One strange thing about organization design is that nobody seems to be responsible for it.
To be more precise, within each unit, it is certainly part of the line manager’s responsibility to ensure that one has the right organization in place. And most line managers will, through a process of trial and error, gradually learn how to do it.
But who is developing relevant corporate policies and guidelines, providing effective tools and frameworks, ensuring experience transfer across units, and providing support during a re-design process? In many cases, the answer is “nobody”, which may partly explain why so many organization design processes are so poorly executed.
The line manager may be responsible for utilizing IT, too, but that doesn’t mean that he/she is expected to come up with the IT strategy, purchase computers, and install the software him/herself. There’s an IT department for that. But there is no “organization design department” in the majority of firms.
The HR department would be an obvious candidate for an internal unit that could take some responsibility in this area. But sadly, I have found that most HR departments are individual-focused rather than system-focused. HR runs leadership training, performance management, and succession planning processes – all based on the assumption that improving individual performance is what matters most.
Yet the situation is gradually changing. I have been in touch with a handful of large, international firms the last few months that are planning to establish an internal role (or in some cases, an internal team) with responsibility for organization design. In most cases, the role/team will be part of the HR function, but it may also be placed in a different unit (in one case I know about, the role reports to the CFO, in another, it is placed in Shared Services).
For most organizations, this is a new development, so it’s important to think through how one should proceed. I don’t have the full answer myself, but I jotted down some ideas in a mind map that I created the other day (you can view and download it by clicking on the image. Let me know if you have any comments or would like to add something.)
It can be challenging to get this right.
I have been an internal consultant and corporate staff member myself, and I have observed that many corporate staff groups have rather ambiguous goals, and receive only lukewarm support from top management, who tend to view such internal resources as costs rather than as investments.
So at the initial stage I think the key thing should be to build senior management support and develop a clear and compelling mandate. Once that is done, one should try to get top qualified people on board.
There are some fairly obvious benefits for the firm. With stronger internal capability, it will be able to capture more of the learning internally, increase the skills of line managers, and create continuity and consistency in how it manages organizational design processes.
Since I am an external consultant myself, you may wonder why I would advocate more internal capability. Doesn’t it imply that there would be less work for people like myself? In some cases – sure, it may imply that one will be able to do without external assistance during a change process, and rely on internal resources instead.
For most firms, however, it won’t be economically possible to build up an internal group that is large enough to substitute for all external consultants. In addition, even if internal resources are available, there will be times when line managers prefer an outside, neutral partner in a change process.
More importantly, however, I think a firm with strong internal capabilities will be a better and more discerning buyer. As an external consultant, when contacting potential clients, I invariable find it easier to create a dialogue with those who are already interested in the topic and knowledgeable about the field. In fact, one sign of weak internal capability is that one isn’t even aware of the need for examining organization design issues.
A firm with strong internal capabilities will have people who recognize that there is a need, who know what to look for when considering external consultants, and, once hired, will make sure that one learns and interacts with them in the most productive way.
Carlos Henao says
Here in Colombia, South America, where I work as an external consultant the situation is very different. All large colombian companies I can think of have an organizational development department staffed with a good number of people. These are companies such as Ecopetrol with anual sales of US$33 billion or Bancolombia with US$6 billion operating income.
BTW, thank you for sharing your knowledge and others’ in your interesting blog.
Nicolay Worren says
In Europe and the US too, it is not uncommon to have internal organizational development consultants. However, in most cases that I know of, these do not have an explicit responsibility for organization design.
Carlos Henao says
Thanks for your reply. Most of the organizational development departments I mentioned are chartered with supporting the design of the organizational estructure, business processess and governance arrangements. Some others also offer internal services for process benchmarking, process performance improvement, change management, and entreprise architecture (although less often). They typically set policies, define methodologies, hire external consultants when needed, administer the org chart and process repository, and orchestrate the governance of the organizational design.
Nicolay Worren says
Carlos, thanks for pointing this out, well, if this is the situation I think the South American companies are ahead of the European ones in this area!
Iv read your text book several times and organization design in practice makes much more sense to me now. However, what i miss is a specification of what you put in “operating model”, “resource model”, “governance model” and the other high level design parameters. How does this look like in practice? Have you written a blog post about this? Are there any place i can get more information (e.g., book, article, we page)? Are you planning to write blog posts about this?
Thank you in advance. Looking forward to keep reading your blog:)
Nicolay Worren says
thanks for your comment – sorry about the late response.
Yes, I have covered this briefly in a blog post. Did you see this one already?
Also, note that the five “layers” are covered in chapter 7 of my book, although indirectly since that chapter is about interdependencies.
A couple of other people have also made this point so I will try to write more about it, I agree there might be a need for more clarity. I will probably start by looking more closely at the concept of “operating model” and how it can be defined.
Kind regards, Nicolay