Organisation design

Organisation design, or re-design, focuses on aligning the shape and structure of an organisation with its strategy. It involves:

• reviewing what an organisation wants and needs
• analysing the gap between where it is and where it wants to be
• designing organisational practices that bridge that gap. 

It often requires a review of the entire organisation and its context to decide what does and doesn’t work. This includes systems, structures, people practices, rewards, performance measures, policies, processes, culture and the wider environment. See how organisation design fits into our Profession Map.

When organisation design is implemented, the practices are maintained by ongoing organisation development activities. For example, organisation design uses the same kind of review an architect would undertake before drawing up plans for a new office building – they would look at how it will be used, by how many people, what it should look and feel like– all before drawing up building plans. When the building has been built (implementation of organisation design), it will be maintained and improved as it is used (organisation development).

The key difference between organisation design and organisation development is the scale of the issue(s) and solutions. If they are relatively self-contained and local in their impact, then an organisation development approach is more suitable. 

However, if success in one area is inextricably linked to practice elsewhere, and a variety of mechanisms need re-aligning, then larger-scale organisation design is more appropriate.

Because of its strategic nature, organisation design sits in different departments in different organisations, including:

• Quality - particularly if the organisation is highly compliance-led and has a keen focus on process driven value.
• Project management - as organisation design and development are often implemented through a series of projects.
• HR - where the organisation recognises that effective people practices will have the biggest impact on overall performance and success.

Organisation design requires specialist knowledge, skills, and behaviours, but people professionals more broadly have an important role to play. They’re often the gate keepers of the organisation’s people data, have a system-wide view of the organisation, and have a good understanding of the organisation’s ‘undiscussable’ issues and performance challenges. 

Whether undertaking a formal organisational design activity or not, HR practitioners at all levels can undertake organisation design to some degree. Designing and implementing HR practices will benefit from an organisation design mindset. Our podcast A new dawn for OD explores how we see organisation design evolving.

Wherever it sits, it’s good practice to use multi-disciplinary teams and employee involvement techniques to ensure a wide range of individuals and functions are involved. 

Organisation design is usually triggered by one or more of three situations:

1. Internal or external factors require a reaction

The most common trigger for organisation design (or re-design) is internal or external factors which significantly affect an organisation. For example, the introduction of new technology (internal factor) or a new competitor in the market (external factor).

The disadvantage of carrying out organisation design based on such ‘trigger’ events is that it is often ineffective longer term. For example, organisations that restructure because of a reduced budget may focus on structure and headcount changes, without considering the performance, reward and cultural changes required to embed the new ways of working resulting from reduced workforce numbers. This could lead to a need for future re-design activities.

This is also where organisation development can work in tandem with organisation design to create strategic value. 

2. The organisation’s strategy, goals or purpose changes

Organisations change over time. They may change their strategy, goals or purpose to align with a new vision for the future.

This is a future-focused organisational re-design, and will often involve a review of the existing operations to identify what can be kept (because it is already aligned) and what needs to be changed or introduced.

The challenge many organisations face is the increasing pace of change and transformation which is demanding frequent re-design activities. Organisations are now trying to re-design themselves to allow them to respond to emerging changes without having to implement large re-design programmes – see the concept of reconfigurable organisations.

3. Consolidation and reconfiguration

The third trigger is where organisation design overlaps with organisational development.

Over time, developments and practices may reach a point where they are no longer fit with each other or with the strategy that they are trying to implement.

Using the architecture analogy above, if an office building has been developed with several extensions as it has grown, the layout may become ’patchy‘, slowing down communications and leading to ‘silo’ working. This may justify an organisation design–level review of what a new building might look like.

Organisation design models and frameworks

Organisation design theory developed to look at organisations as a system, full of interconnected practices that bring about certain results. Change in one area is likely to cause an effect in another. To help understand these links, early models mapped out an organisation’s framework. They all take a different perspectives, depending on what factors they considered to be most important. The most common systems-based organisation design models include:

• McKinsey 7-S Model 
  
  
• Galbraith Star Model 
  
  
• Burke Litwin Model 

These models are mostly inward looking, based on a stable and single overarching business design. However, organisations may need to consider more agile, adaptable business models to stay future fit – read more about internal change in our report People Profession in 2030: a collective view of future trends. External collaborations, partnerships, networks and joint ventures are also becoming increasingly common.

Modern organisation design models are responsive to such trends, recognising that the traditional approaches won’t always bring about the desired change in practice. Newer, emerging models include:

• Holonic Enterprise Model – a flexible view where members are autonomous but co-ordinated, and often working together on a time-bound objective or project.
  
  
• McMillan’s Fractal Web – sees the organisation as an organism and focuses on its ability to learn, grow and adapt as it responds to the external environment.
  
  
• Ken Wilber’s AQAL Model – looks at ‘all quadrants and all levels’ of an organisation, including individuals and groups from both the inside and outside.

There’s more on emerging models in Naomi Stanford’s book 'Guide to organisation design: creating high-performing and adaptable enterprises' – see further reading, below.

When undertaking organisation design, organisations should pick whichever model focuses on the factors most relevant for them (or combine elements to create a bespoke approach).

Diagnostics and gap analysis

The selected organisation design model is often used as a diagnostic and visioning tool, where each part of the framework is examined to identify:

• What it should look like for the organisation to achieve its goals, strategy or aims (future state).
• What those areas look like today (current state).
• What the gap is between current and future state (gap analysis).

A range of different tools can be used to do this, including:

• SWOT and PESTLE analysis
• focus groups
• qualitative feedback loops
• organisation wide surveys
• internal audits
• collaborative process reviews. 

It’s important to include objective metrics and organisational data in the review. Taking an insight-driven HR approach can provide HR and leaders with objective indicators to reveal how well the organisation is doing and track improvements and also quantify the scale of a problem. This can be used to justify the need for a bigger picture exercise. 

Designing inputs, outputs and results

Early organisation design approaches predominantly focused on the ’hard‘ mechanisms in an organisation, such as structures, systems and processes, whilst organisation development was seen to mainly focus on creating the ’softer‘ mechanisms such as engagement, behaviour and culture.

Modern approaches include both of these elements. A simpler way to view it is to focus on inputs, outputs, and results.

Inputs are the activities selected/designed to produce certain behaviour and ways of working. For example, the structure and people processes. In HR: Getting smart about agile working we showed that many organisations focus on several areas of job design and organisation design to improve productivity and performance.

These inputs produce outputs, which often include many of the ’softer‘ factors, such as employee engagement, autonomous behaviour, or a self-managed culture. 

Contacts

Global Organization Design Society

European Organisation Design Forum

Books and reports

Burton, R.M., Obel, B. and Dojbak Hakosson, D. (2020) Organizational design: a step-by-step approach. 4th ed. Cambridge: The University Press.

Morrison, R. (2021) Data-driven organizational design: delivering perpetual performance gains through the organizational system. 2nd ed. London: Kogan Page.

Stanford, N. (2022) Designing organisations: why it matters and ways to do it well. London: Economist Books.

Stanford, N. (2015) Guide to organisation design: creating high-performing and adaptable enterprises. 2nd ed. London: The Economist.

Stanford, N. (2018) Organization design: the practitioner’s guide. 3rd ed. London: Routledge. 

Varney, S. (2015) Organisation design: a framework for thinking about your own approach. Brighton: Institute for Employment Studies.

Wilson, C. (2015) Designing the purposeful organization. London: Kogan Page.

Worren, N. (2018) Organization design: simplifying complex systems. 2nd ed. London: Routledge. 

Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.

Journal articles

Aronowitz, S., De Smet, A. and McGinty, D. (2015) Getting organizational redesign right. McKinsey Quarterly (online). 1 June.

Carucci, R. and Shappell, J. (2022) Design your organization to match your strategy. Harvard Business Review (online). 6 June.

Eirich, R., Schafer, B. and Ringlstetter, M. (2019) An organization design framework for digital innovation: critical review of Galbraith’s STAR model. Proceedings of ISPIM Conferences. pp1-27.

Jeffrey, R. (2020) Naomi Stanford: “We’re just not prepared for automation”. People Management (online). 23 August.

Kretschmer, T. and Khashabi, P (2020) Digital transformation and organization design: an integrated approach. California Management Review. Vol 62, No 4, pp86-104.

Neilson, G.L., Estupinan, J. and Sethi, B. (2015) 10 principles of organization design. Strategy+Business. No 79, Summer. pp28-33.

Roffey Park (2019) So you want to learn about Organisational Design do you? Here are four organisational design principles to get you started … (Blog) Horsham: Roffey Park. (One of four blogs on the theme).

Rook, J. W. (2016). Transforming industrial R&D into an entrepreneurial organisation: implications of organisational design on enabling innovation. International Journal of Organisational Design and Engineering. Vol 4, No 3-4, pp213-237.

Tolchinsky, P.D. and Wenzl, L. (2014) High engagement organization design. People & Strategy. Vol 37, No 2. pp34-38.

CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.

Members and People Management subscribers can see articles on the People Management website.