How Organizational Design Impacts Culture and Agility

The focus on organizational design has continued to increase as organizations seek to optimize their structures to position themselves for better performance and growth, as well as to increase innovation and agility. But the traditional model of organizational design needs to be adapted. The traditional model consists of developing a new structure, implementing it in a large-scale change effort, and then essentially “freezing” the structure. Then when that structure no longer works, another reorganization takes place. This is disruptive to the organization and doesn’t reflect today’s organizational realities.

Today’s environment requires constant evolution and adaptation. We have been working with our clients to create an Adaptive Organization. Put simply, this is an organization in constant evolution and adapts when conditions change. It moves away from the continuous cycles of reorganization and the associated disruptions that come along with these large-scale change efforts. This approach yields better results, but it does require a different approach to the initial organizational design.

So how is this new approach different? It requires a change in the underlying assumptions. From an organization level, the expectation should be that the structure will change, rather than trying to hold off change as long as possible. From an individual manager level, it requires a shift from the mindset of headcount being “my resources” to a mindset of headcount being “our resources.” It’s understanding that the purpose of staff is to help the organization accomplish its goals, and consequently the organization should be able to redeploy those resources at any time in the best interest of the organization. Not only does this help the organization maximize its resources, but it also helps get over the tendency towards “empire building” that some organizations and managers have.

This speaks to the organization’s culture and the impact that structure has on it. Often, structure reflects culture in the organization – organizations with a product-centric structure tend to have product-centric cultures. Same with geographic orientation or customer segment orientation. Which is the proverbial chicken, and which is the egg can be debated, of course. At a deeper level, the structure often reflects philosophical leanings of an organization. Those that have strong hierarchies and multiple layers tend to have more command-and-control cultures. Those who want to empower the front lines and make decisions closer to the customer tend to have flatter structures. When determining organizational design, it is critical to account for the culture that you want to exist in the organization, as well as what kind of culture shifts you are trying to make. The key factors to consider when it comes to the future culture are decision-making (speed and centralization), autonomy / empowerment, collaboration, and market responsiveness. Being able to describe how the organization should behave in these areas will allow it to determine the desired culture and consequently, the organizational design decisions that will enable it. Designing an organization and a culture that is more agile and more adaptable – one that evolves naturally as the environment changes – is most important.

Beyond the mindset changes, the actual structure options are different. The emphasis is on flatter, more streamlined structures with clear accountabilities and minimal coordination requirements, while still delivering end-to-end visibility for process and customer outcomes. This means less emphasis on matrix and more emphasis on transparency that drives the right decision-making. It also includes more communication and education about the strategy and the impacts of individuals’ actions on the strategy in order to promote good decision-making on the front lines. Structures in this model tend to emphasize rapid communication and information sharing, which helps increase adaptability and resilience. But just as important, there is an emphasis on flexibility in the model. Teams can change, resources can be temporarily assigned, and re-assignment can happen in hours instead of weeks. Several supporting policies are needed to make this seamless. It also requires a culture that supports this kind of rapid evolution.

When analyzing potential structures, we must think through natural evolutions. We conduct “Stress Tests” on organizational designs, which means putting a proposed design through a number of what-if scenarios. For example, what if business volumes significantly increase or decrease? What if key staff are unavailable for some reason? What if there are regulatory changes? These are just a few of dozens of questions we ask. In each case we look at how well the design stands up, how it could possibly break, and what are the natural evolutions. We look at what it takes to grow the structure and what it takes to staff the model. This is supported by a proprietary approach to job analysis that helps ensure the jobs can be staffed by talent available in the marketplace at a reasonable cost.

Once the design is developed, it is important to teach managers, leaders, and employees how to work in the flexible and ever-evolving environment. While this does take some time investment, the return is worth it in terms of increasing the adaptability of both the structure and the staff. One of the principles you will often hear for good organizational design is that it provides stability for employees, but that stability does not have to translate to rigidity. One of the common complaints in organizations, for example, is the lack of growth opportunities. The dynamic organization structure provides many opportunities for growth and development. Stability is found in common culture, standards of good management, work processes, approaches to managing teams, and a host of other work practices. Realistically, adaptability does not require that the structure change every week. Rather, it is supported by the natural and gradual evolutions required to deal with the changing environment and organization needs. Managers and employees both find this structure advantageous over traditional organizational designs.

Questions about how organizational design can impact culture and agility in your organization? Contact hrQ today!