Organizational Design

Organizational Design

In today's business landscape, intensified competition demands an enhanced level of teamwork and interaction across different disciplines to ensure the success of projects and operations. At the heart of any organization lie its people and processes. In this context, the key to effectively managing processes lies in properly planning and implementing organizational design.

Organizational design, in essence, involves reviewing the desires and needs of an organization, analyzing the gap between its current state and its future aspirations, and crafting organizational practices to bridge that gap. Given its comprehensive nature and its forward-looking approach, it necessitates a holistic review of the entire organization. Hence, it typically encompasses the examination of systems, structures, human practices, rewards, performance metrics, policies, processes, culture, and other broader environmental factors.

Steps in organizational design include:

• Recognizing the necessity for change and understanding the environment, business processes, workflows, roles and responsibilities, work volumes, activity analysis, and resources,
• Designing and testing new models or structures, planning and managing the transition from the old to the new structure,
• Implementing and monitoring the introduced changes,

These steps are pursued to elevate managerial activities of the company. Whenever a change is implemented, it's sustained through ongoing organizational development efforts.

When Should Organizational Design Be Implemented?

1. Changes in Company Processes

Changes in the processes that affect the work may necessitate alterations in the way of working. For instance, transitioning business processes to a digital environment, purchasing new technology, or protocol amendments might call for a fresh organizational design.

2. Introduction of New Strategies and Goals

Newly established goals and the strategic decisions taken to achieve them can modify success measurement methods. To keep track of these new strategies, a novel organizational design process would be needed.

3. Inefficiencies in the Current System

Over time, new developments within a company (like changes in employee count, division of units, working hours, etc.) can render the existing organizational system ineffective. In such cases, a new organizational design might be necessary for employee satisfaction and process efficiency.

Highlighted Organizational Design Models

1. McKinsey’s 7S Design Model

Its objective is to analyze organizational efficacy through the interaction of seven fundamental elements. These are viewed not just in relation to strategy, but as a holistic entity in balance and harmony. Elements are categorized into hard and soft factors.

• Hard Factors:

Strategy: Defines how the company competes in the market.

Structure: Represents how business functions are organized, as reflected in the organizational chart.

Systems: The framework, processes, and procedures that dictate how the company operates.

• Soft Factors:

Skills: Ranging from individual knowledge, skills, and abilities to analytics, it represents the capability of an organization defined within a competency framework.

Staff: The composition of the workforce and how it's managed.

Style: Refers to how top leaders manage the organization and the symbolic value they offer to stakeholders.

Shared Values: These are the norms and standards that guide behavior at every level of the organization, forming the core of the 7S model.

The 7S model also attempts to illustrate how these factors align and how they build upon each other. Understanding how these factors interact is key to predicting what will transpire across the organization when changes are made.

2. J. R. Galbraith’s Star Model

The Star Model breaks down the organization into dimensions. It emphasizes the importance of five elements in the organizational design process: Strategy, organizational structure, processes, reward system, and human management practices. The "Star Model" advocates for consistency among these five elements.

3. Congruence Model

The Nadler-Tushman Congruence Model offers a six-step plan to bridge the gaps in understanding how elements of an organization work together. It examines communication and information flow to understand the harmony among four components. It's a relatively easy model to understand and implement.

• Job: Refers to the tasks performed by employees and whether they align with the company's goals.

• People: Relates to skills and knowledge, referring to experience and training, in compensating for and enhancing their potential.

• Structure: Ensures consistency between what an organization wants and what it does.

• Culture: Represents the values and norms, patterns of behavior, and both written and unwritten rules.

"Expanding the scope of control in managerial roles directly increases the effectiveness of those roles."

Considering Concepts of Span of Control and Layer in Organizational Design

Span of control and layer are management tools used to diagnose and optimize an organization's structure by assessing its width and depth.

• Span of Control: Measures the breadth of the organization. A larger average range indicates a wider scope of control.

• Layer: Evaluates the depth of the organization.

These concepts influence how an organization delegates tasks. By performing these analyses, the aim is to manage the organization more leanly and robustly. Evaluations of span and layer look at the control range of different levels within the organization and the various management layers in current structures. Some key benefits these analyses bring to an organization include:

• Rapid Decision-Making: Fewer layers lead to quicker decision-making. Additionally, making decisions closer to where the action happens makes operations more relevant and effective. Reducing the number of non-expert small work groups in large-scale companies also boosts efficiency.

• Effective Oversight: Fewer layers mean faster communication. It plays a crucial role for companies seeking organizational transformation in designing what the future structure should look like to support strategic objectives.

• Behavioral Changes: Expanding the span of control in managerial roles directly boosts their effectiveness. Managers can elevate their tasks and responsibilities to more strategic roles. As employees are given a broader set of responsibilities, this prioritization, provided the right support mechanisms are in place, can lead to improved behaviors.

• Lean Cost Structures: As scopes expand, fewer roles might be needed within the organization. Leaner and more efficient organizations can make decisions more swiftly, adapt to change more easily, and better embrace innovation. Transparency and communication across the organization improve, leading to enhanced operational costs as a direct byproduct.

An organization isn't just a blueprint created during company formation. It's an evolving system that needs constant application and enhancement. To adapt to changing conditions and achieve goals and strategic plans, an organization must have an updatable design. As the company grows and working conditions change, the organization's structure should be developed accordingly.