As businesses mature and grow, you need to create new roles and hire people to fill them. In many small to medium-sized organisations, 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 your goods or services, or because there’s been an injection of capital.
Regardless of the drivers, simply being reactionary won’t always deliver the best results, and it’s much better to take the time to analyse and tactically design the structure of your organisation 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 organisational design (or organisation design or ‘org design’ for short). It’s a process of defining the structure of your organisation in terms of the roles or jobs within it and the responsibilities those roles have. It’s all about ensuring the design is aligned with your objectives, so you can make good decisions that enable you to effectively and efficiently achieve them.
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 my experience - and that of MyHR’s team - working in large multinational companies and from growing a start-up business with 1 employee to a scale-up with over 60.
Do I need to worry about org design?
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 organise the way the work is done, how roles fit together, how decisions are made and communicated, and what the lines of reporting are.
Org 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 organisation 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 objectives.
Leaving it to chance doesn’t maximise 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.
How to do it effectively
There’s a simple formula we use to approach effective org design. It flows from the top down, like this:
- Start with your strategy - what is your business and what do you want to be? This overarching plan and purpose then defines:
- What work needs to be done to achieve these goals? Once you determine what the work is and how it is performed, that then defines:
- The specific roles and responsibilities and how they fit together in the organisation.
Often, organisations 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 takes time and energy, but the effort (working on your business rather than in it) will pay dividends in the long run. Just 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. We also recommend reviewing it annually or at key junctures, so it stays current, but making frequent changes to the design of your organisation is damaging to your people, the culture, and your overall business performance.
Some working examples
#1: The fast-growing business
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 organisation may also be expanding into new territories, so the hierarchies and responsibilities need to be clear to ensure people know what to do, how and why, and that nothing is being overlooked or effort is being duplicated.
Often, in a fast-growing organisation, there are a lot of moving parts, things can change quickly, and there is often more work to do than the team can reasonably do, but the last thing you want is to hastily hire a bunch of new people and then hope they know what to do to achieve the required outcomes.
#2: The small business
Not every organisation 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 organisation 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 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 is that your business will be a more attractive place to work if the aspirations and expectations are clear to everyone. This, in turn, helps when you need to hire new blood and flows into greater employee satisfaction, motivation, and less staff turnover.
#3: The downsizing business
Good organisational design is also crucial when you are restructuring and looking to shed roles rather than add them. The success of your new design will determine the future success of the company, and the new structure is the basis of the restructuring proposal and process, which needs to be handled smoothly and lawfully, so you get the best outcomes with the least risk.
Find out more about the restructuring process.
The pitfalls of piecemeal org design
I don’t want to get too preachy about the risks of not being strategic in your design or letting the roles define the work and your structure, as we have been through it at MyHR.
When the business was small, we were so busy managing the day-to-day that we didn’t take a step back and think strategically 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 organisation (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 organisation back because the 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 being costly, takes time and effort that could be better spent on boosting the performance of the business.
Also, we are currently in a tough labour market, with significant skills shortages in certain sectors. This is an issue in lots of countries, too, and many New Zealand companies are in a global market for skilled workers (dubbed “the war for talent” by some).
Hiring mistakes are costly at the best of times, but right now, you really 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 they 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 maximise the chances of a new hire succeeding, they need to clearly understand the organisation’s goals and expectations and how their job contributes to its success.
Find out more about recruiting in our current market.
