How to get your macro-level organizational design right first time
Learn how to decide whether macro or micro design is right for your business. If macro-level organizational design is really what you need, here’s how you can get it right first time.
Published by Rupert Morrison
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When most people talk about organizational design, they usually mean macro-operating model design. This is the big picture stuff, the fun part of design work and is about choosing the best operating model to execute the organization’s strategy.
The operating model defines how your organization will function and informs the detailed micro design that follows. This article sets out a gated process that will enable you to get the macro-operating design right first time.
A four-stage process for successful macro-level organizational design
As the graphic below shows, the process consists of four stages:
- Articulating your strategy and case for change
- Setting your design principles and design criteria
- Listing potential models and mapping those to the value chain
- Selecting a model and creating the business case.
It’s vital you think about these stages in terms of their sequence. You shouldn’t start a stage until the one before it has been agreed and signed off. For example, it makes no sense to start mulling over different operating model designs until you’ve defined your design principles and design criteria.
Be clear on the fundamentals of change
At the start of the macro-operating design process, you should ask some fundamental design questions to ensure everyone is clear about what’s needed and why. Questions like: Where do you want to go? Why do you want to go there? And crucially, how are you going to get there?
Having clear answers to these strategic questions is the single most important thing to get right. It’s also fundamental to having a shared and common understanding across all stakeholders.
These answers provide purpose for the new design and a way to make trade-offs as you progress through the design process. Yet they’re often not articulated sufficiently or aren’t documented effectively and then miscommunicated.
Minimizing your maximum regret
The most important thing to remember, and yet the easiest to forget, when it comes to macro-operating design is that there’s never a right or perfect answer; I prefer to think about minimizing the maximum regret. In other words, you and your leadership team will need to articulate the single thing that you most need to achieve, knowing that if you don’t achieve that thing, it’ll be your biggest regret.
You must get to a point where you’re all united in what this biggest regret would be, that you can explain it and know why it will be your biggest regret; and most importantly, that you all believe it to be true. You’ll need to assess your likely maximum regret for a range of different options, use your comparisons to make trade-offs and decide between them.
At the end of the day, who knows what you might have achieved if you’d gone down a different road? But if you fail, you need to be able to look back and know that, in the situation, you made the best possible choice. Otherwise, you’ll pave the way for a lot of frustrated, sleepless nights thinking what if? You can’t predict the future and, at some point, you’re going to have to take risks.
Stress-test your case for change
The great thing about business is that, while inevitably you’ll need to take chances, it’s you who decides the game you’re going to play, who your competitors will be and, to some extent, what rules you’re going to follow. And moving fast in a determined, aligned fashion is a source of competitive advantage in its own right.
Once you’ve answered those where, why and how questions, you need to create a compelling case for change. There’s no point trying to do something as invasive as changing your operating model unless there’s an incredibly strong rationale for doing so.
That case for change will get converted into sets of design principles and design criteria that can then be used to help you evaluate alternative operating model design options. At each stage, you’ll be faced with the need to make trade-offs. As recommendations for the path forward emerge, so too will the need for a business case that stands the test of time.
Macro-level organizational design in practice
Macro-operating redesigns are costly, time consuming and rarely much fun. They cause disruption and fear. So, the case for change has to be overwhelming for it to be worthwhile. When you’ve got through stage one of the process, look hard at the situation and consider whether macro-operating design is really necessary, or whether micro-detailed design changes would be enough.
Too often, organizations embark on macro changes when they really don’t need to. Macro-operating design is usually triggered by strategic redirection, but it has to be truly needed. And you must be convinced that you can’t achieve your goals through micro-detailed design work. I can’t emphasize this enough. Micro design interventions are usually sufficient in the continuous pursuit of organizational performance gains.
Be sure before you start
Many, if not most, redesigns don’t focus on the entire organization but on sub-elements of it. For example, when redesigning the salesforce, marketing or supply chain. The more frequent these mini redesigns, the greater the dynamic nature of the underlying drivers. For instance, as markets, products and customers change, so too will the salesforce in terms of results needed, the activities to be performed and the skills or knowledge required.
Again, in most cases, a redesign won’t be necessary. The process of thinking about and answering fundamental questions about your organization helps set the path for the future and it’s always crucial that you’re clear about that.
This article is an excerpt from Data-Driven Organization Design (2nd edition) by Rupert Morrison, founder of Orgvue. The book breaks down the task of organizational design into three blocks: macro design, micro design and implementation. This excerpt is taken from chapter 2 of the book, which covers macro design in practice and how you can set yourself up for success.
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