Models of Org Design you should know

Until about 20 years ago, companies underwent organizational restructuring every few years or even decades. Most leaders experienced this only a few times in their careers. However, automation and competitive pressure have begun to accelerate the pace of organizational change.

Around the year 2015, organizational change became a lifestyle. A McKinsey study in this context revealed that 60 percent of companies had restructured in the last two years. Another 25 percent had done so three or more years ago. Then the pandemic struck in 2020, forcing massive changes. Most companies experienced upheavals in a matter of months that would have previously taken a decade.

Previously, we had time to adapt to one change before the next one occurred, but today’s successful companies have embraced change as the foundation of their actions. Metaphorically speaking, it’s not just about rearranging the furniture in the apartment. The new circumstances completely change the way we work.

It’s partly true that some companies are merely hoping to survive, waiting for pre-pandemic conditions to return. In contrast, the most successful companies are implementing new organizational models that anticipate and adapt to change by flexibly altering their ways of working.

In this new series of blog articles, we explore traditional organizational models and how they have been used to align structures and processes with corporate strategies. We will demonstrate how these models can still serve as diagnostic tools to understand where various organizational factors may become unbalanced.

The second blog post in the series then shows how organizations have moved from static models for diagnosis and alignment to flexible models that help them adapt to continuous, dynamic change. With this in mind, in part 3 of our series , we look at two experimental organizational models and compare them to the established flexible organizational model.

Most of the organizational models known today were developed in the 1970s and 1980s. Their creators aimed to transition organizations from the hierarchical models of the industrial age to flatter, more responsive structures. As a result, organizations face different priorities and challenges in organizational design. Understanding traditional organizational design models can aid in selecting the right tools for diagnosing and changing operational models.

The most well-known and widely used design model is the McKinsey Model. Its aim is to analyze organizational effectiveness through the interactions of seven key elements. This is not done by examining a single element or considering it only in relation to the strategy, but by balancing and aligning it as a whole.

First, let’s consider the “hard” elements: structure, strategy, and systems:

These elements are more challenging to manage than the “hard” elements. This includes skills, staff, style, and shared values:

The 7S model has been criticized for not being specific enough to identify gaps in strategy or execution. It’s worth considering that McKinsey, like other consulting firms, developed its models as frameworks for organizational design consultation. Therefore, it is doubtful that the original intention had anything to do with do-it-yourself organizational change.

The Star Model is a framework for influencing employee behavior through a set of design policies that can be controlled by management. These include:

Strategy
Strategy determines the goals, values, tasks, and overall direction of the company. It establishes criteria for choosing between alternative organizational forms so that strategists can determine the relative importance of activities.

Structure
Structure determines where power and authority lie in the organization, based on an analysis of four areas:

• Specialization refers to the expertise required for job execution.
• Form describes the number of individuals in organizational units or the span of control at each level.
• Power distribution can be vertical, determining how flat or hierarchical the organization is, or lateral, referring to the shift of power to a department dealing with critical issues.
• Departmentalization involves establishing organizational units based on functions, workflows, markets, customers, and geographical aspects.

Processes
Processes refer to the flow of information and decision-making processes within the organizational structure. Vertical processes serve resource and talent allocation, while horizontal (lateral) processes represent workflow.

Rewards
Rewards align the goals of employees with the goals of the organization. To do this, they must be harmonized with the other design components.

People
The term “People” pertains to the alignment of human resources policies and functions with the development of employees and organizational capabilities.

Introduced in 1976 by Marvin Weisbord, this model originated from his work on a “tool that everyone can use.” In this context, he mentioned that it helped him expand his diagnostic framework “from interpersonal and group issues to the more complicated contexts in which organizations are led.”

By envisioning the six elements as points on a radar screen, he demonstrates how to manage relationships, similar to air traffic controllers handling the distance, altitude, and speed of airplanes.

Like other organizational design models, the Six-Box Model is a diagnostic tool designed to understand relationships and balance elements.

Weisbord’s approach is similar to Galbraith’s. Both can be helpful as diagnostic tools. Like Galbraith, Weisbord supports the application of his models through an extensive collection of writings and guides.

As the practice and methods of organizational design have evolved, the focus has shifted more towards managing successful change rather than diagnosis. For this reason, in the next part of our series, we will introduce transformation models in detail as an evolutionary step.