How do you define organisational design?
At its heart, it’s the means by which you effectively marshal your available capabilities and capacity to ensure your organisation can achieve its strategic intent: “I’m going to organise the way we undertake what we do in this way, as opposed to that way.”
Whatever choice you take, it’s essential that it stems from, and is aligned to, the organisation’s purpose – ensuring that the whole team understands that linkage, and is enabled to perform to its maximum potential.
Examples of factors that could influence how you prioritise your design choices may include:
- a unique business capability used to exploit a specific market opportunity,
- risk management and/or process controls if operating in a heavily regulated industry, or
- end-to-end consumer experience journeys.
However, organising resources in line with such choices is not the whole story: most organisations will also operate some form of matrix that intersects different specialist skills areas within the business. There’s an art to balancing the need for purpose-aligned designs and the benefits that come from exploiting collaboration between centres of expertise – for example, HR, risk, finance, pricing, marketing, operations and so on.
Effective organisational design is about generating the conditions that allow those capability intersections, where individuals can form teams and productive relationships. That enables staff to add a value greater than the sum of the organisation’s parts – and, in so doing, deliver the organisation’s purpose.
All of which implies that, if an organisation’s goal shifts over time, so too does the organisational design.
Whenever I start working with a new team or organisation, I tend to find that that the written definition of its organisational design doesn’t correlate with the reality of what’s happening on the ground. If, indeed, it’s even written down!
That's often because the document was written at some point in the past, before more recent decisions or events have influenced and evolved the organisation’s shape, risk appetite or purpose. That evolution may well have been to the benefit of the organisation, and/or its customers – but if the shift isn’t reflected in everyone’s on-paper understanding of how things work inside the organisation, it is likely in one way or another to hinder performance.
In severe cases, that disconnect could lead to separations in understanding, activity and behaviour between purpose definition at senior level and what’s really happening within the core of the organisation itself.
How should leaders approach organisational design from a best-practice perspective?
There is no, one correct way – however, as I have mentioned, any organisational design must be led by the overarching, strategic purpose.
It’s certainly not a simple task of drawing a structural chart on a page. It’s about organising the unique capabilities at your disposal in such a way as they can most effectively achieve the overriding purpose and, in the process, deliver value.
Leaders must recognise that, if executed well – with appropriate leadership permissions and freedoms operating locally within that broad framework – self-organising teams will emerge organically, as individuals find faster and more efficient ways to achieve local goals and objectives.
Where do people fit within this, so that it avoids being a purely diagrammatic exercise?
If you start from a position such as, “How are we going to organise Katy in marketing and Jon in operations?”, you will end up with a design that potentially works for today – but, as soon as those individuals have changed, will be at risk of failure.
However, if you start from, “I’ve got a marketing and an operational capability – how do I bring those two areas together in the most effective way to meet the organisation’s purpose?” – then you’re getting somewhere.
First of all, you’ve taken the individuals out of the equation. For example, you’re not basing decisions on the professional relationship Katy and Jon have and their ability to work well together. You’re focused on how to combine their respective talents in the most expeditious way to create results, so that Jon’s operational skills can, for example, effectively support the primacy of the firm’s broader marketing mission that Katy leads.
The challenge for organisational designers is how to create those productive intersections. And regardless of whether you’re using say an agile methodology and way of working, or something more formal like Stanley McChrystal’s ‘Team of Teams’ approach, your teams can effectively combine their strengths at those intersection points.
So, organisational design is more than drawing a structure chart – it’s about creating the framework and conditions that enable teams and organisations to be successful.
How does organisational design support effective performance?
When I’m working with organisations, I often find that, at the C-suite level, there’s a good level of clarity about what needs to happen. But when you get into the core of the business, personal agendas – alongside evolved processes and policies – often take precedence in key decisions and activities over a focus on organisational purpose.
It is important to ensure that everyone understands the organisation’s immediate goals and long-term strategy, and can get behind that purpose by understanding how their position in the organisation contributes to it.
That’s not to say everyone needs to think and behave in the same way. There is an absolute need for a healthy tension operating in every organisation – that’s the check and balance that helps to ensure good decisions are made.
For example, marketing, pricing and finance functions will inevitably see the world through different lenses when attempting to achieve, say, an increased market share. But if those teams can come together in the correct way, with a focus on a clear purpose, that tension will express itself as designed-in, creative dialogue, rather than negative behaviours.
Negative behaviours arise when the broader purpose isn’t clear, and the matrix of roles and responsibilities – particularly around who has the lead and is empowered to make decisions – is absent or poorly defined.
That can result in teams wasting valuable time and effort on trying to work out how to get things done – rather than applying themselves to getting them done in a conducive environment. There can often be a gulf between those two states.