From improving client and employee experience, to saving an ailing business from the brink of bankruptcy, evolving your organizational design can have a stunning impact.
Team silos, lack of ownership, and fractured customer experience are just a few consequences of poor organizational design (the way your company’s people, processes, and systems work).
And since ironing out the wrinkles in workflows takes extensive resources, most companies stick with their standard processes — making only weak efforts to optimize their org design.
In fact, 72% of companies share they’ve operated under the same organizational structure for five or more years, according to a 2021 survey.
But wait just a second there: picture the profits you can drive simply by identifying and removing redundancies and barriers from your workflows. Besides driving increased profit, you’ll see improvement in employee engagement and customer/client experience — all while reducing wastage.
So, who’s ready to improve their organizational design? Read on to find out the consequences of ignoring it and examples of the results other companies achieved.
Organizational design is the way your company operates. This involves:
The aim here? To make sure all the people, tools, and processes involved optimize organizational efficiency.
But here’s the thing: designing your organization’s workflows and internal processes isn’t a one-and-done task.
Instead, regular organization redesign is crucial to a business’s success and maintaining client satisfaction. You’ll need to evaluate your procedures and processes in light of your current business vision and strategic priorities, current logistics, and prevailing industry rules and regulations.
In certain instances, this evaluation might lead to a large-scale transformation. In other cases though, subtle shifts are enough to boost operational efficiency.
Since organizational design touches on various aspects of day-to-day work ops such as your decision-making process and company hierarchy, it impacts different business aspects.
For example, evaluating the tools your teams use and the ways they use them can help you identify opportunities to streamline your processes.
Let’s say, reviewing your HR processes might show you that the team has been keeping manual employee inventories — spreadsheets recording each employee’s skillset, interests, vacation time off, and similar details.
However, by introducing a resource management software, you can help the team automate and streamline their processes. In turn, this saves time and increases operating efficiency.
This is just a small example though.
By reviewing and reorganizing team structures, processes, and tools based on your current strategic direction, you can encourage business growth. Here’s a broad overview of how organizational design positively impacts different aspects:
An efficient organizational design aims to reduce long approval chains and repeat work. Based on your leadership team and their management style, it also empowers teams to take ownership and make project-level decisions.
At the same time, it simplifies team structures so they’re open lines of communication — not only within teams but also across teams. This removes silos and reduces office politics, boosting overall employee morale and motivation at work, retaining them better.
Engaged employees, bottleneck-free processes, and efficiency-boosting tools contribute to improving the quality of your deliverables.
Plus, by removing redundancies in your workflows, you can ensure all projects move from one stage to another smoothly.
All this, in turn, assists in giving you a competitive advantage and improving client satisfaction.
Cross-team collaboration, efficient work processes, and overall improved output quality increases work efficiency as well as revenue.
What’s more, by using the right tools at defined stages in your organizational workflows, you can lift workplace productivity and reduce wastage.
Just as efficient org design culminates friction-free work operations that drive revenue growth, the lack of or an outdated organization design advances business decline.
For example, employees who have to wait on approvals, have little to no authority to make creative decisions and feel they’re governed by mandatory (sometimes unnecessary) procedures can experience a decline in their commitment to work.
Over time, this can snowball into reduced work engagement and high employee turnover.
Now imagine problems like these cropping up in different wings of your business and you’d instantly recognize the cost leadership pays due to poor organizational design.
Here’s a rundown of the negative consequences of poor org design:
Over time, these consequences elicit bigger problems including reduced business profits, tarnished reputation, unsatisfied clients, and high employee turnover.
Still unsure if investing in organizational redesign is worth the resources?
See how these three leading companies turned the tides in their favor as their business leaders invested in org design:
Microsoft’s near-death experience before Satya Nadella took over as CEO is well-known. Profits were down, reputation was damaged, and employees and loyal customers alike were unsatisfied.
Today though, Microsoft’s integration with OpenAI’s ChatGPT has given Google, the undisputed search browser, a tough challenge.
But how did Microsoft go from a company on its last legs to a business that’s now giving Google an AI-powered challenge? The short answer: by improving its organizational effectiveness.
When Satya was appointed, he made a handful of changes:
To this end, Satya took a startup-like approach to redesigning Microsoft’s organizational structure. Here’s a summary of the strategic changes made:
Satya changed the focus from sales to customer satisfaction. The team set up dashboards to review product usage for learning customers’ real-time preferences.
Previously, engineers had to deal with upper management, spending a lot of time in meetings to make the case for their innovative ideas. Satya changed that by reducing hierarchies. He also eliminated the organization’s rigid rules on contacting people for answers to specific problems. As a result, engineers now have more freedom to innovate.
Microsoft hosted the world’s largest private hackathon where its engineers, across the company, worked together. The annual event helped break down silos, improved collaboration, and better enabled Microsoft to address sudden opportunities and threats, faster.
In the 1990s, Nike faced severe backlash about its labor practices. Allegations included below-minimum wages, labor bullying, and child labor with working conditions likened to a sweatshop.
The shoe giant’s reputation ultimately became the catalyst for its organizational redesign, though.
The first step, of course, was recognizing the need for change. Nike created a 150-member corporate responsibility group in 2001 — packed with people from labor, community investment, and environment subgroups.
This group had a straightforward goal: to move beyond taking a reactive approach to all the allegations and increase transparency and cooperation with the world.
Their responsibility to this end included:
At the same time, Nike also increased wages — shifting its internal mindset to bring about a cultural change.
The result? Nike was able to get out of the allegations, humanize its brand, and reestablish its authority in the sportswear industry.
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Before Robert Iger took over Disney as CEO, the company was nearly failing. As with Nike, its reputation was rapidly declining and profits were down.
The Disney as we know it today, however, is majorly a work of Robert Iger. And one of the first things he did as he took the CEO seat? Reorganizing the strategic planning team.
Before Robert’s stint as the executive officer, stat planning was a group of 65 folks wielding authority over all business decisions. All big and small decisions alike moved through this unit.
Not only did this slow down decision making but it also decreased employee morale as they couldn’t take any pride in their work.
Robert decided to dissolve their power — reformatting the team structure which led to the creation of a lean team of 15 members who would advise on acquisitions.
The result? “[...] the announcement that they [the old strat planning group] would no longer have such an iron grip on all aspects of our business has a powerful, instantaneous effect on morale. It was as if all windows had been thrown open and fresh air was suddenly moving through,” explains Robert in his biography, The Ride of A Lifetime.
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Evaluating success boils down to periodically reviewing how well you’re achieving the goals you set as you plan your org design initiative.
Your reviews, however, shouldn’t be limited to tracking set metrics only. Instead, take these three steps:
Measuring success starts from day one when you identify your pressing needs for changes to make in the org design and set goals. In doing so, set KPIs to measure on a monthly and quarterly basis.
Let’s say, one of your desired outcomes is optimal resource utilization. In that case, you’ll need to measure metrics like ramp speed and effort variance.
Send out monthly surveys to learn how well the new changes are bringing results.
Make sure you pair survey data with one-on-ones with employees to get deeper insights into what’s working and what’s not.
Lastly, review your operating metrics and financial numbers on a monthly or bimonthly basis to determine the impact of your org changes on them.
Remember, your business strategy and goals change over the years. Industry regulations change as well, and bottlenecks quickly crop up in your work processes.
So be sure to identify these barriers and redundancies before they grow to damage your organization. At the same time, review your people, processes, and systems to make sure they align with your company vision and prevailing industry regulations.
Lastly, keep in mind: although the organizational design process can feel overwhelming, its benefits are well worth the effort. Simply keep your focus on optimizing your processes and hierarchical structure and you’ll results surfacing in no time.
