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- 2. Structure Organization Design is a process for shaping the way organizations are structured and run. It involves many different aspects of life at work, including team formations, shift patterns, lines of reporting, decision-making procedures, communication channels. Organization Design – and redesign – can help any type of organization to achieve its goals. Sometimes, a large-scale reorganization is necessary. At other points, more subtle shifts in structures and systems can ensure that an organization continues to thrive. In this article, we’ll look at when and why Organization Design is necessary, and how it happens in practice. As a result, you'll know how to contribute to the process whenever you get the chance. We'll also explore how different organizational designs affect the people who work within them. That way, you'll be able to recognize and respond to both the challenges and the opportunities – wherever you work. Organizational design
- 3. An organization's design must be right for it to operate efficiently and effectively, and its structures and systems need to be aligned with its core strategies. There are many potential benefits to having a design that suits the business and its people, and the environment in which it operates. For example: Increased efficiency. Faster and more effective decision making. Improved quality of goods and services. Higher profits. Better customer relations. Safer working conditions. A happier, healthier and more motivated workforce. reater preparedness for future challenges. However, if there are flaws in its design, an organization can suffer serious problems, solving. Wasted timeLack of coordination between different parts of the business. Inconsistent quality of work. Failures of legal compliance. Reputational damage. Low morale,leading to high staff turnover. Below- target business-level results. Even if a particular setup was successful in the past, that doesn't mean it will remain so for ever – or even for long. As businesses develop, and as the world around them changes, it's vital that they keep a close eye on the way they're organized. And when it's no longer fit for purpose, that's the time to put a new phase of Organization Design into action. Organizational Design Impact of organization design
- 4. Organization Design is often divided into two distinct styles: hierarchical and organic. The table below shows some of the key features of hierarchical and organic designs – examined in terms of complexity, formality, levels of participation, and communication styles. Hierarchical and Organic Organization Design
- 5. Two popular types of hierarchical organizational designs are Functional Structures and Divisional Structures. In a Functional Structure, functions (accounting, marketing, H.R., and so on) are separate, each led by a senior executive who reports to the CEO. This can be a very efficient way of working, allowing for economies of scale as specialists work for the whole organization. There should be clear lines of communication and accountability. However, there's a danger that functional goals can end up overshadowing the overall aims of the organization. And there may be little scope for creative interplay between people in different teams. In a Divisional Structure, the company is organized by office or customer location. Each division is autonomous and has a manager who reports to the CEO. A key advantage is that each division is free to concentrate on its own performance, and its people can build up strong local links. However, there may be some duplication of duties. People may also feel disconnected from the company as a whole, and enjoy fewer opportunities to gain training across the business. Examples of Hierarchical Organization Designs
- 6. Organic structures include Simple/Flat Structures, Matrix Organizations, and Network Structures. The Simple/Flat Structure is common in small businesses. It may have only two or three levels, and people tend to work as a large team, with everyone reporting to one person. It can be a very efficient way of working, with clear responsibilities – as well as a useful level of flexibility. A potential disadvantage, however, is that this structure can hold back progress when the company grows to a point where the founder or CEO can no longer make all the decisions. In a Matrix Structure, people typically have two or more lines of report. This type of organization may combine both functional and divisional lines of responsibility, allowing it to focus on divisional performance while also sharing specialized skills and resources.However, Matrix Structures can become overly complex, effectively having to uphold two hierarchies, with potential tensions between the two. A Network Structure – often known as a "lean" structure – has central, core functions that operate the strategic business. It outsources or subcontracts non-core functions. This structure is very flexible, and it can adapt to new market challenges almost immediately. But there's an almost inevitable loss of control due to its dependence on third parties, and all the potential problems that come from managing outsourced or subcontracted teams. Examples of Organic Organization Designs
- 7. Recently, the trend in Organization Design has been away from a linear, top- down approach, toward more organic (but often more complex) structures and systems. And as new types of organizations emerge, they have an increasing range of designs to choose from. These include:The Holonic Enterprise Model: a flexible approach, allowing teams to work separately or in collaboration as required.The McMillan Fractal Web: in which organizations are encouraged to adapt and grow organically. Ken Wilber's AQAL Model: where developmental psychology is used to explore how individuals and organizations interact. New Styles of Organization Design
- 8. The complexity and scope of Organization Design means that it is usually the responsibility of the senior management or leadership of a company. But many organizations find that a collaborative approach across all levels is essential for design to be truly effective in the long term. You can find out more about this in our article about the related discipline of organization development. .But for those who get to shape the Organization Design process itself, how should they go about it? Here are some of the key factors to consider: Strategy: Strategyorganization intends to be innovative, a hierarchical structure may be a block. But if your strategy is based on low-cost, high- volume delivery, then a rigid structure with tight controls may be the best design Size : You could paralyze a small organization by creating too much specialization. In larger organizations, on the other hand, there may be economies of scale from maintaining specialized departments and teams. Designs may need to change, too, as organizations grow. (We've already referred to the Greiner Curve, about organizational growing pains. For ways to cope personally, see our article, Dealing With a Wide Span of Control . Environment : environment is unpredictable or volatile, your organization needs to be flexible enough to react. But elements of a hierarchical structure may still be important, to protect you against turbulence, and to ensure that key functions – compliance tasks, for example are carried out accurately and on time. Making Organization Design Decisions
- 9. Controls : Some activities need special controls (such as patient services in hospitals, money handling in banks, and maintenance in air transport) while others are more efficient when there's a high degree of flexibility. Controls and Incentives
- 10. Incentives. These need to support any new organizational design. If you want to grow by acquiring new customers, for example, then you'll have to refocus the incentives that you offer to your sales team accordingly. If not, that team may be working out of sync with everyone else. Incentives