An organization enables groups to outperform individuals in terms of the effectiveness efficiency, and make it possible to do things that no individual acting alone could accomplish.

Structure refers to the relationships among parts of any system. For example, relationships between bones, organs, blood, and tissue structure of a human body and enable all the desired functions – mobility, digestion, respiration, circulation, etc. Due to the harmony with which the parts of the body function with respect to the relationships, the human body functions well with its ability to ‘self-organize’. When parts of the system do not function well, the ‘self-organize’ ability gets affected, and the body needs external support like medicine or other procedures.

Similarly, an organization can be designed to ‘self-organize’, where the parts can function in harmony with each other, and the intended goals can be achieved. The concept of ‘Holography’ demonstrates that it is possible to create processes where the whole can be encoded in all the parts, so that each part represents the whole. Organization design concepts have evolved on these principles resulting in ‘self-directed teams’ or ‘autonomous organizations’. Even in organizations, when the harmony of relationship among the parts is disturbed, excessive external support such as more frequent reviews by senior/top management and excessive follow-ups are required to get things done.

Why Organization Design?

Organizations are getting more complex in terms of multiple customer segments, products, business units, and geographies requiring greater number of interfaces to be managed. Business models are becoming complex and cannot be executed by simple organizations and such organizations will not spontaneously ‘self-organize’.

Organization design is used to create an effective organization capable of achieving its business strategy. Organization design is the deliberate process of configuring structures, processes, reward systems, and people practices, aligning individual motivations with the interests of the organization. A well-designed organization makes it easy for employees to make the right decisions every day and the collective work of accomplishing complex tasks easier.

The Star Model

The Star Model is one of the organization design frameworks, which has been used and refined over the past 30 years. Its basic premise is that different strategies require different organizations to execute them. A strategy implies a set of capabilities in which an organization must excel in order to achieve its goals. The leader has the responsibility to design and influence the structure, processes, rewards, and people practices of the organization to build these desired capabilities.

The best way to predict the future is to create it.

Peter Drucker

We have made the workplace a frustrating and joyless place where people do what they’re told and have few ways to participate in decisions or fully use their talents.

Dennis Bakke

Organization design is the deliberate process of configuring structures, processes, reward systems, and people practices to create an effective organization capable of achieving the business strategy.

Amy Kates

The Star Model: Broken Down

Strategy

Strategy is the driver of the organization design process. The strategy is to gain competitive advantage in terms of offering a customer a better value than competitors.

Organizational Capabilities

Organizational capabilities are the unique combination of skills, processes, technologies, and human abilities that differentiate a company. Different strategies require different organizational capabilities, and hence different organization designs. They are created internally, and therefore it becomes difficult for others to replicate.

Organization Structure

An organization structure determines reporting relationships, power distribution, and communication channels. The four primary building blocks of organizational structure are function, product, geography, and customer or a combination of all four.

Processes

Structures create silos and boundaries when people are grouped according to different logic. Processes are a series of connected activities that moves information up and down and across organizational boundaries that force organizational units to work together.

Metrics and Rewards

Metrics and rewards align individual behaviours and performance with the organization’s goals. Metrics are the measures that are used to evaluate individual and collective performance. The reward system motivates employees and reinforces the behaviours that align with their contribution to the defined metrics.

People Practices

This refers to the human resource policies for selection, staffing, training, and development that are established to create desired capabilities. Complex organizations require employees at all levels to have a fundamental set of competencies to interact across organizational boundaries, participate on teams, and make decisions that take multiple perspectives into account.

Alignment

The idea of alignment is fundamental to the Star Model ensuring each of components of the model supports the strategy. In a time of stability, this creates efficiency. In a time of change, such static alignment can become a constraint. Hence, the organization needs the flexibility to recognize and respond to opportunities and threats. The more rapidly the organization can be realigned, the faster the leaders can “turn the ship” and execute new strategies and opportunities as they arise.

This is especially important for large companies that must compete against smaller, more nimble organizations. Therefore, alignment is best thought of as an ongoing process, rather than a one-time event.

Organization Design

Home

Domains