NOW is the time for an org design

Jul 11

Economic pressure is a common trigger for organisational design as businesses look to reduce operating costs. However, the disadvantage of this reactive type of organisational design is that it can often focus on headcount changes and therefore lack a holistic review of culture, purpose and performance – all things needed to create an agile, sustainable and thriving business.

So even though economic uncertainty is daunting for businesses (ours included), this blog aims to make the case that downturns are also an opportunity to reprioritise purpose, innovate and strengthen how a business operates today. And this can be achieved through good organisational design.

Firstly, what is organisational design?

Organisational design is the process of creating or redesigning an organisation's systems and operating model to achieve its strategic objectives.

In a nutshell, we review an organisation's objectives, analyse the gap between its current state and its future goal state, and then design the organisational practices, roles, processes and structures to bridge that gap. It provides the framework for an organisation to deliver on its purpose, values and objectives.

Why is it needed?

Lack of productivity and performance can almost always be attributed to poor organisational design and culture. An organisation can have great people and great tech and still not perform well because of the way the organisation is designed. This often shows up as confusion within roles, lack of creativity and innovation, poor communication and a disparity between departments.

On the other hand, good organisational design is a holistic view of the entire business. It aims to create a business that is effective, agile, innovative, and aligned with purpose, empowering employees towards productivity and success. It helps improve communication, increases productivity, and inspires innovation.

Key factors impacting organisational design

Several factors impact organisational design. These include strategy, environment, technology, size, and culture.

This piece focuses on two critical and timely factors: strategy and environment.

Effective organisation design needs to be aligned with the business strategy and the business's operating environment.

Strategy

Strategy is the most important starting point for organisational design. Yet one thing is often overlooked: strategy and purpose go hand-in-hand.

Formulating strategy has long been the focus of business leaders. But strategy alone does not inspire employees to consistently deliver. For that, organisations need people who are invested and who care.

Prioritising purpose means creating an organisation that employees are proud of and believe in (and therefore, we see greater productivity, retention and so on).

Technology can play a meaningful role in creating an organisational design that delivers on purpose. For example, AI can add value by using algorithms to streamline work processes. But technology can never replace the power of social connection, empathy, kindness, culture and trusting relationships - all essential pillars of successful organisational design.

This process of identifying purpose and shaping an org design around that purpose can therefore be difficult because it relies less on business numbers and statistics and more on emotion and intuition (although, of course, the numbers play a part).

Yet the organisations that proudly assert what they stand for almost always attract and retain people who become deeply committed to that organisation's success.

Our organisational design process goes beyond strategy and structure to a blueprint built on purpose and people. Through the lens of purpose, organisational design is less about formal structure and more about culture, innovation, engagement and effective leadership. And one could argue these are the exact qualities an organisation needs to ride out any temporary economic dip.

Environment

The environment an organisation operates also greatly influences organisational design.

In simple terms: in a rapidly-changing environment, the organisation has to design for adaptability, but in a stable environment, the organisation can focus on efficiency.

Conditions that influence the environment include economic, cultural, political, technological, and natural.

We now find ourselves in a fairly dynamic environment where the economic landscape is continuously changing. It can feel, and often is, quite turbulent! (To stick with the aircraft speak, did you read about how our HR Runway can help organisations prepare for an economic downturn?).

When operating in a turbulent environment, leaders must continuously read industry signals to spot emerging threats. Recognising the signs of change can help an organisation get on the front foot by beginning the org design process now.

On the other hand, if leaders wait until the business threat is imminent, change is defensive and not as effective.

And that's why the time for organisational design is now.

We recommend a more future-focused organisational design that enables an organisation to pivot in accordance with its purpose rather than in response to a looming recession.

This type of organisational design will provide the organisation with the right flexibility, systems, and resources to deliver on its purpose. Good organisational design will identify the key drivers that will enable you to navigate the short-term economic dip while not losing sight of the long-term and, most importantly, your purpose.

In essence, organisational design is a lever that will both run the business more effectively in the short-term and prepare the business to be more agile and innovative in the long-term.