We seem to have limited understanding of how important it is to design organizations. This may come from our background of inheriting and not being able to design our own families. Most of us feel that we can only do our best in the context of our family organization and have little control on how it evolves.
The same is not true for the organizations outside our families where we as leaders have much more influence and the ability to actually design them. Given the accelerated changes in our social systems and in our planetary consciousness, designing organizations is something that we should be good at since we will be performing this activity quite often. Think about an organization that you are part of that has been undergoing many changes over the last two or three years. Has the structure of this organization changed to adapt to the needs of its environment? How often?
There are new trends in organization structure to consider. First, let’s demystify the word “structure.” For individuals thinking about new trends in organization design, such as multi-dimensionality, knowledge sharing, disaggregation, freedom from hierarchy, stretch for high performance, and renewal, the word “structure” sounds old and constraining. Structures are as old as the universe. They started with the Big Bang and have guided our evolution. Every atom has structure and, consequently, every life form. However, structures are dynamic and change and evolve, and so do organizations. The fact is that there is always a structure in place even if it simply provides a container for people to be. Think of the most uplifting, most freeing situation that you have been part of in the context of an organization. Now think of the container at that moment. That was its structure.
Now that we are clearer about structure and the need for designing our organizations, let’s think of how we can validate our designs. In their book, Designing Effective Organizations: How to Create Structured Networks, Michael Goold and Andrew Campbell defined nine tests that we can perform to validate the effectiveness of our organization design and aim and make it as adaptable and “networkable” as possible. In their organizational design work, these authors, who are also Accenture consultants, have aimed to generate the most adaptable organizational structures with the least amount of hierarchy. The premise of their designs is that 21st century organizations should be part of global complex systems where creativity and high performance are the results interconnectedness, diversity, self-organization and much less hierarchy.
Goold and Campbell arranged their nine tests into two sets: one for testing the fit of the design and the other for its good design principles. The tests for fit of the design are fundamental and ensure that organizations are fit for their purpose and their ability to deliver on its strategies. While the tests for fit are familiar to most leaders, the authors believe that good design principles and tests represent more of a stretch. They synthesize the vast quantity of academic research and managerial experience about what makes an organization work well.
Tests for Fit
1. The social system value test evaluates whether the organization is placing sufficient attention to all of its product and service market areas in terms of operating priorities and value contribution.
2. The strategy test looks at whether the design allocates sufficient attention to the internal strategies of the overall organization. This test supplements the previous one that is focused on the external value. This test ensures alignment of the organization being designed with the strategies of the total organization.
3. The people test looks at whether the design adequately reflects the aspirations, motivations, and the strengths and weaknesses of the available people.
4. The feasability test looks at whether the design takes into account the constraints that impact its implementation. These constraints include budgets, skill availability, geographies, politics, and communication.
Tests for Good Design Principles
1. The specialist culture test determines whether any specialists need to be isolated in the design. The ideal is to design an open organization that is a cross-functional as possible. However, there are instances where specialized groups need to be kept separate. This limits the amount of integration and potentially collaboration, but it favors dedicated focus. There are tradeoffs between this type of design principle and the next.
2. The difficult integration test determines whether the organizational design calls for any integration challenges and whether these challenges are specifically being addressed. For instance, after a merger and acquisition, an organization design may call for specific teams or individuals to be embedded in the acquired organization to facilitate integration and collaboration. This type of integration would also foster organizational learning.
3. The redundant hierarchy test determines whether the organization retains its knowledge and competency at multiple points of its structure. The sustainability of an organization hinges on how well spread is the knowledge it develops. Important knowledge localized in a small part of the organization could make it vulnerable to changes, both in personnel and the environment.
4. The accountability test looks at whether the design facilitates the creation of feedback and feed forward loops that allow the organization to continuously learn and make improvements. Are these loops feasible and economical to implement, and would they be motivational to the people in the organization?
5. The flexibility test determines whether the design is flexible enough to enable the adaptation to future changes and the co-creation of new value. How easy would it be for the structure to expand or compress? How would the organization respond to changes in the environment? Are there teams and individuals assigned to monitor changes in the environment?
Next time you are designing an organization, think about applying the nine tests delineated above. They will give you a good start with your design. The tests will guide your design thinking toward adaptable and less hierarchical organizations, capable of meeting or exceeding their overall purpose.