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Organization Design (OD) 101: What you need to know

February 24, 2016

We often liken Organization Design (OD) to an art form, because opinions about its definition vary, and like art, the topic is widely debated.  Most people have no trouble pointing out what they think is good or bad art, but they struggle when it comes to describing what specific criteria constitutes a consistently good piece of artwork.  Among many other things art can be pleasant to look at, thought provoking, passionate and inspiring but what are the underlying principles that make it good art?

 

Similarly, good OD can be earmarked by business efficiency, perceived employment status for existing and potential staff, or even award winning performance but what are the specific criteria or principles that make it good?

 

Next to art, OD also has similar characteristics to traditional architecture in the sense that it applies a systematic and methodological approach to design and construct the organizational structure.  In practice we believe good OD is a combination of art and science.  And, that there are 3 fundamental things that you should know about OD.

 

1. The definition of OD

There is good OD and bad OD, but OD itself is hard to define.  Some people go so far as to say OD cannot be defined.  The enormous diversity of OD seems to give credence to this view, as objective and subjective principles coalesce to form a seemingly good or bad organization.  Others believe that in spite of this diversity, all OD shares a set of common design principles and therefore must adhere to a definition.  We will discuss the design principles shortly, but first, some commentary on our definition of OD:

 

"A metaphoric term used to describe how an organization is structured including the inter-connectivity of people, processes and technology that create a unique synergistic system which has greater value than the sum of its parts and is designed either passively to achieve a tactical goal or actively to execute a holistic strategy."

 

We use the term "metaphoric" because not all structural components of OD are literally applicable.  We have yet to see a working crystal ball (or other replicable method) that accurately predicts exactly how the "inter-connectivity of people, processes and technology" will "synergize". 

 

Good design, however, does have "greater value than the sum of it's parts" and is not always intentional.  Although most good design is deliberate, many organizations "passively" evolve without conscious design choices from a "holistic" perspective.  Over time, piecemeal OD tweaks can result in structures that become inefficient, with unclear accountabilities and sub-optimal working relationships.

 

This passive vs. active nature of OD can also be compared to architecture as it often resembles a principle associated with modernist architecture and industrial design in the 2oth century: form follows function.

 

2. Form follows function

Traditionally, the "form follows function" principle dictates that the shape of a building or object should be primarily based upon its intended function or purpose.  For example, historically when the primary function of a building was to provide dense residential housing, a tall, rectangular apartment building was the form of choice.  The key design principle was to maximize population per square kilometer. 

 

Progressively in OD and architecture we are seeing a shift to 'function follows form".

 

 

Increasingly property developers and business executives are making strategic and deliberate design choices that allow function to follow form.  For example, opera houses (function) used to be designed and built as square buildings (form).  Nowadays, they look much different.  The above image was a proposed design for the Busan Opera House Competition in South Korea.  Among the desired functions were:

 

"A place to be together, in our common cultural context...to be alone together, the singular in the plural, and above all a place to meet ourselves in a wider collective consciousness...blurring the definition of inside and outside, private and public, intimate and monumental...exceptionally accessible in the urban context, not just physically but visually and above all mentally."

 

Similarly, the desired functions of businesses are no longer met by form-ing departments like HR, Finance, Sales and Marketing and hiring people to do the departmental work.  Modern OD is much more than plotting and moving organizational chart boxes on a page. 

 

Nowadays the smart business executives want high performance OD that calibrates people, processes and technology to execute business strategy.  They want to improve business agility and the capacity to execute transformational change better and faster than the competition.  They want function to follow form.

 

3. Diagnostic lenses and design principles

Depending on the desired outcome - characteristics, criteria and attributes of OD (we like to call them 'design principles') are assessed or designed by using different diagnostic lenses.

 

Let's use the apartment building example again.  If we built two identical buildings right beside each other, and assessed their design using a "ratio of apartments to area (per square kilometer)" diagnostic lens, then we would find that the design principles of each building are the same. That is to say, because they are identical, each building would have the same number of apartments, and therefore the ratio of apartments to area (per square kilometer) would be identical. 

 

By contrast, if we assessed the buildings using a "population density to area" diagnostic lens then we would most likely find slight differences between the building populations, because the population density would vary depending on the number of people that actually lived in each apartment (e.g. two adults and a newborn vs. two adults and two kids in a two-bedroom apartment).

 

Now consider if one building was a luxury condo tower and the other was government subsidized housing.  The luxury tower would have higher quality finishes, materials and amenities but many characteristics, criteria and attributes would  remain equal. Depending on the diagnostic lenses used to assess the design, the results could remain identical, or, could be dramatically different. Therefore it is critical to select the right diagnostic lenses when assessing or designing an organization.  What if we decided to rent or sell the apartments before identifying the obvious differences?

 

Although the above scenario is unlikely, quandary predicaments happen all the time with OD and it is important to recognize that there are consequences for poor OD decisions and poor application of OD principles.  

 

What you need to know

Guiding design principles clearly address questions about the planned design for their intended organization, such as:

 

What is the strategic aim of the organization?


How are resources aligned to the execution of the strategy?

 

What are operational needs/restrictions of the organization from a resource perspective?

 

Which activities are core to the execution of the organizational strategy, and which are non-core?

 

How are activities and business processes governed and controlled?

 

How is the sustainability of the organization reflected in its structural design?

 

How is performance measured and improved?

 

The key to effective OD is to first understand what are the guiding design principles for your organization, and then to assess alignment to the principles by using the correct diagnostic lenses.  Using the correct lenses will identify conformity to specific characteristics, criteria and attributes of the required design principles.

 

We probably can't help you to paint the world's next Mona Lisa or design the next Guggenheim, but if you need to improve business performance or are thinking about OD remember to consider form, function and to assess design principles with the right diagnostic lenses.  Like art or architecture, good OD requires skill and technique - which can be developed and learned with the right training.

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