Hidden Drivers of Ideal Organizational Performance in Volatile Times

The COVID-19 global pandemic prompted many organizations to respond quickly with furloughs and layoffs to reduce labor costs. According to the U.S. Bureau of Labor Statistics (2020), in April 2020, unemployment rates in 43 states reached their highest levels since unemployment data began being collected in 1976. However, organizations may have been better off to consider other options than layoffs and furloughs of large numbers of employees because of the hidden impact these changes can have on organizational performance and effectiveness. This is especially true for organizations with large percentages of knowledge workers.

Figure 1. State Unemployment rates, April 2020 seasonally adjusted. Source: U.S. Bureau of Labor Statistics.

Hidden Drivers

The congruent and sequential alignment of strategy, structure, processes, rewards, and people drives organizational performance and effectiveness. Typically, organizational misalignment occurs due to

“three sources: external to the organization, internal from managerial actions, or jointly – from a combination of external and internal sources” (Burton et al.)

An internal leadership decision to layoff or furlough employees can create organizational misalignment. The question that leadership needs to be asked is if the short-term cost-benefit associated with labor savings is higher than the organizational misalignment performance cost. Failing to consider this question can result in significant marketplace losses.

Options and Building Resiliency

Leaders have many different drivers to create or fix organizational misalignments such as creating new strategies, new product lines, different approaches to incentives, new ways of designing work tasks, mergers, strategic alliances, and new technology solutions. While no one approach works well in every possible situation, it is worth considering if the organization's design itself contributes to being unprepared for an uncertain future. Utilizing a regular time-based schedule for optimizing the organizational design is one way to creatively build agility toward ideal organizational performance and resiliency for an uncertain future.

References:

Alberts, D. S. (2012). Rethinking organizational design for complex endeavors. Journal of Organization Design (Aarhus), 1(1), 14-17. doi:10.7146/jod.6338

Burton, R. M., Obel, B., & Håkonsson, D. D. (2015). Organizational design: A step-by-step approach (Third ed.). Cambridge University Press.

Galbraith, J. R. (2011). Designing the customer-centric organization: A guide to strategy, structure, and process (1st; ed.). Jossey-Bass.

Guthrie, J. P., & Datta, D. K. (2008). Dumb and dumber: The impact of downsizing on firm performance as moderated by industry conditions. Organization Science (Providence, R.I.), 19(1), 108-123. doi:10.1287/orsc.1070.0298

Hardcopf, R., Gonçalves, P., Linderman, K., & Bendoly, E. (2017). Short-term bias and strategic misalignment in operational solutions: Perceptions, tendencies, and traps. European Journal of Operational Research, 258(3), 1004-1021. doi:10.1016/j.ejor.2016.09.036

Heracleous, L., & Werres, K. (2015). On the Road to Disaster: Strategic Misalignments and Corporate Failure, Long Range Planning, doi: 10.1016/j.lrp.2015.08.006

U.S. Bureau of Labor Statistics. (2020). Home.

U.S. Bureau of Labor Statistics. (2020). TED. The economics daily.