Time to Build the Optimal Organisation?
New Strategies will drive your Organisation
Two myths are associated with Organisational Structures. The first is that organisational structures enable work to be carried out and achieved in an organisation. The second is that barriers are formed in organisations by the organisational structures.
Why are these commonly held beliefs wrong?
Firstly, work in organisations is achieved through the business processes and procedures not the organisational structure. These are both formal procedures and informal procedures.
Formal procedures are typically documented and are a part of an induction or training program or built into the logic of a computer program. The handling of customer complaints, order entry, warehouse stocktaking are usually formal procedures in many organisations. They have step by step activities, authorisations and approvals.
Informal procedures are essential for organisations to function as they cater for the non-standard demands that fall upon the organisation. These can be associated with a customer’s special requirement, new product development but are typically associated with solving problems and issues with the organisations. Informal procedures rely upon networks which are not defined between divisions and departments; they rely upon personal relationships that have been developed over time and through necessity to achieve the organisations goals.
Secondly, barriers in organisations are more likely to be the result of poor design of formal processes and procedures in organisations. Examples of this could simply be the production department not having the correct authorisations to view customer complaints in the CRM system. The argument that organisational structures can form “silos” which leads to dysfunctional outcomes simply highlights that the procedures are not developed to link the organisational structures to provide the desired outcome. Other barriers in the organisation can be driven from weak strategies, poor application of technology, confusing policies, poor skills or incentive schemes which reward the wrong performance.
So what is the purpose of the organisational structure?
An organisation’s structure enables people to be grouped into entities which have a shared missions and common management as well as providing a reporting structure. These can be grouped by function, geography, market, process line or product line. The emergence of global organisations has lead to a trend in product based organisational structure as country boundaries are no longer as important as they were thirty years and more ago. In addition, organisations are increasing their focus upon their customers’ needs and as a result are forming division which will serve the different customer needs. Banks are structuring their organisation on retail, small business and corporate customer segments.
So what are the drivers of the Optimal Organisation?
The Leaders of organisations have the primary responsibility to interpret the external environment, such as government policy, economic trends, community expectations, shareholders expectations and markets/customers and formulate strategies that will drive their organisation forward. The Optimum Organisation design starts at this strategic level. The Optimal Organisation is the “vehicle” through which the strategy is delivered to the organisation and to the shareholders by way of dividends and growth.
As mentioned at the outset, the business processes and procedures of an organisation will deliver the outcomes of the organisation. Therefore the Optimal Organisation must meld strategy and organisational processes in such a way as to maximise the efficient delivery of the strategy. In order to achieve this efficiency, the Optimal Organisation should be designed upon the following elements:
- Clarity in those business processes which are critical to the success of the strategy
- The human capabilities and skills required
- Information and Knowledge management
- Goals and measures which will drive the step by step progress towards achieving the strategy
- The necessary culture required by the organisation to succeed.
The Optimal Organisation is totally focussed and driven by the strategic direction of the business. Alignment at all levels of the organisations as to the strategic goals is essential to ensure that dysfunctional distractions do not emerge over time, resulting in resources being focussed on non-strategic issues.
The Optimal Organisation must be a key consideration in the annual review of strategic direction. Most organisation neglect the organisational structure during strategic reviews. The result being, they have an “evergreen” strategy but the organisation is in capable of responding the meet the new business challenges. This outcome result in expectations not being met, internal frustration and over time highly dissatisfied customer, shareholders and employees.
Finally, there is no prescriptive optimal organisation, no “flavour of the month organisational fad” but rather a design that effectively and efficiently ensures that a direct and tangible links are achieved between strategy, business processes and the people within the organisation.
