What is Organizational Design?

Definition of Organizational Design

Organizational Design (also called “organization design”, organizational design and development”, and other variations of these) is a broad yet in-depth topic that aligns an organization or department’s strategy, structure, processes, skills/talent, measurement and reward system to set it up for success.  It is this alignment of the structure, processes, skills, measurement and rewards systems to the business strategy and objective that makes Organizational Design all-encompassing.  This is why it is such an important topic.  

Components of an Organizational Design Engagement 

An OD practitioner will ensure that several things have been put into place while working on an OD engagement.  These elements are:

1. that a coherent strategy is available or has been developed,
2. that an appropriate structure has been designed which supports and enables the strategy, 
3. that roles and teams within the structure have been defined, 
4. that processes have been mapped out to ensure maximum efficiency, 
5. that measurement frameworks for both people and processes have been defined and set up, and
6. that an additional rewards framework for the former has been put in place.  

Behavioral Component of Organizational Design 

OD also includes a behavioral component that supplements the scientific approaches to designing an organization.  This is so important, because it indicates a recognition that the human aspect of OD has a large influence on the scientific or “business” aspect of it.  A big part of the behavioral component is anchored in stakeholder management and change management.  Other pieces of behavioral considerations include an understanding of organization culture and how specific structures, hierarchy, areas of responsibility and specific accountabilities may be threatened or even unsuccessful within the current organization’s environment.  

Why is Organizational Design Important?

The OD practice is important, most of all, because it drives success for the organization.  The stitching together of strategy, structure, processes, skills and more provides the organization the best possible chance for a positive outcome.  Without the alignment created by Organizational Design, you could have a great strategy, great people and effective processes, measurement systems and rewards in place, but they could be completely misaligned, not supporting or enabling the business strategy or objectives at all – clearly a big problem.    

What does Organizational Design Entail?

End-to-end, Organizational Design involves the following steps:

1. Articulating the strategy, goal, current state and gaps

Although the OD engagement may not include setting or defining the strategy, it is important for there to be a strategy in place.  The strategy must be well articulated so that the OD practitioners, stakeholders and other team members can use it to ensure the rest of the OD work supports and enables the right strategy.  

2. Designing the structure

It should come as no surprise that the OD engagement will include designing the organization structure.  The difference between merely constructing a structure and constructing one within the context of an OD engagement is that the latter ensures the structure supports and enables the strategy, whereas the former may not necessarily follow a methodology to ensure it does.  

3. Defining roles, teams, hierarchy, span of control and accountabilities within the structure 

An OD piece of work provides users a methodology and framework with which to identify roles & teams.  Although this can be done separately, when doing it as part of an OD engagement, you’ll find that the outcome is clearer and easily to achieve.  

4. Creating job descriptions for all the roles within the structure, highlighting both hard and soft skills

Because of the detail involved in the OD work, it becomes very easy to produce job descriptions and, if needed, team descriptions.  Both will cover accountabilities, responsibilities and required skills of either the team or the individual.

5. Mapping out processes for at least the main or major activities throughout the organization/department 

Again, because of the detail involved in the OD work, mapping out the major processes is also something that can be done fairly easily and quickly.  One of the key benefits of an OD engagement is that by putting in the work required by the methodology in the beginning, all of the details become clear and easy to identify later on.  

6. Defining measures of success for teams and processes

After defining the team roles, job descriptions and major processes, it is necessary to articulate the measures of success for teams and processes.  With the information already available at this point, these measures are also fairly easy to identify, as the team accountabilities and processes have already been defined.  

7. Deciding on rewards for performance

The last part of the OD engagement covers rewards for performance.  This is very often left out, but it shouldn’t be, as it cements leadership’s commitment to the strategy and to ensuring everything is being done to achieve it.   

A Final Note on Organizational Design

Hopefully your interest in Organizational Design has been piqued.  It is, as I mentioned earlier, one of the best ways to ensure success in your organization – and who doesn’t want success?