​Organisational Design: Keeping Your Eye on the Ball

by External11 Jun 2014

Here are some common reasons for misalignment of organisation design and strategy:

One of the most common reasons is also the easiest to correct: communication. In many companies, the majority of people don’t fully understand the strategy. In our workshops, we often ask the more senior participants to write or draw their company’s strategy. At first, we were surprised by how few could clearly articulate it. But it no longer amazes us since this problem has proven to be so common.

Similarly, we have seen management teams unable to agree on the best metrics for success, simply because they don’t fully grasp their strategy. Companies happily spend millions of dollars creating a great strategy but fail to communicate it in a simple and inspiring manner. If people don’t entirely comprehend your strategy, then it will be no surprise to see your senior managers designing organisations that fail to deliver it.

The second most common reason is that the work of individual functions or departments has not been purposefully planned to deliver the strategy. This is particularly common in the support functions, which are less close to customer needs. But even in front-line functions like sales we find that a high percentage of work has little or no impact on achievement of the strategy.

People are busy collecting information, following processes or pursuing projects, but these activities have not been carefully designed with the strategy in mind, so their efforts are not creating value.

In fast-growing companies, people and departments are often added in haste to keep up with the growth, without carefully aligning with the company strategy. When the cycle slows or reverses, the company then finds it has a lot of people or whole departments not adding value.

The misalignment of organisation design to strategy can also happen because people lose sight of your strategy over time. The organisation starts off carefully designed to deliver your strategy, but over time things drift.

In organisations everything evolves. Unfortunately, things rarely become simpler. New projects and activities get created and processes reworked, but because the strategy is not at the forefront of your mind during these changes, the organisation design gradually shifts away from its strategic purpose, rather than towards it.

This drift can also happen because people are still doing what they have always done, even though the strategy has changed and the organisation has been reconfigured accordingly.

Humans can be very resistant to and scared of change. Old habits and ways of working are hard to kill. So we often find that the organisation was, on paper, carefully redesigned to align with a new strategy, but people have simply drifted back to their original activities and ways of working. Of course, it is easier to carry on doing what we know well, and companies rarely invest enough time and money in embedding new processes or new ways of working.

Organisational Alignment Tool
Organisational Alignment Tool: Click on image to enlarge

There are ways you can test whether your organisation design is in harmony with your chosen strategy. We call it the ‘organisational impact tool’. It offers you a simple yet methodical way to assess if all the elements of your organisation design are fully aligned with your intended strategy. You can do this at a company level, but it works equally well when looking at the organisation of specific divisions, functions, departments or teams. When looking at the organisational alignment tool, ask yourself the following questions:

Looking at our organisation’s structure chart, does the way we divide up activities and responsibilities into different functions and departments give us the best possible chance of delivering our stated strategy? Do the reporting lines make sense? Does our current structure hinder strategy delivery in any way?

Do different teams and functions collaborate effectively to ensure we make good decisions that help deliver our strategy? Which connections work well and support our strategy? Which ones hinder us from delivering our strategy?

What are the skills, know-how and capabilities that our people need to deliver our strategy? Do we already have these skills? Is our organisation designed to ensure we develop these skills?

What are the key values and behaviours we need? Does our culture support our strategy or hinder it? Is our organisation designed to ensure that the right values, behaviours and ways of working are encouraged?

Does the way we measure and reward teams and individual performance help us deliver our strategy well? If not, how can it be improved?

Do we provide people with the information and resources they need to deliver our strategy and check that we are on track? If not, how can we improve in this regard?

As you assess your organisation design against each of these six questions, ask yourself: is this particular aspect of my design helping me deliver my strategy, the whole strategy and nothing but the strategy? Limit yourself strictly to two options:
YES: My organisation design does seem to support this element of my overall strategy. (Outline how exactly, then consider if it could be done even better.)

NO: My current organisation design does not support this element of my strategy. (How could you change it to improve the alignment?)

You can take this assessment even further with what we call the ‘stop/start/continue’ tool. Apply it as a final checkpoint to help you decide which existing elements should be stopped, which continued, and which new ones you need to kick off to improve things. This is a good way to summarise your learnings. At the end of this exercise you should be able to see clearly which elements of your organisation are well aligned with your strategy and which elements are not.

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