Organization Design

The Practitioner's Guide

Naomi Stanford

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351867054
• Edition: 3
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

Organization Design looks at how to (re)design an organizational system in order to increase productivity, performance and value, and provides the knowledge and methodology to design an adaptive, agile organization capable of handling the kind of continuous organizational change that all businesses face. The book clarifies why and how organizations need to be in a state of readiness to design or redesign, and emphasizes that people as well as business processes must be part of design considerations.

With an enhanced international focus, this third edition includes new material on:

• organization design theories
• designing ethical, diverse and inclusive organizations
• the role of leaders in organization design work
• organization design in public sector organizations
• and evaluating the success of an organization design project

This book is a must-read for students or practitioners involved in organizational design, development and change.

1 What is organization design?

Outcomes: what you will be able to do at the end of this chapter

• Define what organization design (OD) is – and is not.

• Describe some of the underpinning systems theory of OD.

• Compare the common models used by organization designers.

• List four key influences on OD.

• Apply your learning to a case study.

Overview

An organization design (noun) is the outcome of an organization design process (verb). This chapter opens with a definition of OD, and a discussion of the fact that design is not just about the organization chart. It moves on to considers systems theory as the foundation of OD work, and considers how established assumptions on this approach are being challenged by five megatrends and four related disciplines, including complexity theory. The chapter closes with a case study that shows how to apply the learning.

What is organization design?

Organization design is arranging how to do the work necessary to effectively and efficiently achieve a business purpose and strategy while delivering high-quality customer and employee experience.

Note that arranging involves aligning the organization with the strategy, and creating coherent designs, while building trust among key stakeholders.

This definition – used throughout this book – hints at five organizational elements that should be considered when approaching OD: the strategy, the work, the systems/processes involved in doing the work, the people who do the work, and the way in which they do it. These are discussed further in Chapter 4, Starting.

The definition comes as a surprise to people who think that OD is mainly about the structure – (aka organization chart). It is not mainly about the organization chart; it is mainly about the organization. Organization charts are useful shorthand for describing some things, but not for others.

Table 1.1 What does the organization chart tell you?

What does the organization chart tell you?	What doesn’t the organization chart tell you?
Hierarchy	Goals, objectives, strategy, values, principles, protocols, outcomes of the organization unit
Reporting lines, who reports to who	Workflows
Number of jobs, teams, employees (but usually not full-time equivalents)	What the work is, how the work gets done, who does the work
Names of jobs, teams, employees	Who is accountable for the work, decision-making clarity, delegation
Core business – how work is sectioned	Relationships Interactions, interdependencies, links between areas of the business
Core leadership team(s)	Levels of influence, ‘real influence’, power
Gender	Expectations
Job vacancies	Employee work styles, performance, areas of expertise, skill sets, skill gaps Employee photos – so I know what they look like when I go to meet them/have questions for them! Does the structure work? Why does it work/not work? Processes and systems Workforce movement Criteria for matching employees to roles Succession planning, critical roles Work arrangements (P/T, F/T)

Focusing on an organization chart is not the way to do OD. Nevertheless, it is still a common response that is aimed at trying to solve a business problem (see Resources, Activity 1.1).

For example, the new CEO of a 300-person healthcare company decided to ‘restructure’ in response to a combination of circumstances, including changes in the external healthcare market, requests from clients for a higher-quality level of service, and loss of market share to competitors.

He gave a revised organization chart, similar to the one shown in Figure 1.1, to the OD consultant, with a request that she implement it. This CEO was not alone in his response. It is all too easy to take the boxes on the chart and put them into a different configuration, usually without thinking through the consequences or the risks associated with doing so. Even a quick glance at Figure 1.1 raises questions like: ‘How will we know this is the right structure for the organization?’, ‘Is this the best structure to deliver the strategy?’, ‘Are ten direct reports to the CEO too many?’, ‘Why is Grants linked to Behavioural Health and Dental – shouldn’t it be in Development?’, ‘How will this help increase customer satisfaction?’ and ‘What risks does it bring with it?’.

Figure 1.1 Health company organization chart.

Note

Unlabelled items were still under discussion at the time of chart production. It was a ‘work in progress’.

Trying to solve a problem starting with changing the organization chart will not achieve the desired outcome, and will have unintended consequences because it is a partial response to a problem usually triggered by one of the following:

• External pressures: for example, competition, regulation, skill scarcity and customer dissatisfaction.

• Internal pressures: for example, the desire to give someone a promotion or new role, a new leader who wants to ‘shake things up’, changes in internal policy.

• A combination of external and internal pressures.

Looking just at the organization chart does not address the fact that choices around the organization chart can help to solve or complicate further the presenting problem. This is because:

1 Different structures do different things. For example, in a hierarchical structure authority is based on level in the hierarchy, while in a flat, networked structure authority is based on knowledge and resources. The structure must be carefully chosen to position authority where it best delivers the business strategy and solves the problem.

2 Some structures are better in some situations than others. For example, an organization pursuing a global strategy is likely to need a different structure than an organization pursuing a regional strategy.

3 Business processes (which deliver the business strategy) should drive the organization structure. A structure designed to deliver a known workflow is more efficient and effective than one in which the workflow has to fit around the structure. One of the tests of a well-designed structure is whether it supports the flow of work efficiently and effectively.

4 As Table 1.1 explains, a typical organization chart does not show the interdependencies, interactions, lateral co-ordinations and handover points for the people in the roles on the chart. If the chart is restructured without reference to these crucial aspects then the workflow can be disrupted, with severe consequences.

5 Related to point 4, if a structure is developed without clarity or agreement on the boundaries of the organization, things get difficult. There needs to be some discussion on what is in or out of the organization being designed. For example: Are strategic partners in or out? Is the whole supply chain in, or just part of it? Are contractors and contingent labour part of the organization or not?

6 In restructuring, people get confused with roles. Figure 1.1 shows roles without names, but for the most part organization charts have names in the boxes. Sometimes restructuring is initiated, not because of external pressures but because someone has left, someone needs a promotion, or there is an issue that means, for example, that Pat cannot report to Jim. Restructuring around people is very risky. They may leave, move on, stop performing or become demotivated. Structuring around workflow is much less risky.

7 Fully employed members of staff work side by side with contractors, consultants and temporary workers. It is difficult to argue that this type of staff augmentation is not part of effective organizational functioning and success (why pay for their services if not to have them contribute?), but these people do not appear on a standard organization chart.

Well-designed structures are developed by being clear about the business strategy and the problem to be solved; knowing what work needs to be done in order to achieve the strategy; having technology and other systems that carry the work; and employing people to deliver the work into and out of the systems, preferably in an engaging and motivating environment. Hence the definition of OD given earlier.

To illustrate this point further, look at Figure 1.2, which shows the timber-framed structure of a Wealden house. The structure of the original house (its shape, interior layout, number of windows, etc.) came about by answering a set of questions, including:

1 What is the purpose of the building?

2 What is the work or activity of the people who will be in the building?

3 What will their movement be through the building in the course of their activity?

4 What systems will support the building’s functioning, for example, water, lighting?

5 What, ideally, would their experience be of living in the building?

Only when these types of questions have been answered in some detail can architects start to design options and propose structures.

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