Organizational Design — Why?

Quick reaction: What do you think of when you hear “organizational design”? The answer I most commonly hear is: Org chart.

Yes, an org chart is a potential output of organizational design, but what are we really interested in with organizational design? As a CEO, why are you making your choices around grouping of functions and who reports to a specific leader?

Entire books cover the scope of organizational design — I’m not going to cover that breadth of work here. I’m interested in what are we trying to achieve at the foundation of organizational design.

When I wrote an organizational design case study for the Society of Human Resource Management (SHRM), one of the points to hammer home was this question of what we are really trying to achieve through organizational design. For me — along with several scholars — the ultimate goal of organizational design is to (1) facilitate effective and optimal flow of information across the organization, and to (2) drive the coordination of behavior in and across functions of the organization.

Another way to think about this… In a single-person organization — where the single person is isolated, e.g., no contractors, no clients, no stakeholders — organization design probably doesn’t meet the threshold as a requirement because there are no relationships requiring information flow and there is no coordination of behavior. So, organizational design is a people and relationships driven activity. At its core, organizational design is a decision making process focused on social interaction.

Of course, the social interaction is designed to help the organization and its individuals to best accomplish organizational goals.

Luckily, many CEOs and executive leaders seem to intuitively know about these underpinnings. However, knowing more directly about why we are making organizational design choices can help to improve organizational aspects such as operational efficiency and cross-functional collaboration. In turn, these achievements can help improve the impact the organization and the CEO can make.