5 Reasons to Invest in Your Organizational Design and Structure

Editor's Note: Take a look at our featured best practice, Organization Design Toolkit (103-slide PowerPoint presentation). Recent McKinsey research surveyed a large set of global executives and suggests that many companies, these days, are in a nearly permanent state of organizational flux. A rise in efforts in Organizational Design is attributed to the accelerating pace of structural change generated by market [read more]

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Businesses need to pay attention to their organizational design and structure. To achieve a set of specified goals and objectives, you need to design your business goals, processes, and resources, which are integrated for optimal performance. No matter how good your business idea is, misalignment can negate all prospects of attaining business efficiency. When your goals, strategy, design, and structure are aligned, you have effectively set your business up for success. Therefore, the reason the organizational design is important is that its part of the vehicle that helps business execute their strategy to achieve certain goals. If the design component fails, the business fails, too.

Effective businesses focus on integrating the design component with every other part of the business. People should structure it in such a way that all the moving parts fit together to produce efficient results. This process usually takes a lot of thought and consideration. Achieving coherence usually involves process redesign and restructure because businesses may have to move things around in finding out what works and doesn’t. Therefore, your business’s design and structure matter for your business to flourish. For that reason, you ought to look for an excellent designer who can help you with the design process. Check here for professional organization design consulting.

That being said, here’s a guide about the reasons you should invest in organizational design and structure:

1. Promotes Efficiency

A good organizational structure integrates the different parts of a business with systems that create value through efficiency. A well-designed organization will always yield efficiency. Also, efficient business processes ensure faster production, and in this competitive landscape we’re in, nothing beats efficiency because if you fall behind, you risk staying behind. So you should design your organizational structure well. Efficiency will be the by-product.

2. Increases Productivity

Worker productivity will increase because it streamlines job roles. A well-designed organization allows people to be productive in their designated roles by improving their focus. Every employee will know what the organization stands for, what their goals are, and what it expects them to do. Also, it’s motivating to be part of an organization that’s organized. A well-structured organization simplifies life for others and consequently helps them become more productive in what they do.

3. Creates Great Work Environment

A good organizational design ensures that there’s a flow to everything. Because it promotes efficiency and productivity, it will also likely help employees to be happier at work. When the employee feels empowered to do their work because you’ve designed your business to nurture and challenge employees to become better people, you have succeeded as an employer. You would’ve gotten it right, which isn’t always easy. When the employees are happy, they’ll be productive. It’s a positive cycle.

4. Improves Communication

Employees will communicate better because a well-integrated business structure allows inter-functional and inter-departmental communication. For example, when the marketing department wants approval to launch a campaign, there should be a direct link to the finance department to ensure that the funds are availed timeously. A well-designed system breaks the communication barriers that rigid business structures often possess.

5. Encourages Creativity And Innovation

An organization that is designed with the aim of constant improvement will empower its employees to come up with innovative solutions to current and future problems. If you design your business in such a way that employees are free to express themselves healthily, bright ideas will emerge. Creativity thrives in environments that allow for exploration.

What Are the Requirements for Good Organizational Design? 

A good organizational design guarantees a working environment that helps heads and employees to perform effectively in delivering their tasks. Below are the requirements for having a good organizational design that you might need to know:

Flexibility

 You should approach business design with a flexible mindset. The reason is that you might not get it right the first time. Also, if you need to do a redesign, you might have considered the earlier stages of design. And a good way to do this is to find areas in your organization that can be decentralized. It can allow for goals achieved more efficiently. If you’ll need to do a staff restructuring, a decentralized organization is likely to adjust more smoothly because it affects only a specific department, segment, quality circle, or business function. The extent to which a department or business function can be decentralized differs. But, where possible, seize the opportunity to do so.

Coherence

Coherence is all about fit. Your business needs to be designed with a unity of purpose. Every branch, team, department, and business process should aim towards achieving the same goals. Also, how a certain function does may be different, but the overall goal has to be at the center. Therefore, businesses have to work around this overall goal and establish strategies that align with it. Alignment is empowering. When things are aligned, the business will flow more smoothly.

Functionality

With the organizational design, you need to optimize processes as much as possible. The parts of the process that don’t add value are deadweight. Deadweight can slow you down. You want to remain with the parts of the business that matter to achieve your goals. So, you need to endeavor to design everything in your business to make it work. Functionality is about purpose. Ensure that when you design and structure any part of your business, you have to focus on the aspects that are most relevant and functional.

Automation

If any business processes can be automated, automate them. Automation promotes efficiency, and it’s important because it results in things being done more speedily. Ideally, your organization’s design and structure should be automation-ready. Enterprise Resource Planning Systems (ERP) are a good example of how a business can use automation to optimize productivity and performance.

Conclusion 

Organizational design and structure are crucial for business success. Every business has different core activities, and therefore, has unique business structures. Regardless, you need to invest in making sure that you get the design of your business right because it makes your business more efficient.

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Organizational Design (AKA Organizational Re-design) involves the creation of roles, processes, and structures to ensure that the organization's goals can be realized. Organizational Design span across various levels of the organization. It includes:

1. The overall organizational "architecture" (e.g. decentralized vs. centralized model).

2. The design of business areas and business units within a larger organization.

3. The design of departments and other sub-units within a business unit.

4. The design of individual roles.

In the current Digital Age, there is an accelerating pace of strategic change driven by the disruption of industries. As a result, to remain competitive, Organizational Design efforts are becoming more frequent and pervasive—with the majority of organizations having experienced redesign within the past 3 years. This has only been exacerbated by COVID-19.

Frustratingly, only less than a quarter of these Organizational Design efforts are successful. Most organizations lack the best practice know-how to guide them through these Transformations effectively.

Learn about our Organizational Design (OD) Best Practice Frameworks here.