Tuesday, January 20, 2015

Organization Design for Business

Is your organization doing everything it can to succeed in this VUCA (Volatile, Uncertain, Complex, and Ambiguous) economy?  Are you sure?

Is your organization properly designed to meet your goals?  Are your marketing, financial, and manufacturing strategies fully aligned with your overall strategy? Are your structures and processes fully aligned with your business plans?  Are your accountabilities and authorities aligned with your processes? Do you have the right jobs and skill sets in your organization?  How do you know?  Because you completed a review last quarter?  What about tomorrow? These issues may be costing you money and negatively impacting your operational capability.

What is Organization Design?

Organizational design is the way your organization is structured to comply with the strategic plan.  It is the link between your business goals and how managers & staff achieve those goals.  It helps achieve full alignment between your overarching strategy, your structure, and the key functions & roles in your business.

Organization Design focuses on the proper assignment and division of labor; establishing the appropriate level of coordination, control, authority & responsibility; and designing jobs that match the needs of your organization and the skills of your employees.

Effective organization design drives productivity, communications, and innovation.  It creates an environment where people can work effectively. 

When Should I Review my Organization?

Today!  Symptoms of ineffective organization design to look for include the following:

§  Poor inter-office coordination
§  Excessive friction and conflict among internal groups
§  Unclear roles
§  Misused resources
§  Poor work flow
§  Multiple Boss Syndrome
§  Reduced responsiveness to change
§  Proliferation of extra-organizational units such as task forces, committees, and projects

What Does an OD Project Look Like?

Organizational analysis involves reviewing your vision, mission, & strategy; assessing your current structure relative to your mission & strategy; drilling down to departmental levels to understand how units function; and addressing challenges & opportunities.  The objective is to improve performance by evolving from your current state to a desired future state.

Tips and Best Practices for a Successful Re-organization

1.   Problem Statement: Define your business needs, internal & external challenges, and organizational objectives.  What exactly are you trying to fix?  What is your ‘desired state’?

2.   Conceptual Business Model: Look in the mirror.  Outline your organizational strategy, resources, inputs, major functions, and outputs (products & services) in a clear & concise model.

3.   Design Principles: Create a set of design principles at the start of the project.  These are attributes that your new organization must have.  Examples include service excellence, process efficiency, business process ownership, P&L accountability, and implementability.  These become your evaluation criteria.

4.   Workflow: Map out the major activities and steps in your key business, discipline-specific, & administrative processes.  Identify and link the key roles (jobs / positions) that perform each step.  These become the building blocks and architectural platform of your future organization.

5.   Organizational model options: Create several potential ‘to be’ states divided into three groups; A. minor change, B. practical and realistic change, and C. radical ‘outside the box’ change.  Quite often the ideas generated in Group C will prove to be effective in a Group B option.  Evaluate the relative advantages and disadvantages of the options using your design principles / criteria.  Select a winner.

6.   People: Assess the “people impact” of changes.  Prepare a People Plan and take steps to address potential retraining, re-assignment, replacement, and recruiting needs.  Be open to the need to design a function or a unit around the skills and attributes of the incumbents – as opposed to what looks best on paper.

7.   Systems and Processes: Focus as much on how the new structural model will work as on what it looks like.  Ensure that systems and processes are fully integrated with the re-design. 

8.   Culture: Be aware of your organizational culture (unwritten norms and behaviors). Ensure that the re-design is in sync with your culture.

9.   Change Management: Expect management pushback and employee resistance to change, and plan accordingly.  Appoint a senior executive as project champion.  Develop a clear communications plan and adhere to it.

10. Implementation: Pay attention to how the re-design will actually happen. Prepare a detailed implementation plan and hold people accountable.  Address risks and bottlenecks as early as possible.

11. Beware of Entropy.  Entropy is the silent killer of organizational performance.  It is the measure of the disorder of a system, a natural process of degeneration, an automatic and unavoidable trend toward chaos.   The alignment of functions, positions, skills, processes, human talent, and performance to business priorities deteriorates over time and we don’t see it.  The cure is maintaining full alignment between your organizational strategy and your structure & processes – in other words – organization design.

Tim McConnell is the Managing Partner of McConnell Consulting (Organizational Architects) Inc. in New York.  More information can be found at www.McConnellConsulting-NY.com.

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