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Organizational design

Shaping your organization to better achieve its business strategy

The essential guide to organizational design

From humble beginnings in HR, organizational design is fast becoming a survival strategy for every business, no matter how large or small. Economic uncertainty, market disruption, geopolitical instability, and changing consumer behavior mean that businesses are constantly under threat. So much so that experts predict 50% of companies listed in the S&P 500 will disappear within 10 years. 

Organizations can no longer afford to rely on opinion and gut instinct to make decisions about their future. They can no longer afford to take six months to plan their workforce every three to five years. It’s now essential to design based on data and to plan continuously if businesses are to survive.

What is organizational design?

Organizational design is the discipline of shaping an organization to better achieve its business strategy and objectives by aligning its people and the skills they have with the work they do. 

Screenshot from the Orgvue platform showing an organizational design data visualisation
Using Orgvue to visualize data in different formats and on the same screen
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Organizational design is driven by the business strategy and operating context, and requires holistic thinking around systems, structures, people, performance measures, processes, culture, and skills.

Naomi Stanford, Organization Design Consultant

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Rethinking organizational structure and business planning

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Research has shown that even the best business forecasters are unable to plan reliably more than 400 days out. Clearly, the days of annual planning are over. Business must now find a way to adapt quickly to change, make fast decisions and plan continuously and iteratively using accurate, consistent data. But the technology solutions in use today make this challenging to do.

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Instead of working methodically to a 3-year plan, organizations will need to become more agile in how they respond to uncertainty and change. They’ll need to get used to the idea of continuously adjusting their business plans in shorter and shorter cycles. 

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This is where organizational design takes on new importance. Until now, structuring an organization has assumed a certain predictability in market behavior. But today those assumptions have all but disappeared.

The time to fundamentally rethink organizational structure has come. Being able to design your organization and plan your workforce as an interconnected, cyclical process is now the only option. 

Where does organizational design go wrong?

As companies develop and grow, systems and processes become more complex and can fall out of alignment with business strategy. Consequently, those organizations that don’t continuously monitor business performance are likely to experience a number of problems: 

  • Dysfunctional workflows that stall or break down
  • Siloed, fragmented workloads with low quality output
  • Duplication or redundancy of activities
  • Poor accountability for activities and delays in decision making
  • Poor information and lack of authority to solve problems as they arise
  • Lack of trust between managers and employees

These problems are all symptomatic of underlying causes related to organizational design.

Organizational design challenges to overcome

Designing organizations is always difficult because you’re dealing with a moving target. Whatever changes you make will have a ripple effect on your company’s ability to pursue its strategy. This ‘connectedness’ gives rise to a number of design challenges and pitfalls that can be grouped as follows:

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People and politics

Designing around people and roles rather than business needs is the single biggest mistake you can make. Don’t be tempted to keep the peace in the short term at the expense of business performance over the long term. 

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Data and analytics

Aside from the technical challenge of collecting, merging, structuring, cleaning, and storing data, obtaining information can be difficult for ethical reasons. Employees may be fearful of data transparency and resist disclosure. This challenge will take time to overcome and relies on trust and behavior change.

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Design processes

Organization design is about more than just structure, so make sure you apply the same rigor to all areas. Don’t just focus on org charts, be clear on the processes that make up the organization as a whole and understand how they connect. 

There are no perfect answers to organizational design and every case is different. It’s a continuous process that works to sustain the organization over time and improve business performance.

Organizations are connected, living systems

Underpinning successful organizational design is the idea that organizations are connected systems and not static structures drawn on paper. They are complex organisms with many moving parts that are constantly changing and evolving, and that are dependent on the ecosystem in which they exist. 

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From climate change to Covid19, technological acceleration, geopolitical issues, and shifting fiscal priorities, businesses are facing a number of pressures
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Organizations have a huge amount of different types of data at their fingertips

Demonstrating that the effectiveness of organization systems is greater than their component parts isn’t difficult. What’s challenging to understand is exactly why this is. And to do that, you need to be able to visually represent those systems with data.

Orgvue uses a conceptual model to describe the relationship between people and work, so you can see how different activities combine to drive business performance. The model enables you to monitor and adjust the nature and flow of work in response to changing circumstances. 

The organization as a system

This model is different from others in that it breaks down the organization system using data points to deconstruct people, roles, and positions, as well as enabling gap analysis aimed at optimizing the system. 

You begin by associating individuals with positions, which are grouped by role. For example, you may have several sales managers (role) for different regions (positions). This relationship helps to quantify the workforce demand of the business over time, which can then be compared with the supply that the current workforce represents.

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The organization as a system

Benefits of data-driven organizational design 

Diagram showing the benefits of data driven organizational design

Once you have an indication of the gap between supply and demand, you can begin breaking down roles into the processes and activities (in other words, the work), alongside the skills and competencies needed to do that work. Using accountability metrics, this allows you to measure how effectively the work is organized and distributed.

Your business is then in a position to monitor workforce productivity using associated data points to check that work isn’t being duplicated, trim back work where too much effort is being invested in particular activities, and redirect effort elsewhere when needed. Importantly, it also means the financial impact of any changes can be tracked.

This is far more insightful than tracking salary costs across the workforce, for example, which doesn’t tell you the financial contribution the workforce is making, only how much it’s costing you. By shifting focus to the work, you can quantify the value that your workforce delivers.

3 steps to organizational design 

Designing an organization that’s more responsive and resilient to unforeseen changes calls for a more precise understanding of your organization as it is today. Design methodology considers activities (work), competencies (knowledge and skills), roles (to complete the work), and human capital (people with the right competencies) needed to fulfil positions and meet objectives (targets).

Broadly speaking, there are three steps to successful organizational design. You begin with the big picture, then go into the practical detail, and finally focus on putting the design into practice. Then it’s a case of continuously repeating that cycle by tracking and monitoring progress. Organizational design, like workforce planning, is a habit, not a one-time event:

1

Macro design

Unpacks the business strategy and prioritizes objectives

2

Micro design

This is all about the detail. You need to understand what roles you have, the rationale for those roles, and the activities that each role and position responsible for?

3

Design in practice

Going from micro design to implementation is an iterative process. You won’t get micro design entirely right first time but that’s better than doing no micro design at all. 

Continuous design

Once you’ve completed the design work, shift your focus to continuously tracking and monitoring your organization’s performance against your business strategy and objectives. At this point, it’s about bringing everything back to the macro level, so you can appreciate the direction of travel, what you’ve achieved, and what lessons can be learned.

Organizational design is a journey

In the short term, the single biggest change you can make in how you approach organizational design is to go from thinking about data as static snapshots to visualizing movement over time. 

Like your organization, data is constantly changing, both for actuals and forecasts. Understanding the relationships between the two, where and what the gaps are, and how these ebb and flow is the key to improving your organization’s performance against its objectives.

Even so, organizational design is a journey. It’s complex work that’s never finished but Orgvue is here to help.

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“Messy” data can be turned into something scalable, repeatable, and visual

How Orgvue helps

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Visualize movement over time

Cleaning and organizing your data in Orgvue, then linking and bringing it to life through interactive visualizations enables you to reach a remarkable depth of analysis into the causal relationships that truly explain how your business operates.

For example, you’ll be able to identify connections between individual performance and business objectives. You’ll be able to understand whether an employee would benefit from specific training, whether they’re overloaded with work, or whether a change of manager has affected performance. These findings give you actionable insight to make changes with confidence.

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Orgvue sunburst graphic illustrating the whole organization broken down by department
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Using Orgvue to understand the ethnicities by department
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Orgvue helps you to understand your business

With Orgvue, it’s simple to bring data from disparate systems in dispersed locations into one place to create a single source of truth, so you can see you organization how it truly is.

  • Gather your data in one place, whether from your HR system, financial systems, skills or activity data, business data and more. Orgvue’s drag-and-drop functionality allows to you easily clean your data to remove errors and inconsistencies.
  • Use Orgvue’s pre-built set of ‘solution packs’ to reveal insights about the current state of your business at the top level and granular level​.
  • Quickly and easily switch between graph types to look at your data from different angles.
  • Color-code your data using key metrics such as location, department, gender, preferences, skills, and many more​.
  • Share your findings with stakeholders by exporting visuals straight to Microsoft PowerPoint and tell your organization’s story in the terms they respond to best.

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Orgvue helps you explore your business

Orgvue’s pre-built packs of visualizations help you look in detail at specific areas of your business and overall organizational health. You’ll be able to look at key metrics like:

  • Spans and layers
  • Age and tenure composition
  • Vacancies
  • Organizational dimension
  • Gender diversity
  • Ethnic diversity
  • Reliance on contractors and part-time workers
Orgvue graph showing the breakdown of diversity and inclusion of an organization on the platform

Answer questions such as:

  • How many layers does my organization have?
  • Is it in line with my design principles?
  • Are my teams overall the size that I want them to be? 
  • Are higher grades reporting into lower grades? 
  • And does that make sense for my org productivity?

4

Orgvue helps you to model your future business

Drag and drop

Use Orgvue’s drag-and-drop functionality in solution packs to understand how different scenarios would affect your business, so you can model your future organization with confidence.

Screenshot of an orgvue chart showing savings and expenditure by organizational changes
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Visualize the future state of your organization and identify areas that need attention

See your organization as a whole, align with your strategic goals, and decide where to investigate and model further.  

Answer key questions such as: 

  • What if I relocated a team from the US to India? 
  • What if my whole workforce went remote? 
  • What if I wanted to cut costs from a specific department? 
  • What would be the cost impact of going from a regional to a centralized marketing team? 
  • What if I outsourced my whole creative team? 
  • What would happen to my available talent pool if I took geography out of the equation? 

Solution brief: organizational design

Planning and visualizing the future of the workforce is becoming crucial for businesses to thrive. Read the Organizational Design Solution Brief to learn how Orgvue can help you to model your organization, assess the impact and design with confidence.

  • 3 key challenges of organizational design you will need to overcome.
  • a SaaS platform that changes everything – and how
  • A customer story of successful organizational design with Orgvue
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More resources

THE BOOK

Data Driven Organization Design (2nd Edition)

SOLUTION WEBINAR

Adapt and achieve with agile organizational design

ARTICLE

How to put organizational design into practice

EBOOK

Meeting constant disruption with constant design

Design your business of tomorrow, today

Discover what Orgvue can do for your organization first-hand, request your free demo.