The Star Model

Star Model

The Star Model provides a framework to assess and design organisations which successfully implement strategy. This model helps us to see the way in which all the elements of an organisation need to be aligned to deliver strategy. It is a combination of technical issues like the actual design of structures, processes, procedures and systems; and the social factors such as culture, capabilities, attitudes and values.

The Star Model was developed by Jay R Galbraith and the descriptions in this paper are adapted from his book 'Designing Organisations'

Strategy

Strategy is the company’s formula for ‘winning’. It specifies the short and long term goals and objectives to be achieved as well as the values and mission to be pursued. It sets out the basic direction of the company. The strategy specifically outlines:

  • The products or services to be provided
  • The markets to be served
  • The value to be offered to the customer
  • The source of competitive advantage
  • What activities are most necessary (core work processes)

It should also allow for experimentation and opportunism. Thus strategy should be shaped as broad framework to guide choices and decisions rather than a fixed set of plans and actions. Strategy should contain within it that which is fixed in terms of the core business and ideology of the organisation and that which is to change in terms of the challenging aspirations which will stimulate progress. It should never be expressed simply in terms of profit, which will always be a necessary condition for existence, but is never the overall point of the organisation.

If a strategy is not in place or agreed it will result in Confusion

  • No common direction
  • People pulling in different directions
  • No criteria for decision making

Developing strategy means asking

  • What is happening in the environment?
  • What are our competitors doing?
  • How would we measure success?
  • Where does our focus need to be – products, operations or customers?
  • What kinds of shifts do we need to make?
  • What are our audacious goals for the long term?
  • How can we express this in simple meaningful ways?

Structure

The structure of the organisation determines the placement of power and authority. Structure policies fall into four areas:

  • Specialisation – the type and number of job specialities used in performing the work
  • Shape – the number of people constituting the departments at each level (that is spans of control and number of levels)
  • Distribution of power – in the vertical refers to the degree of centralisation and in the horizontal how power moves across departments dealing with critical issues
  • Departmentalisation – is the basis for forming departments at each level such as functions, products, work flow processes, markets and geography.

If the structure is not aligned to the strategy it will cause Friction

  • An inability to mobilise resources
  • Ineffective execution
  • Lost opportunities

Reviewing the structure means asking:

  • Do people have to work with others outside their immediate department but find it difficult to cross boundaries?
  • Does the structure cause barriers to people working with people outside the organisation (internal and external stakeholders, customers and suppliers)?
  • Are there groups that could be combined?
  • Is there a logic and rational for all the pieces and do they connect together with smooth handovers (no dropping the baton)?
  • Are their overlaps between roles of departments or units?

Processes

Information and decision processes cut across the organisations structure. So structure can be thought of as the bones of the organisation and processes as the muscles, connective tissue and neural networks.

Some processes run vertically – to cascade objectives, build plans and allocate budgets. Other run horizontally along work flows and across departments – for new product development, or order fulfilment. Processes can be standardised to allow for ease of cross functional working and hand-offs between teams:-

  • Meeting protocols
  • Portfolio management
  • Innovation pipeline
  • Product development

Other lateral mechanisms support collaboration and team working:

  • Informal social networking events
  • Conferences and meetings including numerous departments
  • Team briefings
  • Liaison roles
  • Account manager roles
  • Product champion roles

If the development of processes and coordinating mechanisms are left to chance it results in Gridlock

  • Lack of collaboration across boundaries
  • Long decision and innovation timescales
  • Difficult to share information and best practices

Building a coherent process framework for lateral working means asking:

  • Where there are issues of speed and what happens too slowly?
  • Does everything happen vertically or do things work across the organisation?
  • Is there meaningful involvement at the right levels?
  • Are decision made at the right time and place and are the right people informed?
  • How are priorities decided and shared?
  • How differences and conflicts are resolved, how does the criterion for resolving them link to the strategy?
  • How does information flow, do the right people have the right information at the right time? Where is there too much or too little information?

Rewards and Metrics

The purpose of the reward system is to align the goals of employees with the goals of the organisation. It provides motivation and incentive for the completion of the strategic direction.

The reward system should define policies regulating:

  • Salaries
  • Promotions
  • Bonuses
  • Stock option
  • Profit sharing
  • Benefits
  • Pensions
  • Recognition programmes

A great deal of change is happening in this area, particularly in support of lateral processes to encourage teamwork and collaboration across departments. Companies are now implementing pay-for-skill salary practices, along with team bonuses. There is also a growth in non-monetary recognition or challenging assignments as rewards.

The star model suggests that rewards should be congruent with the structure and processes to influence the strategic direction. Metrics should be in place to track key parts of the strategy and assess progress. These metrics need to assigned to individuals or teams to allocate responsibility.

When metrics and rewards do not support the goals it causes Internal Competition

  • Wrong results (loss of profits)
  • Diffused energy
  • Low standards
  • Frustration and turnover

Developing a powerful metric and rewards system needs to listen out for:

  • Do people understand their goals and how they link to the strategy?
  • Do the measures drive the right behaviours and results?
  • Do people get timely and specific feedback?
  • Do people take responsibility for improvements?
  • How well do metrics report potential problems (leading) and what has been achieved (lagging)?

People

This area governs the human resource policies of

  • Recruiting
  • Rotation
  • Training
  • Development
  • Talent management
  • Skills set definition
  • Culture & attitude
  • Behaviours

These build the organisational capabilities necessary to execute the strategic direction. Flexible organisations need flexible people. Cross functional working requires team development skills and meeting skills. Policies can simultaneously develop people and build organisational capability.

When people practices do no enable and empower people the result will be Low Performance:

  • A lot of effort without results
  • Low employee satisfaction
  • Blaming and complaining

Building the people capabilities in the organisation means asking:

  • Do we have the right people to deliver our strategy?
  • How do our policies need to change to recruit more of the right people?
  • What are the skills gaps and what is the most sensible route to fill them (recruit or develop)?
  • How well are people supported and developed?
  • What additional tools and resources do we need to help people do a good job?