A global manufacturer of electronics felt like he was in a constant state of re-organizing his organization structure. Due to the Asian market demands, he had to introduce new lines of communication devices after every few months. The process required him to reorient the sales, support functions, and marketing campaigns. Every time he migrated to cloud-based solutions, he had to change his IT department. Altogether, his business changed its organizational design six times over 10 years.
Suddenly over the past couple of years, the company faced a new challenge. Since many new technologies had been developed for its sector, its CEO decided to switch from a product-based structure to a customer-centric business model. This meant a more significant change in the organization design. This time they had to go beyond shifting the boxes and lines in the organization chart. They needed to change the most fundamental building blocks of the organizational design, including decision-making processes, allocating responsibilities, the chain of command and hierarchy, and more. This confused the leadership team, as they didn’t know where and how to begin.
The above situation describes a typical scenario in today’s world. Due to the constantly changing global business trends, many businesses face significant disruptions in their operations and functions. One of the critical reasons for this is the heightened competition in specific sectors. Further, the ongoing pandemic has brought about even more drastic changes in consumer behavior, causing a dire need for businesses to cope with the disruptions faster before they end up losing their sales.
There are disruptions in distribution channels, production processes, and human resource management systems. As CEOs of large organizations look out for these changes, they recognize and announce the need to shift the organization design. But is the management of each of these companies ready to make the shift? Not always! The redesign needs to be done as painlessly and effectively as possible. It must align with the organization’s overall strategy and not disrupt the daily functions and capabilities of the employees. Causing too many disruptions in redesigning the organization structure might lead to a loss of brand image and customer base.
Nowadays, the average tenure for a global company’s CEO is about five years. This means every company is likely to undergo a change in organization design only once under a certain CEO’s leadership. The CEO thus must get the reorganization done right the first time, as they are unlikely to get a second chance for it.
Although every organization is different, and there is no hard and fast rule to determine its most appropriate organizational design, certain guiding principles can be followed to make sure it’s given its best shot. In this post, we have identified 6 such principles that you can apply to your company if you are in this situation. These principles give a direction to the leaders whose action plans require a new and different type of organization design than the one they currently have.
But before we get into discussing each one of them, we want to define an organizational design in business terms. This will give you a better understanding of the guiding principles of organization design that follow.
What is Organization Design?
Organization design is a step-by-step methodology that identifies the aspects of workflow, systems and structures, procedures, and dysfunctional areas and realigns them to fit the business vision and goals. Its function is to develop plans for the implementation of new changes. Building an organization structure is usually focused on improving the human and technical side of a business.
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In most companies, the process leads to a more efficient organizational design, which can bring about better internal operations, customer service, and business profitability. One of the purposes of building an effective organization design is to empower the employees and increase their commitment to its success.
The hallmark of the process is a holistic approach for continuous improvement that touches upon all aspects of the corporate culture and business operations. A good organization structure helps you achieve the following.
- Reduced operating costs
- Excellent customer service
- Increased profitability
- Enhanced efficiency and productivity
- A culture of engaged and committed employees
- A clear strategy for growing and expanding the business
A good organization design incorporates the integration of the company’s employees with core business processes, systems, and technology. In other words, it ensures that the organization structure matches its objectives and strategies. This makes it more likely that the collective efforts of its employees will be rewarded and successful.
As a company grows, it faces more challenges in its external environment that might cause a hindrance in its growth. Under these circumstances, it becomes even more critical for the management to develop an efficient organizational design that can uphold the business strength to pave its way forward.
Companies that have poor organization design suffer from the following situations.
- Delays and inefficiencies in decision making
- Too long to get something done
- Lack of integration between the staff and the systems
- Fragmented work and goals, with little regard for the good of the entire organization
- Inefficient workflows and frequent breakdowns in projects
- Redundancies in task management
- Lack of authority among individual employees to solve problems
- Mistrust between the management and workers
6 Principles of Organization Design
Here are 6 principles of organization design that you can apply for improved efficiency.
1. Declare Amnesty for the Past
Begin your process of building an organization design with corporate self-reflection. What is the actual purpose of your business? How does it make a difference for the investors, clients, and staff? What sets it apart from others? How do you plan to deliver your value proposition over the next five years?
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Answering these questions might require you to go beyond your comfort zone. You need a bold direction that enforces your organization’s goals. Maintain a forward-looking view in the process of designing your organization structure.
2. Design with DNA
What does this mean? When you design your organization structure, focus on the necessary elements first. It might feel like a complex process, but it can be simplified if you let go of the redundant or unnecessary blocks. There are generally eight building blocks essential for your business model and organization design.
- Decisions
- Norms
- Commitments
- Motivators
- Information
- Mindsets
- Structure
- Networks
Some of these elements are tangible, while others are intangible. Using these elements will enable you to consider any necessary changes that need to be implemented in your organizational design, so that your entire enterprise can be integrated and solidified instead of being pulled apart.
3. Fix the Structure Last
The existing organization chart typically does not capture the way operations are carried out in a business. Therefore, changing the organization structure at the beginning of the process will not address the existing problems. Even if you can temporarily reduce costs, layers of issues will creep back, making the short-term gains disappear.
The right way to redesign your organization is by laying out a sequence of events and interventions that takes the company from the past into the future. The organization structure should be the last thing to be changed. It acts like the capstone and not the cornerstone. Otherwise, the new organization design won’t be able to sustain itself.
4. Make the Most Out of Your Top Talent
Having talent in your company is essential. Unfortunately, this aspect is often overlooked when creating an organization design. Some might think that the skills and capabilities of the existing staff will not have much of an impact on the organizational design. But that’s not true. You need to create positions in a way that allows you to make the most out of your employees’ strengths. Consider the managerial and technical skills of your key staff. Ensure they are equipped in the right way to foster empowerment and collaboration from the employees below them.
5. Focus on What Can be Controlled
The best is to make a list of everything that’s holding your company back. The constraints and scarcities slowing down your operations need to be tackled first. Take stock of the real-world limitations to ensure that you can sustain your new organization design.
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6. Incorporate Your New Organization Design in Your Corporate Website
Many organizations build and design a new organization structure but procrastinate updating it on their corporate website. This causes confusion among the audience, mainly if you sell your products and services directly through your site.
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If you find it difficult to edit, revise or update your website regularly, you probably need to change your website building platform. Create a fresh website on an easy-to-use platform that allows you to make changes to your site any time you like.
Our users who build a website on Strikingly find it convenient to manage changes to their site, no matter how frequently they need to do so. Our user-friendly editor allows you to simply click and edit your web pages. This is because our platform is developed for not masters at coding or programming. Our tools and features are suitable to be used by any layman who wants to have a solid and professional online presence for their business.
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