Regardless of the organizational structure you currently have, definitely want, or are striving for, always design an organization with a two-to three-year time horizon in mind. Anything shorter than two to three years makes the organization unstable, and anything beyond two to three years is patently unrealistic. For example, if you’re trying to design an organizational structure based on a six-month timeline, instead of the recommended two to three years, you’re basically focusing on all short-term goals with no long-term plan; it’s a little like building your company on quicksand. You have to go beyond six months, even twelve months, even eighteen months (and more), to project far enough along to create realistic goals for yourself and your company. Too short a timeframe also means instability for the organization – people will constantly be thinking about “what’s coming down the pike” instead of focusing on the job at hand. Transformation needs more focus, not less.
Likewise, planning too far out, say three to five years, is also too long to do your company any good. So much can happen past the three-year mark to make prudent business decisions impossible. Think of our recent financial struggles with a worldwide economy in freefall. Could any of us have predicted this economic downfall three, four, or five years ago, let along even a year or two ago?
Now, organizational “design” is often used synonymously – and, I would add, incorrectly – to mean the same thing as organizational “structure.” Organizational design includes: structure, engagement, and governance models, rewards, recognition, etc. Organizational structure, on the other hand, is the “boxology” I mentioned before. So in essence, organizational structure is a subset of organizational design.
Traditionally, in most companies, organizational structure is crafted by the leader, with perhaps some help from HR. I do not advocate this process, as it is often impossible for one leader to understand all the inner workings of the organization (at all levels). No matter how popular it is, this approach always has problems when it comes to true adoption. And when it comes to transformation, adoption isn’t just half the battle but THE battle.
Here now is an alternative approach that I have been using for years, with great success. The overall process explained below is applicable to all industries (including product and service-based industries). It is used for non-profit organizations as well.
Before beginning any work in this area, it is important to realize that it is critical to engage key people from multiple levels of the organization to assist in crafting the organizational structure. This approach is what I refer to as a “high-engagement” approach.
The good news is that – if you’ve been following a transformation process – you’ve already laid the groundwork for this earlier when you pulled together a team to assist with SWOT analysis. If so, see if the same or similar team can be pulled together because – while you won’t need them for long – you will need them (or a team similar in size and strength to them).
Depending on how we lay it out, this exercise may take anywhere from two day to two weeks. Naturally, the size and complexity of the organization plays a critical role in how long and involved the process or organizing its basic structure will take.
It is critical that all the key stakeholders/players in the organization are involved in designing (or redesigning) the structure – especially the skeptics, politically motivated, and/or passive-aggressive types who always sit on the sidelines and comment (mostly negatively) about the organizational change, but do little to help initiative or fulfill it. It is important to make them feel like they are part of the solution and, in fact, their adversarial opinions and proven expertise at playing the devil’s advocate may just point out the pros and cons of several alternatives that may not have been raised otherwise. This will force them into a problem-solving mode, as opposed to them just complaining and making excuses for why things are not working.
Crafting an organizational structure does not come naturally to most people, but let me assure you that by the end of this process you will be quite good at it.
Design an Organization in 4 Simple Steps
Before we get into discussing each of the following four steps, let me first give you a bird’s eye view of the entire process. The idea is to have the leader of the organization stay out of the initial work of architecting the structure. Instead, the leader develops a guideline (or criteria) that the team’s proposed structure complies with. Yes, you heard right – there will be multiple structures proposed.
Each team comes at the problem from a different angle, making the exercise very adversarial (not always a bad thing), interesting, and comprehensive. The organizational leader then picks one structure and improves it by incorporating interesting elements from other structures (I call this a “cherry-picking” exercise).
You now have a draft structure to share with key stakeholders and that can be fine-tuned by more rounds of approval by the initial teams (this step can be ignored for relatively smaller organizations). The rest of this process involves developing details like job descriptions and success metrics. Now that we understand the high-level approach, let’s take a look at each step and walk through the details.