This guide is part of a progression set comprised of Core, Advanced, and Emerging Organizational Design practices.

What it is

Organizational design encompasses all activities involved in outlining and implementing an organizational structure that enables the pursuit of the business strategy and organizational objectives. These activities start with clarifying the scope of the organization's design to align with the business mission and strategy, organizational priorities, and operating standards and principles. They also include selecting a structure, designing roles, and assessing, selecting, and placing people into roles to enable the organization to pursue its strategy and realize its goals.

At this level, core practices include determining which parts of the structure are to be designed or redesigned and specifying who will oversee the effort and how decisions will be made. They engage business and HR leaders to understand the business objectives, how they are affected by environmental (external and internal) challenges, and the evolving requirements of customers and critical stakeholders. These practices establish a corporate governance framework and select (or adapt) an appropriate organizational structure from models that address key design considerations, thereby driving an efficient and effective operating model. They involve designing individual jobs and roles aligned with the organizational capabilities needed to meet the organization's purpose and function, and then assessing, selecting, and placing people into roles to enable the organization to pursue its strategy and realize its goals.

Why use it

A good business strategy is not, by itself, enough to achieve success. Companies also need well-designed organizations aligned with their mission, strategies, and objectives to clarify the human capabilities required to execute those strategies and to empower people to perform at their best. A properly tailored organization design accomplishes this by establishing a formal structure for conducting the enterprise's work, guiding and leveraging collaborative relationships and collective action across functional, business-unit, and geographic boundaries. It establishes effective oversight of process workflows and defines work group and individual responsibilities and accountabilities across the structure in a strategically aligned manner. 

Designing and implementing effective organizational structures can be challenging, given that companies often operate in dynamic business environments and that effective organizational design requires coordinating various aspects of the organization. This set of practices is designed to create a formalized, disciplined approach to defining a structure that meets both business and human performance requirements. It accomplishes this by guiding the organization of people around the workflows that create value and purpose for the enterprise. 

A thoughtful, comprehensive approach to organizational design can propel organizations to unlock the employees’ potential and achieve faster growth and improved performance. This process is not possible without the active involvement of leaders and experts in operational considerations. Their insights and expertise are crucial to identifying improved ways to build organizations and teams that better meet the needs of the business and its customers, stakeholders, and partners. It provides the structure needed to help employees understand their roles and relative positions within the larger organization, thereby supporting effective governance, decision-making, and support. A well-designed structure clarifies for leaders, managers, and employees where to look for strategic guidance, workflow clarification, and other resources for collaboration and expertise.

Outcomes

By leveraging these practices and steps, a comprehensive set of recommendations for structuring a new business or function, or for restructuring an existing one, can be developed in a disciplined manner. The process creates an organization design that is deeply aligned with the business purpose and imperatives, is “owned” and championed by key decision-makers engaged in its design, and addresses the flow from business strategy to the human capabilities needed for individual role design. This results in a clear understanding of the critical tasks to be completed in each process, aligned with each part of the organization, with each task assigned to a set of individual roles from which position requirements can ultimately be developed. It provides a structured approach to identifying and justifying staffing requirements and to managing the placement of individuals into specific roles. It creates a structure that optimizes the appropriate levels of employee management and oversight, given the nature of the work, the collaboration and communication required between employees and teams, and how teams interact and make decisions.

Practices at this level

Establishing governance and principles for designing the organization that are aligned with business strategy.

Engaging the appropriate stakeholders, utilizing the proper information, and ensuring that the newly designed organization is aligned with the business strategy.

Designing an organizational structure to facilitate coordination and effectiveness across business areas and levels.

Selecting and tailoring a structure that meets the needs of the organization and determines how the organization will work together to implement its strategy and achieve its goals.

Defining capabilities, tasks, and roles to create clarity and accountability in the organization.

Providing clarity for the work required to achieve the organization’s objectives and creating a shared understanding regarding who will perform the work.

Assessing, selecting, and placing people into roles to leverage employee capabilities in the organization.

Leveraging a structured approach to fairly and equitably evaluate talent and place people into defined roles.