Redesigning an organization to take advantage of today’s sources of wealth creation isn’t easy, but there can be no better use of a CEO’s time. ~ McKinsey Quarterly
By improving the effectiveness of our organizations Human Resources adds value, and in the right circumstances directly impacts the effectiveness of our organizations competitive strategy. Organizational design, is one of these circumstances.
Organization design is the alignment of organization structure, roles, and processes to execute on organizational goals. The better aligned, the more effective the organization is. Modern organizational design goes far beyond the traditional boxes, lines and employee classifications, it involves culture, behaviors, communication and more. These are all areas in which HR is a strong candidate for being involved in, or even leading within an organization. According to research by Capelle Associates Inc. “organizational design leads to increased employee and customer satisfaction, improved financial performance and offers organizations a competitive advantage.”
While there are many organizational design models available (McKinsey 7S, Galbright, Queen’s University Model), I prefer a model presented by Richard Long, PhD. while I was completing my B.Comm. The model is designed to align organizations with their outside circumstances by quickly aligning structural components (managerial strategy) with the outside environment (contextual variables). So, lets take a look at the structural variables, and their ideal alignments.
With these, your organization can quickly and easily evaluate whether or not each structural element is aligned with their business strategy. When structural elements are aligned, organizations run more effectively. You can also compare these to determine if your structure is well suited to your environment (contextual variables). Any managerial strategy needs to be aligned with the external environment. Imagine the difficulties of running Ferarri efficiently and effectively with a workforce without a high school education – would it even be possible? Or running a low-cost assembly line in an area with a highly educated, mobile workforce with significant competition for talent.
Contextual Variables:
- Environment: environmental complexity, customers, competitors, suppliers, labour, and the regulatory environment.
- Technology: This is not specific technologies, but rather the generic “style” of your business. Do you create specialized “batch” products or services, long run processes (oil refinery), or individual one-off products/services (craft focused)
- Competitive Strategy: Are you a low-cost leader (Tata Motors), or a high-value organization (Ferarri).
- Organizational Size: This will have a significant impact on how you structure your organization to be efficient. Small (under 100 employees, medium (100-500), or large (500 or greater)
- Nature of Workforce: Analyzed using variety of psycho-graphic metrics, with key areas being the standard education of your workforce and the external job market.
When you compare your organizations structural elements to the contextual environments, is it aligned? If there is interest I will provide more information on evaluating the contextual variables.
Resources for Evaluating Structural Variables:
- Job Design – Any basic Human Resources Textbook, or Job Classification / Evaluation model.
- Coordination & Departmentalization – Anything article on matrix, bureaucratic, divisional, functional, knowledge networks or helix structures.
- Control – Management byPeter Drucker (The essential book on management from the man who invented the discipline)
- Communication – Assessing Organizational Communication: Strategic Communication Audits (A step by step guide to evaluating organizational communication. I’ve personally used these methods, and found the process successful, but requires modification)
- Decision making and Role of Leadership – Decide and Deliver (Based on research by Bain & Co consultants it offers a step by step guide to evaluating and improving organizational decision making).
- Reward Systems – Strategic Compensation in Canada (a fantastic book, written by professor Richard Long who introduced me to this organizational design model, Canadian examples and academic rigor applied to an often “gut-instinct” filled field)
That is, as brief as possible, a crash course in Organizational Design. If you’re an HR professional working in this field, or looking at an organizational design hopefully this helps. Feel free to contact me with any of your own experiences or methods.
Tyler Totman
twitter: @FAphoenix