What is Organizational Design?

Organizational design refers to the way in which a company functions. Good organizational design aligns the company’s processes and management functions with its overall goals. Poor design can be most easily identified when a company utilizes traditional methods of organization rather than looking for innovative solutions.

The most effective way to organize a company depends entirely upon the company’s specific needs, functions, and goals. When considering the best design, one must first define the purpose of the company. All other features of the company’s organizational methods should center around fulfilling this purpose. A company whose purpose is centered around helping others, for example, would need a very different design than a company that is technologically focused. If both companies were to utilize the same design principles, one or both would be operating well below their optimum potential.

In addition to considering the purpose of the company, organizational design must also evaluate the skills and purposes of the individual employees. A creative company may thrive with a loose organizational system, ample opportunities for free brainstorming, and playful incentives. A company with more left-brained individuals may do better with a rigid, well-defined structure. Most situations will call for a unique blend of these methods.

A company’s organizational design also serves to define the chain of command and division of labor within the group. It determines who each individual reports to, what various departments are responsible for, and how everyone works together. The best designs typically allow for plentiful communication both between managers and employees as well as between various divisions of the company.

Many consulting firms specialize in organizational design. Their purpose is to look at a company’s performance, methodology, and structure and compare these with the goals of the group. These consulting firms have the advantage of an outsider’s view as well as a studied understanding of the best ways to meet a company’s needs. After evaluating the situation, they will recommend changes to the company’s design which may help to improve its overall success.

Organizational design can also be improved from within. Managers who are open to making changes in the way the company functions can often discover new ways for the group to meet its goals. Rearranging internal structure is often an effective way to begin. Encouraging departments that typically work independently to merge their talents, for example, can improve many areas of the company. The best organizational design solutions will always align the company’s actions with its goals.