Debate over what makes a good model of organizational effectiveness has rumbled on for years. Whilst some models fall in and out of fashion, the McKinsey 7S framework developed in the early 1980s by Tom Peters and Robert Waterman, has persisted with its basic premise that there are seven internal aspects of an organization that need to be aligned if it is to be successful. Building on this enduring and well respected model, here Dr Anton Franckeiss of Acuity Global Development sets out 10 Organizational Design Considerations for new organizations.
- Enable the strategy to come to life
The overall organization design must be aligned with the business strategy and the market environment in which the business operates. But more than that, it must let the strategy come to life. A correctly mapped out design provides the blueprint for optimum organizational effectiveness to create sustainable competitive advantage, long term benefit and keep the business strategy on track.
- Operate within constraints and boundaries
Selecting the right business controls, flexibility, incentives, people and resources is a complex task. Within the constraints of location boundaries, core processes and market environment, a sound organizational structure will provide clarity on what each function (and ultimately each person) is accountable for.
- Cost Effectiveness
Many productivity and performance issues can be traced back to poor organizational design. A company can have a great mission, great people and great leadership, but still not perform well because of poor organizational design. In terms of cost effectiveness, getting the design right from the start is vital to prevent costly mistakes further down the line.
- Eliminate difficult linkages - consider clustering/bundling of roles
The organizational design must also seek to optimize work flow to sustain competitive advantage. Examine where activities can be streamlined, eliminated or run in parallel and explore how decision making processes could be improved. Processes that allow gaps in information, fragmentation or conflict in priorities must be eliminated.
- Optimize Hierarchy - the values of each layer of the organization
Excessively hierarchical organizations can lack flexibility, use up resources and under-use key people and skills with their overly rigid approach, however, those that optimize hierarchy, manage to get the right balance for the good of the organization and its workforce. Implementing the right controls, the right flexibility and the right incentives gets the most from people and other key resources.
- Protect critical specialism and expertise
The requirements of the technical specialists must also be protected within the organization structure. The design should reflect that not all can or should be generalist people managers. Some have a more focused, sometimes narrow area of specialism, and should be protected and valued from a career progression standpoint whilst not encumbered by the whole management of people and leading of teams. This is best illustrated in an organizational matrix structure.
- Clarify decision making and role responsibilities
Allocating role responsibilities and deciding which individuals get to participate in which decision-making processes is vital to protecting the business strategy and overall company vision. When people understand to what extent their views shape the organization’s actions, they can offer the right contributions at the right level.
- Strengthen accountabilities
Structure dictates the relationship of authority and accountability in an organization and, therefore, also how people function. For this reason, a good team can only be as effective as the structure supporting it. By strengthening accountabilities, people focus more on the core processes and develop a sense of personal investment into the successful operation of the company.
- Improved innovation, flexibility and responsiveness to change
As markets, competitors, and strategies evolve, so do the structural, people, and process elements of a coherent design system. But new opportunities for organizational innovation continue to present themselves, and those companies able to recognize and willing to embrace them will gain huge competitive advantage. Any successful organizational design must both support the current business strategy and allow the organization to adapt to changing market conditions and customer needs over time.
- Leverage the right people (internal/external)
An organization’s structure is only as good as the people operating within it, and how well they’re suited to their jobs. When there’s close alignment between job requirements and an individual’s style and experience, then they will perform at a high level whether they operate or are recruited from within or the external marketplace.
The architecture of any organization has to have solid foundations, because without them, just like a bricks and mortar structure, at some point the whole construction will crumble. If you fail to get the design right from the start, no matter how good any of the component parts are or how much money is spent trying to drive the business, in the long run, it just won’t work. Obviously organizations evolve their design over time, but if they start with flaws in the blueprint, then pitfalls such as processing gaps, communication barriers and misaligned incentives are just some of the factors that will cause the business to falter and ultimately fail.