Flevy Management Insights Q&A
How can the STAR Model enhance organizational design and performance?
     Joseph Robinson    |    Organizational Design


This article provides a detailed response to: How can the STAR Model enhance organizational design and performance? For a comprehensive understanding of Organizational Design, we also include relevant case studies for further reading and links to Organizational Design best practice resources.

TLDR The STAR Model aligns Strategy, Structure, Processes, Rewards, and People to create a cohesive and agile organization capable of achieving Operational Excellence.

Reading time: 5 minutes

Before we begin, let's review some important management concepts, as they related to this question.

What does STAR Model mean?
What does Organizational Alignment mean?
What does Change Management mean?
What does Agility in Organizational Design mean?


Understanding the STAR Model in business is crucial for C-level executives aiming to enhance organizational design and performance. This framework, developed by Jay Galbraith, serves as a comprehensive template for analyzing and designing an organization's structure and processes. It stands on five key components: Strategy, Structure, Processes, Rewards, and People. Each element is interconnected, ensuring that changes in one area necessitate adjustments in others to maintain alignment and drive performance.

The Strategy component dictates the direction and goals of the organization, serving as the foundation upon which the other elements of the STAR Model are built. It's about making deliberate choices on where to compete and how to win. This strategic planning sets the stage for the organizational structure, which determines how tasks and responsibilities are distributed. The Structure should facilitate the execution of the chosen strategy, whether through a functional, divisional, or matrix setup.

Processes encompass the flow of information and decision-making mechanisms within the organization. Effective processes ensure that strategic objectives are translated into actionable plans, with clear roles and communication channels. This is where operational excellence comes into play, optimizing the core activities to deliver on the strategic intent. The Rewards system, on the other hand, is designed to align incentives with the organization's goals, motivating employees to contribute to success. It's not just about financial compensation but also recognition and career development opportunities.

Lastly, the People component focuses on the capabilities and culture of the organization. It's about having the right talent in place, equipped with the necessary skills and driven by a culture that supports the strategy. Leadership, development, and engagement practices are critical here, ensuring that the workforce is prepared and motivated to execute the strategy. This holistic approach, integrating all five elements, enables organizations to design a structure that is coherent with their strategic objectives, fostering an environment conducive to high performance.

Implementing the STAR Model

Adopting the STAR Model requires a systematic approach, starting with a clear understanding of the current strategy and how well the other elements of the model support its execution. This involves a thorough assessment of the organization's structure, processes, rewards, and people practices. Consulting firms like McKinsey and BCG emphasize the importance of alignment across these elements to ensure that the organizational design supports the strategic direction.

For instance, if a company's strategy shifts towards digital transformation, this might necessitate changes in the organizational structure to promote agility and innovation. Processes might need to be streamlined to accelerate decision-making, while the rewards system could be adjusted to incentivize digital initiatives. Similarly, talent development programs might focus on building digital skills and fostering a culture that embraces change and innovation.

Real-world examples abound. Companies like Google and Amazon have famously aligned their organizational structures and processes to support rapid innovation and customer-centric strategies. Their success underscores the importance of ensuring that all elements of the STAR Model are cohesively designed to support the overarching strategy. It's not just about having a strong strategy but also about having the right structure, processes, rewards, and people to execute it effectively.

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Challenges and Considerations

While the STAR Model provides a robust framework for organizational design, its implementation is not without challenges. One common pitfall is underestimating the interdependencies among the five elements. Changes in one area can have unforeseen consequences on others, potentially disrupting the alignment with the strategy. It requires careful planning and coordination to adjust all elements cohesively.

Another consideration is the external environment. Market dynamics, technological advancements, and regulatory changes can all impact the effectiveness of an organization's design. Leaders must remain vigilant, ready to adapt their strategy and, consequently, their organizational design to stay ahead. This agility is crucial in today's fast-paced business environment.

Moreover, the human aspect cannot be overlooked. Implementing changes to the organizational design often encounters resistance. Effective change management practices are essential to navigate these challenges, ensuring that the workforce is engaged and aligned with the new direction. Communication, transparency, and involvement are key strategies to foster buy-in and facilitate a smooth transition.

In conclusion, the STAR Model offers a comprehensive and flexible framework for enhancing organizational design and performance. By aligning Strategy, Structure, Processes, Rewards, and People, leaders can create a cohesive and agile organization capable of executing its strategic vision and achieving operational excellence. However, success requires a nuanced understanding of the model's components, a keen eye for external influences, and a commitment to managing the human side of change.

Best Practices in Organizational Design

Here are best practices relevant to Organizational Design from the Flevy Marketplace. View all our Organizational Design materials here.

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Explore all of our best practices in: Organizational Design

Organizational Design Case Studies

For a practical understanding of Organizational Design, take a look at these case studies.

Organizational Alignment Improvement for a Global Tech Firm

Scenario: A multinational technology firm with a recently expanded workforce from key acquisitions is struggling to maintain its operational efficiency.

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Talent Management Enhancement in Life Sciences

Scenario: The organization, a prominent player in the life sciences sector, is grappling with issues of Organizational Effectiveness stemming from a rapidly evolving industry landscape.

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Organizational Redesign for Renewable Energy Firm

Scenario: The organization is a mid-sized renewable energy company that has recently expanded its operations globally.

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Inventory Optimization Strategy for a Plastics Manufacturing SME

Scenario: A small to medium-sized enterprise (SME) in the plastics manufacturing sector is confronting significant Organizational Development challenges, stemming from a 20% increase in raw material costs and a 10% decline in market share over the past two years.

Read Full Case Study

Organizational Effectiveness Improvement for a Global Technology Firm

Scenario: A multinational technology company is struggling with declining productivity and employee engagement, impacting its overall Organizational Effectiveness.

Read Full Case Study

Retail Workforce Structuring for High-End Fashion in Competitive Landscape

Scenario: The organization is a high-end fashion retailer operating in the competitive luxury market, struggling with an Organizational Design that has not kept pace with rapid changes in consumer behavior and the retail environment.

Read Full Case Study

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Related Questions

Here are our additional questions you may be interested in.

How can the principles of organizational design be applied to enhance remote work effectiveness and employee engagement?
Applying Organizational Design principles, such as structuring for remote efficiency, fostering a culture of engagement and collaboration, and emphasizing Continuous Learning and Development, can significantly enhance remote work effectiveness and employee engagement. [Read full explanation]
What strategies can leaders employ to ensure organizational design enhances global competitiveness?
To enhance global competitiveness through organizational design, leaders should focus on strategic alignment and adaptability, invest in technology and innovation, and foster a global mindset and inclusive culture, alongside implementing efficient processes, decentralized decision-making, and continuous improvement practices. [Read full explanation]
In what ways can data analytics be leveraged to enhance organizational alignment and decision-making?
Data analytics enhances organizational alignment and decision-making by informing Strategic Planning, improving Performance Management, driving Digital Transformation and Innovation, and strengthening Risk Management, as evidenced by successes at Amazon, Netflix, and Google. [Read full explanation]
How can the principles of sustainability be integrated into organizational alignment to support long-term business goals?
Integrating sustainability into organizational alignment involves Strategic Planning, Operational Excellence, and Leadership commitment to embed sustainability principles into core strategy, operations, and culture, driving long-term business success and resilience. [Read full explanation]
What are the key considerations for organizations when integrating ethical AI use within their operational processes?
Integrating ethical AI involves Strategic Planning, Operational Excellence, and continuous Risk Management and Performance Management to align AI use with ethical standards, legal requirements, and societal expectations. [Read full explanation]
What impact will the increasing importance of sustainability and corporate social responsibility have on OD strategies?
The growing emphasis on Sustainability and Corporate Social Responsibility is fundamentally transforming Organizational Development strategies to include sustainable practices, driving Innovation, Operational Excellence, and Risk Management, while enhancing Employee Engagement, Leadership Development, and Stakeholder Relationships for long-term success and resilience. [Read full explanation]

Source: Executive Q&A: Organizational Design Questions, Flevy Management Insights, 2024


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