When you hear the words organization design, what typically comes to mind? If you think about organization charts, moving boxes, and mapping talent to roles, you’re not alone. When faced with the need to reevaluate their design, this is the first thing many leaders think of.
In reality, organization design is about much more than names in boxes. When done correctly, it is a complete system of performance that includes structure, processes, people, and metrics—all aligned to the organizational strategy and capabilities.
While the process of organization design can be daunting, with many moving parts that must be aligned, there are five key principles that you should keep in mind.
5 Key Principals of Organization Design
1. Organization design should always be driven by strategy first.
The first thing to do when an organization redesign is deemed necessary is to look at the business strategy. Has the current plan changed or shifted? Strategy is addressed first because it influences all organization design decisions. It sets the direction by clarifying goals and objectives, including clarity on markets, target customers, value provided, products, and services, as well as the organization’s vision, mission, goals, objectives, and values. The strategy dictates which activities are necessary to meet objectives and how those objectives will be achieved, providing the criteria by which decision-making occurs. If the strategy is not clear, it is impossible to align the remaining elements to the same point.
2. Organization design requires a holistic system of thinking to be successful.
When making decisions, it’s critical to consider how changes in one division of the business will impact the organization as a whole before taking action. This can be especially difficult for division leaders who naturally want to solve any issues as quickly as possible. Jumping into a situation too quickly, however, will often create a situation in which you end up treating the symptom without addressing its root cause. Performing a more thorough, organization-wide review of a division’s pain points will likely point to more specific solutions that will not be obvious from a more limited perspective.
For example, let’s envision a scenario in which poor communication is causing incidents of rework in one division of an organization. This can be traced to how and when information is shared with the appropriate teams. To address this issue, a tactical approach can help improve the communication process. If necessary, a more comprehensive approach may be taken to examine the surrounding processes and to identify a better way to align the teams and surrounding systems to operate more effectively. Finally, the challenges associated with the communication breakdown may reveal additional issues concerning how teams and workflows are organized through the product life cycle. This type of effort may result in the need for a complete overhaul.
Maintaining balance does not always require such significant changes. Sometimes, it’s just a simple matter of checking in and pressure testing any changes against the structure of the teams completing the new process, and the skills of the talent performing the activities. If either cannot support the new process, then it must be addressed during the design process.
3. Organization design should aim for the future, not the present, and certainly not the past.
The first critical point is that organization design should always be driven by strategy first, and the strategy should always be developed with the future in mind. As leaders often consider the strategy and talent first, it’s easy to get stuck in the pattern of working with what you have, starting with the current model, and heavily weighting the current realities. This model will never provide the foresight needed to stay focused while moving in the direction of the larger vision.
When the vision tends to be 10+ years into the future, and tactics are typically 18-24-month actions, strategy is generally designed 3-5 years in the future, a steppingstone to that bigger vision. Identifying key performance indicators or metrics to assess regularly will help keep the design future-focused. Strategy metrics, such as market growth, will not immediately reflect the strategic changes, but they are a good measure of the strategy’s alignment with the vision. These metrics will typically be evaluated quarterly. Shorter-term metrics, such as operational metrics, reflect the day-to-day tactical actions that we anticipate will impact the effectiveness of the strategy. If your strategy metrics are things that can be measured daily or weekly, they are likely not future-focused enough.
4. Good organization design is the foundation for strong business performance—do not shortcut it.
Organization design is the foundation of all business operations. Achieving results begins with the proper alignment of resources and processes. Misalignment of components can cost valuable resources such as time, money, and talent due to the resulting challenges and frustration. Redesigning a structure without considering the impact to individual processes may result in a duplication of efforts. Adjusting process flow without aligning metrics and rewards could result in competition or misalignment of values. Making any adjustment without evaluating alignment with strategy may result in disruptive tension or conflicting priorities. While one priority, such as restructuring to align with geographic priorities, may appear more urgent and pressing than others, taking the time to conduct an organization redesign properly by aligning each component with strategy and organizational capabilities will pay dividends in efficiency, productivity, and employee engagement.
5. Organization design must be supported by a quality adoption process—regardless of the size of the effort.
Regardless of the size of the effort, a structured change plan to support adoption is imperative. Organizations often view the change process as beginning at implementation. Change management efforts are more effective the earlier they begin. Identifying stakeholders, organizational readiness, and potential resistance early allows the change plan to begin addressing those factors early and potentially even provide valuable information that may impact the design.
Organization Design: Your Competitive Advantage
Organization design can feel overwhelming, but it doesn’t have to be. By taking one step at a time, addressing each element in the system, maintaining focus on the future vision with constant alignment to the strategy, and providing the resources necessary to get it done effectively, organization design can provide a strong competitive advantage.
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