The key to staying ahead of the game involves creating an effective organisational structure that enables your organisation to reach its full performance potential. Two crucial concepts that come into play are Operating Model (OM) and Organisational Design (OD); the focus of this article will be based on the OD concept, and we’ll explain why OD is essential regardless of whether you’re at the beginning stages or already established.
An operating model describes how value is delivered by your entity to stakeholders or customers. Establishing an organisational structure that aligns people, processes & systems with your companies’ goals is what’s known as ‘organisational design’. Both practices when done well enable efficient operation with adaptability towards market shifts.
Organisation Design for Early-Stage Businesses
If your business is still relatively young, then ensuring a solid foundation through good OD should be prioritised. For instance, a flat organisational model can allow start-ups faster decision-making along with promoting innovation through teamwork amongst employees. In the early stages of an organisation with limited staffing a flat structure is useful in honing product- market fit; however, growth demands hierarchical management for scalability of increasing complexity.
As organisations develop and scale up, determining roles’ boundaries can become confusing- causing inefficiencies at times. The key is identifying company vision, purpose and principles to align employee skills which enable them to operate effectively within their core expertise while allowing them the flexibility of transcending job titles when required. Adopting this approach empowers individuals towards agility while laying strong foundations for organisational scaling DNA development too. Collaborating across departments with a positive attitude towards personal growth and learning capabilities can foster an environment of innovation and adaptability while leveraging diverse talents within the company during its expansion phase.
Organisation Design for Established Organisations
Established organisations too must regularly assess their organisational design for responsiveness amidst market changes using creative problem-solving
methods. For example, using design thinking & agile methodologies leading towards enhanced consumer experience creation & innovation through leveraging technology such as automation & artificial intelligence. This reduces operational costs, expands employee’s understanding of roles & responsibilities enhancing collaboration within a strong customer-centric operating model increasing productivity efficiency & innovation thus improving customer loyalty generating revenue growth.
Many people commonly assume that OD is only necessary during specific events or crises. However, this idea is erroneous. For organisations to react proactively to market dynamics and achieve success, OD needs integration into annual business reviews, OKRs, and long-term strategy. Especially in today’s challenging environment with VUCA (volatility, uncertainty, complexity, and ambiguity) operating conditions and a global economic climate present – even thriving organisations appreciate the importance of continuous OD practices. With ongoing efforts in OD, they can amplify their operational effectiveness while increasing flexibility as well as seize burgeoning opportunities amidst a constantly evolving landscape.
Creating an innovation culture within any organisation is key to achieving optimum productivity while fostering creativity across departments. This can be enabled through effective OD with well-thought-through team structures that emphasise cross-functional collaboration, definition of career paths both vertically and horizontally, improved ways of working, clarity of roles, documented up-to-date processes and Standard Operating Procedures (SOPs) and finally, effective governance and decision-making processes in place.
Summary: Why Investing in Good Design Matters
Organisations seeking long-term success need to prioritise effective organisational design as well as creating a work culture that values innovation. By cultivating an innovation culture supported by good organisational design based on creative problem-solving methods, businesses can attain higher level productivity while staying nimble enough to react swiftly to changes occurring in the market making them more likely stay ahead of their competition on a sustained basis.
Research in 2019 and 2002 on the relationship between organisational design and performance shows that around 30 percent of the variation in performance can be explained by the organisational design. Further studies in 2019, companies in the top quartile of organisational health were 2.2 times more likely than lower-quartile companies to have above-median EBITDA margins, twice as likely to have above-median growth in enterprise value to book value, and 1.5 times more likely to have above-median growth in net income to sales. It is, therefore, important to invest in getting the design right. Companies that do not invest in organisational design or do it poorly can expect to experience a morass of contradictions: failure to share ideas and cross-pollinate knowledge, lack of deliberate co-ordination between teams and functions, a disconnect from the big picture, confusion of roles and responsibilities, and slow decision-making bring unnecessary chaos, complexity, stress and conflict into the organisation.
