Organizational Structure: Start with Design Principles

House project

It would be foolish to design a home without first thinking through your needs. How much living space do you need? How many bedrooms?  What style do you like?

However, organizations are built each and every day without considering these types of fundamental questions around what the design is attempting to accomplish.

In order to create organizational structure, the key is start with design principles which are statements about what the design should provide.   It is critical that these design principles guide the entire design process since they focus us on creating an organization which accomplishes our objectives.

Below are ten organizational design principles from groups that I have consulted for:

  1. Build depth of leadership capability
  2. Be more agile via delivering faster
  3. Create cost efficiency
  4. Optimize people and system resources
  5. Enable process efficiencies
  6. Create best in class customer satisfaction
  7. Foster better service delivery
  8. Increase manager accountability
  9. Enable collaboration between departments
  10. Build internal change readiness

For example, I helped design a very different type of structure for the organization hoping to increase leadership skills versus the organization seeking to deliver products faster. In order to improve leadership, we crafted a structure that would challenge leadership to gain new skills, knowledge and abilities.  While at the organization looking to deliver products more quickly, we streamlined the structure resulting in more agility.  Clearly, depending on outcomes, the types of functions created, how they are organized and the roles and responsibilities within those functions are going to be very different.

Design principles are the foundation for trade-off decisions.  The design principles provide leadership with a tangible way to surface and discuss competing interests and outcomes.  Leaders are able to clearly state the improvements that they want to see as a result of the design.  This allows for a robust discussion across parties helping leadership gain consensus around the primary outcomes. [JayGalbraith.com, 2016]

I typically have leadership rank the importance of design principles since it allows them to evaluate the value of various design solutions.  I have found this to be the most effective and fastest way to determine which outcomes are most important to leadership.  We can then more easily determine whether an organizational design that is functional, divisional, strategic business unit, matrixed or project based will result in the best outcomes.

Jay Galbraith [JayGalbraith.com, 2016] makes a strong case for the importance of robust design principles.  He says that the criteria should be debated, rated, and kept prominent throughout the design process.  As a result, design principles are a topic in each and every conversation that I have with clients about the new design.  Clients find that as a result of this ongoing exploration of the principles, their understanding of what they are driving towards via the organizational design and how to get there becomes clear.

Questions:

  • Imagine that three years from now the Wall Street Journal [WSJ] names your organization the best in your field. What is the WSJ saying about you that makes you the best?  [This will provide you with clues as to your design principles.]
  • How can we best organize our work and people in order to accomplish our strategy?

Note: This blog reflects my thoughts and not the opinions of my employer.

Focusing on How to Execute Your Strategy Improves the People Side!

Keep Calm and Get Things Done blue sign

Keep Calm and Get Things Done blue sign with a crown making a great concept.

We have learned that some organizations execute their strategy based on the amount of money they have available in the bank, the skills of their current workforce or educated guesses about where the business environment is headed. However, more mature organizations are executing strategy by identifying and filling gap between the business capabilities they have today and the capabilities they need in the future. Doing so results in improvements across your organization – even in areas where you did not expect to see wins such as your structure, processes, people and even culture!

Business capabilities are what differentiates the organization and ensures that it is equipped to execute its strategy. Capabilities are the “What” is needed in order to execute, followed by the “How” to achieve the desired result. These are the operational things or what the organization must know how to do to execute strategy. For example, a manufacturing firm must know how to design and create innovative products. [http://www.accelare.com/strategy-to-execution]

What is a capability-driven organization good for? In short, running your organization based on capability models can improve your design, implementation and outcomes. Capability based planning involves getting real about what is needed to execute and about getting to the root cause of issues that are holding you back. As a result, capability-driven efforts improve:

• Strategy: Unpack strategy as part of exploring capabilities allowing strategy to become much more clear and likely to succeed

• Structure: Employ a capability based organizational design which ensures accountability of capabilities to execute the business strategy. [And bust through silos!]

• Processes: Improve the series of connected activities that make up the work you carry out for efficiency/effectiveness

• People: Clarify the skills, knowledge and abilities needed in order to deliver so that human resources are operating at peak performance

• Culture: Amp up the beliefs, values and norms which represent your organization’s unique character and makes it what it is

For example, a health insurance company adopted capability based planning solely to improve their performance via better execution of strategy. However, over time I observed that the strategy to execution work was positively impacting other aspects including people becoming more collaborative, processes becoming more efficient and technology tools becoming more useful for end-users. In fact, a common refrain from employees on the ground was that the culture had improved.

Hard to believe that capabilities can improve all these areas? It is not surprising given that capability based planning involves figuring out what it will take to succeed from a People, Process and Technology point of view and filling these gaps. This is all about becoming a high performance organization. A simple formula that works.

What challenges are you facing that may be solved through capability based planning?

Note: The views expressed in this blog are my opinions and do not in any way reflect the views of my employer.

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