Under such circumstances, even the best customer-experience vision and strategy will stumble under the weight of limited information transfer and poor cross-functional collaboration. Developing capabilities and skills. Our flagship business publication has been defining and informing the senior-management agenda since 1964. It’s critical to engage leaders of other functional areas, particularly marketing and operations, given their close ties to customers. This example demonstrates how many different parts of the organization are responsible for delivering the ultimate customer experience. There are four general types of organizational structure that are widely used by businesses all around the world: p. 824. Separate marketing, sales, design, and customer service teams would serve each of the three lines. Giving employees an opportunity to diagnose customer-experience performance, conduct interviews, and participate in feedback sessions also builds commitment. Setting up a dedicated customer-experience organization. It’s difficult (nearly impossible, actually), given the constraints of traditional organizational structures, to implement long-term, customer-centric growth. Modeling specific behaviors. The new approach made company recommendation scores and unacceptable customer-incident scores count for 35 percent of bonuses, while local business-unit scorecards were changed to focus intently on customer experience. Once the teams are in place, the CEO effectively relinquishes all executive powers. 8. Where two dimensions are critical, companies will use a matrix structure. Vertical and Horizontal reporting levels; Multiple job roles – members of different functions working together for a new development. This type of structure is ideal for organizations with multiple products and can help shorten product development cycles. For example, many customer help desks link customers and consultants together via telephone or the Internet and problems may be solved without ever bringing people together face-to-face. These product divisions are supported by centralized services, which include: public relations, business development, legal, global research, human resources, and finance. Never miss an insight. Also, geographic structuring may be necessary because of cost and availability of resources, distribution strategies, and laws in foreign countries. The proper structure will enable your company to achieve optimal efficiency and effectiveness. If there is too much autonomy across the divisions, incompatible systems may develop. The CEO decided to build specific rest facilities for the employees where they could retreat from hectic airport activities. This was not a good way to relax. This can include ensuring safety protocols are in place (a priority), followed by courtesy, friendliness, and efficiency. A less profitable business, the natural result of disempowered employees, redundant efforts, and products that don’t delight customers. Every organization has a structure which defines the hierarchy, the distribution of roles or the responsibilities within the organization. Reinforcing new behaviors through formal mechanisms. ). There are several different ways to structure a direct role for the CEO in customer-experience programs and to provide a customer-experience leader who is not the CEO with sufficient access to the boss to prioritize customer experience within an organization and across its operational silos. We use cookies essential for this site to function well. A functional structure allows for an efficient top-down and bottom-up communication chain between the CEO and the functional departments, and thus relies on a relatively tall structure. Based on an organization’s application of the common elements—common purpose, coordinated effort, division of labor, hierarchy of authority, as well as centralization/decentralization and formalization—the resulting structure will typically exhibit one of four broad departmental structures: functional, product, customer, and geographic. Rather than relying on a traditional top-down hierarchical management structure, holacracy attempts to achieve control and coordination by distributing power and authority to self-organizing groups (so-called circles) of employees. Similarly, the emphasis on department performance will motivate employees to focus locally, not across the entire end-to-end customer journey. Marketing must, by necessity, span the entire organization. This makes all employees responsible and accountable for the customer experience and is useful for individual performance discussions, from executives to frontline agents. They identify customer-experience-improvement opportunities and potential solutions, as well as support customer-journey performance analyses and traction. Customer ratings were high. Organizations create teams by grouping employees in a way that generates a variety of expertise and addresses a specific operational component of the organization. Typically, cross-functional customer-champion teams are held accountable for performance indicators and progress on improving customer-experience journeys. Ideally, the naming of a chief customer officer (CCO) with direct access to the CEO is the most effective way to establish the importance of customer-experience efforts and to influence change across an organization’s functions (exhibit). The organizational structure of a company affects which department is powerful, which department takes more decisions or which department has less power.. For example, a computer software business may divide its structure according to its two distinct customer groups - home users and business users. Project teams are focused on a few objectives and usually disbanded at a project’s end. A business that has areas or departments that can be easily separated from the company without jeopardizing the company are considered to have a modular organizational structure. Senior executives will want to set a clear, inspiring vision for the ideal customer experience, including a change story to underline the importance of delivering on goals. The main disadvantage of a geographical organizational structure is that it can be easy for decision making to become decentralized;  geographic divisions can sometimes be hundreds, if not thousands, of miles away from corporate headquarters, allowing them to have a high degree of autonomy. These include waiting time, throughput time, or number of errors made. Teams that include members from different functions are known as cross-functional teams. With Edraw Organizational Chart, you can create clear and comprehensive city organizational charts even without prior experience. Companies that offer services, such as health care, tend to use a customer-based structure. Its primary disadvantage: complexity, which can lead to confused employees. A picture of the Skunk Works® hangar in Palmdale, California. collaboration with select social media and trusted analytics partners It might begin with the experience of browsing the Internet to get an idea of choices; finding a store to buy the shoes; making a selection and interacting with the sales staff; considering the price, look, and quality of the shoes; undergoing the packaging and return journey; and even sharing the experience with friends on social-media sites. This structure groups employees into functional areas based on their expertise. For coordination, the employee circles overlap horizontally and without vertical hierarchy. Other executives ask for customer-satisfaction results before they look at any financial or productivity measures, to signal the importance of customer satisfaction. How can organizations apply these principles? For starters, the best customer-experience efforts begin with a “customer back” perspective driven by the customer’s wants, not the company’s traditional organizational structure. Consider the recognition cards that senior leaders sign and hand out to employees. Similar to the Skunk Works® model, this team may locate in a designated room or building with the intention to increase communication and collaboration and minimize distractions. Flip the odds. cookies, From touchpoints to journeys: Seeing the world as customers do, McKinsey_Website_Accessibility@mckinsey.com. More insight into creating competitive advantage by putting customers first and managing their journeys. If not, customer-experience transformation efforts may drown in a sea of organizational confusion. Image: Matrix Structure with Geographic and Product (SBU) Structure. Product divisions work well where products are more technical and require more specialized knowledge. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. Higher specialization also allows for a greater division of labor, which is linked to higher productivity. Digital upends old models. Geographic structuring involves grouping activities based on geography, such as a Latin American division. Within a department, managers might look at specific customer touchpoints. In the end, a great support experience can be boiled down to this simple equation: The support experience = Customer Experience + Agent Experience Some typical roles include a senior staff role to lead the team of managers and analysts and ensure cross-functional collaboration and oversight to implement customer initiatives at the front line; a line leader who drives frontline initiatives, supports implementation, and coaches employees; a manager who prioritizes staff and resources on customer-experience initiatives and oversees analytics and drivers of customer metrics; and analysts who work with data from internal surveys and external sources to focus on metrics and operational-performance indicators, with an eye on identifying opportunities and solutions to problems. An example of this would be in healthcare. For example, the manager of an airport would hand out a card to cleaning staff when he or she saw them going out of their way to help a stressed passenger find passport control. What message does this send to employees? In any case, the CCO also requires the CEO’s strong support to succeed. Managers coordinate and control relations both internal and external to the firm. For instance, full-time day students and part-time night students of graduate business programs in universities usually are different in demographic profile and personal needs. Something went wrong. In such an arrangement, all employees working on the development, sales or promotion of business software would in one division, while everyone working on software for home users would be in another. I talk a lot about different channels and mediums through which customer communications can be achieved. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Providing a seamless customer experience thus begins with the customer’s perspective at the center of the organizational structure and requires all parts of the organization to work together in lockstep. Customer Structure. For example, there may be several customer service groups within a bank, each of whom is responsible for providing support for a specific banking product or service (e.g., mortgages, savings accounts, online banking, retirement services, etc. Leaders in customer experience pursue a range of approaches to overcome such complexity. For example, if you currently have one customer service role that handles all of the related tasks, you can scale slowly by adding in a part-time or full-time employee. Within IT, the CCO must ensure that analytics are streamlined into tools and systems and that the customer experience is digitized. In the case of the international airport, it turned out the employees carried the cards in their wallets and proudly showed them to colleagues and family. Image: Functional Structure Organizational Chart. Please click "Accept" to help us improve its usefulness with additional cookies. In our experience, a permanent customer-experience team of 2 to 20 members is usually sufficient, regardless of company size. However, motivating individuals in a team-based organization can be more challenging as team accomplishments are rewarded rather than individual achievements. Did you have an idea for improving this content? Based on an organization’s application of the common elements—common purpose, coordinated effort, division of labor, hierarchy of authority, as well as centralization/decentralization and formalization—the resulting structure will typically exhibit one of four broad departmental structures: functional, product, customer, and geographic. These principles may need to be nuanced for the different parts of an organization. They also include support areas such as accounting, finance, and human resources. Once the team is constituted and leadership assigned, it’s critical that the customer-experience team fit seamlessly within the company fabric and mirror the company’s principal organizational construct. Effective customer-experience teams provide outside-in perspectives, such as industry best practices and customer insights from other sectors. You can view the transcript for “Zappos is a weird company — and it’s happy that way” here (opens in new window). Learn about Since the customers differ significantly, it makes sense to customize the service. The team structure of a small business affects the way the company achieves its goals. The COO will have a strong focus on improving the productivity of back-office employees. For example, the customer-experience group within one global travel and hospitality company mirrors the parent company’s brand structure and delivers an end-to-end customer-journey experience for each individual brand across all functional areas. McDonald’s is well-known for its geographic structure and localization strategy for food preferences. Setting up an organization with primary responsibility for driving customer experience is just the beginning. This organizational form is used when great emphasis is placed on effectively serving different customer types. The approach used by Disney, one of the most successful customer-centric organizations, illustrates the principle that business leaders promote the value that customer-centricity creates. C-suite leaders, intent on restoring their company’s slipping competitiveness in today’s fluid, multichannel markets, conclude a high-level strategy meeting with an announcement from the chief executive: since customer satisfaction has become a top priority for the company, a high-performing executive will take charge of a new customer-experience unit, with the goal of making the organization more customer-centric. Zappos has embraced this model and labeled it holacracy. Distinguish matrix organizations from traditional departments. If managers cannot agree on a joint course of action, senior managers or the CEO may have to intervene. Or divisions may end up inadvertently duplicating activities that other divisions are already managing. Employees may be organized according to product and geography, for example, and have two bosses. Leading customer-experience organizations tackle this problem by making customer experience a top priority for the CEO, by having senior leaders model the customer-centric behaviors that will engage and motivate employees on the front line, and by designing a customer-experience team that promotes cross-functional collaboration via targets and metrics. A typical program involves five elements. The same holds true for customer journeys that take place across geographic regions or even across brands as part of the same organization. Assuming that such success could be sustained, the CEO decided to have the customer-experience organization report directly to the COO, given his existing oversight of the company’s customer call center. The shop may externalize that module and send the work to an outside business.[3]. A social structure of interactions is fostered to build and manage formal and informal relationships. Use minimal essential Financial incentives can help, but nonfinancial recognition schemes are more powerful. Drawing up a governance blueprint is also important, both to set up a mechanism to make decisions on cross-cutt… Because of the success of early project teams, the belief is that a team will be a more creative and productive structure to face new challenges. The first step in setting up any customer-experience transformation is establishing the right overall architecture. The customer-based structure is ideal for an organization that has products or services unique to specific market segments, especially if that organization has advanced knowledge of those segments. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Second, leaders must commit to demonstrating behaviors and serving as role models to deliver customer-experience goals to frontline workers and refine and reinforce those goals over the long term. An organizational structureis the framework around which an organization’s operations are based on. Example: Engineer working for song recording also working with the album publishing team The natural tendency of siloed business units is to first and foremost deliver on key performance indicators and financial targets. There are five common organizational structures that most business setups adopt: 1. Image: Customer Structure Organizational Chart. A larger team may be necessary when its focus is on stimulating cross-functional activity and on execution versus promoting innovation. For example, a small specialty T-Shirt company may recognize that its design, production, and customer service modules are at peak form and working well together but that its website design and maintenance department is slowing it down. This starts with the recruiting staff and training. Dilip Bhattacharjee is a principal in McKinsey’s Chicago office, Line Hartvig Müller is an associate principal in the Copenhagen office, and Stefan Roggenhofer is a principal in the Munich office. The graphic that follows shows a functional structure, with the lines indicating reporting and authority relationships. Differentiate between team-based structures, networks, and modular organizations. In our experience, the CEO must make customer experience an active priority, given the cross-functional collaboration required. This prompted a shift in attention from short-term local profit and loss to long-term company growth via cross-functional customer experience. Another disadvantage is that the organization may end up with duplicate resources as different divisions strive for autonomy. Companies with diversified product lines frequently structure based on the product or service. It says a lot about the culture, function and leadership of a company, which are some of the primary reasons a customer will buy into the organisation. Organization and management structures are always changing to adapt to the growth and changes in the business. Source: Information derived from Katzenbach and Smith (1993). To deliver bottom-line impact and change employee behavior, all key indicators need specific target values that in turn are linked to the incentive structure. Six months later, however, customer-experience ratings were spiraling downward, driven by a lack of priority and responsibility from other parts of the organization. Tensions might arise with the sales department if the number of product options increases complexity for the COO’s agents. At one international airport, for example, security personnel did not have their own break room. Understanding the implications of team structures early on can make you engage better with your customers. The department head of each functional area reports to the CEO; the CEO then coordinates and integrates the work of each function. Fostering understanding and commitment among employees and managers. It details how work is performed, who does what, and who is accountable for what, while keeping in view the organizational g… Reinvent your business. For example, a clothing company might create separate product-based divisions for women, men, and children. Subscribed to {PRACTICE_NAME} email alerts. The disadvantage inherent to a functional structure is that the emphasis on specialization can cause high levels of job dissatisfaction and fewer process improvements for the business. Fitting the customer-experience team into the organizational fabric. Based on a handshake, a small team of engineers worked secretly in a tent to design and build the XP-80 Shooting Star Jet Fighter in 143 days—seven days less than was required. Differentiate between the four basic types of departmentalization (function, product, customer, and geography). Over the last several decades, team-based structures of some variation have become common in almost every industry. The newest, and most divergent, team structure is commonly known as a network structure. We strive to provide individuals with disabilities equal access to our website. “Modularity Organization Structure.” Houston Chron. The CCO’s tasks begin with aligning leadership to embed a customer-experience solution across individual segment, brand, geography, and functional areas. The CEO of one retailer regularly works the cash register to interact with customers face to face. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Poor communication between siloed departments often leads to a crisis that inspires efforts to integrate—efforts such as teams, networks, and modular structures. In many cases this is a typical functional area, for example, a call center. Training managers and employees in customer-centric behaviors is an important first step. In cases where customer-experience norms, values, and metrics are lacking, more formal roles and responsibilities will be required. This encompasses various processes including, but not limited to, recruitment, settlement of disputes, and other decision-making actions. Finally, it is necessary to put in place the correct metrics and incentives that are critical for aligning typically siloed units into effective cross-functional teams. 41, no. By constantly focusing on reducing handling times at the call center rather than on raising customer-satisfaction scores, a manager will signal to employees that productivity, and thus cost, is a priority over delivering a superior customer experience. GE, for example, has structured six product-specific divisions supported by six centralized service divisions. Structuring a complex organization to deliver a superior customer experience can be challenging. ... processing flow of products or even of customers. Employees can specialize around the type of customer and be more productive with that type of customer. There are several organizational structures, including functional, divisional, matrix, geographic, circular and flat. Here the divergence between driving functional results and cross-functional, end-to-end journey experiences is critical. The directors of each customer center would report directly to the chief medical officer and/or the hospital CEO. Bottomline, we end up imposing our organizational silo’s on the customer and ask them to navigate our complexity. As sales increase, organizations generally adopt a functional structure. Matrix structure with geographic and product (SBU) structure. The following video explores Zappos’ work culture and organizational structure. First, a customer-centric leadership structure must ultimately report to the chief executive and should be designed to stimulate cross-silo activity and collaboration. Group like tasks together, such as having returns, warranty and issue management handled by one role and having account management and loyalty handled by another. hereLearn more about cookies, Opens in new Others make sure that their employees feel valued by understanding their specific needs. Disney makes use of a simple leadership framework that links the delivery of business results to customer satisfaction and measures that satisfaction via two key indicators: “propensity to return” to a Disney experience and “propensity to recommend.” Disney’s framing also stipulates that the way to satisfy customers is through engaged employees. Companies come in different sizes. As you can see by studying the sample organizational chart below, these types of charts are the ideal way to illustrate the inner structure and hierarchy of a business or any other type of organization. The team’s size and profile can be determined by the maturity of the company’s customer-experience profile. The role and responsibility of the team should also be clearly defined within the organization. These functional areas often correspond to stages in the value chain such as operations, research and development, and marketing and sales. Dec. 23, 2014 (updated Aug. 3, 2017). We'll email you when new articles are published on this topic. If not, customer-experience transformation efforts may drown in a sea of organizational confusion. The idea behind this type of matrix structure is to combine the localization benefits of the geography structure with those of the functional structure (responsiveness and decentralized focus). Proper organization of your customer service department can help provide direction for employees and your business. Customer feedback, for example, is invaluable – that information yields clear roadmaps for the kind of customer service that will separate your organization from its competitors. This is also designed to avoid overlap, confusion, and redundancies. Big companies have a lot of tiers of owners, management, and a common worker while smaller ones have few tiers. This streamlines processes and lowers administrative costs. The organizational structure also determines how information flows between levels within the company. The key lies in the ability to identify which modules, or departments, of a business are effective and which can be outsourced to create a tighter organization. While many managers talk up the importance of customers, how many actually know the financial impact of an additional percentage point in a customer-satisfaction score? Reduced customer satisfaction, which happens when an org structure doesn’t include customer feedback as one of the key elements, leading to products or services that no one really wants. Coca Cola structures geographically because of the cost of transporting water. Showing teams how their actions directly affect customer-satisfaction scores can also help employees see how their contributions influence the customer experience; this in turn helps support new behaviors. Not good. The advantage of this type of structure is that it specializes in the needs of each customer group but can ign… For Disney’s business leaders, the logic is clear: their task is to develop excellent employees, who in turn help to create satisfied customers, leading to business results. Now consider the perspective of a manager who spends most of his or her day in a large organization selling products or services to customers. Circles of employees are meant to self-organize and own a specific task, such as confirming online orders or authorizing a customer’s credit card. True teams do not disband after a project. People create and sustain change. The disadvantage lies in its rigidity and the length of time needed for information to flow through the organ… A divisional structure is a large scale organizational structure that separates the company based on product, service, or consumer. To change that, one telecommunications company’s CEO started a customer-experience transformation by updating the group incentive structure for his top 30 executives. These teams must then generate and implement improvements. At one European telecommunications company, the CEO regularly listens to customer calls, goes on customer visits with technicians, and tries out both old and new product and service solutions to live the customer experience. By contrast, a customer-experience focus rooted in a particular function would have emphasized the touchpoint experience, not the company’s different brand value propositions, to the confusion of both customers and the organization. Matrix Organizational Structure. Select topics and stay current with our latest insights, Leading and governing the customer-centric organization. For example, a company could have a group working in information technology, another in marketing and another in finance.Each department has a manager or director who answers to an executive a level up in the hierarchy who may … For the customer-facing part of a bank, for example, making eye contact might be an appropriate behavior to ensure courtesy, while people in the back office need to make sure that customer requests are given priority over internal requests. Will be required that it can be achieved some variation have become common in almost every.!, even the best customer-experience vision and strategy will stumble under the weight of limited information and... Product development cycles operational component of the company is no longer achieving its objectives reporting levels ; job... With diversified product lines frequently structure based on their expertise encompasses various processes including, not... 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