In previous articles we’ve looked at the importance of defining and establishing a coherent company purpose and culture as the foundation and cement of successful transformation. Now it is time to build the actual structure, starting with the organisational design (OD).
Today we are witnessing a game-changing trend that is reshaping organisations: a shift from traditional, hierarchical and siloed teams to customer-centric, cross-functional and agile powerhouses. This helps future-proof the business, adapt to the demands of the “future of work” and enhance the future success and flexibility of the organisation.
But why do companies feel this need to change? There are different symptoms that prompt CEOs to review and adapt organisational design. These may include slow decision-making, a lack of coordination among functions, a lack of accountability, a lack of teamwork or complicated structures. This leads to inefficiency in your ways of working and processes, makes it difficult to retain your workforce and, in the end, fails to help your company unleash its full potential. To be successful, we need structures that support our goals and fit our cultural aspirations.
What is organisational design?
OD is more than just adding and adjusting boxes and lines in the organisation chart. It is about aligning capabilities, structure, roles, processes and motivators with the strategy of the business. The goal is therefore for OD to be driven by and built to facilitate the delivery of a business strategy and purpose. A good OD should help answer the question “What capabilities are required by the business to allow it to meet its strategic objectives?”
The OD process typically starts with a diagnostic phase followed by the definition of the fundamental architecture of the organisation. Subsequent phases include designing roles, processes and motivators, followed by staffing.
But how can you distribute accountabilities and empower people to unleash the superpowers within the organisation and achieve long-term growth in the company?
At PwC we work on OD interventions based on a comprehensive and proven methodology that provides a common understanding of organisational design and the necessary tools for employees to embed OD initiatives sustainably. We will outline some of the key steps of the methodology below. For more details, you can also check out our PwC OD web page.
Case for change
It all starts with defining the objective of the organisational transformation. This case for change provides a clear direction for your new organisation. It also helps create a shared understanding of why you are doing this. For example, we worked with a client whose problem was that responsibilities, roles and accountabilities were unclear and there were simply too many opinions in their consensus-based decision-making process slowing down work and creating confusion.
Design principles
Once we know the direction of our transformation journey, it is important to define guidelines for getting there. These so-called design principles should support your strategy, purpose and cultural aspirations. To pick up on the example above, a design principle could be: “Push decision-making down to the lowest logical point in the organisation to empower your employees”. This will help people understand the reason behind design decisions and encourage them to build ownership into the structural change.
How to take decisions?
Returning to our example from earlier, it is important to clearly define who is accountable for what decision, and equally important to define how we make decisions.
Gather the team and create an overview of the most important and frequent decisions and define who is accountable for taking what decision. Keep in mind the design principle and identify decisions that can be pushed to a lower level in the organisation.
The crucial point is how we make decisions: The decisionmaker seeks input and advice from colleagues and gets useful perspectives that help to improve the proposal. Their co-workers trust the decisionmaker to make the best decision. The decisionmaker takes action and informs everyone involved about the decision taken.
This practice speeds things up significantly and empowers people with more entrepreneurial freedom. Decision-making in this example is not about reaching a consensus, as not everyone has to fully agree with the decision, but about trusting each other to get enough advice to make an informed decision.
You also need to define who can make what decisions and how you are going to escalate them in the event of conflicts. This formalisation will ensure that teams have more entrepreneurial freedom and can make decisions faster. It will also mean that fewer decisions need to be passed on to management and that there is less duplication of effort.
Where do you stand?
In closing, remember that knowing where you stand is the first step towards making a change. So, ask yourself the following questions:
- Do you have the right organisational capabilities to meet your strategic objectives?
- How do you distribute accountability and decision-making across your organisation?
- Are people held accountable for decisions they make, and do they also hold each other accountable for their actions and decisions?
If you are facing difficulty in these areas, it could be that your organisational design needs an overhaul so that it supports your strategy, purpose and cultural aspirations.
What's next?
We have previously discussed the crucial elements that should be considered during a transformation in the last three articles. The final article will focus on how to actually lead your transformation towards success. We share our lessons learned and provide you with a comprehensive guide.