If you’ve come across the term “organizational design” or any variation of it (“organization design”, organizational design and development”, “organizational development”, etc), you hopefully already know it is an important topic, and one that is critical to the success of your business. The main reason for this is that OD brings together the organization’s purpose with the people and support systems required to bring it to fruition – which is absolutely critical for success.
For information on what Organizational Design is, go to the article “What is Organizational Design”. It will open in a separate tab so you can come back to this article afterwards.
The lack of a holistic OD exercise when it comes to setting up or changing elements such as strategy, structure or talent can result in a plethora of unwanted outcomes. I’ve listed the most important reasons to embark on a full OD project, based on my experience and the issues I’ve seen unravel in departments and organizations that did not consider all the elements of organizational design when making changes that required it.
Reason #1: To align your structure to your strategy
In “What is Organizational Design”, I described the importance of an OD engagement to create alignment between your organization’s structure and resources. If you haven’t read the article yet, I suggest you read it and then come back to this one. Back to our topic – OD is important if you’re interested in making sure your structure supports and enables your strategy. And that in turn is important if you are looking to have a successful business.
Reason #2: To ensure all required activities are accounted for
Without the detail involved in an Organizational Design engagement, it’s very possible to completely miss some activities that may be real game-changers for your structure. These activities might be part of solutions to existing problems or even entirely new opportunities. By going through the OD framework, you’ll make sure that all required activities are documented.
Reason #3: To ensure structural gaps are avoided
Following from the previous point, without the detail involved in an Organizational Design engagement, it’s also possible to miss structural requirements entirely. This could be a missing function, if the function is small (could still be important though!). Other potential issues are the hierarchy and reporting lines of different teams. Using the OD framework, you’ll be able to make sure that you’re not missing any structural pieces to ensure the success of your organization.
Reason #4: To ensure adequate headcount
If you make a mistake with your activities and teams, there is a good chance you’ll end up with the wrong (lower) headcount too. And that’s not something that’s going to make success any easier. So as a result of points 2 & 3 above, you’ll also be able to make sure that you’re estimating required headcount more accurately.
Reason #5: To provide a strong base from which to draw up job descriptions, skills and role requirements
At this point, I think it’s easy to see that with the points mentioned above and the steps you would have followed throughout the OD engagement, you’ll have plenty of detail for job descriptions, skills and requirements for specific roles. It may take some time to get to this point, but by the time you’re here in the process, everything becomes very fluid. In fact, it is much easier and a lot more comprehensive to write up a job description after going through this process (versus doing one from scratch). It also means that you won’t miss any important accountabilities or skills as you’ll have a complete picture of what the role does and how it fits in the organization.
Reason #6: To easily identify processes and process steps
Similar to point 5 above, when you go through the Organizational Design framework, you’ll be able to identify processes (including, of course, who is involved in those processes) very easily. You can then extract entire processes and use them in training, communicating new changes and documenting your processes.
Reason #7: To provide the basis needed to define measurement
Lastly, with all the information above, and knowing what the organization is striving to achieve, you’ll be much better equipped with identifying the best metrics and measurement frameworks to provide visibility on how well your organization is performing in achieving its objectives.
Final Thoughts on the Importance of Organizational Design
In closing, I would like to stress that “designing a structure” is not the same as following an Organizational Design framework. The former focuses only on the organizational structure – how to organize people – potentially leaving out important areas such as alignment to strategy, split of accountabilities and activities across teams and people, defining processes to ensure efficiency and effectiveness, defining measurement frameworks, identifying required skills and competencies, and deciding on performance rewards, frameworks and mechanisms. So if you’re looking for something holistic, Organizational Design is it.
What are you biggest challenges with Organizational Design at the moment? Do you have any current or planned Organizational Design work that you would like more information on? Post your comments and any questions below, and if you can help anyone else out with an answer, don’t hesitate to do so! As always, if you’ve found this article useful, share it with someone who’ll benefit from it as well!