In today’s fast and fluid world, business transformation is a necessity, not an elective. To transform, organizations must embark on three parallel journeys:

• Activating, aligning, energizing, and equipping leaders to inspire and drive the change
• Embedding new governance and adaptive end-to-end program management practices to ensure rapid change
• Engaging and empowering employees in real time through transparent multiway communications

More than ever, facilitating people’s journeys is critical to changing behaviors and ways of working to make the transformation stick. The rising adoption of agile, design thinking, and other digitally oriented practices demonstrates the increasing importance of these changes.
Successful transformations set specific goals and implement clear methods for measuring progress. In the past, organizations undergoing transformations relied on quantitative scorecards to assess financial and operational results, but they employed qualitative measures to evaluate people. It was therefore difficult to generate reliable and insightful data about the financial impact of people’s performance.

People analytics has changed the game, with engines that can generate quantitative behavioral data on what people do at work, how a transformation will affect their work, and how changes in behavior can improve financial performance.

People analytics engines are built on a foundation of simplicity and standardization so that the insights are understandable and actionable. This allows executives to track progress against a baseline and link performance to cultural and people dimensions.

Properly deployed, people analytics can help unlock the full force of a business transformation and spur leaps in performance. In particular, five fundamental people analytics questions can help set the stage for a successful transformation:

• Is the target organization design sufficiently simple, lean, and customer focused?
• Are leadership roles well designed and staffed, with sufficient attention to diversity of the leadership team and overall employee engagement?
• Will the transformation help create the desired behaviors and ways of working, and are those behaviors and ways clearly articulated?
• Are organization activity metrics, such as attrition rates and internal job rotation frequency, being used to support the transformation?
• For the most critical parts of the business, what are the key people levers that most influence performance?

Depending on their transformation goals, organizations may modify these questions. Whatever the specific questions, they should almost certainly focus on elements that influence behavior, such as performance management systems and HR processes. The art of changing behavior lies in identifying the handful of simple and measurable people analytics elements that can put the power of an organization’s people behind its transformation. An organization may change these elements over time as a transformation unfolds.

TARGET ORGANIZATION DESIGN

It’s time to put design back in organization design. The modern organization has become increasingly complex. Intricate and intersecting solid and dotted lines represent the added accountabilities and dimensions of business activity—new digital businesses, centers of excellence, external partnerships, and so on.

Many transformations, especially those oriented around agile and customer journeys, aim to reduce this complexity and refocus the organization on the customer and end user. There is no shortage of KPIs, role charters, and other mechanisms to guide and track organizational behavior. In the quest to be on the cutting edge of practice, however, organizations should not lose sight of the tried-and-true metric of spans of control. (For an overview of potential metrics, see Exhibit 1.) The ratio of managers to direct reports remains the single best test of whether a design is top heavy. The number of layers and the number of leadership positions remain a strong measure of organizational effectiveness. Too many layers and leadership positions can hurt both financial performance and customer satisfaction by 10% to 15%.

With a few exceptions, organizations should strive to ensure that leaders have an average span of control of eight when they are managing functions driven by expertise and skill. Spans may be even higher when overseeing transactional functions. In many organizations, however, about 60% of leaders have five or fewer direct reports. Low spans are generally not deliberate but a second-order consequence of inadequately defined leadership roles and career paths.

LEADERSHIP ROLES

In an organization with proper spans of control, managers do not have the time to micromanage or make individual contributions. Their job is to coach and set direction. With fewer leaders in place, organizations need to ensure that they have selected the right people for these roles and are providing adequate support. Organizations that reduce the number of leaders may end up spending more on leadership training and development and external recruitment of leaders. Effective training increases leadership quality by 5% to 15%.

Companies should also look to outside hires to infuse new ideas. Some companies push for external recruits to constitute 10% or even more of the total workforce, depending on the business model and strategy. Other companies pull up rising stars with fresh ideas from lower levels of the organization. This has become an increasingly popular strategy with the rise of digitization.

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