When it comes to organisational performance, classic business books focused more on leaderships and mindsets as opposed to the boring nitty gritty details of how to configure an organisation for excellence. Unfortunately, the fascinating topic behind building great organisations has a dull name: Organisational development.
Organisational development is something that Renoir Consulting has decades of experience in driving, and this article will share some of the key concept and methods that have enabled it to be a trusted partner for hundreds of companies around the world.
Organisation Development vs. Organisation Design
First things first: organisational development is not organisation design. A good way of differentiating these two concepts is to remember that:
- Organisation design is concerned with procedural changes, i.e., how to design a great organisation.
- Organisational development is concerned with behavioural changes, i.e., how to develop a great organisation.
That being said, a pre-requisite for organisational development is good organisation design.
Organisational development refers to everything that is done to upgrade the skills and improve the overall job performance of the employees. It seeks out cultural changes — such as increased empowerment, improved team dynamics, knowledge management and continuous learning — so that the company is better able to adapt to new challenges.
The Basics of Organisational Development
Some of the key focus areas regarding organisational development are:
- Policy deployment
This refers to the careful alignment of long-range goals of the business to all organisation levels.
- Permission versus control
Companies need to find a balance on the aspects of direction (visions, goals, objectives), boundaries (external and internal regulations), space (freedom from close oversight, effective delegation of authority) and support (resources, from training and development on explicit ways to doing things, to financial ones).
- Responsibilities and accountabilities
The responsible party (the person who performs the task) and the accountable party (the person who checks on the task completion) are often not clear, let alone formally recorded.
- Delegation of Authority (DOA)
A common complaint in organisational development involves senior managers being overloaded with requests coming up from the ranks. DOAs must be in place, with managers and supervisors trained on what kinds of decisions they are expected to take — and reprimanded when they do not take them.
- Competency development
Gaps in skills and competency levels need to be addressed through appropriate training and on-the-job coaching.
- Active management behaviour
When we conduct observations with clients, we typically see less than 5% of a supervisor/manager’s day dedicated to active supervision/management. On-the-job coaching in active supervision and management is a major component of all our programmes.
- Organisational behaviour
When it comes to rolling out new ways or working or sustaining high levels of performance, most companies manage this in a subjective manner. In Renoir, we have developed techniques that measure the expected behaviours of an organisation. This results in objectivity regarding behaviours, and the ability to correlate this to performance.
- Transformation Management Office (TMO)
This function is concerned with the future performance of the company. It’s imperative that a TMOP has dedicated resources and is autonomous from the rest of the organisation; short-term changes and cost-cutting measures can curtail the function’s effectiveness.
The practice of most companies when redesigning their organisation is to draw new ‘box and wire diagrams’, experiment with different classical structures, and then spend a great deal of management time in subjective debate about what will and won’t work. There is much more to effective organisation design than this; you wouldn’t put a chef in a pilot’s seat, but often that is a good analogy for what companies try to do.
Organisation design, in its simplest definition, is the optimisation of a company’s ‘operating model’ to better achieve business objectives. Breaking the notion that organisation design is just a structural exercise is one of the first fundamental steps towards effective organisation design.
Putting together the organisation chart (the ‘micro-structure’) is one of the last activities to be undertaken when conducting organisation design. An organisation design approach starts with examining the company strategy and ensuring alignment with:
- The macro-structure (the overall organisation architecture)
- The deployment of processes
- The control of processes (also known as Management Control Systems)
- The micro-structures (the organisation structures and responsibilities and accountabilities etc) and people (numbers and capabilities etc)
The Basics of Organisation Design
There are many configuration areas when it comes to organisation design. Here are a few of them:
- Organisation design principles
There is no such thing as a perfect organisation design. Therefore, design principles must be agreed to evaluate the organisation design options.
There are many high-level organisation architectures possible (functional, geographical, hybrid, etc.). It is important to understand what these are to be able to identify the suitable type.
- Centralisation vs. decentralisation
This is a very common feature of organisation design, and it is important to understand where it is appropriate and why.
- Outsourcing and offshoring
Saving money is the prime motivator here. However, because of the inherent risks involved only non-core departments should ever be farmed out.
- Process complexity
For some departments, there are very clear boundaries regarding the processes involved (such as finance and IT). However, many processes run across units, and this adds to the organisational complexity. It is impossible to eliminate all these interfaces, but it is possible to reduce them.
- Check and balance (conflict of interest)
This scenario is often present when it comes to business processes. One common manifestation of conflict of interest is when planning is not separated from execution.
No work should start on the micro-structure until multiple macro-structures have been conceived, evaluated against the selection criteria, and the final choice signed off.
- Activity analysis and job design
Outside of the manufacturing shop floor, proper job design is usually weak or entirely absent in almost all other industries and functions. Yet it is a crucial configuration area when it comes to being able to properly crew a company.
- Span of control (supervisory/management)
Up to 40% of payroll goes into management. That’s why the span of control is a brutally straightforward way of dealing with top heavy organisations.
Changing an organisation design can be a daunting task due past precedents of interpersonal relationships, expectations, roles, and career trajectories. In general, people will fight any change that results in a real or perceived loss of power. These things can make it very difficult for companies to make a clean break from the past and take a fresh look at what the business should be now.
In short, a redesign done wrong exacerbate internal politics and increase resistance to change. A redesign done right will address and release resistance to change, helping those affected to see the full picture, as well as to understand and appreciate their new roles in it.
Getting a fresh eye’s perspective — and a thorough organisational design and development program done — is something Renoir has the capacity to deliver. If you would like to learn more about how we do this, please feel free to get in touch with us.