Share insight
Idea In Brief
Specialisation is not a dirty word
As they grow, organisations that once relied on generalists will discover they need dedicated experts focused on specific functions.
Process design is crucial
Changing organisations must consciously design processes and mechanisms to accommodate new ways of working and making decisions.
Scale demands formalisation
Ad hoc and relationship-based ways of working may fuel early growth, but they become unsustainable as headcount grows.
While rapid growth sounds like a good problem to have, many superannuation funds are wrestling with it. Funds under management have grown dramatically from ~$400 billion in 2000 to ~$3.9 trillion today. Organic growth together with M&A activity across the industry is seeing super funds under pressure to successfully manage the inflow of new members, funds and employees alongside the globalisation and internalisation of investing and other functions.
Corporate history and academic business literature abound with examples of organisations becoming stifled by their own success. When assets and employee numbers grow quickly, organisations too often become more bureaucratic. Decisions take longer and more time is spent in meetings rather than acquiring and serving customers and finding new ways to meet their needs. While these challenges are not new, they are persistent. And they can have lasting effects on customer satisfaction, employee engagement and financial performance if not managed properly.
Drawing on our experience working with funds and growing organisations across sectors, we've identified four common hurdles super funds must overcome to take full advantage of their growth.
Accept that growth necessitates increased specialisation and hierarchy
Where previously a handful of generalists may have worn many hats, larger organisations need dedicated experts focused on specific functions. And although almost all organisations are trying to become flatter and more agile, it also becomes necessary to add one or more layers of management to the organisational structure to coordinate work within and between teams. A more formal organisation structure enables clearer accountabilities and more targeted development of capabilities. In our work developing organisation structures to support growth for superannuation funds, we not only determine the new teams, but also specify accountabilities, required capabilities and KPIs for each team, and (often) what each team doesn’t do that previously they may have done.
Consciously redesign processes for work and information flow
As the number and size of teams expand, coordination of work becomes more complex. Informal ways of working are suitable in a small, tight-knit group, but often fail at scale and need to be replaced with agreed high-level and then detailed processes for ‘how we work’. Organisations also need to agree how decisions are made and how to coordinate work between different teams. The trick is to consciously design mechanisms to accommodate the specific work and decision-making required by the changing organisation. Too many organisations let committees proliferate. It is important to consciously determine what needs to be coordinated and then to tailor fit for purpose process flow diagrams, accountability statements, committees and other decision-making bodies, time limited project teams, and in some cases ‘integrating individuals and departments’ (such as a procurement team) to improve decision making and work coordination. There is no one-size-fits-all best-practice approach. It always depends.
Decentralise decision making
As organisations grow, decisions can easily become bottlenecked at the top, slowing responsiveness and demotivating the front line. Pushing decisions closer to those with the most intimate understanding of members or customers and operations not only reduces bottlenecks, but also empowers employees to solve problems more creatively. Of course, this requires robust governance and risk management frameworks to ensure consistency. As we see in our projects with large growing financial institutions, once established, decentralised decision-making supported by well-designed information provision and clear governance (including delegations, KPIs and reporting) boosts customer satisfaction and reduces internal bureaucracy.
Embrace ‘formalisation’
The ad hoc, relationship-based ways of working that fuel early growth become unsustainable as headcount grows. Organisations need to introduce clear policies and agreed processes and use enterprise systems (rather than Excel sheets) to enable the organisation to work efficiently with increased standardisation and consistency. This can feel like a loss of autonomy for longtime employees, but it is essential to working at scale. We can look for inspiration to the healthcare industry, which in recent decades has moved to more consistent, evidence-based approaches, whilst also (slowly) shifting from paper records to electronic ones.
While these four key changes can feel like they constrain growth and innovation, they are crucial for long-term success and continued growth. The key is to design the organisation to fit its new needs, and then proactively manage the transition with clear leadership, communication, training and support that gets employees on board and advocating for the change.
By increased specialisation, introducing management layers with clear accountabilities, consciously designing team coordination and decision making, decentralising customer and operational decision making, and formalising policies and processes, organisations can scale their impact and avoid the common pitfalls that too often undermine growth.
The question is: Is your fund ready to grow successfully by making these changes?
Get in touch to discuss how your super fund can embrace organisational change to maximise growth.
Connect with Greg Joffe on LinkedIn.
Prepared with input from Sudipto Sarkar.
A version of this piece was originally published in FS Super on 2 August 2024.
