As businesses mature and grow, they need to create new roles and hire people to fill them. In many small to medium-sized organizations, this can happen organically in response to internal changes, like a person resigning, or external ones such as an increase (or drop) in demand for goods or services, or because there’s been an injection of capital.
Regardless of the drivers, simply reacting won’t always deliver the best results. It’s much better to take the time to analyze and tactically design the structure of your organization so you have a clear notion of what needs to be done and the roles and skills you need to do that work. It’s about making sure you get the right people in the right places at the right time.
This is what is called organization design or organizational design (or ‘org design’ for short).
Organizational design is the process of defining the structure of your organization in terms of the roles or jobs within it and the responsibilities those roles have. It’s all about ensuring the design of your organization is aligned with your objectives and strategy, so you can make good decisions that enable you to effectively and efficiently achieve them.
Deloitte's research has found that effective org design improves decision-making and innovation, optimizes costs, accelerates business growth, and boosts employee satisfaction.
This blog post looks at the fundamentals of org design, how you can get it right and what can happen if you don’t. It’s sprinkled with the expertise of MyHR’s team, who have worked in companies around the world, and MyHR’s own experience in growing from a start-up business with 1 employee to a scale-up with over 60.
As mentioned, org design happens whether or not you put conscious effort into it. Any business is a collection of people performing tasks to achieve outcomes, regardless of whether you do anything to actively organize:
Organization design is often thought of as only being the domain of large corporations, with traditional org charts made up of boxes and hierarchies, but no organization is too small to benefit from actively thinking about and designing their structure and the way individual roles contribute to delivering on your goals and priorities.
The overall design of your organization doesn’t have to be complicated, but it should be considered and purposeful.
Leaving it to chance won’t maximize your chances of making good decisions and at MyHR, we are firm believers in taking a proactive approach to org design. We learned this ourselves in developing our business, and we see it all the time in businesses of all sizes and at all stages.
There’s a simple formula we use to approach effective org design. It flows from the top down, like this:
Often, organizations approach their design in the reverse order: letting the existing roles and resources define the structure, or hiring new people or restructuring without defining the overall goals and outcomes, and hoping the new roles fit into the business and deliver on the strategy.
Design planning does take time and energy, but the effort (working on your business rather than in it) will pay dividends in the long run.
Also keep in mind that your org design shouldn't be written in concrete, but should be flexible enough so you can meet any challenges or opportunities that crop up. Review it annually or at key junctures, so it stays current.
You do need to strike a balance, however, as making frequent changes to the design of your organization is damaging to your people, the culture, and your overall business performance.
Organization design requires more than Post-it notes on a wall. Effective organization design outlines not only your business’ structure, but the roles and responsibilities, processes and workflows (the way roles fit together), governance, and the company’s culture or ways of working.
In considering your org design, define the following:
Let’s look at an enterprise that’s in a growth phase, because of increasing demand or investment. You need to be clear on what your company will look like as it grows, e.g. from 10 employees to 20, then 50 to 100, and on upwards.
Along the way, you will go from being a flat structure with all the employees reporting to the business owner to a structure with managers looking after staff and reporting lines. Many roles, at this point, are outside the visibility of the owner (or CEO).
The organization may also be expanding into new markets or territories and there will typically be a lot of moving parts, with things changing quickly, and more work to do than the team can reasonably do.
Effective org design will ensure the hierarchies and responsibilities within the company are clear so managers and employees know where to focus their efforts, how and why, and that nothing is being overlooked or effort is being duplicated. You don’t want to hastily hire a bunch of new people and then hope they know what to do to achieve the required outcomes.
But you also need to be prepared to adapt and learn as you grow. Seeking advice from mentors or other business leaders who have experience in fast-growing companies can provide invaluable insight.
Not every organization strives to be bigger, but in smaller, or mature, stable businesses that are happy with their size and position (or are in the not-for-profit sector), the sort of organization you are and want to be should still define the way you structure yourself to achieve the outcomes you need to succeed and reach your objectives.
People are often performing multiple roles in a small enterprise, so being clear about your org design means efforts are optimized, and people know the mission and how they fit and contribute. It also means you can be creative and nimble in how you approach your structure, e.g. by balancing employees with contractors, volunteers, or outsourced labour, systems or suppliers.
Another benefit of having clear aspirations and expectations is that your business will be a better, more attractive place to work. This helps when you need to hire new blood and it also flows into greater employee satisfaction, motivation, and less staff turnover.
Good organizational design is also crucial in periods of change or when you are restructuring, i.e. you are looking at shedding roles rather than adding them.
The success of your new design will determine the future success of the company, ensuring you have the right roles doing the right tasks, and that you have people with the right set of skills and attributes to help you reach your goals.
At MyHR, we know the risks of not being strategic in your organizational design and letting the roles define the work and your structure. We have been through it ourselves.
When the business was small, we were so busy managing day-to-day tasks that we didn’t take a step back and think critically about the way the company was structured. Business was booming but it got to a point where we had to be smarter about aligning the design of the organization (and the teams and roles within it) with our strategy or we risked becoming scattered or directionless.
Luckily, we didn’t need to unpick a poor structure, but that can happen and it’ll set your organization back because structure can be a complicated thing to undo once it’s embedded, or the roles aren’t aligned with what you need, or you have people in jobs that don’t match their skills.
You may need the help of experts and consultants to help you realign your roles and the people performing them, which aside from costing money, can take up a lot of time and effort.
Hiring mistakes are also costly, especially if you are in the market for skilled workers. You don’t want to start recruiting without a clear understanding of the way the role fits into achieving your aims and what skills, experience, and aptitudes a person needs to do it well.
You risk finding the person you hire can’t deliver what you require, which means more training and development (and possibly performance management), or you let them go and you’re back repeating the whole recruitment process.
Also, to maximize the chances of a new hire succeeding, they need to clearly understand the organization’s goals and expectations, and how their job contributes to building its success.