Organizational Structure and Design: What You Need To Know

A common discussion among HR leaders today is Organizational Design. CEOs want scalability and operational efficiency, while remaining responsive. Organizational design is a critical component of creating an agile organization that can support these goals.  Anyone can move boxes around on a white board, but how do you ensure that an organization design actually makes a difference in performance and agility? Both a top-down and bottom-up approach is required to ensure that your organizational design makes real change.

The process generally starts with a top-down process that looks at overall objectives and strategic changes needed in the organization. These could include moving away from “command and control” and focusing on a data-driven organization or pushing accountability down to lower levels. The analysis at this stage must be grounded in the strategy of the organization and the measurable goals it wants to achieve. It should also follow a set of guiding principles. Guiding principles provide focus, drive decisions, and often help resolve seemingly conflicting choices or priorities. Examples of guiding principles might be:

• We will strive to serve the customer on their terms, and go to the customer rather than forcing them to come to us
• We will strive to make our customers’ lives easier and keep complexity “in the background”
• We will leverage technology to increase our efficiency, but keep our customer interactions “high touch”
• We will not bounce customers among groups – whoever is the customer’s initial point of contact will be responsible for guiding their issue to resolution
• We will search for a way to say “Yes” and try to avoid telling our customers “You can’t do that”

If these guiding principles are defined up front, it is much easier to make choices in the design process.

This initial analysis should be coupled with a bottom-up process (steps shown below) that delves deep into the processes and tasks needed to run the organization. Each step in this stage is critical to ensuring that the overall organizational design fits the objectives of the organization and is conducive to doing the work of the organization.  Both are critical in order to ensure a design that will achieve the desired changes. Culture is also a critical consideration, as the organizational design can be supported or undermined by the current culture. Many times culture change may be an objective of the organization design.

1. Determine Scope & Objectives of Organization
2. Determine Core Processes
3. Map Tasks That Need To Be Performed Based On Core Processes
4. Map Roles Into Jobs and Job Families 
5. Determine Skills & Performance Support Requirements
6. Create Organizational Design

When discussing core processes, you should consider more than just the processes that produce particular outputs or deliverables. You should include those that enable adaptability, agility, and innovation that touch all aspects of how the organization works.

After both of these steps have been completed, you’ll be ready to draft your organization design.  Always be sure to check it against the overall scope and objectives of the organization and the guiding principles to ensure your design has stayed consistent through the process.  You should also check the design against the organization’s Key Performance Indicators (KPIs), philosophies of management, and other relevant guidelines. You must also look at organizational congruence issues. For example, do you have a function whose focus is primarily long-term reporting into a function whose sole focus is short-term? Do you have functions whose primary advantage is automation and efficiency reporting to functions whose major focus is tailoring solutions to particular customer needs?  Jobs should be given a sanity check as well. This is the time to ask key questions such as: Is the amount of work realistic? Will we be able to find and train someone with the needed skills? Is it interesting? Can it be managed effectively?

Next, the organization can determine the number of staff required to handle the projected volume – essentially a workforce planning process.  This, combined with the organizational design, will give the staffing group clear requirements for staffing the organization.

If you are redesigning an existing organization, be sure to take care when placing current staff into new roles. A careful balance must be struck between giving people roles with appropriate “stretch” (allowing them to develop new skills, etc.) and creating an organization that won’t be effective for 6 months because there are too many people in learning roles. Effectively managing the transition component of implementing a new organizational design is critical.

Organizational design can be a critical component of the company’s competitive advantage and can be essential to ensuring the organization can achieve its mission. Following a disciplined and comprehensive process to addresses organizational structure and design ensures all of the key factors are aligned and that the final design truly delivers on its promises.

For help with organizational design or workforce planning projects, feel free to reach out to me and the hrQ team.