If you read the business sections of newspapers or some business magazines, which I certainly do, you will note many references to companies “reorganizing.” The benefits being claimed usually include “faster decision-making,” “more customer focus,” “lower costs,” and more. In 2014, we reorganized functions between divisions at Freddie Mac as a result of the Three Lines of Defense and Shared Services reviews and are seeing many of these benefits, along with “more clarity about accountabilities, so less daily frustration,” as the primary benefits delivered.
Now that functions are in their proper divisions, I am looking for the 11 divisions to take the next step in 2015 and examine themselves to make sure they have efficient organizations interna
lly as well. In this case, “efficient” means that the organization structure similarly supports fast decision-making and customer focus, is shareholder-friendly by not having high costs, and supports a good people culture.
The genesis of this intra-divisional organization review, interestingly, is the Single-Family Division — which worked with an outside consulting firm (called Capco) to examine its own efficiency last year, beginning with Operations. Simply put, they developed an approach to do a relatively quick but in-depth review of an organization chart. More recently, the Finance Division signed itself up to do a similar review to improve its own effectiveness.
Together, Single-Family and Finance account for about 40 percent of our staff. Based upon this, I decided we should just keep going with the organization structure review throughout the entire company. I do note that, learning from the experience of Single-Family, we will also be enhancing the Capco review process with a few more features and the development of an implementation plan for any changes to be undertaken.
To keep this company-wide review of all the divisions as practical and impactful as possible, there are a few ground rules.
- Each division head is leading the review for his/her division. Just as for Single-Family and Finance, they are “doing it to themselves,” aided by Capco, rather than “it being done to them.” Accountability and ownership sit squarely on the head of each division to have the best organization structure possible. My role is to make sure the review is comprehensive and of high quality.
- I encourage this to be done in the spirit of the 80-20 rule, i.e., getting a “good” easily implementable result quickly is more important than a “perfect” result which takes a long time and is hard to implement.
- The reviews are being scheduled to all be completed in 2015. Implementation may go into 2016, but we don’t want this hanging over everyone’s head for an overly extended time.
- I do note that there is overlap with the program to simplify our many processes, about which I wrote last week. I would expect that our current organization structure at times can only be changed to be better as we change certain processes, or automate them perhaps. So, the division heads will also have to take this into account in doing the organization structure review and its implementation.
So, how will this make Freddie Mac a better organization — better for our customers, better for our shareholders, and better as a place to work? Examples would include:
- Decision-making will be faster. We now have as many as nine layers at Freddie Mac — i.e., there are eight layers of people under me in some areas. Lots of decisions have to go up and down those many layers, which takes too much time. I am hopeful that, when we’re done, the average number of layers will be down to five to six. In other words, we will have a “flatter” organization chart and so faster decision-making.
- People managers will be more effective because they will have more “scale” to develop their skills. In this case, “scale” means that the average span of control will go up — from our corporate average of about four to more like six. In particular, we should end up with few situations where people managers just have one or two subordinates. Instead, people managers will get more training and experience, and thus get better at, setting goals, leading a team, and developing their people.
- More permanent employees will replace contract workers (CWs). On average, we have an unusually large number of CWs per employee. Some of this may be totally justified, but the usage of CWs will be examined one by one as part of the organization review. When we’re done, I expect fewer, maybe a lot fewer. Costs will go down (as we won’t have to pay fees to CW staffing agencies) and our business effectiveness should go up as permanent employees replace time-limited CWs.
- Based upon the experience in Single-Family, the odds are good that there will be a surge in the number of people rotating positions. Simply put, taking a holistic look at the organization chart seems to unlock a lot of the usual “stickiness” of people in their current positions. And this is great to develop skills and improve motivation.
Let me end by asking the question many of you may be thinking: “How will this impact me?” The answer is that the vast majority of people will be positively impacted. Overall, we will have faster decision-making, less “checkers checking the checkers” (i.e., more satisfying jobs), more immediate opportunities for rotation, and so on. If you also happen to work in a unit that already has an efficient organization chart, then the changes will not go much, if at all, beyond the general benefits I just summarized. But if you work in one that has features that are not so efficient, then there will be changes — possibly including uncomfortable ones — in terms of who does what, on who reports to whom, and so on.
This is all, of course, being done so that we’re the best company we can be, winning in the marketplace (especially against Fannie) and delivering value to our shareholders (who happen to be the taxpaying public while we’re in conservatorship). And, just as important, being a better place to work.
Thank You!
-Radwan
