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

What it is

Effective coordination requires more than just an established organizational structure. It is best facilitated when all aspects of the organization work together to achieve its goals. Designing an organization requires formalizing a structure that enables and enhances repeatable execution of core business processes while optimizing cross-functional and inter-team collaboration. This structure drives interconnection and sharing of data, ideas, and insights, which can significantly improve operational efficiencies and effectiveness. It involves establishing an “operating model,” or a representation of how work gets done to achieve the organization’s goals. An operating model clarifies how different parts of the organization coordinate to complete key tasks, how information is shared, and how performance is measured and rewarded.

Leading practice at this level includes drilling down into critical workflows, formally documenting how each aspect of strategically important work tasks is executed step by step. These include formal process flowcharts that define the actions to take and the decisions to be made to complete the tasks and generate the required outputs and value. At this level, process governance and decision rights are clearly defined, with the various roles contributing to the work throughout execution formally called out and assigned. Performance metrics are determined by the business priorities and objectives of each participating function/department and are designed to clarify each one's required contributions to success. Given those performance indicators, appropriate incentives are developed to reward and encourage the key elements of those contributions.

Why use it

Companies need effective coordination to compete in today’s increasingly complex and competitive business environment. The need for coordination intensifies as organizations grow and mature. Organizations should be designed to facilitate value-creating linkages among individuals and teams across the enterprise. The ultimate value lies in the formal structuring and reinforcement of the desired contributions—who will make those contributions, how they will do so in relation to other roles and teams/functions, the standardized manner in which the associated tasks will be accomplished, who will be held accountable for taking action and making decisions, how those will be measured and managed, and how the various roles will receive reinforcement for conducting those activities successfully and on an ongoing basis. The output of these activities should be well aligned to contribute to larger organizational goals. 

In a well-functioning operation, the structure provided by these practices increases the likelihood of achieving goals. A combination of formal governance and measurement of critical performance indicators offers a solid, repeatable method for assessing how well the design helps the organization improve its outcomes and, if not, for identifying design flaws that can be corrected for future success.

Outcomes

When well-designed and executed, these practices create a clearly defined linkage between parts of the organization whose efforts require collaboration and connection. They identify the capabilities (know-how, expertise, processes) the organization will develop and utilize to create stakeholder value and achieve its goals. They categorize all capabilities by their strategic value and operational criticality to create a vivid picture of what is essential and requires ongoing focus for sustainable excellence and competitiveness. They develop a view of the enablers needed to manage those capabilities, informed by decision-making, people management, and governance considerations, which can be brought to life and integrated into a sound, well-designed organizational structure. 

As an organization employs many people, providing them with structured guidance and context for how they conduct business on a daily basis is necessary and is enabled by formal documentation of work processes and expected information flows. When coupled with clearly outlined maps of task responsibilities, clarity on how responsibilities for each primary task and workflow are shared, and on how decisions are made, this ensures reliable process execution, with the most suitable experts driving work completion. Furthering the benefits of such a structured approach to task assignment, the creation and fielding of associated performance measures and aligned incentives enable tracking of progress, outcomes, and adherence to work and decision-making protocols, while providing suitable rewards and recognition for quality work and results.

Practices at this level

Creating an operating model to align the organization with business strategy.

Designing a model to identify how all aspects of the organization will work to both implement the business strategy and achieve prioritized goals.

Designing process and information flows to efficiently allocate organizational resources and facilitate information sharing.

Creating and documenting major workflows to clarify tasks that are to be performed in an organization and identify the information that is needed for and generated by each task.

Establishing governance and decision rights for key processes to strengthen accountability and ownership.

Assigning responsibilities and accountabilities for critical decisions and actions to be taken in each step of key business processes.

Implementing performance metrics and incentives to empower the organization.

Identifying key performance indicators and reporting tools that can be used to monitor processes and measure employee performance in alignment with business objectives.