What is Organizational Design?

The basic concept of organizational design is based on the assumption that employees in companies never behave randomly. It is much more the case that they adapt their own behavior to the framework conditions in the company or in their department. It doesn’t matter whether it concerns internal behavior or interactions with suppliers and customers—the structures, roles, rules, and processes a company chooses to deliver its services are referred to as organizational design. In this article, you’ll learn what organizational design is and what goals it pursues, why it matters, and which steps a company needs to take to establish an efficient organizational design.

Organizational design involves working to find the most efficient organizational structure for your own company. Two central levels are particularly relevant here:

1. The Organizational Structure
The organizational structure determines the organizational structure of the company. The aim here is to establish the necessary framework conditions for sustainable growth and efficient processes. It also defines which areas make sense, which levels should exist and what an appropriate hierarchy might look like.

2. The Process Organization
The process organization is also known as the collaboration model. It defines which roles exist in the organization and the rules according to which cooperation is organized. This also includes agreeing on how decisions are to be made and which forms of meetings are to be considered appropriate.

A good organizational design incorporates both perspectives equally. As a result, the company’s desired goals are structurally anchored in the organizational structure on the one hand and sustainably internalized in day-to-day work with the process organization on the other.

The fundamental objectives in the development of an organizational design include

When it comes to reconciling different objectives, ambidexterity comes into play. This involves balancing fixed and flexible structures and mindsets in order to ensure efficiency in the right places and at the same time enable exploitation, i.e. experimentation and innovation, in other places. This means that companies that work ambidextrously are able to develop new ideas and concepts as well as improve their existing business practices.

An ambidextrous organization promotes innovation by investing resources, creativity and time in the development of new ideas. At the same time, it optimizes its work routines to ensure that its existing business remains efficient, lean and competitive. Ultimately, this can lead to a better business outcome as the company is able to respond more quickly to changes in the business world and maintain or increase its competitive advantage.

Companies need to go through a number of process steps in order to work out the most efficient organizational form for them and ensure better company performance in the long term. The aim is to develop the full potential of your own organization.

Step 1
The starting point is the definition of a vision, a strategy and corporate goals. The vision represents the customer benefit and the business in the future. At the same time, it lays the foundation for the strategy, which describes how the vision is to be realized. This, in turn, is operationalized through goals that simultaneously contribute to the strategy and vision.

Step 2
In the second step, an analysis of the status quo clarifies where your company currently stands in relation to questions such as: What is working well and what is not? What are the main challenges? What does the organizational culture look like? What framework conditions need to be observed? What does compliance with governance and legal requirements look like? What are the internal strengths, i.e. the resource-based view, compared to the external requirements of the market, the competition, the industry, i.e. the position view?

Step 3
In iterative organizational design, a suitable organizational design is then developed step by step on the basis of the already defined target image and the analysis of the status quo. It is important to take a holistic perspective and integrate various aspects and feedback.

Step 4
A transformation process that is adapted to the corporate culture and environmental conditions is also relevant. This is a decisive factor in actually achieving the planned result of organizational development.

What needs to be considered during the transformation from an old organizational design to a new one? There are five guiding factors for the development of an organizational design:

1. The Strategy
This is where the strategic priorities of your organization are defined. This makes the strategy the most important influencing factor for the development of the organizational design.

2. The Environment
The strategic direction of your company and its positioning are influenced by the environment in which your company operates. If an environment changes in short cycles, as is the case in the digital economy, for example, the organizational design should focus more on flexibility and adaptability. If, on the other hand, the environmental factors tend to be stable, the organizational design should focus more on efficiency.

3. Technology
The software solutions your company can rely on determine the success of the organizational design. Innovative solutions such as Ingentis org.manager provide important insights, support new processes and create transparency.

4. The Size of the Company
The size of your company has a significant influence on the organizational design. It is obvious that 30 employees at a single location require different processes and structures than 30,000 employees spread across different countries and cultures.

5. The Culture
For employees and potential candidates, the culture in the company has become one of the main factors for their own satisfaction at work. Therefore, the question of which culture prevails in the company is both decisive for the organizational design and relevant for its implementation. For example, flexible, self-determined work is not so compatible with rigid and numerous hierarchical levels.

Professional software solutions support companies in creating a well thought-out and fact-based organizational design. Ingentis org.manager visualizes interrelationships so that a well-founded analysis of the current situation is possible. Optimizations are made on this basis, which can also be tested and evaluated using simulation functions before actual implementation.

Ingentis org.manager thus enables companies in any sector to visualize HR and organizational data automatically and in line with requirements, to comprehensively analyse the actual state of the organization, to design target states and to subsequently optimize structures.