Designing organizations is much more than moving the boxes. Contemporary organizations are playing a different kind of game - one in which the key to success is the continuous, rapid deployment of resources and new products to capture emerging opportunities locally and abroad. The strategic goal of this new "game" is creating and maintaining organizational flexibility, thus enabling rapid responses to new markets and responding to global competition. That flexibility must be created throughout the organization. Strategic organization design has become a critical determinant of strategic competitive advantage.
The traditional definition of organization design is creating an organization chart. Yes, an organization chart is one manifestation of an organization design process, but quite a simplistic one. Organization design is a more robust process that focuses on aligning structures, systems, processes, human competencies and culture to achieve strategic objectives within the context of market imperatives. How well organizations align those elements with a well-articulated strategy, greatly impacts their ability to execute and achieve bottom-line results.
Organization redesigns also provide a good opportunity to examine critical business processes. In fact, analyzing core business processes often identifies where most of the critical breakdowns are occurring. Business process analysis becomes a tool for identifying where to place organizational boundaries. When doing an organization design, critical organizational systems that will ultimately support the structure should also be addressed. Some of these systems include: rewards, goals and metrics, decision-making, training and staffing.
No one single way of designing organizations is best. Creating an effective organization design is not about mimicking competitors. Rather, it requires being intentional and deliberate about your own organization's performance and positioning. It requires a process of inquiry and experimentation to pinpoint on those factors that are unique to your business. However, good intentions are not sufficient. Three fundamental modern organizational design principles must be understood and applied. Those are: Proper unit differentiation, Systemic optimization and Flexibility for reconfigurations.
There are several situations in which creating a new design is self-evident. These include:
- Startup of a new business, subsidiary, or venture
- Significant growth, or conversely contraction in the business
- Shift from a domestic to global company
- Merger or acquisition
- Spin-off or divestiture of products and businesses
However, organization redesign is often needed during the normal course of implementing business strategy. Existing organization designs can lose relevance as market conditions change, leadership changes, and processes change to increase efficiency. These changes can occur slowly, "sneaking up" on the company and accumulating to the point where a redesign is needed. And a key problem for leaders is that by the time they recognize the need for redesign, it may be too late.
Some typical early warning signs that call for an organizational redesign include:
- Slowdown/difficulty in meeting business plan targets
- Disconnects in key processes as they flow across different departments or work groups
- High levels of conflict within and between organizational units
- Difficulty obtaining and sharing resources across the organization
- Lengthy, cumbersome decision-making processes
- Role confusion/turf issues
- Metrics are hard to define or overly complex
- Productivity declines
What these indicators all point to is a fragmentation in the smooth flow of information, materials and decision-making. These are signs that the structural boundaries are located in the wrong places. Leaders should monitor these signs and initiate redesign efforts sooner versus later. This will enable them to respond more quickly and effectively to market changes. Also, when employees and leaders begin talking about "communications" problems in the organization, take note. The root of these communications problems is often an inappropriate structure, either at a macro-organizational level or involving specific roles within the organization.
Some indications that you can use as checks to test a new organization design are the following:
- It provides greater ability to carefully allocate resources (people and money) to specific areas to drive strategy.
- It ensures that the right information is reaching the right people at the right time.
- As market and technologies shift, the right structure provides executives the ability to reallocate resources and adapt to market shifts.
- It enables the development of a high performance culture: the line of sight among employees to strategic goals is not blocked by barriers created by ineffective organizations.
- It provides greater transparency in the financial performance of its key products and technologies, enabling executives to better track the execution of their strategy. It is clear which products and markets are providing a revenue/profit stream and which ones are not.
As my admired colleague Ulises Pabón uses to say - "every organization is perfectly designed to deliver its present results". Therefore, should you be in need of improving the levels of performance of your organization, you should address Design as a resource. At the end of the day, the design drives people's behaviors, and behaviors drive results.
Ramón L. Rivera
President & CEO
Quality for Business Success, Inc.
You may contact him at:
MCS Plaza Suite 1210
255 Ponce de Leon Ave
Hato Rey PR 00917
Tel. (787) 758-1003; fax (787) 758-1337
Copyright 2009 QBS, Inc.