What Is Organizational Design and How Can It Support Your Growth?

As a Senior Human Resources (HR) Consultant and Fractional CHRO, I love working with growth-minded CEOs who dream big dreams and inspire others to do the same. So, it’s heartbreaking when I see organizational issues impeding even the best business strategies. No one intentionally creates such issues, but they can easily happen when you are busy running your business and not focused on foundational operations.

A winning organizational design can support business growth, reduce inefficiencies, and increase employee productivity by aligning strategy and operations. Here, I explain what that means and what you can do when things go off track.

What Is Organizational Design?

Organizational design (a.k.a. organizational architecture) is the assessment and process of determining what kind of organization you must build to pursue your business strategy from a people perspective. It’s about creating a roadmap to ensure you hire the right people at the right time and build a healthy HR infrastructure to support them, empowering you to grow and scale confidently.

Like an architect designing a home, an organizational plan allows you to capture all the people and skill requirements for your strategy, execute that vision, and have an ongoing blueprint to scale and guide decisions in the future.  

Unfortunately, many CEOs become too focused on the here and now. A proven organizational design process mitigates this issue by clarifying the end goal and working backward, making the activities you engage in today multiply in productivity for the future.

What Is the Goal of Organizational Design?

The primary goal of organizational design is to intentionally build a financially sound and effective organization that supports your growth. That will make achieving your revenue goals and business objectives more manageable and even provide you with a competitive advantage. It also streamlines the process of running your business day-to-day. When you know who you need to hire, why you need to hire them, and have a plan for doing so correctly, you are more likely to avoid situations requiring hasty decisions.

Engaging in organizational design from the outset is best. Still, many companies develop organically and only realize they need this planning when problems arise. Although that is not ideal, it is far from unusual, and that’s okay. That is when you bring in a strategic partner with the playbook to solve your problems based on your business’s maturity.

The role of strategic HR is to listen to your plans, assess the situation, and then hold up a mirror as an objective third party. They ask whatever difficult questions are necessary to help you make the most of what you have today while building the organization you need for the future.

How Do You Know You Have a Problem?

Sometimes, companies only consider organizational design once they encounter the results of not having one. So, if you are reading this blog post, you are already going in the right direction. Perhaps you have noticed signs of an organizational problem, such as the following.

• Your team is having trouble hitting revenue targets.
  Many factors could affect a company’s ability to reach its goals, including issues with the external environment that are out of your control. However, you can often trace this problem to the talent. For example, you may have trouble hiring the right project managers, retaining employees, or incentivizing your salespeople.
• There are disconnects in how your organization functions.
  Suppose you are having challenges because it is unclear what each function or role does, or your people don’t understand how everything connects to complete deliverables seamlessly. That’s a sign that your organization’s design may need attention.
• You are experiencing problems with employee performance.
  High performance requires clarity. If you are experiencing inefficiencies or missed deadlines, there may be people in the wrong roles or with unclear expectations. That is often a result of haphazard hiring to address immediate needs without thinking of the long game.

To illustrate how organizational problems can play out in real life, consider the following example.

A Case Study

The Problem

I worked with a company that had recently been acquired. They reached out for help because they were tasked with a rapid growth plan but needed guidance on how to do it.

The Solution

I spoke with the company’s leaders to understand their business goals, the type of organization they were trying to build, and the roles they wanted to fill. Then, I performed an assessment and learned that the company had three significant issues.

1. They had not gone through an organizational design exercise, so they didn’t know what to prioritize, what they expected each role to do, or how their people would help them meet their long-term goals. They also lacked performance metrics, so no one knew what success looked like or how to achieve it.
2. The messaging on the company’s website was unclear. It was hard to understand who the company was, who it served, and what it was trying to do (from a strategic perspective), so they were not attracting the right talent.
3. The company’s compensation and benefits packages were below industry standards. Most candidates would need to take a pay cut to accept a role.

I recommended they engage in an organizational design process. It helped them clarify who they needed to be to meet their business goals tomorrow, what talent was required to drive them there, and what HR programs and improvements to prioritize immediately to support their talent. Through this exercise and the roll-out, we did the following:

• Gained alignment on the organization’s mission, vision, and values, updated their website accordingly, and built an engaging talent acquisition program.
• Improved their executive leadership and strategy.
• Reworked their compensation plans, job descriptions, and interview process to be transparent about what we were looking for each candidate and what we had to offer in return.
• Established clear performance metrics (aligned with the organization’s goals) to track success.

These steps got the organization back on track and helped them create a more robust talent pipeline.

What Can You Do When You’ve Identified a Problem?

If your company has organizational problems, consider following the steps below.

1. Hire an HR Strategist to Provide Guidance

Most CEOs are too busy to focus on organizational design. There is a discipline around this practice, so I would encourage hiring a professional. If you don’t need or can’t budget for a full-time strategic HR professional, you can outsource this work for a fraction of the cost.

Find someone with knowledge of organizational design principles, but don’t focus on that in your interview. If they start citing textbook principles of organizational design, reel them back by asking them to describe their experiences. They should be able to explain how they successfully led companies through this process and how they would resolve your challenges using best practices.

2. Clarify Your Business Goals and Organizational Values

I mentioned earlier that this process involves identifying the end goal and working backward. So, you must gain alignment with your overall vision. In other words, how would your leadership team answer the following questions?

• What is your business strategy?
• What is the ideal timeline?
• What are your guiding principles?
• What kind of organization do you think you will need to achieve that?

If you don’t have an answer to that last question, don’t worry – we can help.

3. Reverse Engineer Your Org Chart

Once you know what you want to achieve, partner with your leaders to design the ideal organization. Various tried-and-true structures exist, but the correct format for you will depend on the type of business you wish to build, the kind of management you require, and the skills you need.

4. Collaborate with Functional Leaders to Design Each Team

Working with each functional or business unit leader is integral to defining who and what they need from a talent perspective to support the company’s strategy. They are responsible for the deliverables and will help create efficient reporting structures by clarifying each person’s span of control and avoiding hiring people you don’t need long-term.

For example, you may envision a Chief Financial Officer (CFO) leading your finance and accounting team, but perhaps you don’t need one immediately. We would explore how you might hire today with that in mind. You could employ a controller who wants to grow into that role or someone who wants to remain a controller and is comfortable reporting to the future CFO when the business scales. Either situation could work if you think it through and hire with intention, writing clear job descriptions and setting realistic expectations to avoid misunderstandings.

5. Assess Your Current Situation

When you know what you want, assess the talent you have today. Once the roles are clear, who is on your team? What skills do they possess? Is the talent poised for success as you grow? What structures do you have in place? The goal here is to determine what you have so you can optimize and develop a plan for filling the gaps.

If you wish to perform this exercise yourself, consider downloading our HR Infrastructure guide, which contains a self-assessment checklist.

6. Build Your Organizational Roadmap

The steps above set you up to create a roadmap. Now, you can outline your organizational structure and the steps you must take to get there. How will each function evolve as the business scales? And how will you develop what’s needed to end up with a successful organization? Answering these questions involves thinking through the following areas.

• Hiring Plans – Roles, Responsibilities, Timing, Recruitment
• Talent Acquisition, Onboarding, and Training Plans
• Compensation and Rewards Strategies
• Performance Measures – how will you promote accountability and measure desired outcomes
• Professional Development
• Processes, Procedures, Systems, and Controls

7. Prioritize, Implement, and Track Effectiveness

With your plan in place, the work begins, but I will save those details for another blog!

The Bottom Line on Organizational Design

Organizational design involves building the structural organization you need to meet your business goals. It happens in steps, not all at once, but there must be a north star. When you know what your business should look like, we can optimize what you have and determine what to create. Contact us today to discuss how we can help you navigate this process at your company.