Anyone who has experienced a restructure at work, either departmentally or organisation-wide, has been a witness to and/or a participant in organisational design. So what exactly is organisational design, why is it important, and how does it differ from that other ‘OD’ – organisational development?
Organisational design vs. organisational development
Let’s take the easiest question first: What is the difference between organisational design and organisational development? According to the Human Resources Department at the University of Southampton, UK, organisational design is the process of aligning the structure of an organisation with its objectives, to improve efficiency and effectiveness. It is not just about designing a structure chart, and includes understanding the environmental factors influencing the need for change; assessing business processes; testing new models; managing the transition from the old to the new structure; and monitoring the impact of the change.
By contrast, organisational development focuses more on organisational behaviour and is a systematic process that aims to improve the effectiveness of an organisation. It may or may not involve a redesign of the organisation but does usually involve intervention in processes, structure and culture.
Factors that may trigger an organisational (re-)design
We operate in a disruptive business environment. Markets, consumer behaviour and technologies are changing more rapidly than at any time in modern history. Successful businesses are agile and responsive to dynamic social, cultural, commercial and regulatory conditions and continuously align business processes to strategy. Although it is not necessary to overhaul the organisation to adapt to every new trend, the need to review and refresh the design and structure of the organisation occurs more regularly than it did a few decades ago, when companies had established hierarchies that changed very little from one generation to the next.
Growth, either organically or by acquisition, can trigger a review of organisational design. Moving into new markets…whether geographic, product-related or consumer segment…can create a need to revisit the architecture of the organisation. Geographic expansion may require an additional regional layer of management; or greater globalisation may suggest removing the regional layer and focusing on customer segments or product categories instead.
Some industries are heavily influenced by regulation; and a change in the regulatory environment may require an organisational design response: job descriptions and reporting lines may need to change to meet statutory requirements.
Change is scary – but can be a force for good
Whatever your reason for reviewing your organisational design, if you have reached this point, it is very unlikely you will retain the status quo. And while turning the established order on its head can be a daunting prospect, the benefits are waiting for you.
A design solution that is sensitive to your organisation’s unique set of circumstances, culture, and environment will enhance value creation and improve overall business performance. It can result in cost savings, even if that is not your primary motivation. It can unlock talent potential, boost morale, improve accountability and encourage collaboration.
Start where you are now
When you decide to leave the ‘current state’ behind, the ‘to-be state’ can be hard to see clearly. Rarely is there one obvious answer. And it is no bad thing to engage in some scenario planning around various options. “What will the organisation look like in three/five years’ time if we do X versus Y?” This type of thinking helps to turn concepts into tangible routes that can be implemented and can tease out obstacles and issues.
Blue-sky thinking encourages creativity, but there are processes to follow that will make the task manageable. The current state must be understood before any new design can be imagined. You must assess the strengths and weaknesses of your organisation and understand your challenges. These might be found in the structure itself or in your culture or linkages. Ask yourself: What is your purpose? What is the difference you make to your clients, employees and stakeholders? How is your value proposition different to your competitors and what do you have and/or do that sets you apart? How will this change or develop in the next few years?
It is very important at this stage to be objective and not fall into the trap of clinging to the current state just because it is familiar (or because you were involved in its original implementation). To answer the questions above, you must decide to neither blame nor credit the existing structure for shortfalls or successes. The minute you do that, you are focused on the past, not the future.
Align to strategy
We can’t emphasise this enough. The organisational design must support the business strategy. What are the strategic priorities and critical operations of the company, and of each business unit? What are your strategic growth targets? The answers to these questions will help determine the optimal set of roles and job profiles and the best structure in which to locate them.
Take your people with you
Your employees need time to catch up with your new thinking. They need clearly communicated accounts of the process, the time frames and any impacts the re-design may have on them. If there are likely to be retrenchments it is important to be transparent about the scale, or the rumour mill will start working overtime and your efforts to effect a smooth transition could be sabotaged. A readiness assessment can help to determine the capacity of people, processes and systems to change and the degree of active change management that will be required. Once the new design has been developed, and even before implementation commences, a good transition plan is your critical enabler.
Don’t design in isolation
It is easy – and tempting – to think of the organisational structure as an entity in itself, distinct from the people who will inhabit the roles. It’s true that where retrenchments are concerned you must consider the job and not the employee, but when constructing a leadership team and deciding on spans of control, you can’t divorce the positions from the talent you need to drive the organisation forward. People are more than their job descriptions. Make the most of the strengths of the people who will fill those roles, taking into consideration technical skills, experience and managerial aptitude. Have you got the right leaders to foster the loyalty and collaboration needed from below? Talent management is an important component of organisational design.
Don’t go it alone
For the reasons cited above and many, many more, attempting your own organisational design can be challenging. An impartial and independent third party can bring perspective and objectivity to the task that you may struggle to achieve internally. You will also benefit from the expertise of specialists who have undertaken multiple organisational designs. Even the most experienced HR generalist has probably only been involved in one or two restructures, if that.
At EOH Capital Solutions we have a proven track record in organisational design and in-house specialists in Organisation Design, Talent Management, Reward and Recognition, Industrial Psychology, HR Management and Organisational Development. Let us help you review your organisation structure. If it’s not broken, we won’t suggest you fix it. But if your structure needs refreshing to match your strategic direction we can guide and support you through the process. Contact us today on 012 940 6300