eight steps to create new org design

8/2/2019 Eight Steps to Create New Org Design

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PeopleWiz Consulting 2011

Eight steps to create a newOrganization Design

Protima Sharma, Partner, PeopleWiz Consulting

Organization Design Lever for Business Transformation

To transform an organization, the most often used levers by a business leader aresetting the strategy and appointing the right people to operationalize the business

vision. Though good people are important, they do not work in isolation. Theorganization design defines structures, processes, metrics and reward systems, and

people practices that will ensure that individual and organizational energy is focusedon those activities that support the achievement of the strategy.

Organization Design is the means for creating a community of collective effort that

should yield more than the sum of each individuals efforts and results. Theorganizations structures, processes and practices channel and shape peoplesactivities and energy. The values and culture of the organization influenceinterpersonal interactions and determine which decisions get made. The form of the

organization can enable or inhibit peoples innate desire to do good work on a dailybasis. It is important to create an optimal organization design that serves the

business strategy and makes it easier for people to collaborate, innovate andachieve.

Organization Design Approach

There are two distinct starting points for redesigning any organization: Strategically

driven top down or operationally focused bottom up. Both the approaches have itspros and cons and in our experience, we have realized that they are not mutuallyexclusive. Any dynamic organization needs to have a clear vision and a strategy thatrealizes the vision. The strategy directs the identification of organizational capabilitiesthat in turn determine the operating model. However, to maintain the balancebetween a grand vision and operational realities, it is important to ensure that theoperating model caters to day to day ease of working, smooth communication

channels, quick decision making and responsiveness to any change in the externalenvironment.

A hybrid approach that combines the positive aspects of both the approaches isshown in the figure below.


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Design of an organization is not an exact science. Hence the main thrust of thisapproach is to define design criteria accepted by the organization and proposeoptions that can be evaluated by the executive team based on the identified criteria.

It is imperative to ensure all design requirements and organizational constraints arecaptured as design criteria and the deliberations of the executive team are facilitatedto pick the most optimal design.

There are two distinct streams of work that can be carried out simultaneously, whichcontribute together for identifying design options.

Each step shown in the figure above is described below.

Stream 1- Starting from the top

1. Assess the relevance of current Organization Design

The Current State Assessment (CSA) provides a snapshot of the strengths and

weaknesses of the organization at a point in time. This provides importantinformation on baseline conditions and helps determine what changes will have thegreatest positive impact on the organization. This is a way to surface the ideas forimprovement that are latent throughout the organization. This is a crucial linkbetween the needs of the organization and the design process. It is important to

select a representative sample of workforce across different levels as respondents toquestionnaire or interview candidates to obtain an overall perspective of the current

design flaws. The following questions need to be answered by CSA

Do people have to work with others outside their own department but find itdifficult to cross-organizational boundaries?


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Does the structure create barriers to working with people outside theorganization (e.g. internal and external customers, key suppliers, businesspartners)?

Are there groups that should be combined into new departments? Is there a logic and a rationale for each of the pieces (departments, units) orhave they just grown organically ( or represent past political decisions ) ?

Are there overlaps between the roles of the departments or Units?

2. Establish organizational capabilities that create competitiveadvantage

Having understood the current design limitations, the next important thing tounderstand is the competitive advantage that the organization aims to create. To putit simply, if the strategy of the organization is to provide excellent customer service

through increased customer responsiveness, it needs to concentrate on building astructure that is customer facing externally and is internally supported by anintegrated end-to-end process run on ERP system owned by the customer serviceteam.

Organizational capability is defined as an integrated set of skills, technologies andhuman abilities that create competitive advantage for the organization. Generally,

there are 3 areas in which competitive advantage can be gained- product, customer,and operations.

3. Define integration capability expected from potential options

Success of an organization design depends on how well various units of theorganization work together. Integrative processes support the main operating model

of any organization. They provide information and shape decisions in order tocoordinate activities spread out across different units of the organization. They are

the business and management processes that provide value to the customers andget work done. Although numerous processes exist within any organization, typically

there are three to five that are critical to the business and involve multiple parts of theorganization to carry them out.

For a strictly product focused company, new product development, innovationmanagement, market research and intelligence might be essential processes. For a

customer organization, relationship management, knowledge management, andsolution development processes might be important. These integrative processescan be defined in the organization design as a separate function or additionalresponsibility.

4. Establish management control requirement

A crucial input to any design exercise is the number of layers of management and

right span of control. There is no one right answer to this question. Layers and spansare structured to help managers get work done, so the decision on the number of

management layers and the span of a managers control requires discussions and

agreement on what managers are there to do.


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To help get a good enough answer to the how many layers question, there are fourrules of thumb (related to the four management activities of planning, coordinating,controlling and allocating). Each layer should:

1. Be flexible and adaptable enough to enable managers to forward plan in a

context of constantly changing operating environments;2. Facilitate co-ordination between units (There are six forms of business unit to

unit co-coordinating activity; leveraging know-how; sharing tangible

resources; delivering economies of scale; aligning strategies; facilitating theflow of products or services; creating new business)

3. Have appropriate control and accountability mechanisms ( note that any task,activity, or process should have only one person accountable for it andaccountability and decision-making should be at the lowest possible level in

the organization; overlap and duplication, fuzzy decision-making and conflictresolution processes are all symptoms of lack of adequate controls );

4. Enable its managers to allocate effectively the range of resources (human,time equipment, money, and so on) they need to deliver their businessobjectives.

Stream 2- Bottom up analysis

5. Identify the scope of roles based on the reengineeredprocesses

Before defining any roles in the new organization design it is essential to clarify thescope of the roles. A good way to get clarity on the scope of roles is by creatingoperational process flowcharts swimlaned as per role.

6. Analyze each process step to articulate tasks and relatedcompetency

A detailed task analysis needs to be carried out to assess impact of process changeon the roles and requisite competencies. To capture the competencies required foreach manual task, task analysis interview need to be carried out with processowners. It is possible to present all identified competencies as a competency

dictionary for the organization for future reference. This information can then be usedto identify new roles by collating all related tasks

7. Group tasks to create role definitions

To create role definitions all related tasks should be brought together and relatedcompetencies should be collated. The swimlaned process charts and task analysisdocument should be used together to identify relevant roles in the new organizationdesign.

8. Calculate productivity to establish the headcount


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A headcount analysis needs to be carried to establish headcount required to handleexpected volumes at the productivity defined by new processes. This also providescritical input to span of control discussions.

Theoretically, an organization can be structured in a limited number of ways- byproduct, by function, by geography or in a matrix. Practically, the structure is alwaysa hybrid of these options.

Following the steps mentioned above will provide the team, entrusted with creating anew organization design, enough information to evaluate the potential options. It is

only through deliberations on the data collated and building a consensus with thesenior executives that a final organization design can be created.

To know more about how PeopleWiz can support your organization-restructuring visit

us at http://www.peoplewizconsulting.com

eight steps to create new org design

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