Constant and accelerating change. This is what characterizes our world today. Enterprises continue to adjust and flex to these changes. The challenge is designing and creating organizations that are resilient, adaptable and sustainable. Fast paced change has spawned a number of creative concepts and practices. Most executives and human resource professionals have to appreciate how best to design organizations.
Criticality of Design
Building an organization capable of executing strategy is not an easy one. In fact organizational restructuring has to be undertaken when truly needed and required by the organization. It is not done on mere whim or frustration with the existing structure. Solid reasons have to be put forward such as the need to deliver on new strategies and in the case of mergers and acquisitions. Extra attention is required for drawing the new organization and even more care in terms of the performance support for managing change from the old to the new.
Clearly the organization structure needs to support strategy. Organization design encompasses selecting people for key positions, the skills and core competencies needed to execute the strategy and the need to devise rewards that support the delivery of objectives and strategies.
ORGANIZATION DESIGN CONCEPTS
Today a number of concepts and practices prevail. One is the doughnut concept, an enterprise retains the positions and functions that are essential in terms of retaining its strategic advantage, all other functions are outsourced to external, reliable partners. Two, is outsourcing to smaller companies that then become part of a “supply chain” managing intricate internal and external customer and supplier relations. Typical of this would be the case of Japanese companies where its suppliers often co-locate with the production plant to ensure just in time delivery of materials. Three, is to create another company, dedicated to serve the mother company as in the case of captive business process outsourcing companies. Fourth is the concept of drawing networks and circles rather than boxes.
KEY PRINCIPLES
With all these variations do the key organization design principles still apply? The dictum that structure follows strategy remains a truism in organization design. Today companies look at three principles to ensure the right organization for the right industry and environment. One is simplicity where flatter organizations are in and the pyramid organization is out. Two, that the organization is able to deliver with speed to the satisfaction of the customer. Three, is to ensure that the processes across functions are streamlined with all costly non value adding processes taken out. In fact most leading industries today have already developed their own process maps and language that enable them to function with excellence. The process driven organization often means that people retain a resilient mindsets open to going beyond the roles dictated by their job descriptions.
ELEMENTS ORGANIZATION DESIGN
Organization Design can be defined “as the process of reshaping organization structure and roles. It is the alignment of structure, process, rewards, metrics and talent with the strategy of the business.” The appropriate organization design can lead to competitive advantage and performance. One can design to incorporate design values such as flexibility, innovation, and rapid change. It also facilitates effective alliances and networks.
Galbraith Star Model
One model for organization design is the Galbraith model that looks at alignment of the 5 elements of strategy, structure, processes, human resource policies and rewards. Galbraith defines these elements. Strategy determines key actions. Structure determines the location of decision making power. Processes have to do with the flow of information. Human resource policies influence and frequently define the employee mindsets and skills. Rewards systems influence the motivation of people to perform and address organizational goals.
Structure policies can be classified into 3 types: specialization, span of control and distribution of power. Specialization refers to the type and numbers of job specialties used in performing the work. Span of control refers to the number of people constituting the departments (that is, the span of control) at each level of the structure. Distribution of power has two dimensions: the vertical dimension, refers to the classic issues of centralization or decentralization and the lateral dimension, refers to the movement of power to the department dealing directly with the issues critical to its mission.
Strategic Organization Design Process
The ideal, strategic organization design process, based on our experience, depends on factors such as the choice of the CEO to impose a structure or pursue design in a collaborative fashion. Then comes the issue of time allocated to move from the current to the future structure. If time is of the essence a team can develop a structure, getting needed inputs from others and simply implementing the structure managing change from the old to the new. If time allows, others pursue a participative process.
In essence, organization design efforts would consist of 5 steps. At the beginning it may serve to go zero based so as not to be constrained by what exists.
Ideally, the first step is to develop the vision, mission and strategies of the organization. However in some instances as in conglomerates, it is easier to focus on the vision, mission and strategies of the business unit even with a simple directional advice from headquarters. Step 2 is to review the strengths and weaknesses of the current structure. This analysis includes gathering the information needed to make major design decisions.
Step 3 is to draw the strategic organization design based on the key tasks to be performed and the core processes that need to be performed. Step 4 is to develop the operational design that includes the number of supervisory and manpower required and the description of key roles and competencies required.
Step 5 is then to compare the current organization design and the proposed design and undertake refinements of the design that ensures that the future design is also grounded on reality. Step 6 is all about managing change and transitions from the current to the new design . As most experts note, a company can develop the transition to the new design through stages with clear assumptions behind each stage.
Developing a new design is like constructing a new house or doing major renovations. It requires a good design accompanied with careful execution.
[Tita Datu Puangco is the President and CEO of Ancilla Enterprise Development Consulting, an innovative provider of Organization Development and Training solutions in the ASEAN region. These solutions include strategy development and execution, managing change breakthroughs, brand management, innovation and human resource systems. For your letters/ feedback, kindly email: tita.datu76@gmail.com, For other inquiries, please call 8810-3129/0920-9218332/0917-8348176]
