Creating an Effective Organizational Design

Successful companies start with effective organizational design. This process shapes an organization’s structure and strategies. An effective organizational design can improve decision-making, increase growth rates, and drive motivation.

In this article, we’re going to explain what organizational design is, define the different schools that have emerged, and break down some key elements.

What Is Organizational Design?

So, what exactly is organizational design? Going hand in hand with your organization’s strategic plans, organizational design involves finding the best fit between strategic choices (vision, mission, and goals) and organizational setting. It aligns structure, processes, culture, and objectives.

Organizational design requires creativity and is individual to each workplace. There isn’t a set way to do it. A poor design can negatively impact workplace coordination and the quality of work. But when organizations achieve effective organizational design, there are numerous benefits.

• Improved decision making
• Increased efficiency and profits
• Better customer relations
• More motivated and satisfied employees
• Equipped for future challenges

Different Schools of Organizational Design

Because it’s different for everyone, various structures have emerged over the years. Let’s discuss six different schools of organizational design.

1. Bureaucratic – Bureaucratic designs are a good fit for bigger organizations. They have clear roles, hierarchical structure, and respect for merit. Managers have a lot of control when it comes to decision-making. There are also a lot of rules overseen by supervisors.

2. Functional – Functional designs organize people by activities, skills, and expertise. Common examples include marketing, finance, and HR departments. It’s a great way for employees to specialize in their areas of expertise. It can, however, limit communication and make for a rigid workplace.

3. Divisional – Divisional designs are common in companies with varying products or services across departments. It’s a great way for managers to monitor performance and better focus their efforts. Companies can easily add or remove divisions based on needs or results. Unfortunately, there can be unhealthy divisional rivalry.

4. Matrix – Matrix designs are a combination of functional and divisional. Employees belong to two groups with two individual managers– one concerned with functions and another with a product or project. This approach increases flexibility and training opportunities. It can, however, create power struggles and complicate things.

5. Network – Network designs primarily rely on calling upon individuals from across departments when there’s a skill demand. Alternatively, companies can contract out specialists. Eliminating any hierarchy, individuals work together on common goals. The major disadvantage is the complex supervision requirements.

6. Hierarchy-Community – Hierarchy-community designs understand that organizations cannot purely exist hierarchically. They are more of a community where employees come to work and grow. It finds a balance between efficiency and creating a sense of belonging.

Elements of Organizational Design

No matter what structure your organization adopts, there are several basic elements of organizational design. Let’s discuss them and some tips for making improvements.

Clear Hierarchy – A clear hierarchy will establish a chain of command and define who reports to whom. It better clarifies different roles and responsibilities.

• Tips for improvement: Regularly reviewing your hierarchy can ensure that it’s still in alignment with business needs and will reduce unnecessary layers of management.

Defined Roles & Responsibilities – Every role in the organization needs a clear definition so that employees understand their tasks and expectations.

• Tips for improvement: Consistent performance reviews will help you improve these definitions. Use them to track growth and changes in responsibilities, gain feedback, and then make necessary adjustments.

Effective Communication Channels – Communication is key. You need effective communication channels to share information across the organization and maintain transparency.

• Tips for improvement: Embrace two-way feedback and communication. Implement frequent team meetings. Welcome constructive criticism from employees and act on their feedback.

Flexibility & Adaptability – The market is constantly changing and technology advancing so organizations must remain flexible and adaptable.

• Tips for improvement: Facilitating a continuous learning culture through regular training, upskilling, and reskilling can help foster a team of flexible employees.

Alignment with Strategic Goals – The main point of organizational design is alignment with strategic goals. The elements must work towards achieving your goals.

• Tips for improvement: It’s important to understand that organizational design is not a one-and-done process. Review and adjust the design as your goals evolve and make sure that everyone is on the same page.

Have You Achieved Effective Organizational Design?

Now that you have a better understanding of organizational design and its elements – would you say your organization has achieved an effective design? Perhaps it’s time to implement one or undergo a

You can do a self-evaluation. How well do your teams adapt to change? Are everyone’s roles and responsibilities clear? How efficient is your team’s communication? Is your design aligned with strategic goals? Look to your employees for feedback.

Effective organizational design means your organization efficiently allocates talent and resources, is adaptable, and is prepared to grow – all key elements of success.