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Organization Design

introduction Mar 04, 2021

When many people hear the words “design” and “designer,” they often think of fashion, interior design, or the design of everyday items such as glasses, saltshakers, and so forth. However, everything that is not created by nature is designed by humans (consciously or unconsciously). Thus, our human-created organizations can be purposefully designed or redesigned to produce even greater value for multiple stakeholders.

Unlike buildings or objects, organizations are concepts and sometimes difficult to make fully explicit. Organization designs consist of artifacts that convey information about the context, culture, and systems. Artifacts take many forms from diagrams and descriptions of systems to visual displays of data to organizational symbols. To help understand the design of organizations, we focus on the tangible artifacts (Figure L0-2-1). In this case, the artifacts include the tangible objects and communication media from four cornerstones (stakeholders, strategy, systems, and scorecard), the culture (rituals, heroes, and symbols), and the context of the organization, including the physical environment and the external operating environment. These artifacts, including the less tangible words and deeds of leaders, are what members of the organization see and hear, think and feel, and ultimately say and do (behavior).

 Figure L0-2-1 Organization Design Components 

Cornerstones

The four cornerstones of organization design are stakeholders, strategy, systems, and scorecard. While the four components are all interrelated, there is a logical sequence to help you think about the alignment of these components. Stakeholder needs and desires inform the development of strategies for both products and the organization's design. Strategies produce both external products and services as well as organization system changes to effectively create and deliver those products and services. Finally, a comprehensive scorecard measures how well the systems and products are working, how the strategy is progressing, along with the value created for the multiple stakeholders. All four cornerstones are manifested in artifacts, including documents, speeches, etc.

The first cornerstone is stakeholders — or the WHO of organization design and the basis for organizational alignment. There are three critical elements to this cornerstone. First, understand the stakeholders — what they need and want. Second, empathize with them — thoughtfully consider what it is like to be them. Third, develop win-win relationships. The stakeholders' needs, inform the strategy.

The second cornerstone is the strategy (goals, objectives, and priorities) or the WHAT. Effective strategies for sustainable excellence address all the stakeholders. This doesn’t mean that you necessarily need individual goals for each stakeholder group. Some goals cut-across multiple stakeholders.

The third cornerstone consists of the systems and processes — or HOW strategy is executed.

Finally, the fourth cornerstone is a comprehensive scorecard — or HOW WELL you are doing.

“Comprehensive” means the scorecard measures the system performance, strategy progress, and the stakeholder value and satisfaction. These four cornerstones provide a solid foundation for the journey to sustainable excellence.

However, this foundation is only as strong as the alignment and linkages between the cornerstones. The cornerstones need to be consistent and congruent. The focus on stakeholder needs and relationships helps provide a common alignment point for strategy, execution, and learning, and innovation. Also, a systems perspective combined with design thinking provides the basis for organization designs that create value for multiple stakeholders.

These four cornerstones are inert without people to make them come alive. The culture fills in the spaces between the cornerstones and helps to bring the inert cornerstones to life.

Culture

The four cornerstones are held together by a culture of excellence and innovation. The culture brings these four critical components to life and provides the energy to move the organization forward. To achieve and sustain excellence, the key cultural elements — including values, rituals, heroes, and symbols — have to be aligned with the stakeholders, strategy, systems, and scorecard.

When I ask successful leaders of organization transformation what they would do differently next time, the most common response is they would have aligned the organization sooner because that was where the real power was. The challenge we face with culture is the values of an organization are not directly visible. Our values can’t be observed directly. We infer values through their manifestations — behaviors, decisions, priorities, etc. Values are inferred from how people act (practices) and the rituals, heroes, and symbols of the organization that are visible and audible.

As Mom used to say, “Choose your friends wisely.” The corollary for organizations might be, “Choose your heroes wisely.”

Your heroes’ behavior (what they say and do) is a powerful message. Heroes are those individuals the organization holds up as the epitome of success in the organization. These are the people they tell stories about. They are legends. The second tangible element of culture are the symbols. There are symbols throughout our organization that tell us what is important and valued (e.g., reserved parking spots). Also, organizations have a wide variety of rituals from executive retreats to Friday afternoon beer busts. Rituals are designed to create thoughts and feelings in the participants’ minds that influence the desired behavior.

The task is to select heroes and design symbols and rituals that send messages that are aligned with our desired organization and values. Some have tried to separate culture from the other components of organization design such as strategy. However, all the parts work together as an integrated whole, and the design and results are context-dependent.

Context

Context is a crucial consideration when designing any aspect of the organization. For example, the most appropriate strategy development and deployment system might be very different for a Fortune 100 with operations in 40 countries vs. a mom-and-pop coffee shop with two locations in one city. The context contains essential information, including the facilities, the technology, the type of work (e.g., nuclear power vs. education), the workforce, and the purpose and mission of the organization. The cornerstone and culture components need to align with and fit the unique characteristics of your organization. These all have to make sense together with the type of work you do, your facilities, the geography, etc.

Alignment

The bad news is many organizations are a hodge-podge of ill-fitting pieces, making it difficult to create value for any stakeholders. The good news is organizations were designed by humans and thus can be redesigned.

While low-performing organizations are chaotic, complex, and confusing, high-performing organizations are aligned and congruent. Four key elements must be aligned and integrated for any major change effort to succeed: stakeholder needs, strategy (goals and objectives), the action plans along with resources, and the performance measures (scorecard). In fact, the alignment and integration of the cornerstones with the organizational culture may be the most important facilitator of organization [re]design and transformation. Alignment and integration determine the degree to which the four cornerstones are consistent and working together with the culture in the same direction.

For our purposes, organization design is a stakeholder-centered approach to aligning and integrating the systems, strategy, and scorecard with the organization’s culture and the unique context.

Why Organization Design?

So why do we focus on organizational design? There is an old saying, “You can’t get flowers to grow by pulling on them.” The components of organizational design are what people see and hear. What they see and hear influences what they think and how they feel. What they think and feel influences what they say and do or their behavior. Their behavior influences organization performance (Figure L0-2-2).

Figure L0-2-2 Why Organization Design?

We focus on organization design because it influences the behavior of those who work in and with the organization. Stakeholders experience the organization’s many processes and practices, interactions, and artifacts. While interacting with the organization, stakeholders hear and see many manifestations of the organization's design. William McDonough proposes that “Design is the first signal of human intention.” But whose intent?

 

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