Chapter 6
Organizing for Service Strategy
THE FOLLOWING ITIL INTERMEDIATE EXAM OBJECTIVES ARE DISCUSSED IN THIS CHAPTER:
- ✓ Organizational development
- ✓ Organizational departmentalization
- ✓ Organizational design
- ✓ The role of service owner and business relationship manager
- ✓ Strategy management, service portfolio management, financial management, and demand management roles
To do well on the exam, you must ensure that you understand the concepts associated with organizational development and design. You will also need to understand the roles associated with the service strategy process. You will need to demonstrate that you can apply these concepts to the scenarios by analyzing the information provided in the exam questions.
Organizational Development
There is no one best way to organize. Every organization has its own strategic objectives. The best way to organize is to adopt a structure that maximizes the chances of achievement of these objectives. Elements of an organizational design, such as scale, scope, and structure, will differ according to the strategic objectives, and a design that is suitable may become less effective over time. Each organization has its own culture, and the organizational structure needs to be compatible with this.
Well-performing organizations tend to become more decentralized, with greater autonomy allowed for local managers. Where the organization is not performing well, the tendency is to retain more centralized control. Centralization is the result of a lack of confidence in local decision-making, and a belief that it needs to be controlled from the top. Senior managers can see the “whole picture” but lack the detailed knowledge of local managers.
This moving between centralized and decentralized management can be the source of long-term organizational problems and has been described as “the illusion of being in control.” Figure 6.1 shows the advantages and disadvantages of each approach.
Figure 6.1 The centralized-decentralized spectrum
Copyright © AXELOS Limited 2010. All rights reserved. Material is reproduced under license from AXELOS.
Organizations move through different management styles, known as network, directive, delegative, coordinated, and collaborative. Again, there is no one correct style; at different times, different styles are appropriate—the same style may be inappropriate in a different situation. Over time, there will be challenges that cannot be met successfully with the current management style. Reverting to a previous style is not the answer—the organization must move ahead. The adoption of each style is a stage in the evolving maturity of the organization. Figure 6.2 shows these stages.
Figure 6.2 Stages of organizational development
Copyright © AXELOS Limited 2010. All rights reserved. Material is reproduced under license from AXELOS.
Let’s look at each of these stages in turn:
Stage 1: Network This style has an informal approach to service delivery. The focus may be highly technical and is against having formal organizational structures. Over time, as the organization develops, this approach struggles to cope with increasing demands; the technical skills required for this style are not helpful when trying to manage a growing organization.
A common structure in this stage is called a network. This means actions are coordinated by agreements rather than through a formal hierarchy of authority. Staff complement each other’s activities, working together. The organization shares its skills with the customer to allow them to become more efficient, reduce costs, or improve quality.
The key advantages of a network structure are as follows:
- Lack of bureaucracy
- Flat structure, fewer managers required
- Adaptable
The disadvantages are as follows:
- Need for managers to integrate staff activities
- Difficulties coordinating actions
- Difficulties in externally sourcing functional activities
As the organization grows, the network approach is less useful, but moving to the next stage is challenging. The aim is to develop a management team with skill and experience in service management structures to guide the development to the next stage.
Stage 2: Directive As the stage 1 organization develops, the management team encourages lower-level managers to become responsible for particular functions. Stage 2 is therefore quite hierarchical, with the functions separated and basic processes in place.
Issues can arise when centralization prevents autonomy; this means that actions are carried out in the agreed way but little innovation occurs because any deviation from the standard approach requires authorization. This leads to staff frustration and lack of innovation. In order to prosper, the organization needs to develop to the next stage and encourage delegation, such as having process owners at the lower levels.
Stage 3: Delegation The challenges of the directive structure are met by encouraging delegation, which allows the organization to strike a balance between technical efficiency and the encouragement of innovation. However, this delegated structure presents its own challenges, such as when functional and process objectives clash. Functional owners feel a loss of control and seek to regain it. Top managers intervene in decision-making only when necessary. The conflict may encourage a return to a centralized approach, but this is not advised; a better approach is to enhance the organization’s coordination techniques and solutions. The most common approach is through formal systems and programs.
Stage 4: Coordination The focus of a stage 4 organization is on the use of formal systems in achieving greater coordination. These systems are the responsibility of senior managers. The solutions lead to planned service management structures that are intensely reviewed and continually improved. Each service and its investment are carefully monitored. Technical functions are centralized while service management processes are decentralized.
The challenge is to respond to business needs in an agile manner. The business may regard IT as bureaucratic and rigid. The emphasis on delivering a good service may prevent innovation, and adherence to procedures may mean a loss of agility.
Stage 5: Collaboration An organization that has reached stage 5 has a strong collaboration with the business. Managers are used to manage relationships and resolve conflicts in an effective and flexible manner. Cross-functional teams respond to changes in business conditions and strategy. There is an open-minded approach to the adoption of new approaches. Matrix management is common.
A matrix structure is shown as a rectangular grid, as shown in Figure 6.3. Functional responsibility flows vertically; product or customer responsibility flows horizontally. There are basically two (or more) line organizations, with dual lines of authority and a balance of power, and two (or more) bosses in each area, each actively participating in strategy setting and governance.
Figure 6.3 Services through collaboration
Copyright © AXELOS Limited 2010. All rights reserved. Material is reproduced under license from AXELOS.
A matrix structure has both advantages and disadvantages. The advantages are as follows:
- Reduces and overcomes functional barriers
- Increases responsiveness to changing needs
- Improves communication between functional specialists
- Provides cross-skilling opportunities
- Uses the skills of specialized employees who move from product to product, or customer to customer, as needed
The disadvantages are as follows:
- Staff not knowing what to expect of each other
- Staff disliking the resulting ambiguity and role conflict
- Potential for conflict between functions and product or customer teams over time
Deciding on a Structure
The descriptions of each stage in the preceding section show how each phase influences the others over time. There is no right or wrong phase, and the progression through phases may not be linear (1, then 2, then 3, for example). Understanding the characteristics of each phase helps senior management recognize which phase they are in and what the issues are; this helps to inform their decision-making regarding the direction they wish to move along the centralized-decentralized spectrum and the extent of that move.
Effective service management organizational development is dependent upon understanding where your organization is in the sequence and what the options are. There are no easy answers because each option will bring new challenges.
Organizational Departmentalization
Organizations are usually organized as a hierarchy. Often these hierarchies are based on the functions carried out by different groups. As these functional groups become larger, we think of them in terms of departments. A department might loosely be defined as an organizational activity involving more than a certain number of people. When a functional group grows to departmental size, the organization can reorient the group to focus on one of the following areas:
- Function: Preferred for specialization, the pooling of resources, and reducing duplication.
- Product: Preferred for servicing businesses with strategies of diverse and new products, usually manufacturing businesses.
- Market space or customer: Preferred for organizing around market structures. Provides differentiation in the form of increased knowledge of and response to customer preferences.
- Geography: The use of geography depends on the industry. By providing services in close geographical proximity, the organization minimizes travel and distribution costs while leveraging local knowledge.
- Process: Preferred for an end-to-end coverage of a process.
This means the organization will organize its departments to suit its strategy. Table 6.1 shows how some structures are particularly suited to some particular strategies.
Table 6.1 Basic organizational structures
| Basic structure | Strategic considerations |
| Functional | Specialization Common standards Small size |
| Product | Product focus Strong product knowledge |
| Market space or customer | Service unique to segment Customer service Buyer strength Rapid customer service |
| Geography | Onsite services Proximity to customer for delivery and support Organization perceived as local |
| Process | Need to minimize process cycle times Process excellence |
Copyright © AXELOS Limited 2010. All rights reserved. Material is reproduced under license from AXELOS.
Organizational Design
The first consideration when choosing an organizational design is strategy; this is illustrated in Figure 6.4, showing how we match strategic forces with organizational development. It sets the direction and guides the criteria for each step of the design process.
Figure 6.4 Matching strategic forces with organizational development
Copyright © AXELOS Limited 2010. All rights reserved. Material is reproduced under license from AXELOS.
Again, before we start designing our key processes, we should first choose a departmentalization structure. For example, if the provider’s organization will be structured by geography or aligned by customers, the process design will be impacted by this decision. Once key processes are understood, we can begin organizational design as shown in Figure 6.5.
Figure 6.5 Organizational design steps
Copyright © AXELOS Limited 2010. All rights reserved. Material is reproduced under license from AXELOS.
It can be helpful to think of processes as organizational software—they can be adjusted and configured to match the requirements of a service strategy. This is not a one-off process; we create basic processes and structures, learn about current and new conditions, and adjust them to suit in an ongoing iterative process.
Service Strategy Roles
A role is a set of responsibilities, activities, and the levels of authority granted to a person or team and defined in a process or function. One person or team may have multiple roles; for example, the roles of configuration manager and change manager may be carried out by a single person. Roles are not the same as job titles, which are defined by each organization, so the same role might be known by a different job title in another organization.
Roles fall into two main categories—generic roles, such as process manager and process owner, and specific roles that are involved within a particular lifecycle stage or process, such as a change administrator or knowledge management process owner. We will look at both types of role in relation to service strategy.
Service Owner
Large organizations will have many specialist areas, each concerned with its own processes and capabilities. Providing a service to a customer requires many of these specialist departments, or silos, to contribute. The service owner provides an end-to-end view, which ensures consistency across the service.
The service owner understands what the service needs to deliver and how it has been built to satisfy these requirements. As the representative of the service, they are involved in assessment of the impact of changes affecting the service, and when it suffers a major incident, they are involved as an escalation and communication point.
By attending internal and external reviews, the service owner ensures that the service is delivered according to the customer requirements. This allows the role to identify the requirements for improvement and provide input to continual service improvement to work with IT to address any deficiencies.
The service catalog process provides the business with information regarding the service, and maintaining this information with the service catalog process owner is another responsibility for the service owner.
The service owner interfaces with the underlying IT processes. It will have close associations with many of the processes:
Incident Management Involved in or perhaps chairs the crisis management team for high-priority incidents impacting the service owned
Problem Management Plays a major role in establishing the root cause and proposed permanent fix for the service being evaluated
Release and Deployment Management Acts as a key stakeholder in determining whether a new release affecting a service in production is ready for promotion
Change Management Participates in change advisory board decisions, approving changes to the services they own
Service Asset and Configuration Management Ensures that all groups that maintain the data and relationships for the service architecture they are responsible for have done so with the level of integrity required
Service Level Management Acts as the single point of contact for a specific service and ensures that the service portfolio and service catalog are accurate in relation to the service
Availability and Capacity Management Reviews technical monitoring data from a domain perspective to ensure that the overall needs are being met
IT Service Continuity Management Understands and is responsible for ensuring that all elements required to restore the service are known and in place in the event of a crisis
Financial Management for IT Services Assists in defining and tracking the cost models in relation to how the service is costed and recovered
Business Relationship Manager
Many organizations will have a person with the job title business relationship manager (BRM). This job may combine the roles of the business relationship management process owner and the business relationship management process manager and allocate it to one person. There may be several business relationship managers, each focused on different customer segments or groups. The role is sometimes combined with the role of service level manager.
By its nature, the role of business relationship manager often includes tasks from other processes; in the event of a major incident, for example, the BRM might attend major incident reviews to represent the customer. This does not make those activities part of the business relationship management process.
As we have said, the roles of business relationship management process owner and business relationship management process manager are often combined. The business relationship management process owner’s responsibilities typically include the generic process owner role of accountability for policy, documentation, auditing, and so on for the process combined with working with other process owners to ensure that there is an integrated approach to the design and implementation of business relationship management.
Now let’s consider the business relationship management process manager’s responsibilities. Typically they will have the following responsibilities:
- Carrying out the generic process manager role for the business relationship management process
- Identifying customer needs and ensuring that the service provider is able to meet these needs with an appropriate catalog of services
- Ensuring that customer expectations do not exceed what they are willing to pay for and that the service provider is able to meet the customer’s expectations before agreeing to deliver the service
- Ensuring high levels of customer satisfaction, indicating that the service provider is meeting the customer’s requirements
- Establishing and maintaining a constructive relationship between the service provider and the customer based on understanding the customer and their business drivers
Further responsibilities are as follows:
- Identifying changes to the customer environment that could potentially impact the type, level, or utilization of services provided
- Identifying technology trends that could potentially impact the type, level, or utilization of services provided
- Establishing and articulating business requirements for new services or changes to existing services
- Ensuring that the service provider is meeting the business needs of the customer
- Mediating in cases where there are conflicting requirements for services from different business units
It is important to remember that there are other parties involved in the business relationship management process. The business has a responsibility to play its part in the relationship. So, the customers and users of the IT services need to be involved, state their requirements, and work with the business relationship manager to ensure that these requirements are met so that the required business outcomes are supported.
Strategy Management Roles
Let’s look at the roles associated with strategy management for IT services. These include the process owner and process manager.
Strategy Management for IT Services Process Owner
The strategy management for IT services process owner typically has the following responsibilities:
- Carrying out the generic process owner role for the strategy management for IT services process
- Working with other process owners to ensure that the organization’s overall IT strategy is effectively reflected in their processes
Strategy Management for IT Services Process Manager
The strategy management for IT services process manager typically has the following responsibilities:
- Carrying out the generic process manager role for the strategy management for IT services process
- Formulating, documenting, and maintaining the organization’s overall IT strategy to best underpin the business strategy
- Assisting in informing, publicizing, and marketing the key aspects of the IT strategy so that all stakeholders are aware of the strategy and how it will be implemented
- Being responsible to the IT steering group for the successful implementation and operation of the IT strategy
- Reviewing how well the strategy is working, and making any necessary adjustments to make it more effective
- Ensuring that the appropriate support is in place for any strategy management tools and processes
- Coordinating the interfaces between strategy management for IT services and other processes
Other Roles Involved in Strategy Management for IT Services
In addition to these specific roles and activities, others are performed by the service provider’s senior management and the wider organization. Whatever they are called within an organization, the following roles should exist.
- Business strategy manager. This role formulates, documents, and maintains the organization’s overall business strategy.
- IT steering group. This role is formed of senior management from the business and IT roles and may include one or more enterprise architects to make decisions on policy.
- IT director or service management director. Larger organizations sometimes appoint an IT director or service management director to be responsible for all of their ITSM processes and to establish a service management office.
Service Portfolio Roles
Now let’s consider the roles associated with the service portfolio management process. These include the process owner and the process manager.
Service Portfolio Management Process Owner
The service portfolio management process owner typically has the following responsibilities:
- Carrying out the generic process owner role for the service portfolio management process
- Working with other process owners to ensure that there is an integrated approach to the design and implementation of service portfolio management
Service Portfolio Management Process Manager
The next role is that of the process manager. The service portfolio management process manager typically has the following responsibilities:
- Carrying out the generic process manager role for the service portfolio management process
- Managing and maintaining the service portfolio
- Managing the surrounding processes for keeping the portfolio attractive to customers and up-to-date
- Marketing the portfolio, and in particular the service catalog, so that customers and potential customers are aware of the services available
- Helping to formulate service packages and associated options, which enables the logical grouping of services into products designed to be marketed to, sold to, and consumed by suitable customer groups
Financial Management Roles
We will now look at the roles associated with the financial management process. It is important to remember that although job titles may differ, many organizations will have a person with the job title IT financial manager. This job typically combines the roles of financial management for IT services process owner and financial management for IT services process manager.
Financial Management for IT Services Process Owner
The financial management for IT services process owner typically has the following responsibilities:
- Carrying out the generic process owner role for the financial management for IT services process
- Working with other process owners to develop an integrated approach to the design and implementation of financial management for IT services
Financial Management for IT Services Process Manager
The financial management for IT services process manager typically has the following responsibilities:
- Carrying out the generic process manager role for the financial management for IT services process
- Compiling and formulating the annual IT budgets to be scrutinized by the IT steering group
- Managing the IT budgets on a daily, monthly, and annual basis, ensuring that expenditure is in line with the budgets
- Producing regular statements of accounts to enable relevant managers to manage their own areas of the budgets
- Formulating and managing recharging systems for IT customers
- Reporting on value for money of all major activities, projects, and proposed expenditure items within IT
Budget Holders
Another role associated with financial management is that of budget holder. Individual IT managers may be budget holders responsible for managing the budgets for their own particular area. Their responsibilities typically include the following:
- Submitting an annual budget estimate
- Negotiating and agreeing on their annual budget
- Managing their budget on an ongoing basis
- Reporting budget activities and outcomes
Demand Management Roles
Our final process roles are related to the demand management process. These include the process owner and process manager.
Demand Management Process Owner
The demand management process owner typically has the following responsibilities:
- Carrying out the generic process owner role for the demand management process
- Working with other process owners to ensure that there is an integrated approach to the design and implementation of demand management
Demand Management Process Manager
The demand management process manager typically has the following responsibilities:
- Carrying out the generic process manager role for the demand management process
- Identifying and analyzing patterns of business activity to understand the levels of demand that will be placed on a service
- Defining and analyzing user profiles to understand the typical profiles of demand for services from different types of users
- Helping to design services that meet the patterns of business activity and that have the ability to meet business outcomes
- Ensuring that adequate resources are available at the appropriate levels of capacity to meet the demand for services
- Anticipating and managing potential situations where demand for a service exceeds the capacity to deliver it
- Gearing the utilization of resources that deliver services to meet the fluctuating levels of demand for those services
Summary
This chapter covered the concepts of organizational considerations as they relate to service strategy. We explored organizational development, departmentalization, and design and the roles of service owner and business relationship manager in addition to the roles involved in strategy management, service portfolio management, financial management, and demand management.
Exam Essentials
Understand the development of organizations, in particular the phases of organizing by function, product, market space or customer, geography, or process. Understand the strengths and challenges delivered by each.
Understand the generic role of the service owner. Be able to describe the role of the service owner.
Be able to explain and expand on the role of process owner for each of the service strategy processes of business relationship management, strategy management, financial management, portfolio management, and demand management. Each process will have an owner, and each process has slightly different responsibilities allocated to the role to meet the process objectives.
Understand and expand on the role of process manager for each of the service strategy processes of business relationship management, strategy management, financial management, portfolio management, and demand management. Be aware of the difference between the process owner and process manager. Differentiate between the process managers for each process and the responsibilities associated with each.
You can find the answers to the review questions in the appendix. Which of these are recognized organizational structures in the ITIL Service Strategy publication? Select all that apply. Deciding on an organizational structure requires an understanding of where your organization is in the sequence of management styles. Put these styles in the correct order: coordination, directive, collaboration, delegation, network. What are the key characteristics of the network management style? Which of the following steps need to be taken before organizational design begins? Select all that apply. Which of these is the correct description of a role according to the ITIL Service Strategy publication? Which of these statements about a service owner is correct? According to the ITIL Service Strategy publication, which of these is identified as an additional role within financial management for IT services? Which of these is the best description of the role of service owner? Matching the description to the process role, which of the following statements are correct? (Choose all that apply.) Which option best describes the responsibility of a demand management process manager?Review Questions