Interview: What is organisational design and how can it benefit your organisation?

Alistair Milner: SRI have worked with a range of different clients on organisational design and each project is unique. Penny, given your experience working with many dozens of companies in this area over the years, how would you describe it?

Penny Illston: Any organisation, tiny or enormous, is essentially a group of people coming together to produce or deliver something: a business benefit, a product, a service. Organisational design is how you bring those people together and in what form. What are the structures and processes required so that people can work effectively together to produce the best results for customers, clients and all stakeholders? It is partly structure – the squares and lines on your organisation chart – but it isn’t just that. It’s all of those other aspects which go to making an organisation effective. The way that people make decisions, the way communication structures work, how people work across functional or regional boundaries.

Organisation design is not just the thing that ‘sits on a page’ – it really comes to life through implementation.

What advice would you offer leaders when it comes to organisational design?

Any leader considering this question should first consider the strategy of the business, where it’s going, what it’s anchored in and an assessment of ‘how are we doing?’ Are there things that we are doing now that are serving us particularly well? Are there aspects of our process or behaviours which are getting in the way of us progressing and being ready for the future? Because if there are – if your instincts are telling you something is not quite right, that there is something that needs to be fixed so that you are in the best place to achieve your goals, that’s when you should consider taking a look at your organisational design.

Is the design process suited to businesses of a particular size or maturity?

It can be helpful for any organisation of any size. We’re in a highly unpredictable world. You only have to look at what’s happened in the last two years for a staunch reminder that it’s impossible to predict the future. It’s important to get as much clarity as you can on the way an organisation works. Clarity of purpose, roles, individuals’ contributions – what they bring to the party and how that fits with other people in the organisation. If you take out some of that noise – some of that confusion – you are in a much better place for moving forward. On paper, it can be a wonderful intellectual exercise. How you bring that to life, how you take people’s thoughts and feelings into account, is what really makes it work in the long term.

When we work with leaders and teams on reviewing their current structures and designing to be future-ready there are often light-bulb moments. The way forward starts to become clearer and benefits start to reveal themselves even in the short-term. What are some of the tangible benefits that you have seen?

The overriding benefit is clarity. If you can find clarity in the way you are pulling people together that can remove a lot of things that typically concern people and cause nervousness, preventing them from performing to their best. When I look at some of the organisations I’ve worked with during the past there have been external influences that have really made people stop and think about how they were doing things. For example, one large organisation I worked with that had thousands of employees, had an imperative to reduce people cost. It wasn’t an option for them, it was a requirement that they must take out some of the cost of their people.

This meant looking at the number of roles they had and the way they were organised. They were delivering their product and services but they needed to do this with fewer roles and fewer individuals. In this case, I gave the organisation a recommendation for an interim step and then a further step. It’s important when looking at an organisation’s design to be clear: how mature are they; how experienced are the people within the organisation? Will it work to make all the changes at once or are there some interim steps that are more likely to lead to a successful change?

Another organisation I was working with was enjoying rapid growth. And with growth comes complexity. We examined how the organisation was currently operating; what was good about the current operations and what was getting in the way. We put in place an organisational design that included structure but also what we might call the ‘glue’ for the organisation or in other words, the shared values and purpose that bind people together.

We’ve seen that it can be a relevant process if you need to downsize and/or change and/or grow, would you agree?

Absolutely. I would also add that it takes a degree of insight, of vision, for a leader to realise that they need to do things differently and to realise that it’s not just an intellectual exercise, it’s also an emotional exercise. I would advise anyone considering this process to be prepared for that. If you look at the change it’s not a straight line that is going to be clean, going from a to b to c etc, it’s going to be more convoluted because we’re dealing with people, we’re dealing with change and inevitably when you go through that process you will uncover emotion.

I would also say to the leader “be prepared to look at your own thinking and perspective”. Any organisation is limited to a certain extent by a leader’s perspective so, to change, they have to have the willingness to consider whether they are looking at things in the right way or whether they need to look at them differently. I would also strongly recommend that the leader involves their senior team and their key people in understanding where the organisation is and where it needs to go because they are going to be fundamentally important in helping the rest of the organisation to move forward.

We all go through the change curve at our own speed. Each individual hits their own points of resistance and questioning. So a leader that’s examining their design, needs to think beyond the organogram. That’s one of the pitfalls actually – people think it’s all about the organisation chart – and it isn’t – that’s just one part of your total organisation design.

A frequent pattern in our work with clients is an immediate focus on what the “org chart” will look like. Who will report into who, what power dynamics will shift, how will “I” as an individual be affected?

It’s far too easy to focus on the organisation chart, the lines and the boxes. The truth of it is that that is only part of it and it doesn’t give you the answer. And it certainly doesn’t give you the answer in the world that we are in now, which is so complex. You can have the most logical, beautifully drawn organisation chart but it’s the way that people operate within it that matters – the way relationships are built, the way that people communicate, understanding of roles and accountabilities, are all fundamental. Those are the things that will really make an organisation come alive and perform.

Another common mistake is that it can be tempting for leaders to look at successful competitors or other organisations and think ‘they do it that way, we’ll do it that way too’ – it isn’t one size fits all – it’s a tailor-made suit, not an ‘off the peg’ because your tailor-made suit allows you to think about the size, shape, maturity of the organisation and the sector that you are in and your strategic aspirations. Every organisation has their unique combination of those factors and so every organisation design is going to have to reflect all those different aspects. The final pitfall is to think that the job is done once it is on the page.

The implementation of any new organisational design is a transformation programme. It needs to be able to flex and respond to feedback. Equally, you need to keep in mind where you are going. One of the things a leader can find themselves doing is listening to the feedback, the emotion or resistance to their designs, and then change course or tweak their plans.

Sometimes by tweaking they lose sight of the overall direction and where they are going. It takes courage to start on the path and it takes courage and resilience to keep focused on the result.

The concept and understanding of organisational design, what is involved, the terminology, the sequence etc has been a learning journey for some of our clients who have never had any reason to go through it. How would you describe some of the key components like Operating Model or Spans of Control?

Operating Model is the visualisation of how an organisation comes together to deliver for its customers and shareholders: the elements of an organisation that need to collaborate so that the product or service is delivered effectively, and cost-effectively. ‘It is partly about profit, partly about the output but also partly about the feedback from customers, clients, shareholders and from employees. An effective operating model addresses the questions, concerns and needs of all those stakeholders.

‘Spans of control’ is very simply the number of people that are reporting to a manager. The old wisdom was that 5 or 6 was about right but that has changed. It will depend on the nature of the organisation, the maturity of the organization, the industry and where it’s based. Technology has influenced Span of Control – a lot of the activity that you might have found a manager doing in the past, which would have restricted the number of direct reports, can now be done by technology.

How have some of the leaders you have worked with realised their organisation is making progress?

A leader should be looking at things like the behaviours of the senior team, how well are people collaborating? Are people clear about their role and accountabilities are? Is it clear how different parts of the organisation should work together? There are ‘flash points’ – interactions between organisational building blocks that can either go beautifully well or horribly wrong. How are we addressing those flashpoints?

Each leader will have specific metrics to measure the health of their organization internally as well as with the customers and clients. Is the feedback consistently good? Are people seeing a positive change? Are we seeing an improvement in the quality of the services? Are we delivering our objectives and if we’re not what’s getting in the way? Those are the things I would be looking at on your organizational dashboard as you are moving forward with implementation.

What do employees typically experience when their business is carrying out an organisational design project?

If it’s gone well employees will have clarity and feel that they understand what they are here for. They will feel that they were allowed to ask questions and hopefully, engaged with the purpose of the organization. They’ll also feel valued – all of those things that impact engagement.
You would hope that at the end of an organisational design process the level of engagement in the organization has improved and that if you were to ask your employees “how are you feeling now about being in the organisation?” they would feel like there is less ‘noise’ in the system. In any organisation design project, we aim to take out the noise that gets in the way of people enjoying and productively working and collaborating.

What are some of the real-life benefits that you’ve seen organisations enjoy having gone through this type of journey?

There are real-life benefits. If you think about what an organisation that hasn’t been through this can be experiencing. It could be confusion, frustration or dysfunctional relationships which can lead to a waste of effort, internal squabbles and a lack of understanding or alignment on how to deliver things. If I think back to a global professional services organization that I worked with. The challenge was: how do we make sure that this business is delivering for its shareholders? How do we make sure it’s delivering profits? This business needed real clarity and focus.

The creative people needed to focus on what they did best and the business people needed to get on with running the business – let’s not try and do each other’s jobs and let’s be clear about the assignment of our responsibilities. It’s about how that comes to life for people. And having mutual respect. That’s key: some of the best organisations have people that don’t necessarily agree with each other but they have mutual respect and can collaborate and work effectively together. Particularly when it’s a global organisation being able to work productively across boundaries is important.

People must be allowed to create a world that they want to contribute to, that they feel they have value in and that they enjoy – that’s when you are going to get the best results.

One of the most significant outcomes to surface from an Organisational Design process is clarity and robustness around your Succession Planning and future Talent Strategy. This is a key reason why SRI offer a full suite of Talent related services, including organisational design, and work with expert Associates to add even more value to our Clients. How does organisational design typically link to talent strategy in your experience?

One of the things that is fundamental to any people’s agenda is clarity around roles and responsibilities. A good organizational design will batten that down and make clear the capabilities that the organization needs and therefore that you need in your people. You will identify gaps. This is a critical foundation for your talent strategy as you will have a clear picture of where you are currently in terms of roles, responsibilities and people capabilities, and what you are likely to need for the future.

You can then start to develop your talent plan: how many people with what capabilities do we need by what point? Do we have people that we can develop? How are we going to invest in those individuals and put them onto a career path and a development plan that gets them from here to there? Do we have gaps in capability that we need to now go out and recruit? One of the most important things about an organisational design and a future-ready organisation is to have robustness in your succession planning and your future talent.

Thanks you so much to Penny Illston for sharing her insight on Organisational Design, if you want to learn more on #SRIFutureReadyTalent, check out the seven ‘wins’ of great feedback, alternatively find out how the language used in job descriptions can effect the candidate pool.