The HR guide to organization design

Organization design is important as it encompasses the company’s organization structure, culture, rewards system, and leadership – and there is more that can be done to meet competitive labor market needs, and address talent shortages.

With more than 90% of jobs categorised as ‘service roles’ – roles that require human ingenuity or empathy – analysts at the Josh Bersin Company revealed that employers need organizational models and structures that empower individuals, clarify what’s important, and assign responsibility in a way that works for cross-functional teams, projects, and solutions. In short, organizational design (OD) must excite and engage people, give them a sense of autonomy and ownership, and encourage continuous innovation and creativity.

On that note, the company released a report called to the Definitive Guide to Organization Design: The Journey to Agilethat encompasses information on why OD is a phenomenon employers should look at today, and how can they develop solutions around it to achieve higher and positive levels of business, people, and innovation outcomes.

Why is organization design important?

According to the research, OD might be the most important consideration in business. This is because it encompasses a company’s organization structure, culture, rewards system, and leadership – and there is more that can be done in that domain to meet competitive labor market needs, address talent shortages, and the likes. To this end, business leaders, HR executives, and consultants would require organizational models that can adapt, reward people quickly, and encourage people to stay, or models that are flexible enough to accommodate a transient workforce, which is defined as talents quitting and then coming back to an organization/sector after a few years.

“Great organization design is agile and accountable,” the report cited. “It’s continuous and business-integrated; it creates clarity and productivity; and it encourages the growth of individuals and businesses. Agile and accountable organizations are not just more adaptable to change—they are more profitable, their customers are more satisfied, they deliver higher employee engagement and retention, and they encourage innovation.”

What should OD look like?

An organization design framework, according to the analysts, should encompass five key factors: business model, operating model, work, job, and organizational structure.

The ‘business model’ factor, for instance, should touch on the purpose & business strategy (ie, a company’s mission, vision, and purpose), the talent strategy (ie, the people and workforce approaches required to support the business strategy), as well as culture & leadership (ie, cultural constructs and leadership models that enable strategies to be successful).

The ‘operating model’ factor, on the other hand, should cover customer orientation (ie, determining who the customers are, what success looks like, and how to operate for optimal customer outcomes), role definition (ie, defining high-level roles for the model), and governance and metrics (ie, deciding what success measures flow horizontally versus vertically and what the high-level accountabilities are).

The other three factors entail the following areas:

  • ‘Work design’ – Work composition and technology to account for what people and teams will do to drive success, as well as the role of technology in automating, augmenting, and transforming the organization. It also includes accountabilities and rewards to determine what the accountable party will do to accomplish outcomes and how they will be rewarded, and finally, the skills and experience to determine what skills and capabilities are required to accomplish outcomes and how to create a great employee experience through design work right.
  • ‘Job design’ – Job architecture to decide how to organize individual roles and jobs as well as the architecture of job families, functions, and jobs; workforce planning to create strategic and tactical plans for required jobs, skills, and capabilities; and flexible role design to build flexibility into the design of jobs to account for change.
  • ‘Organization structure design’ – Team based structures to organize teams and functions for success; agile models to build agility into approaches and hierarchies to prepare for the future, and flexible organization structure to incorporate flexibility to make the organization adaptable.

What does strong OD bring to the table?

#1 Better organization design, better outcomes

Companies that work through these complex topics with HR capabilities and data to constantly realign their business are, the findings revealed, more than twice as likely to have outstanding financial performance, almost four times as likely to delight their customers, 13 times more likely to innovate effectively, and 27 times more likely to engage and retain employees. Operational outcomes will too improve significantly.

#2 Stronger work design, more outcomes achieved

Companies that understand the needs and expectations of their stakeholders, employees, and customers, as well as the culture and its impact on organization design, are:

  • 1.9 times more likely to accomplish outstanding business outcomes;
  • 6.5 times more likely to accomplish exceptional workforce outcomes; and
  • 6.6 times more likely to innovate and adapt well to change.

#3 Democratises access to career and professional opportunities beyond hierarchies

This is possible because with organization design the role of a work manager vs a people manager becomes more defined at the workplace.

The work manager’s role can be seen as one who:

  • Is designated by the flow of work;
  • Is accountable for deliverables and milestones;
  • Manages projects and timelines;
  • Is often dynamic and changing based on project needs;
  • Manages cross-functional work teams;
  • Works with squads (a small unit of people usually between six and 12 working together on a long-term mission) and tribes (a group of squads working in related fields with no more than 100 members);
  • Is represented by a project structure, and
  • Needs strong project management skills.

Meanwhile, the people manager’s role can be seen as one who:

  • Is designated by functional hierarchies;
  • Is accountable for career and skills development;
  • Leads, inspirations, and coaches in functional areas;
  • Is mostly stable and enduring based on function;
  • Leads functional expertise;
  • Works with chapters (a collection of people who share a similar skills set and work in the same tribe) and guilds (a wider community of people who share the same interest);
  • Is represented by an organization chart, and
  • Needs strong people leadership skills.

#4 Better employee experience, better work performance

Companies that incorporate employee experience considerations into work design are:

  • 5.8 times more likely to be financially high performing;
  • 20 times more likely to delight customers, and
  • 16 times more likely to be seen as a great place to work.

#5 Makes success sustainable

This is possible because with organization design, it creates a sense of accountability in the workforce in relation to business, people, and innovation outcomes. “If it is not clear who’s accountable for a specific outcome, chances are it won’t be achieved,” analysts explained.

Where do we start?

For those who are looking to improve organization design, or implement one, analysts suggested they look at the following 15 practices:

  1. Clearly establish what the accountable party will do to drive success;
  2. Incorporate employee experience considerations in work design;
  3. Understand expectations of stakeholders, customers, and competitors;
  4. Reward and recognize people for accomplishing desired outcomes;
  5. Clearly understand the culture and its influence on organization design;
  6. Consider the human impact of organization design options;
  7. Deploy effective change management approaches to support adoption;
  8. Combine work activities that fit together into roles;
  9. Identify how to organize to deliver value;
  10. Use a flexible organization structure that reflects the way work gets done;
  11. Transparently communicate the future state model and design;
  12. Define which capabilities to build internally versus to buy;
  13. Clearly define the roles needed in the target operating model;
  14. Clearly define work outcomes to be accomplished and measurements;
  15. Consider ease of implementation and practicality of organization models.

Read also:

– Josh Bersin’s employee experience (EX) framework for an irresistible organization
– The workforce in 2022: 15 trends that will shape hiring, learning, working, and more

Image / The Josh Bersin Company

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