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Multiple Views for Different Purposes

What Is Organizational Design?

Organizational design is a diagnostic process or methodology. Its purpose is to identify the dysfunctional elements of a company’s procedures, systems, workflow – even its organizational structure – and then make positive changes to help the company meet its current business goals. Organizational design takes a holistic look at the company with a view to identifying inefficient workflows, such as communication breakdowns and steps that don’t add value. These might include:

  • Duplicated work effort
  • Siloed work that does not advance the overall company goal
  • Poor customer service or lack of focus on the customer
  • Lack of accountability (“It’s not my job”)
  • Turf wars and pointing the finger of blame rather than working to resolve problems
  • Bottlenecks in decision-making
  • Poorly defined systems and processes that hinder, rather than enable, people to do their job
  • Mistrust between managers and workers

The Difference Between Organizational Structure and Design

Organizational structure is the static representation of organization. Whatever type of structure a business is using, you should be able to draw it out in the form of a diagram. The organogram structure – that’s the posh word for a corporate structure chart – provides an easy way to visualize the relationship between one job function and another, the ranks of team members, managers and leaders, and the various chains of command.

Organizational design, on the other hand, is a dynamic representation of organization. The term refers to the procedures for structuring and restructuring an organization, its processes and workflows to make sure the business is continually operating at its best.

The main point about organizational design is that it’s an ongoing process. The economy, market forces, the regulatory framework, customer tastes, the rest of the external business environment – these things all have power to impact a business, and they are constantly changing. So, the business may need to change, too. Organizational design provides a structured way for tweaking the systems that are no longer working with a view to reducing costs and strengthening performance in the light of new external conditions.

How to Design an Organization

Organizational design is one area where consultants have their own proprietary process for diagnosing the weak areas in a business. For small businesses who are going it alone, the Galbraith Star model is a useful tool. This model seeks to design an organization by asking and answering questions in five core areas that are depicted as the five points of a star: strategy, structure, processes, rewards and people.

Strategy

What are your goals and objectives, mission, vision and values? What are your competitive advantages, and what value do you offer to customers? This is where you decide the products or services to be provided, which markets you will serve, and your unique selling proposition.

Structure

How will power be distributed (centralized versus decentralized structure)? Will you organize around functions, divisions, products or in a matrix structure? For most businesses, structure goes hand-in-hand with strategy as together they represent the building blocks of the organization.

Processes

How will you allocate budget across the various functions? How will you document and standardize procedures to make sure the product or service gets into the hands of customers? What are the performance metrics for each process? How are they evaluated?

Rewards

What reward systems are necessary to motivate staff and keep them aligned to the goals of the organization? For example, will you offer promotions, bonuses, stock options, commission or performance-based pay?