Organizational Design for Strategic Success

VUCA

Organizational design is back. That’s what I wrote in an earlier blog. We are increasingly puzzled by the challenges that this VUCA-world puts upon the organisations that we are leading. In the past we had very clear principles of organizational design. We talked about span of control, reporting lines, division of labour, decision-making processes, …
And, we basically talked about two kinds of organisation: line-organisations and matrix organisations. Both of them are hierarchical but they vary on the principle of unit of command. In a matrix there are two (or more) sources of steering. In a line organisation there is only one.
Of course this is a simplification as there are many variations on a theme. Whatever the appropriateness of those organisational design models was then, they have become obsolete. We seem to have a problem because the ancient hierarchical organizations seem to be unable to cope with the speed of change, the complexity of the markets, the increased desire for autonomy, the ambiguous and uncertain environment. Indeed, hierarchical organizational design assumes stability and predictability. And if there’s something we do not have (anymore) it’s just that.
So, look around you. Many industries have been or will be disrupted by new entrants that simply do not care about the way things have always been done. Small pirate-like organisations destabilise the big enterprises. The latter lack versatility, agility, a capacity to reinvent business models. There is not one business model that is safe from disruption. And on top of all that the customer is better informed, better educated, more emancipated. So how on earth could anyone think that hierarchical designs will still be the main answer to these challenges? These new entrants do not worry about organizational design. They seem to change constantly. To established industries and companies they seem to be a virus that continuously evolves.

Yes, but

Many organisations look at the tidal wave coming towards them thinking that the robustness of their organisations, with the chain of command in place, will save them. Well, think again. Media, advertising, travel, music, services, … have been thoroughly disrupted by fairly new companies who do not have any legacy. They adapt according to the needs and they invent themselves as they go along. They have not been fossilised.
So we need to do something else knowing that

• no organizational design solves a business problem in itself. At best an organizational design is a lever for the execution of strategy.
• the success of an organisation depends on the behaviour of its “inhabitants”.
• an organization should stimulate positive behaviours and dissuade people from behaving sub-optimally.
• an organisation is as strong as the worst behaviour it tolerates. But that means that leadership is the true pulse of an organisation, not the structure.
• organisational design is not about drawing boxes and lines. Organisational design should also focus on leadership, context, behaviour and creation of value.
• experience, efficiency and effectives are cornerstones of any organisational design model.

Organizational Design as an Expression of Strategy and Culture

The key message is that there are many ways to look at organizational design. There is not one way. However, it is paramount that organizational design follows strategic choices. And something we should not neglect: organisational design should also an expression of culture, be it the current one, or the desired one.
There are not many answers in organizational design. There are mainly questions. In a next blogpost I will provide the questions to ask if you want to think about organizational design.
In a next blog I will discuss 6 possible ways to look at organizational design.