What is Organization Design and Why Do We Care?
When you think of organizational design, what comes to mind? Many people think of organization structure, the organization chart, reporting relationships, management systems, work processes and procedures. While these are part of organization design, they are not a complete definition. I define organization design from the stakeholder’s perspective in this video and article. Everything in an organization that stakeholders see and hear is part of organization design. Why? Because what they see and hear influences what they think and feel and, in turn, what they say and do or their behavior. And it is their behavior that creates the results.
All organization design efforts seek specific results and outcomes (Figure 1). As leaders of organizations, we change many things in the organization, including the design of activities, leadership style, strategy, scorecard, culture, etc., expecting to create these results (Figure 1). What we often forget is these do not create results directly. Instead, they are the information that the stakeholders see and hear. Stakeholders then translate that information based on what they think and feel. And eventually, apply their translation to what they say and do. How they behave creates the results. Thus, organization design at its core is the design of the information, both message and media, that the stakeholders see and hear.
Think about a typical day in your organization. As you do your work, you are bombarded by many messages from various sources. You have instructions on how to do your job that come in many forms, including work instructions, policies, digital systems designed to facilitate your work, etc. Then your boss stops by to give you specific expectations, priorities, feedback, and advice. Then you see a coworker in the cafeteria who also shares their views on how to succeed in the organization along with the latest gossip, “did you hear is getting promoted….” Embedded in those messages are the norms, values, and expectations of the organizational culture. Then you might get a memo via email on the incentive system and bonus structure, including the criteria. We see and hear all these messages and interpret them based on our thoughts and feelings. All too often, the messages are conflicting, leaving individuals to decide for themselves which messages to follow.
To make the situation even more complex, the stakeholders are all different and consequently think and feel differently about the same messages. People do not obey any immutable laws of nature, they come in infinite variety, and when combined into groups, the permutations are endless. Consequently, organizations are complex whether we like it or not and whether we choose to acknowledge that complexity or not. To help us deal with that complexity, we often divide the organization into individual pieces that are less complex. Different people around the organization do their best to design their pieces based on their expertise, education, and experience. While these are often good designs by themselves, when connected to the larger organizational system, they are often not aligned and integrated well and thus cause confusion and dysfunction in the organization.
Dimensions of Organization Design
To design organizational systems that are aligned and integrated, expand your definition of organization design to include all the information and media that are influencing the stakeholders, including outputs, activities, and inputs, along with the workforce, scorecard, and culture, as well as the guidance messages such as leadership, strategy, and governance (Figure 2).
Core
Start with the core of what the system, process, or activity provides to the customers (internal and/or external). Then identify the activities required to produce those outputs and the inputs needed to support the activities.
Outputs – Identify and define the outputs of the activities and describe how they address the requirements of the customers (internal and external).
Activities – Identify and design the activities required to produce the outputs. Include the decision criteria, tools, techniques, and technologies in the design. Identify and design the connections among the activities, tools, etc.
Inputs – Identify the required inputs to the activities, decisions, etc., and integrate them with the systems that provide those inputs.
These are typical elements of organization design – nothing really new here. The next step is to align and integrate the enablers, the workforce, the measurement system, and the culture.
Enablers
Lack of alignment and integration of the workforce, scorecard, and culture can undermine the core design. There are many examples where activities were redesigned and communicated to the stakeholders only to find out later that the stakeholders were not following the new design. Why not? In many cases, it was because there was a stronger message coming from the incentive system, the performance measures that defined success, and the organizational cultural values and norms.
Workforce – Identify the knowledge, skills, and abilities required to execute the system. Align the related training and development, incentives, and support.
Scorecard – Identify the inputs, activities, outputs, outcomes, and stakeholder measurements that will be used to manage the activities and validate the quality and performance of the design.
Culture – Identify the key “desired” cultural aspects that are embedded in and support the activities, including the organizational values, symbols, rituals, heroes, and practices.
Once the enablers are addressed, the next step is to align and integrate the guidance information.
Guidance
In addition to the enabler messages, there are several guidance messages influencing the behavior of the stakeholders, including what leaders say and do, the strategy, and the regulatory and sustainability requirements.
Leadership – Identify and align the leadership responsibilities, styles, rhetoric, and reporting relationships needed to successfully lead those engaged in the activities.
Strategy – Identify the key strategy influences, including purpose, mission, vision, goals, objectives, and resources. Align the activities with the strategy.
Governance – Identify the legal, ethical, regulatory, and sustainability requirements applicable to the activities. Align the activities with the requirements.
These nine components form a comprehensive design that addresses not only the technical design of the core components but aligns and integrates the core design with the other influential messages in the organization. What is included in each of the nine components will be different for each design project. This is the design step of a more extensive design process, and it raises a lot of questions about the information and knowledge we need to do these design activities, and that’s where the design process comes in.
Design Process
Design is the tenth step in the design process. Before the team is ready to design, it will complete a discovery process to identify the information needed to inform the design (Figure 3).
1. Design Brief – The first step is to define the intent or purpose of the system. A design brief is a formal document that captures the key project requirements and parameters and guides the design team throughout the design process.
2. Stakeholder Requirements – The next step is understanding and empathizing with the stakeholders and their experiences. We start with six stakeholder groups, including the customers, the workforce, the suppliers and partners, along with the financial perspective of investors, the community, and the natural environment.
3. Nature of the Activities – The nature of the activities influences design decisions, such as the amount and type of structure appropriate for the system, the level of control required, and the specificity of the various process steps and activities, etc.
4. Theories and Research – Organizational design is a theory-led discipline. Kurt Lewin proposed, “There is nothing as practical as a good theory.” Theory and empirical evidence from research inform good design. What do we already know about this type of system? What works, what doesn’t work, and under what conditions?
5. Inspiring Examples – We look at other examples of similar systems, just like an architect would take a trip to Europe to study architecture. In this step, the design team reviews and explores how high-performing organizations have designed similar systems for their organizations.
6. Unique Context – We look at the context and identify what’s relevant and important. A custom-designed system fits the organization’s unique characteristics and situation. Consequently. the design of any custom organizational system depends on understanding the organization’s unique context.
7. Design Principles – Design principles are the desired characteristics of the new system. They are cross-cutting and are used to inform the design. Eight established design principles have proven useful for developing high-performing organizational systems, including balance, congruence, convenience, coordination, elegance, human, learning, and sustainability.
8. System Integration – Most (if not all) organizational systems are part of a larger group of systems that combine to create the overall enterprise. For example, a strategy system interacts with several other systems, including the enterprise scorecard, governance system, human resource systems, etc.
9. Diagnosis – If you are redesigning an existing system and want to keep the strengths of that system, assess how well the current system addresses the insights from the first eight steps. If you start from scratch with a blank sheet design, skip this step.
10. Design – Using the information and concepts from the first nine steps as a “springboard,” the design team creates an ideal conceptual design, a doable conceptual design, and a detailed design. A complete design for an organization is composed of nine components, including activities, outputs, inputs, purpose, leadership, learning, people, culture, and scorecard (Figure 2).
11. Develop – Once the detailed design is complete, the development phase begins. The development consists of an iterative process of a paper prototype, a working prototype, and a pilot test.
12. Deploy – Deploying a system or process throughout the appropriate parts of the organization is an exercise in leading change. Successful full-scale implementation of a new design requires a plan, trained employees, resources, and a process to review progress.
For a more detailed discussion of the 12 design process steps, visit the Organization Design Framework page.
While there are many tangible artifacts found in organizations, organizations do not really exist except in the minds of the people. So, when you think about organizations and organizational design, think about designing the information that people see, both the content and the way in which it’s presented.
Resources
For a brief introduction to organization design, read Latham, J. R. (2013). How Much Does Your Organization Weigh? INNOVATION, 32(2), 4.
For an overview of the design process, visit:
For a more in-depth treatment of the design process, read Latham, J. R. (2012). Management Systems Design for Sustainable Excellence: Framework, Practices, and Considerations. Quality Management Journal, 19(2), 15.
