Organisational Design - What's It All About?
At the end of last year, I asked subscribers of my blog, what they would like me to write about in 2019.
One of the responses I received was from Frank Iannuzzelli. Frank asked:
“I’d love to know more about organisational design and how to execute this”.
My challenge with this question was the depth and breath of the potential answer! Therefore the intent of this blog is to describe what organisational design is (and isn’t) and a way in which to approach it.
Organisational design 101
Organisational design (OD) is many things to many people. You only have to Google the term to find that out. Not only are the definitions varied but also the approaches.
Of all the definitions, the one I like best is from a recognised leading expert in organisational design – Jay Galbraith:
“Organization design is the deliberate process of configuring structures, processes, reward systems, and people practices to create an effective organization capable of achieving the business strategy. The organization is not an end in itself; it is simply a vehicle for accomplishing the strategic tasks of the business. A well-designed organization helps everyone in the business do her or his job effectively. A poorly-designed organization (or an organization by default) creates barriers and frustrations for people both inside and outside the organization.”
In a nutshell, organisational design is about changing structures, processes, and how people work (including reward and recognition structures) to align an organisation with the achievement of its overarching strategy and goals.
OD is not a one-off or intermittent process. It is a practice of continual improvement and in its fundamental state does not differ widely from W. Edwards Demming’s continual improvement process of plan-do-check-act.
Most approaches start with an assessment of the organisation’s current state and analysis against its goals and objectives. Improvement activities are then initiated and implemented followed by a subsequent assessment at a predetermined interval or one driven by external or internal forces such as mergers and acquisitions, strategic change, structural changes, changes in customer or consumer demands, competition, talent attrition and so on.
The intended outcomes of OD are improved results (including profits, customer service, operational performance and productivity) and engaged employees who are inspired and motivated to make a difference.
The following is not based on any particular OD approach but rather a snapshot of the basis of most approaches.
Organisational design approach
Commission the OD
OD is not something to be embarked upon lightly. It is a massive undertaking and can be highly disruptive despite being done for all the right reasons. Therefore the imperatives and perceived triggers for change need to be understood. The strategy of the organisation needs to be clearly defined and understood if the organisation is going to be aligned to it. There needs to be a business case for change, an understanding of the scope, the objectives, the resources needed, the participation (including external partners), the timeframe, the organisational change management approach and any other considerations for the program / project.
An assessment of the current state will be undertaken.
This could utilise approaches such as Galbraith’s STAR™ model, which looks at strategy, structure, processes, rewards, and people; the McKinsey 7-S model, which considers style, strategy, skills, shared values, staff, structure and systems; the Nadler and Tushman congruence model, which focuses on tasks, people, structure, and culture; or any other of the many models and approaches available.
There is no right answer in the choice of model. Each consultancy company employed to undertake organisational design will come armed with their own bespoke solution.
There may be be times when funding is not available to engage the expensive consultancy firms, so my guidance would be to do the research and chose a model that as a leader you understand how to use and one that is adaptable so it can be applied to the variety of organisational challenges that may be faced over time.
You may not want to engage an expensive consultancy firm and nor do you have to. I suggest that as part of 'commission' you determine your internal capabilities before you embark on an expensive and perhaps unnecessary external engagement.
The key thing to remember is that the aim of organisational design is to assist a leader move from defining a strategy to putting in place an organisation that enables that strategy to be achieved. So, the choice of model should be based on that premise.
Once the assessment has been undertaken, the leadership team and partners can work together to determine what the future looks like. The design should consider organisational structure, processes, procedures, people (structure and capability), metrics, supporting functions and ongoing improvement.
The design outputs should be able to produce the desired results such as performance, productivity, customer satisfaction, employee engagement, or a combination.
The outputs should connect back to the organisational strategy and goals. If they don't - start again!
Now the rubber hits the road. The design is put into place along with the required structures, training, recruitment, reward systems, performance management, knowledge management, decision-making, and management systems.
As with any change, the effectiveness needs to be monitored and if desired results are not being achieved, then corrective action will need to be taken. This is probably one of the most important steps.
Often, due to the considerable effort that takes place up front, once implementation is underway, the eye gets taken off the destination. It is assumed that because we checked the compass and set course, we will arrive at our desired destination.
What has to be considered are the changes in wind, waves and loading that can all take us off course during the journey.
Our wind, waves and loading could include competition, technology, attrition, customer demand, legislation etc. that could all influence our intended direction.
Our destination and design to get there has to be closely watched, and any deviation responded to.
What has organisational change management got to do with it?
I have already mentioned organisational change management (OCM) once in this post and that was right at the start of the approach.
OCM should be an integral part of organisational design from the start. OCM is the approach to transitioning individuals, teams and the organisation as a whole from a current state to a desired future state, as smoothly as possible.
OCM will be fundamental to the understanding of the impacts of any proposed changes upon the people and their predisposition to that change.
Communication, engagement, education, development, sponsorship and advocacy, support and sustainment, will all be driven by OCM.
Not one without the other
OD is the ongoing, continual approach to making organisational changes to achieve organisational strategy.
OCM is the approach that ensures changes are effectively implemented and the lasting benefits of change realised.
Therefore, OCM is an integral and vital part of OD. Without OCM, OD would not achieve its desired outcomes. Without OD, OCM could not be assured that the changes being implemented where right for the organisation and not just an executive whim.
Try putting a positive spin on that communication!
I believe the imperative is that OD and OCM work closely together and ensure that accountabilities, roles and responsibilities are clearly defined. There are obvious shared desires and outcomes, so close collaboration is essential for success.