Organization Planning in a Troubled Retail Sector: 6 Keys to Success

As we head into Q2, most HR teams are thinking about the performance review process and the resultant discussion around past year performance in a difficult cycle. It's time to assess organizational and individual performance and make talent decisions for the near and long term. However, the best chief human resource officers (CHROs) are thinking more broadly, seeing the performance review process as the start of the larger organization planning process, which supersedes any single event.

It's surprising how many retail organizations avoid any meaningful organization planning of this type or, worse, go through the steps of the process but do nothing impactful with the findings.

As former CHROs, we're fully aware of what's required to ensure that organization planning yields real results. Before we offer our recommendations for successful organization planning, let’s define the process:

Organization planning is the top-down and bottom-up process of reviewing the structure and talent of an organization as it currently exists and assessing whether the structure of the organization is set up to meet the needs of near- and long-term growth.

Unlike succession planning, which usually occurs after the performance management process has been completed and before the strategic and financial planning processes occur (usually the end of Q3), organization planning is more closely tied to the strategic planning process overall, something an organization goes through when looking three years to five years out. Simple? Not at all. Necessary? Absolutely.

Key to Success No. 1: Assessment

To understand how an organization must evolve, it's necessary to one, complete a thorough assessment of the current organizational structure and the current state of talent and two, review the structure and the talent level against the current and future business objectives.

The most robust organization planning process uses a holistic approach, which takes into account both the spirit and culture of the company while identifying “sacred cows” that have been essential to past and, hopefully, future success but need to be recognized and managed in order to be effective.

When Sharon was vice president of human resources with NIKE, for example, the holistic approach took into account the brand's core message: “There is no finish line.” This has been the framework for NIKE’s culture since day one. Any planning process is built with the foundation of “protecting” this mantra. In essence, the organization can always get better, talent can get better, and products can get better; nothing is ever without need of another look, another perspective, another improvement.

“Retention became key and ‘replaced’ turnover as the key organizational people-planning metric when it came to people and evaluating leadership skills.” (Alice Hilliard, ex-GMM; Merchandise Consultant)

Key to Success No. 2: Defining the Desired State

Once an assessment occurs, it's essential to define a desired state for the overall organization and each key function. This design must align with growth plans, talent needs, succession planning and future-focused development planning. In some cases, especially in the current retail environment, organizations may face the need for serious adjustments or realignments due to downsizing that results from negative business cycles or expense reduction demands. How does this fit with considering reorganization, restructuring and even exit planning? This is where HR leadership comes into play.

Key to Success No. 3: Talent and Organization Alignment

HR leadership must shepherd the process of reviewing the current state against long-range plans and strategies, identify any gaps, and determine how to redesign the organization and find the talent to fit that redesign.

Herein lays the “meat” of the planning process. What needs to be done to close the gaps and position the organization to successfully carry out strategic business objectives? HR executives must not only understand the strategic business plans and be able to make assessments around the current and desired states, but they must also guide line management to develop the necessary organization and talent plans. Roles and responsibilities need to be clarified with timelines for deliverables.

Key to Success No. 4: Consistent Communication

Communication is critical for any company going through an organization planning and bench-building process. The CEO, the board and the CHRO must be aligned around business plans and must clearly communicate to the leadership team as they begin to work through these processes.

“Clear, concise, consistent communication emanating from the board, CEO and leadership team is ‘mission critical’ for success. The communication takes on many forms, but the most important is modeling of consistent and aligned behaviors from the CEO and leadership team. How we lead and how we ‘show up’ makes the difference.” (Theresa Sullivan, SVP HR, Lane Bryant)

Communication must be frequent and reinforce the seriousness of the process and the need for clear and clean results. While the greater organization will not be privy to these plans prior to implementation, some periodic “all organization” communication helps to ensure a smooth process.

The most effective companies tie organizational planning to business planning cycles. Communicating through “state of the organization” meetings, emails and other means help dispel rumors and manage expectations and morale. The absence of communication is the best way for rumors and uninformed speculation to run through an organization, creating unnecessary distraction.

Key Component No. 5: Role Definition

Some years back, we were involved in a major organizational planning process for a company that was moving product distribution from a single North American location to a more regional, decentralized model. The CEO delegated the assignment to a group of executives with the following brief: decentralize product distribution. No definition of roles was discussed, little information about the business reasons was provided and, predictably, confusion, gossip and turf wars followed. The effort failed quickly and the CEO was later replaced.

The point of this example is clear: all organization planning must begin with and be led by the CEO, with senior management taking an active part and managing the actual process.

Effective leaders consistently evaluate their organizations, communicate and define roles, and give teams the resources required to carry out their responsibilities. This is part of that holistic planning process that allows organizational changes to be effectively developed and managed, tie these processes to compensation reviews, development needs and all other talent management efforts. Nimble organizations are successful as long as that nimbleness is “ordered” rather than “chaotic.” The example detailed above illustrates the failure of “chaotic nimbleness.”

Key Component No. 6: Culture

An often under-reviewed yet critical component to successful organizational planning is understanding the culture of the organization and whether there's a desire to morph that culture or reinforce it.

An example from our past: the new CEO of a culturally conservative publishing company was hired from a consumer product goods environment. The CEO decided to shift the company from a manufacturing-focused organization to one centered on marketing. The vision was right, but the CEO made a classic mistake — he didn't take the time to understand the power of the existing culture and the resistance to change. The CEO made organizational changes, hired marketing talent and assumed his approach would be readily accepted. It wasn't, and the result was a hostile takeover and ultimate exit of the CEO.

The CEO failed to fully understand the power of the culture and the organization didn't fully understand the change in vision. No communication process was planned to gain the support of key stakeholders. The CEO failed to work with existing leaders who had long histories within the organization. He didn't use a systematic planning process that would get the existing leadership on board.

For organizational planning to have a lasting and positive effect, it must be understood that culture matters, communication and role definition are key, and leadership must be aligned around the need, the process and the expectations. Therefore, a thoughtful process that's part of established business planning cycles, organization planning and talent management processes (all tied to financial objectives) is essential. Effective HR leadership is integral in the process. Operating in a vacuum will only cause failure, resentment and hostility.

Organization planning must be calendared as part of the annual strategic and operational planning process, just like product development and design. There needs to be a continual assessment of the state of the organization and the level of talent in leadership and operational levels, as well as the bench of upcoming talent available.

Talent and talent management is a year-long process. Performance reviews may be seen as an event; however, it's what follows those reviews that matters most — development planning, compensation reviews and distortion, mid-year organizational assessments, and annual and realistic succession planning.

Fredrick Lamster is a partner at Battalia Winston International, and an ex-retail CHRO at L Brands. Sharon Tunstall is a consultant at Connect the Dots Consulting, and a former CHRO at Nike.