Good organizational design has the ability to transform an organization’s culture and accomplish business goals beyond anything imaginable. As a result, many organizations allocate significant time and resources to this design process. However, impactful organizational design can be done more efficiently and effectively if one goes about it in a strategic manner.
We will explore the overall definition and purpose of organizational design. Understanding the scope of organizational design and knowing when and when not to tackle this endeavor are key prerequisites for success.
Definition and Scope of Organizational Design
Organizational design is:
The deliberate process of configuring:
- Processes and policies
- People practices
. To create an effective organization capable of delivering on the Organization’s Vision/Strategy/Goals. [Adapted from jaygalbraith.com]
A key aspect of organizational design is determining where formal power and authority are located. This is the traditional organizational chart with boxes representing grouping of work. These structural components determine the hierarchy and resulting relationships within the organization. These formal components are important since they channel the energy of the organization and provide an identity for employees.
A key point of this definition is that in addition to the structure, one should also pay attention to processes and policies, people practices and culture. Too often organizations craft the formal structure and never get around to the organizational mechanisms which are the underpinnings of the overall structure. Only establishing boxes on an organization chart is akin building the foundation of a house without putting in electrical and plumbing.
The processes allow decision making and work to be carried out effectively and efficiently. The policies help clarify how the organizational components are interrelated for an extra boost of productivity. Finally, one cannot emphasize enough how people practices and culture impact the ability of the organization to accomplish valuable work in a manner which empowers employees.
When to Tackle Organizational Design
Another key aspect of organizational design is knowing when to dive into a redesign effort. Many leaders believe that organizations need to be redesigned every few years regardless of what is happening in the organization and around it. I have consulted for organizations which have successfully operated with the same organizational design for decades. On the other hand, I have advised organizations to dive into redesign within a year of a previous design effort due to the below types of changes:
- Change in strategy
- A crisis or significant events
- Organization around you has changed
- Change in external environment (such a regulation)
- Lack of performance
- New leadership
The following points emphasize how critical it is to be clear about why a redesign is being launched:
- It is important for leadership to know the reasons why the redesign is needed. The rationale for the redesign helps define the outcome.
- For example, I worked with a nonprofit organization which launched a redesign due to lack of delivery and a change in strategy. As a result, we measured the success of our effort via organizational performance moving forward.
- The root cause of the redesign also helps shape the redesign strategy.
- For example, a redesign in a government organization was launched due to changes in the external environment, including regulatory changes, which required an outward focus. We crafted a design process with mechanisms for measuring and monitoring the impact of external factors such as government policies and third party stakeholders.
- Finally, articulating the rationale for the redesign will help employees embrace the effort and necessary changes.
- For example, it was important for employees at a business to understand that a redesign effort was being launched due to a crisis. These employees gave us the benefit of doubt knowing that the organization’s survival, and as a result their jobs, were predicated on the success of the redesign.
We have established the definition, scope and rationale of your redesign effort. In future blogs we will explore how to carry out the actual redesign.
- Why is your organization tackling an organizational design? How will these reasons impact your design outcomes? How will these reasons impact the design plan and processes? How will these reasons impact how you will explain the rationale for the redesign to employees?
- What is the scope of your organizational design? How will you ensure that you design not only the structure, but also processes and policies, people practices and culture?
Note: The views expressed in this blog are my opinions and do not reflect the views of my employer.