MARCH 2010Developed by Agency Human Resource Services, DHRM1 Organizational Design What Is It? Organizational Design is the creation of roles, processes, and formal reporting relationships in an organization (from Wikipedia). –Used to create new organizations or departments. –Used to modify current organizational structures that may not be working effectively or require change due to changing business requirements.

MARCH 2010Developed by Agency Human Resource Services, DHRM2 Alignment of Organizational Strategy & Design Why Is It Important? It is important to match the organizational design or structure with the organizational strategy to achieve desired performance. –Failure to do so may create organizational performance challenges resulting from integration issues, communication problems, overload or overlap of work, too large or too small a scope, etc. Organizational Strategy Organizational Design Organizational Culture Organizational Operations Organizational Results RevenueServices

MARCH 2010Developed by Agency Human Resource Services, DHRM3 Key Steps in Organizational Design Organization Strategy Purpose, Vision, Mission, And Objectives Must Be Defined And Clear Understand Customer Needs And How They Influence The Organization Design Understand The Influences of Technology And Other Environmental Issues Understand Different Organizational Types And Challenges Faced In Existing Design Develop Organizational Designs, Understand Pros/Cons, And Choose An Option Greenfield Approach: Sometimes, an organization will take a Greenfield Approach to Organizational Design. This is an approach in which leadership does not try to modify or use current designs. Rather, they start with a “blank board” and work to create an organization design to match the organization strategy Implement Organizational Design or Reorganization 5 6

MARCH 2010Developed by Agency Human Resource Services, DHRM4 Common Types of Organizational Structures Director OperationsFinanceLegal Human Resources Director Eastern Region OperationsFinance Western Region OperationsFinance Functional StructureDivisional Structure Design by Function Benefits Creates operational efficiencies Creates clarity of function, specialization Potential Challenges Lack of communication/coordination Differing Interests between functions Design by Geography, Product, Market Benefits Creates focus by customer or product needs Speed in responding to market opportunities or needs Potential Challenges Repetition of functions within each segment Create silos within each division

MARCH 2010Developed by Agency Human Resource Services, DHRM5 Newer Types of Organizational Structures Matrix StructureNetwork Structure Design by Function and Product Benefits Knowledge sharing Specialists focused on products/customers/etc. Potential Challenges Multiple “bosses” More conflict and organizational “politics” Design by Outsourcing What Can Be Done Better or Less Expensively Benefits Flexible Can be efficient in having resources only when needed Potential Challenges Lack of complete control over non-core components DesignFinanceEngineering Prod Mgr A Prod Mgr B Prod Mgr C Company Outsource Partner 3 Outsource Partner 1 Outsource Partner 2

MARCH 2010Developed by Agency Human Resource Services, DHRM6 Other Variations on Organizational Structures Team – design that uses horizontal and vertical teams on an ongoing basis (usually self managed) to accomplish goals; teams may be widespread or may be focused in particular areas and used as a component of another organizational design. Team B Team A Boundary-less – design minimizes “boundaries” between vertical, horizontal, and external/internal relationships; combines aspects of network and team structures. Virtual – form of boundary-less design that functions in a virtual world of network relationships through significant use of the internet. Team 2 Team 1Team 3

MARCH 2010Developed by Agency Human Resource Services, DHRM7 Some Key Factors to Consider in Organizational Design Degree of Centralization –Does the organizational strategy support a need for centralization or de- centralization? Centralization supports standardization and central decision making while de-centralization supports flexibility for actions and decision making. Span of Control –The span of control is a determination of the number of direct reports leadership roles have in the organization design. Small spans of control mean that leaders have few direct reports (tall organization). Large spans of control mean that leaders have many direct reports (flat organization). Departmentalization –Higher levels of departmentalization result in higher levels of specialization. Smaller organizations often support simple structures without high levels of departmentalization (“jack of all trades” approach). Departmentalization often increases as organization size increases.

MARCH 2010Developed by Agency Human Resource Services, DHRM8 Tips and Tools for Organizational Design Efforts Tips Do Not focus on individuals when conducting an organizational design assessment. Individual names along with their strengths will be used later in understanding appropriate placement. Be sure the strategy is clear and understood by all participating in the organizational design efforts. An organization may use different types of organizational designs for different parts of the organization. For example, an organization may use components of a matrix structure for product design & engineering and use a functional structure for manufacturing operations. Be sure to focus on implementation efforts once a design is determined. Implementation is critical to acceptance and the success of the design. Suggested Tools Current organization charts Evaluation of effectiveness of current design, including an understanding of what works well and what does not Organizational strategy – current, past, and future including an evaluation of changes If using a Greenfield Approach, a blank board or sheet of paper A neutral third party to help facilitate discussion – Expect conflict; conflict can be healthy in weighing all the options and a third party has no vested interest in the outcome. New organization charts – There are lots of software options for creating organization charts from simple options like PowerPoint and Excel to purchased software. Implementation Plan – project planning tools to create and execute implementation of the new design

MARCH 2010Developed by Agency Human Resource Services, DHRM9 Measurement of success Once an organizational structure is implemented, it is important to regularly evaluate it’s ability to serve and meet organizational strategies and goals. Measurement may include but is not limited to the following – each organization will want and need to adapt specific measurements to it’s strategic and operational environment. Organizational ability to meet timelines and goals –Level of intra-organizational collaboration vs. level of friction –Organizational financial measures (e.g., revenue, payments, etc.) –Operational service measures (e.g., response time, customer feedback, etc.) –Employee turnover and exit feedback –Employee survey (or other) feedback Note: organizations do not operate in a controlled lab type environment. Other factors will also influence these measures. Leadership will need to fully evaluate all measures to determine the most likely impacts on their results. It is like peeling an onion – each layer of evaluation will reveal more information and help to determine the most significant influences.