Organization design is the process of deciding how organizations should be structured in terms of the ways in which the responsibility for carrying out the overall task is allocated to individuals and groups of people and how the relationships between them function. The aim is to ensure that people work effectively together to achieve the overall purpose of the organization. The basic question of ‘Who does what?’ is answered by line managers but HR specialists are also involved in their capacity of helping the business to make the best use of its people. HR professionals can contribute to organization design or redesign activities by using their understanding of the factors affecting organizational behaviour and their knowledge of the business as a whole.
It is generally assumed that organization design is a logical and systematic affair, based on accepted principles and using analytical techniques that produce an inevitable ‘best’ result. But as explained below there is always organizational choice. There are certain guidelines to which consideration needs to be given, and organization reviews should be based on analysis, as also discussed below. But, ultimately, the ways in which an organization functions and therefore its structure (or sometimes its lack of structure) are contingent on the situation. In accordance with socio-technical theory this consists of the people who work in the organization and the systems and techniques it uses to achieve its purpose.
There is never one best way of organizing anything. There is always a choice. It is necessary to bear in mind that structural requirements in organizations or organizational units will vary widely according to what they are there to do and the activities they have to carry out. That is why there are no absolute principles such as the traditional precepts of ‘unity of command’ (one person, one boss) or the need to limit spans of control (the number of functions or people for which a manager is responsible). It all depends. Burns and Stalker (1961) established in their study of electronic companies in Scotland that in stable conditions a highly structured or ‘mechanistic’ organization will emerge that has specialized functions, clearly defined jobs, strict administrative routines and a hierarchical system of exercising control. However, when the environment is volatile, a rigid system of ranks and routine will inhibit the organization’s speed and sensitivity of response. In these circumstances the structure is, or should be, ‘organic’ in the sense that it is a function of the situation in which the enterprise finds itself rather than conforming to any predetermined and rigid view of how it should operate.
In exercising organizational choice an organizational review, as described below, will help in the evaluation of the alternatives, but the law of the situation, as described originally by Mary Parker Follett (1924), should prevail. This states that the work that people are required to do depends on the objective requirements of the situation. The final choice will depend upon the context and circumstances of the organization – as Lupton (1975) pointed out, it is important to achieve best fit.
Organizations may evolve organically without any conscious attempt to design them. But if a deliberate design programme is planned this should be based on the evidence that can be produced by a formal organization review conducted in the following stages:
- Activity analysisto establish what work is done and what needs to be done. Two questions need to be answered: 1) are all the activities required properly catered for?; 2) are any unnecessary activities being carried out?
- Structural analysisto determine how activities are grouped together; the number of levels in the hierarchy; the extent to which authority is decentralized to divisions and strategic business units (SBUs); where functions such as finance, HR, IT and research and development are placed in the structure (eg as central functions or integrated into divisions or SBUs); the relationships that exist between different units and functions (with particular attention being given to the way in which they communicate and cooperate with one another). Attention would be paid to such issues as the logic of the way in which activities are grouped and decentralized; the span of control of managers (the number of separate functions or people they are directly responsible for); any overlap between functions or gaps leading to the neglect of certain activities; the existence of unnecessary departments, units, functions or layers of management; the clarity with which individual responsibilities and accountabilities are defined.
- Diagnosisto identify (on the basis of the activities and structural analyses) the reasons for any structural problems facing the organization or function.
- The choicein the light of the analyses and diagnosis of how the business or part of it should be designed or revised.
- A planto implement any revisions to the structure, possibly in phases.
Checklists covering the points that should be considered in analysing activities and structures are set out in the organization design toolkit . When conducting the review the following factors should be taken into account.
Changes in the nature of organizations
As noted by Parker et al (2001: 418): ‘Organizations… differ from the rather static and inflexible enterprises of earlier times. Greater flexibility is required to enable the rapid delivery of low-cost, high-quality and customized products, and to provide increasingly powerful and demanding customers with seamless service.’ They also noted that the use of teamworking and other flexible forms of working continues to grow, distinctions between departments are disappearing as organizations become more integrated, and IT has changed the way in which work is conducted. These considerations may indicate that a traditional hierarchical and rigid structure is inappropriate and a more flexible approach is required.
Minimum critical specification
In accordance with systems theory and the principle of equifinality (the premise that multiple organizational forms are equally effective), Huczynski and Buchanan (2007: 89) suggested that: ‘It is not necessary to specify in detail the organization structure and the duties of each member. If an organization can develop its own method of operating and change that as circumstances require, then it will be necessary only to detail the basic and most significant aspects. This approach to organization design is called minimum critical specification.’
As noted above, there is always choice about what form an organization structure should take. Child (1972) explained that in making such choices the leadership group (the dominant coalition) had to be persuaded to influence the organization structure through an essentially political process. He called this process ‘strategic choice’. Choice analysis regards debate and negotiation in the social networks existing in organizations as integral to decision-making on organizational structures.
Successful organization design
Organizations are not static things. Changes are constantly taking place in the business itself, in the environment in which the business operates, and in the people who work in the business. There is no such thing as an ‘ideal’ organization. The most that can be done is to optimize the processes involved, remembering that whatever structure evolves it will be contingent on the circumstances of the organization. An important point to bear in mind is that organizations consist of people working more or less cooperatively together. Inevitably, and especially at managerial levels, the organization may have to be adjusted to fit the particular strengths and attributes of the people available. The result may not conform to the ideal, but it is more likely to work than a structure that ignores the human element. It is always desirable to have an ideal structure in mind, but it is equally desirable to modify it to meet particular circumstances, as long as there is awareness of any potential problems that may arise. This may seem an obvious point, but it is frequently ignored by management consultants and others who adopt a doctrinaire approach to organization, often with disastrous results.
The worst sin that organization designers can commit is that of imposing their own ideology on the organization. Their job is to be eclectic in their knowledge, sensitive in their analysis of the situation and deliberate in their approach to the evaluation of alternatives.
Research conducted by Whittington and Molloy (2005) indicated that to achieve success in organization design it is necessary to:
- obtain top management support, especially personal commitment and political support;
- avoid piecemeal, uncoordinated change initiatives by making a strategic business case that anticipates implications across the entire organization;
- achieve substantive, rather than tokenistic, employee involvement in the change process, moving beyond communication to active engagement;
- invest in communications with external stakeholders, including customers, suppliers and financial stakeholders;
- involve HR professionals closely, right from the start – involving HR has been proved to positively impact on a range of performance outcomes;
- maintain effective project management disciplines;
- build skilled change management teams – with the right mix of experience and abilities – that can work together.