A (re)design of the organization accelerates the realization of the (digital) strategy, provided that it is properly tackled and implemented!
Do you recognize the feeling that the current organization prevents you from realizing strategic goals and plans for the future? Do you feel that tasks and responsibilities are sometimes divided in a superfluous or completely fragmented way, or that they’re not divided at all?
With changes following each other at an ever-increasing pace (digitalization, in- or outsourcing of business units, or disruptive innovations), having the perfect fit between the organization’s design and ambitions is a growing challenge for organizations. The moment your organization does not adapt to internal and external developments, you create organizational debt: an ever-growing heap of changes the organization should have implemented but hasn’t.
Establishing and implementing a successful organizational design requires a thorough process in which management is actively involved. This article shows you how to establish an optimal (re)design in four steps (see figure 1) and describes decisive success factors.
Phase 1: Designing the organization encompasses more than drawing an organization chart
A frequently heard statement about the design of an organization is, “We already have an idea of the organization chart, so all we need to do is draw and include the people.” A missed opportunity, if you ask us. An organization’s design process requires a lot more than knowing who will be in what place. It all starts with understanding why the current setup of the organization has a restrictive effect on realizing the strategy. The result is a shared sense of urgency.
After that, it’s important to determine a direction by establishing starting points and translating these into design principles. Not only do these principles ensure a consistent course when (re)designing, they also provide a clear, explainable story as well as a mainstay for future decisions. With this context in mind, a core team joins forces to create a clear outline of the desired design, including required functions, responsibilities, and processes.
Organizing the design process like this with one of our clients in the insurance sector made it easy for us to settle difficult (political) issues and discussions based on content at a later stage in the process. This didn’t result in a simple drawing, but in a well thought-out organizational design.
What does it yield?
- Objectives and frameworks for what can and can’t be changed
- Clear design principles with starting points for the (re)design to direct choices and to let ratio predominate over politics
- A detailed design that goes down to the team and business-function levels so all activities are included
- A clear division of tasks and responsibilities (RACI) and associated objectives (KPIs) so as to clarify how the various teams contribute to the organization’s ambitions
- All relevant input for drafting a request for a recommendation for the works council to complete an efficient consulting process with the works council
Phase 2: The impact of the design goes far beyond FTE numbers
Major steps need to be taken before the new organizational design is also the new reality. A typical statement in this phase is, “Our new organization chart says a lot about the changes going on in our organization, but the real impact is evident at the level of the individual employee!” It’s because the employee can end up elsewhere in the organization, needs to work in a different way, or is assigned other responsibilities.
To ensure this goes as smoothly as possible, it is crucial to determine the impact of the organizational design on people, processes, systems, physical design, and management. Devising all this helps draft an implementation plan.
Logically, it requires the involvement of several parties within the organization – for example, for cost centers, physical design, and FTEs. To tie all parties and components together, it’s useful to designate one directing party.
At an organization in the financial sector, for example, we put HR in charge. This resulted in an overall picture of the impact, in all parties being the true owners of the IST-SOLL transitions in their respective fields, and in a grip on interdependencies.
What does it yield?
- Impact on formation (FTE), functions, competences, and way of working, included in IST-SOLL overviews, so as to see the required changes
- Insight into the way in which the IST-SOLL transition impacts existing processes and systems within the organization
- Concrete and time-bound implementation plan so as to be ready for a proper rollout in phase 4
Phase 3: Decision-making is the result of a solid process rather than an obstacle
A question we often hear at organizations that want to realize a new organizational design is, “How can we complete the consulting process with the works council in a smooth and effective way?” Organizations that involve the works council at a later stage often encounter a huge heap of formalities as well as delays in decision-making. This means the desired implementation can’t take off until later, resulting in higher costs and a lower return on investment.
Rather than considering them an impediment, you should involve them early on and collaborate properly so you’ll have a good brainstorming partner. When working with a client from the retail sector, we contacted the works council as early as in the design phase, which initially yielded a surprised response. During the process, however, they also noticed the difference. This approach turned the works council into a constructive partner rather than an obstacle. We were able to test any choices made early on, which, in turn, provided additional insights. Ultimately, we used these to increase support. Moreover, this approach resulted in a fast, smooth, and timely consulting process.
In other words, involving relevant stakeholders at an early stage helps you create support for the organizational design and, on top of that, acceleration during the implementation. Organizations which, for example, involve the works council at a later stage often encounter a huge heap of formalities as well as delays in decision-making. This means the desired implementation can’t take off until later, resulting in higher costs and a lower return on investment.
What does it yield?
- Grip and influence on the main stakeholders in the decision-making process to complete the process smoothly
- Support for the new organizational (re)design among the various stakeholders, which supports the spreading of the story to the organization
- Constructive and efficient consulting process with the works council, which contributes to a good relationship and a higher quality of the (re)design
Phase 4: Implementation determines the success of the organizational design
Often, the previous phases have already taken quite some time and effort, while the actual implementation still needs to be performed. A frequently asked question is, “How do we ensure the design lands successfully in the organization?”
For one of our clients in the banking sector, we made the conscious decision to approach the implementation in a positive way with a lot of energy. Freeing up time and capacity throughout the organization, paying great attention to communication, and celebrating successes ensured that the implementation became part of everyone’s job.
Making sure a new (re)design lands well forms the key to its success. In doing so, paying attention to how the message is conveyed is at least as important as the message’s content.
What does it yield?
- Employees understand why the change is taking place as well as what it means for them and can therefore contribute to the transition
- Grip on the execution of the implementation plan from phase 2, ‘Determining Impact,’ so the transition proceeds in a controlled manner
- Ownership among internal stakeholders for the realization of a transition and/or implementation plan, so everyone contributes actively to the transition
- A dialogue with the organization on the progress of the implementation, so there is a constant stream of input to tighten up the implementation plan
Success factors for the (re)design of the organization
You can’t roll out the four phases overnight. For many, the thought process surrounding the (re)design of the organization seems to be the biggest challenge, but the real challenge is to pay attention to the content as well as the change process and the way people are affected. This can be realized using the following eight success factors:
- Create an organization-wide understanding of the mismatch between strategic ambitions and the design of the organization and the underlying causes
- Use design principles to ensure that rational substantiation predominates over politics and pragmatism
- Include responsibilities (RACI) and objectives (KPIs) in the new design
- Put one party in control of the change process – from head to tail, from design to implementation
- Have a compact, diverse, and content-focused working group research the design process content-wise
- Involve the organization actively in the change process, but only communicate about content-related changes and impact after final decisions have been made
- Involve stakeholders who play a role in the decision-making process (works council, supervisory board, et cetera) early on
- Map out what needs to be done to ensure the new organizational design lands successfully and incorporate this into a roadmap
All this takes time, but you’ll regain it because the implementation will actually work and land in the organization. Taking shortcuts and opting for a sloppy process often boomerang in the form of poor support, delayed decision-making, and an incomplete execution of the strategy. A good preparation and well-considered steps lead to a first-time-right implementation.
Distinctiveness of IG&H: what can IG&H do for you?
In addition to adopting a thorough and proven approach to achieve an organizational (re)design that is supported, we tackle every organizational transformation based on our Make Strategy Work principle. We believe that any transformation only has a true chance of success when there is a balance between content, process, and people. We consider an organizational (re)design to be a part of the overall (digital) organizational transformation – not an isolated component. Such a transformation requires the integration of various competences, which is an area IG&H specializes in – from leadership development to innovation, from process optimization to culture change.
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