Organization Design Methodology and Framework

William McDonough proposes, “design is the first signal of human intention.” Consequently, the first step is to define the intent or purpose of the particular system. A design brief is a formal document that captures the key project requirements and parameters and guides the design team throughout the design process. The design brief addresses five key aspects of the project, including the reasons for the (re)design, the scope, the purpose and benefits, the design team, and the project plan. The brief begins with the forces for change or challenges, including competition, crises, technology changes, economic conditions, global political risk, etc. Then the scope defines the project’s boundaries, the activities and outputs included, and those excluded. A clear understanding of the purpose(s) of the system and the expected benefits provides a clear understanding of the objectives. Once the scope and purpose are defined, the next step is to select a design team that includes the breadth and depth needed for the particular system. Finally, a project plan is developed based on the 12 steps in the design process.

The next step is understanding and empathizing with the stakeholders and their experiences. First, the team identifies the key stakeholders for the particular system. We start with six stakeholder categories: customers (internal and external), the workforce, suppliers and partners (external and internal), investors, the community, and the natural environment. The trick is to focus on stakeholders directly or indirectly impacted by the system. Then, identify the needs of each stakeholder group, including key features, functions, and components of the system and the associated requirements, as well as the quality and performance requirements such as speed, accuracy, friendly service, responsiveness, reliability, etc. Sources for the stakeholder requirements include direct contact with stakeholders, as well as their representatives, such as unions and government regulatory agencies. Tools and techniques to capture stakeholder requirements include interviews, focus groups, surveys, empathy profiles, and measurement of how well the stakeholders’ needs are being met.

The nature of the activities influences design decisions, such as the amount and type of structure appropriate for the system, the level of control required, and the specificity of the various process steps and activities, etc. There are four basic types or natures of activities, including physical (manufacturing, transportation, etc.); knowledge or information (loan processing, insurance claims, etc.); creative (strategy development, product development, etc.); and bespoke, the degree of customization required for each customer or situation. Physical activities deal with materials that obey the immutable natural laws of science and often require a high degree of standardization and focus on conformance to reduce variation. Knowledge systems provide the necessary and accurate information to the decision-makers with the least effort and cost. Creative systems need a flexible structure as they tend to be less effective when the degree of process specificity and standardization is high. The challenge in designing creative systems is to have just enough structure and no more. The last type of system is a variation of the three mentioned earlier. It is the degree to which these systems or processes have to produce customized or “bespoke” outputs based on a variety of needs of the customer or user. Bespoke systems need flexibility built into the system to perform when working with various changing requirements and situations. These four types of activities are not mutually exclusive. Many systems are combinations of two, three, or sometimes all four types of activities.

Organizational design is a theory-led discipline. Kurt Lewin proposed, “There is nothing as practical than a good theory.” Theory and empirical evidence from research inform good design. What do we already know about this type of system? What works, what doesn’t work, and under what conditions? Unfortunately, practitioners’ actions and practices are often not based on the latest scientific theory and are sometimes practices that we already know do not work. “It is not clear how we got to this point. It is hard for one to imagine an architect not taking into consideration important scientific evidence (e.g., metallurgy) when designing a new building” (Latham, 2012, pp. 12-13). Caution – Social science research typically has many limitations, including the degree to which the findings are generalizable. Consequently, we use research to inform our designs while not constraining our innovative designs unnecessarily. In short, when used wisely, theories and research can improve our designs and the speed at which we arrive at a workable design.

Understand how others have designed their systems to inspire and creatively adapt ideas and concepts. In this step, the design team reviews and explores how high-performing organizations have designed similar systems for their organizations. Example designs help clarify the system concepts and inspire the design team’s creative thinking. Examples are useful at two different points in the design process. First, high-level conceptual design examples are useful during the initial conceptual design process. Second, detailed examples are used during the detailed design to provide tangible options and ideas for specific system activities. See Latham and Vinyard (2011) for a collection of curated examples. Note – Some of the greatest insights and creative inspirations come from examples outside your industry. Studying and creatively adapting key characteristics from example designs as part of a design thinking process can help you leapfrog the competition.

A custom-designed system fits the organization’s unique characteristics and situation. Consequently. the design of any custom organizational system depends on understanding the organization’s unique context. For example, the appropriate strategic management system for the local “Mom and Pop” grocery store is likely to be a bit different from the appropriate system for a large multinational company with over 20,000 people and operations in over 40 countries. In this step, the design team identifies the key factors that will influence the design of a custom system to fit the organization’s unique needs. Organizational factors that are relevant to the design include the external environment, strategy, value chain (including industry, geography, and technology), workforce (types of employees), and culture (values, symbols, rituals, and heroes). Understanding the organization’s unique context is important in designing a custom system that fits the organization.

“Always design a thing by considering it in its next larger context — a chair in a room, a room in a house, a house in an environment, an environment in a city plan.” Eliel Saarinen. Most (if not all) organizational systems are part of a larger group of systems that combine to create the overall enterprise. For example, a strategy system interacts with several other systems, including the enterprise scorecard, governance system, human resource systems, etc. The design team identifies the key inputs, outputs, interconnections, and relationships with other internal and external systems. A system perspective of the larger enterprise system helps design aligned and integrated systems. In addition, the systems perspective allows organizations to look beyond a particular system’s immediate goal or desired outcome and identify key leverage points in the overall system to achieve their objectives and purposes.

Design principles are the desired characteristics of the new system. They are cross-cutting and are used to inform the design. Eight established design principles have proven useful for developing high-performing organizational systems, including balance, congruence, convenience, coordination, elegance, human, learning, and sustainability. The design team must understand the eight established design principles and how they apply to the system. The goal is to understand how each principle applies to the system to inform the design. Then the design team identifies any additional characteristics or design principles to consider during the design phases.

If you are redesigning an existing system and want to keep the strengths of that system, assess how well the current system addresses the insights from the first eight steps. If you start from scratch with a blank sheet design, skip this step. To assess the current design, answer the following eight questions. How well does the current design address the purpose and expected benefits in the design brief? How well does the current design address the requirements of the multiple stakeholders? How well does the amount and type of structure in the current design reflect what is appropriate based on the nature of the activities? How well does the current design reflect the relevant theories and research? How well does the current design incorporate characteristics from high-performing examples? How well does the current design reflect and fit the organizational context and culture? How well does the current design incorporate the design principles? Finally, how well integrated is the current design with the other systems in the organization?

Using the information and concepts from the first nine steps as a “springboard,” the design team creates an ideal conceptual design, a doable conceptual design, and a detailed design. A complete design for an organization is composed of nine components, including activities, outputs, inputs, purpose, leadership, learning, people, culture, and scorecard. First, the design team stretches their thinking to develop a vision of how the organization system could work in an ideal world with few constraints. In this case, an ideal world is defined as unlimited resources, technology, and the desired ideal culture. Experience suggests that if the participants first develop an ideal design with few constraints and then a doable design with constraints, they will end up with a better design than if they go directly to the doable design. Participants review the ideal design and identify the challenges and obstacles to developing and deploying the ideal design. To overcome the obstacles and challenges, the design team uses creativity exercises and techniques to develop solutions to overcome the constraints and create a doable conceptual design. Finally, the team develops the details, so the design is ready to prototype and develop further.

Once the detailed design is complete, the development phase begins. The development consists of an iterative process of a paper prototype, a working prototype, and a pilot test. The first and least expensive first step is to develop a paper prototype. The paper prototype typically consists of flip chart pages posted on the walls and is used to visualize the system and get feedback from the relevant stakeholders. To fully develop the new system, the design team must work with all the “owners” of the integration points throughout the organization. While easier said than done, involving the process owners in the development helps smooth the inevitable rough patches before deployment. The next step is to develop a working process with all the tools, techniques, technologies (T3), and decision criteria. The working prototype is tested by involving representative stakeholders. Finally, a pilot test allows the design team to learn from the limited deployment and refine the design before full implementation. Pilot tests are common practice for systems and processes that include a major technology component, for example, Enterprise Resource Planning (ERP) systems. Once the new system is tested and refined, it is ready for full-scale deployment.

Deploying a system or process throughout the appropriate parts of the organization is an exercise in leading change. Successful full-scale implementation of a new design requires a plan, trained employees, resources, and a process to review progress. The first step is to plan the implementation of the new design. This plan should include key activities, a timeline, and the resources required. In addition, the workforce cannot execute the new or redesigned process unless they understand how it works. Note – the easier it is to execute, the less training is required. However, most new processes require some level of training. As the system is deployed in different parts of the organization, the team continues to test and adapt the system to the new contexts. An organization design is never done! High-performing systems and processes have learning loops built into them to ensure continuous innovation and improvement of the new system and to keep it current with changing stakeholder needs.