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Designing an Effective Organization Structure
January 2009

Effective organization design considers five, interrelated components • Clear vision and priorities • Cohesive leadership team 2. Decision -making and structure

• Clear roles and accountabilities for decisions • Organizational structure that supports objectives • Organizational and individual talent necessary for success • Performance measures and incentives aligned to objectives

1. Leadership

5. Culture

4. Work processes and systems

3. People

• Superior execution of programmatic work processes • Effective and efficient support processes and systems • ‘High performance’ values and behaviors • Capacity to change

Source: Bain & Company organizational toolkit and Bridgespan analysis TBG 090115-OCW-Org Design Structure

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Principles of effective organizational design
• 1 Consider all five components of the “wheel”: A common misstep is to focus on structure alone (boxes and reporting lines) as the solution Align the five components to one another: One element that “doesn’t fit” can limit the performance of the whole system Align strategy and organization to one another: Organizational strengths and weaknesses influence the range of feasible strategies; in turn, organizations should evolve with any new strategic direction

• 2

• 3

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When structures are ineffective . . .
Likely root causes
Symptoms of an ineffective organization
Lack of coordination: work unfinished, teams isolated, out-of step Excessive conflict: Needless friction among internal groups Unclear roles: Functions overlap and/or fall through the cracks Gap in skills or misused resources: Missing or underutilized skills or resources Poor work flow: Disruptions, cumbersome processes Reduced responsiveness: Slow reactions to environmental shifts Conflicting communications: external stakeholders confused, complaining Low staff morale: lack of confidence or drive; poor teaming Note: “People” causes of excessive conflict are typically related to poor performance measures or incentives, not lack of talent or skill per se. Source: Strategic Organization Design: An Integrated Approach, Mercer Delta Consulting (2000); Interview with Peter Thies, Equinox Organizational Consulting; Bridgespan analysis TBG 090115-OCW-Org Design Structure 4

Leadership

Decisionmaking & structure

People

Work processes & systems

Culture

Basic principles of effective structure
• No “right” answer: There’s no silver bullet; every structure has strengths and weaknesses . . . • But a better answer: However, there is likely to be a “better” structure for a your strategy and stage of development –Analysis can help determine alternative structures that will support the strategy

• Making necessary compromises: Given the organization’s strengths & weaknesses, compromises in structure are often necessary –The final structure is likely to be a “hybrid” of the “best” options

• Managing tradeoffs: Whatever structure is selected, it’s essential that the organization manage its inherent weaknesses or tradeoffs –The “levers” that help manage these tradeoffs are the other 4 elements of an effective organization (processes, people, leadership, and culture)

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Structures have two components: groupings and linkings of activities Grouping
• How individuals, jobs, functions or activities are differentiated and aggregated • Optimizes information flow within the group but typically creates barriers with other groups

Linking

• Mechanisms of integration used to coordinate and share information across groups • Enables leadership to provide guidance and direction across the organization

An optimal structure balances differentiation (through grouping) with integration (through linking) Source: Strategic Organization Design: An Integrated Approach, Mercer Delta Consulting (2000); Interview with Peter...
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