Company behaviours change with time and the circumstances surrounding them. However, when businesses are in cruise mode, they function according to design and structure based on a strategy and goals.
Such a system is called organizational design aka org design. In this post, we define organizational design, share common design issues, go into modern org design trends, and shed light on the role HR plays in org design.
Are you a company leader or an HR manager who would like to learn more about successful org design? Contact us.
What is organizational design?
The organizational design process strengthens workflows, structures, and systems. Whether you’re designing from scratch or redoing an existing plan, make sure you align it with current business goals and realities. This approach considers both the technical aspects, like procedures, and the human aspects, like employee engagement. The ultimate goal? To implement changes that create a smoother-running, more successful organization.
The org design, or redesign, process starts by charting a course. Ask yourself: what are your organization’s current needs and aspirations?
The next step is to do a gap analysis: where are you now compared to where you want to be?
Finally, you build the bridge to success by adopting organizational practices that help achieve the strategic vision.
What factors affect organizational design?
Generally speaking, the following factors affect org design.
- Strategy:
An organization’s strategic priorities, defined by its overall strategy, are the most crucial factor shaping its structure and design.
- Environment:
In rapidly changing environments, organizations need structures that allow them to adapt quickly. On the other hand, stable environments allow for efficiency optimization.
- Technology:
Companies with strong, data-driven systems enable informed decision-making and a more collaborative structure. Alternatively, organizations relying on disorganized information might require a more siloed structure with stricter controls.
- Size and life-cycle:
The size and development stage of an organization significantly influences its structure and design. A startup with 20 employees has different organizational design needs than a corporation with 200,000 employees.
- Company culture:
Organizational culture and design are interconnected. Workplace culture shapes the ideal org structure, and the chosen design reinforces or reshapes the culture over time.
Common organizational design issues
Organizational design issues can occur in several ways, but the following are common snags companies can face.
- Poor governance: This problem usually occurs in the form of competing priorities. Aligning departmental goals and leadership fosters collaboration and propels the organization toward its shared mission.
- Bad role design: LinkedIn studies show an average employee turnover rate of 10.9% across industries—yours could be different. Nevertheless, effectively designed roles can successfully drive employee retention.
- Management controls: Leaders can bridge the trust gap with employees by fostering open communication and accessibility.
- Cross-functional competitiveness: Aligning incentives and metrics across departments encourages team-building and collaboration.
Organizational trends in 2024
Organizations sometimes resist change, but rapid technological advances have forced businesses to pivot. The following four org design trends have emerged in the last few years. For this post, we’ll share short and quick descriptions of these trends and revisit them in individual blog posts at later dates.
- Agile organizations: Imagine a team of experts constantly innovating and delivering value in short cycles — that’s the essence of agility. Agile organizations are all about speed and adaptability. Agile professionals replace bureaucratic structures with cross-functional teams that quickly respond to the marketplace or customer needs changes.
- Networked enterprises: This model replaces the traditional top-down organizational pyramid with a web of interconnected teams, departments, and even external partners, all working seamlessly towards shared goals.
- Holacratic companies: Imagine a company where employees are empowered to own their work, collaborate across teams, and drive change from the bottom up — that’s holacracy. It throws out the traditional company rule book, replacing rigid hierarchies with self-organizing circles, each with clear roles, accountability, and decision-making authority.
- Decentralized Autonomous Organizations (DAOs): This new breed of organizations is internet-native, owned and operated by its members minus a central authority. Decisions are made through collective voting on proposals using blockchain technology, ensuring transparency and security. While still evolving, DAOs offer a glimpse into a future of collaborative and community-driven organizations.
What role does HR play in organizational design?
HR is like the engine oil that keeps the machine chugging ahead. When it comes to leading org design, HR is involved in the following ways.
- HR analyzes data to identify ways to strengthen workflows and structure
- HR leads or supports the change management process
- HR ensures that new organizational design is supported by efficient people practices
- HR acts as an advocate for employees during the design process
Don’t know where to begin with your org design or redesign? Let’s talk.