ESTIMATED READING TIME – 3:45
Learning goals for this activity
– Understand why designing organizational structure is important to talent optimization.
– Be able to list and describe the two steps you can take to design your organization.
– Be able to match a business strategy to an appropriate organizational structure.
– Recognize common steps to take when designing an organization.
– Identify best practices for how frequently to update your organizational structure.
Why selecting your organization’s structure is important to talent optimization
Organizations that follow the talent optimization discipline have structures that are purposefully designed and carefully planned—not merely a result of uncoordinated forces and influences that build up over time. Business strategy provides the context for effective organizational structure. For example, if your business strategy requires innovation and collaboration you’ll need an organizational hierarchy that’s flat, with little middle management, so that communication will flow freely. Additionally, the behavioral requirements of roles in this type of organization will favor taking risks and processing information quickly.
To effectively choose your organization’s structure, take the following steps:
- Select an organizational model that supports your strategy.
- Update your organizational structure whenever needed.
Keeping these two best practices in mind, let’s look at how you can develop your organizational design from a talent optimization standpoint:
1. Select an organizational model that supports your strategy.
It doesn’t matter how good your people are or how hot your industry is. If you don’t get your organizational design right, you’re setting yourself up to fail.
The right organizational structure is one that’s aligned with your business strategy. For example, a small startup with a strategy that’s focused on competitiveness, customer intimacy, speed, and intensity will need an operating model that enables rapid decision-making. This type of organization requires a flat structure with relatively few middle managers.
By contrast, a large organization in a highly-regulated environment may need a more hierarchical design with several layers of management to maintain compliance.
Common steps when designing an organization include:
- Create new jobs.
- Consider how jobs relate to one another.
- Define span of control.
- Define workflows and systems.
Don’t worry about who you need to put in each role in the organizational design stage; that comes later on as part of hire and succession planning.
2. Update organizational structure whenever needed.
Most companies treat setting an organizational structure as a one-time event, triggered only by an exceptional circumstance—like an acquisition, a new product, or a division that has grown to a point where it can’t keep operating successfully as is.
But you should see organizational structure as an ongoing practice designed to constantly anticipate and adapt your company’s structure along with its natural evolution. Just like individuals, organizations evolve to adapt to change. There’s a reason why “organizational behavior” is a term taught at leading MBA programs: Different organizations and structures influence different behaviors among employees. Great leaders understand this and they proactively manage their organizational structure and use it as a lever for change.
You might already be asking: Are we pursuing the right strategy? Do we have the right people in place? But you should also be asking: Do we have the optimal organizational structure?
It’s not uncommon for companies in high-velocity environments to revisit and adapt their organizational structure twice a year or more. Even in the most stable industries, assuming your structure should never change could stunt your growth.
Diagnose tells you when it’s time to update your organizational design.
Changes in organizational design are often proactive and planned. But other times you’ll need to update your organizational design in response to a problem. For example, a high-performing, highly engaged department starts to struggle—job performance or engagement data is slipping. This may reflect some change in the business environment that now requires you to update your organizational design.