For you to fully appreciate what is organizational design, it’s essential to first understand what organizational structure entails. Organizational structure describes how role allocation, coordination, and supervision are defined to reach the goals set by the organization’s management.
On the other hand, organizational design refers to how the company’s management reshapes its structure and roles. It’s the process of coming up with the best combination of differentiation and integration for the firm’s operations. Differentiation is the allocation of functions into departments, each focusing on one specific aspect of the company’s operation. Integration is aligning all the firm’s departments to achieve unity. This is a crucial process in order to reach the overall company goals.
What Is Organizational Design Methodology?
The business environment is very dynamic. It is in these times that differentiation and integration are highly essential to counter business uncertainties. Many corporations are aggressively redesigning their organizations to boost performance. Organization design methodology involves strategic decisions to make trade-offs of one set of the firm’s benefits for another.
How to Achieve the Ideal Organizational Design
An ideal organization design could help reduce costs, drive growth, and boost both short-term and long-term performance. To achieve this model, a company has to follow a couple of steps regardless of its size, complexity, and needs.
First, the top management must identify the current business output, performance, and new demands. Next, the administration should assess the current performance of the business. What follows is the design of the new organization structure and its implementation.
Why Is an Ideal Organizational Design Useful?
An organizational re-structure that focuses on high differentiation coupled with high integration has various implications. An ideal organization design results in improvements in product quality, customer service, and output. Moreover, decreased turnover, reduced absenteeism, and lesser cycle times are features of an ideal design.
However, a complete department and staff overhaul may vary depending on a company’s size and available resources. Small organizational designs may take a few resources lasting a week or two. Large and complex designs take up more resources and may last several months.
7 Principles of an Ideal Organizational Design
a. Design Using Previous Performance
Organization re-structure should begin with an assessment of past business’s activity. Once the company identifies the business’s purpose, management should figure out what the future output should be. Using this information, management should incorporate capabilities to propel the business to the desired output into the redesign.
b. Develop Strategy that Creates Value
The new structure should focus on strategies and essential operations in each company department. The operation could be a regional expansion, lowering costs or acquisitions. Once identified, the management should redesign a unique structure that helps the company make the best out of the operation. A great strategy answers the question ‘what is organizational design?’
c. Redirect Head Offices to Value Creation
Most corporate leaders are too concerned with the business chain of command. This diverts attention from core activities leading to bureaucracy. An organizational structure that puts more emphasis on value creation especially at the level of head office would be ideal.
The redesign should identify an explicit mandate for corporate leaders. Such mandates should include key function coordinators or heads of specific strategies. Also, an ideal organization design should make sure all departments have specific performance-management processes.
A redesign makes employees accountable for their work without being micromanaged. Decision rights are concise, and information flows quickly from the top level management to the departments. Accountability certainly answers the question, ‘what is organizational design?’
d. Inspire Collaboration
Enterprise collaboration across departments is what organizational design entails. Teamwork creates enormous value for an entity. It includes collaboration on customer solutions, product development, and innovations. Using social network analysis, a company can tap into informal communities through which knowledge and information are passed. When understood, this information may answer the question ‘what is organizational design?’
e. Deal with Complexity
An ideal organization design must aggressively remove complexities. The design should do away with unnecessary costs and organizational friction. Particular functions should be assigned to employees who are equipped to handle the task. A proprietary complexity survey identifies issues such as lack of duty clarity or poor processes that suppress productivity. The identified issues are then incorporated into the restructure design.
f. Make the Most of Talent
Special skills are critical. Unfortunately, they are often ignored in organizational architecture. An ideal design should include positions that bring out the best of an employee. Leaders who hold certain positions should possess specific technical and managerial skills. The leaders should also be able to promote collaboration and empower their team members.
g. Design the Structure Last
Corporate leaders do not ask themselves what is organizational design ideal procedure? Most of them already know that the current organizational chart does not necessarily show how duty is allocated. However, in the event of a problem, they change the organization’s structure in the hope of solving the problem. An ideal design should first focus on the problem, identify a solution, and charter a design process lastly.
Coming up with an ideal organizational design may be overwhelming for the company’s management. Every company has its strengths and weaknesses. The best way to start is by identifying specific business strengths. It should be followed by plans for strengthening the weak business practices and culture. Management then gradually improve the practices during the design.
What is organizational design at your firm? Most business executives cannot answer this question satisfactorily. Redesigning the company in line with their strategies would be the solution.
However, this is a project only the top executive can shepherd. Senior leaders must consistently be present to find solutions and alternatives to persistent problems. Senior level management should be actively involved in the design team. Additionally, they should be accountable for the transition into the new organizational design.
The principles seek to answer the question, what is organizational design? In the modern business environment, companies should use these policies to guide any redesigns, however large or small. Businesses do not have to outsource these functions. Following these principles, they can come up with the ideal organizational design. In your opinion, what is organizational design and do you agree with these principles?