The process of designing an organization's structure and operations are known as organization design. It covers a wide range of areas of working life, including team structures, work schedules, reporting lines, decision-making processes, communication routes, and more. Any sort of organization can benefit from organization design and redesign to fulfill its objectives. There are instances when a thorough reorganization is required. At other times, more minor modifications to an organization's systems and structures might guarantee its survival. In this post, we'll examine the principles of organization design, its benefits to people, and how to implement them.
What is Organization Design?
Let's begin with a formal definition: The management and implementation of a company's strategic plan is organization design. The organization's strategy determines the best organizational design. It also means that there aren't any best practices for organization design. Creating the optimum match between an organization's strategic decisions and its organization setting is more what organization design focuses on, as we cover in our organizational design certificate program. The strategic direction of the business, often known as the organization's vision, purpose, and goals, influences organization design. These result in competitive strategies for the company, which the organization structure supports.
10 Organizational Design Guiding Concepts
We've seen quite a few organization design attempts fall flat because senior executives were preoccupied with debating the advantages and disadvantages of the previous structure. To avoid this outcome, declare "amnesty for the past." Decide collectively that you will not point the finger at or attempt to defend the current organizational structure or any previous organizational design. It is time to proceed. This kind of proclamation may seem straightforward, yet it's surprisingly effective at maintaining attention to the new tactic.
1. Grant Forgiveness for the Past
Corporate self-reflection should be the first step in organization design. What do you think your purpose is? How will you improve things for your customers, staff, and investors? What distinguishes you from other people both now and in the future? What unique skills will you have in the future, two to five years, to deliver your value proposition?
To respond to those inquiries requires letting go of the past. Declare "amnesty for the past" to avoid getting sucked into debates about the advantages and disadvantages of the previous organization. Decide collectively that you will not criticize or attempt to defend the current status quo or any previous organizational structures. Despite its seeming simplicity, this kind of proclamation is remarkably successful at maintaining attention to the new tactic.
The correct framework, however, can assist you in decoding and prioritizing the essential components of organization design, which can appear overly complex. No matter what industry, region, or business model a company is in, there are eight basic building components that are essential. You will put these construction blocks together to form the components of your design. There may be a temptation to adjust all eight construction components at once. However, if too many therapies are made at once, they may interact in unanticipated ways and have harmful side effects.
Select no more than four or five modifications that you think will have the most significant immediate impact. Numerous variations could result from even a small number of adjustments; for instance, the design of motivators may need to differ depending on the function. While employees in R&D may prefer a career plan with options for self-directed initiatives, external collaboration, and education, people in sales may be more heavily driven by monetary benefits.
3. Make Structural Fixes Last—not First
The most apparent effective communication tool available is the organizational chart. Because it establishes reporting ties that people may love or loathe, it also bears emotional weight. However, a firm hierarchy often returns to its initial equilibrium, especially when org chart adjustments are isolated from other changes. While it is possible to reduce management layers and short-term costs considerably, the layers will soon return, and the advantages will be lost. You don't instantly create a new shape for the organization design when you remodel its organization structure. You're outlining a progression of actions that will move the business from the past to the future. You should design structure last; it should be the culmination of that process rather than its cornerstone. Otherwise, the change won't be able to continue.
4. Concentrate on What You Can Influence
Make a list of the obstacles your organization faces, including restrictions and scarcities (items that are frequently in limited supply) (things that consistently slow you down). Taking stock of practical constraints makes implementing and maintaining the new organization design more accessible.
Regulations, supply shortages, and shifts in consumer demand are a few examples of constraints that may be beyond your control. However, it's crucial to focus on what you can change rather than becoming bogged down in trying to change what you can't. A single worldwide structure with clear decision rights on branding, rules, and usage standards, for instance, would be preferred first if your company manufactures consumer packaged goods (CPG) on a global scale since it is more effective at building a solid brand image. However, if there are regional variations in consumer preferences for your product, a structure that tends to cede decision-making authority to the local business leader may be preferable.
Create your organization design in a way that makes it simple for individuals to take responsibility for their portion of the task without being micromanaged. Ensure that information flows quickly and clearly from the executive committee to business units, functions, and departments and that decision powers are apparent. Accountability can take hold once decision rights and motivators are established.
People eventually develop the habit of keeping their word even without official punishment. This new accountability needs to be consistently nourished and promoted, even after it has ingrained itself into the company's culture. It won't last if, for instance, newly hired employees break promises or if incentives alter in a way that makes the intended behavior less likely to occur.
6. Make the "Lines and Boxes" Serve the Goals of Your Business
There is a perfect arrangement of "lines and boxes"—a "golden mean"—for every business. It is different for every business; it should reflect your chosen approach and support the key attributes that set yours apart. This implies that, despite being in the same industry, the ideal structure for one company may not be the ideal organization structure for another. When creating the spans of control (how many people directly report to each management) and layers (how far a manager is from the CEO) in your org chart, consider your purpose. These ought to be largely uniform throughout the organization design.
Companies find formal components like structure and information flow appealing since they are tangible. They are easily measurable and definable. However, they only tell half the tale. Many businesses redistribute decision-making authority, reconsider organization design, or install knowledge-sharing platforms—yet they don't get the desired results. That is a result of their disregard for the less formal, abstract building blocks.
For things to be done, norms, commitments, mindsets, and networks are necessary. They represent (and have an impact on) how individuals feel, think, act, and communicate. The organization doesn't function as it should when these intangibles are out of sync with one another or the more concrete building pieces.
8. Focus on Your Advantages
One of the most challenging tasks for a chief executive or division leader is restructuring their organization, especially if they are tasked with turning around a failing business. However, there are always areas of the culture and practices that can always be improved. Look to these assets—formal or informal—to assist you in addressing the most pressing issues on your list of priorities. Consider the scenario when client commitment is the norm in your organization's design. When asked to do so, employees are eager to go above and beyond for clients, frequently completing projects early or outside of scope because they understand the challenges clients confront. By creating discussion groups around it, you may call attention to that behavior and promote it by awarding it with more official rewards. It will spread more widely as a result throughout the business.
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One of the most challenging tasks you will ever face is running a business. It will not be simple. You must keep an eye on various factors that either help or hinder the success of your business. The most critical factor in the growth of any business is organization design. By taking actionable steps, you can ensure the proper organizational design and achieve the pinnacle of success for your company. This article should have provided you with a better understanding of the role of organizational behavior in business success.