Three simple questions to test your business’s organisational design
If you want to evaluate whether or not your business’s organisational design is as effective and efficient as it could be, there are 3 simple questions you should ask yourself.
The answers to these questions will inform you, if your organisational design is what it should be, if it would benefit from adjustment or if you need to pull it apart and start again. The questions are,
Question 1: To what extent is your organisational design driven by legacy culture and practices?
This question is designed to challenge the status quo thinking about your organisational design.
Are your people organised in a particular way because they’ve always been organised in that manner, regardless of changes to your processes, the market you operate in and/or competitive forces? Moreover, was it historically designed to accommodate (now redundant) processes, but hasn’t been updated due to a resistance to change from the people within it?
In addition, have any parts of your organisational structure been designed specifically to accommodate the wishes of a particular group or individuals? Have the demands of influential individuals tilted your business’s organisational design to their personal benefit?
If this this type of influence has impacted your organisational design, you have to ask, how is it affecting the productivity of others and what will you do when that person/people move on to pastures new?
Question 2: Does your organisational design support your business strategy?
Way back in 1977, Alfred Chandler of the Harvard Business School published a book entitled, The Visible Hand: The Managerial Revolution in American Business. It was this book that gave us the organisational design mantra of “structure follows strategy.”
Whilst slavish adherence to any organisational design ideology isn’t (in my opinion) to be recommended, the “structure follows strategy” principle still makes sense today. It works on the premise that every aspect of your business’s organisational structure design, divisional, departmental and the reporting lines of every person, must be place the strategy and objectives of the business in the forefront of your thinking.
For example, imagine you have decided that your business’s strategy is to differentiate yourself from your competition by providing superior customer service. Now ask yourself, “what provision have you made in your organisational design to align to this strategy, how many people, how are they organised, who do they report to and how will you deploy them to deliver superior customer service?”
Without clarity in the answers to these questions, it’s likely that executing the strategy will prove to be a difficult task.
Question 3: Is your organisational design fit for future purpose?
I once had a neighbour who worked for a steel production company, he told me that the group of people he worked with had not changed, (the actual people, the number of people, the organisational structure they operated in and their reporting lines) for 15 years.
Unlike my former neighbour, for the majority of us, organisational change is as much a part of business as usual as it is of any change project.
However, it’s often the case that many organisations fail to see that there is a huge danger in changing their organisational structure too frequently; without stability you can’t establish traction and constant change will drain you people emotionally. That said, I think 15 years in the same place with the same people and the same boss might have driven me bananas.
With all of this in mind, if you do decide to redesign your organisational structure you need to ensure that wherever possible you implement a new design not just for today, but also for the future.
In order to do this, in addition to answering the first two questions we considered, (on legacy and strategic alignment) some of the things you might want to check for a fit for future purpose organisational design are,
- Will it improve the service you provide your customers?
- Is it flexible enough to accommodate changes? (think Porter’s 5 Forces)
- Does it provide clarity in accountability for processes and outcomes
- Does it encourage cross-functional interlock and communication?
- Do you have the processes and infrastructure to make it work?
- Are the spans and layers of control effective and practical?
There are a few others, but the above list should give you enough food for thought for now.
Getting it Right
In any business the most valuable, most expensive and hardest to replace asset is good people and deploying them in the correct organisational design is a key cornerstone of any successful business plan.
So, when you get a chance ask yourself the 3 questions and hopefully you can answer them in this order,
- It isn’t
- It does
- ·It is
If you can that’s brilliant, if you can’t, you’ve got some organisational design work to do.