Many believe that hiring the right people is all it takes for an organization to thrive. However, this is a myth. In reality, it's not individuals but the system and organizational design that determine behavior and outcomes in large companies.

A notable example is the NUMMI case, a joint venture between Toyota and GM. Before Toyota's involvement, GM’s Fremont plant was plagued by strikes, high absenteeism, and sabotage. A worker might deliberately leave a can of Coke to rattle and annoy the customer.

However, Toyota didn’t replace employees; it changed the system. By improving processes and focusing on quality, worker behavior transformed, leading to the production of high-quality cars.

For example, they left the lights on in the workshops at night to prevent theft.

They shifted the focus of processes from quantity to quality – every worker could stop the production line with a cord and fix a problem as soon as it arose.

I’ve seen similar results firsthand. At Sber, one of EMEA’s largest banks, we restructured without replacing staff. By forming cross-functional teams with a clear product focus, we reduced time to market by four times. HR policies supported the development of versatile skills, reducing bottlenecks.

Jay Galbraith’s “Star Model” outlines five key design elements controlled by management:

1. Strategy: Defines the mission, goals, markets, and products.
2. Structure: Organizes authority and roles (e.g., cross-functional or functional divisions).
3. Processes: Coordinates divisions and roles, either horizontally or vertically.
4. Rewards: Aligns employee goals with company goals, including bonuses and promotions.
5. HR Policies: Governs hiring, development, and retention.

Culture isn’t a direct part of this model but is shaped by changes in organizational design.

In the "Star Model," all elements are interconnected. Changing one element affects others, so a systemic approach is essential for coherence. Misalignment between elements weakens the organization.

For instance, a customer-centric company should structure itself by segments, tie rewards to customer satisfaction, and hire employees with strong communication skills.

In contrast, if a product company focuses on speed and cross-functional teams but maintains individual incentives and narrow skill tracks, teamwork will falter.

The system sets the path of least resistance.

If the system favors individual rewards over teamwork, employees will follow the easier and more rewarding path.

1. Explore the organization: To understand the existing system, you need to go and talk to people. I recommend choosing one product group and spending at least ten days studying it. I usually conduct dozens of interviews and a series of workshops.
2. Analyze the existing work system: After the research, visualize the elements of organizational design: strategy, structure, processes, rewards, and HR policies. Assess their coherence and find points of conflict.
3. Develop a transformation plan: Identify key changes that need to be implemented in the structure, processes, reward system, and HR policies.
4. Implement changes gradually: Don’t try to turn the whole company upside down. Implement changes in stages. Start with one product line and continuously monitor the results. It is important to be flexible and ready to make adjustments if something goes wrong.