Today’s enterprises are increasingly having to adapt to external shocks, constant competitive pressures, a fluid trading environment, fast-moving digitalization, and changing demographics and working practices.
Relying on long-established organizational hierarchies is no longer sufficient. Instead, as explored in another Ingentis blog post and eBook, businesses need to continually challenge the organizational status quo, to keep pace with change and competition pressures.
What are the factors that businesses need to consider in challenging the organizational status quo? This blog post examines the key criteria and how they interact with each other, and highlights how Ingentis org.manager for SAP SuccessFactors helps organizations surface, assess and model key organizational data to drive effective organizational design decision-making.
Key criteria for challenging the organizational status quo
Alignment to business objectives
Starting from what the business is looking to achieve is critical when it comes to assessing current organizational design.
An organization that is structured on strictly functional and divisional lines may face challenges when a disruptor enters the market, as it may lack the agility and cross-functional communication to innovate and compete effectively.
Competing effectively with disruptors can become a specific business goal that drives reorganizing to a more matrix-driven, team-based structure in those areas where competition poses the greatest threat.
While aligning organization design to business goals is fundamentally important in challenging the organizational status quo, this needs to be balanced with the other key criteria of financial considerations and best practice, and to be driven by actual data on how the current organization structure is performing against business goals.
Challenging the organizational status quo should not be driven purely by short-term cost-saving imperatives, yet historically this has commonly been a driver for organizational restructuring.
Financial considerations are a key criterion in assessing organizational structure, but they need to be considered holistically. Short-term cost management is a valid consideration, alongside maximizing value from the organizational structure in the longer term, and minimizing financial risk by building as much flexibility as possible into the organization.
Reorganizing and downsizing functions which may be regarded as non-core, such as marketing or IT, can achieve short-term cost efficiencies, but at a potentially greater long-term cost in terms of succession planning and chain of knowledge, if business goals are focused on new products and digitalization.
There is a rich resource of experience and learning built up over many years of structuring organizations to meet the needs of the business.
Tapping into this resource, through engaging consultants, creating specialist internal organization design teams, or growing organizational design best practice skills within the HR department, saves the enterprise from missed steps in assessing and optimizing organizational structures.
In an environment where effective, adaptable organizational structures play a critical role in business success, access to organizational best practice skills can be a key differentiator.
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