Future-fit through Design: Rethinking How Organizations work
What would companies look like and how would they function if they were consciously designed?
Probably more efficient, more adaptable, and more people-friendly.
However, the reality is different: many companies have grown historically and are not consciously designed. No one knows exactly how they work, but they do—somehow. But that is precisely the problem.
The result: shadow processes are designed to keep the company running. Collaboration is difficult because each department pursues its agenda. Leadership guidelines, values, vision, mission, and purpose statements exist on paper, and we know that paper is patient.
As a CEO, manager, or specialist in the areas of people & culture (HR) or organizational development, you are probably familiar with these challenges.
This article focuses on why organizations must be consciously designed and not just developed.
Organizations face fundamental challenges
Established studies such as the Gallup Engagement Index, Kienbaum's HR Strategy & Organization Study, and Deloitte's Human Capital Trends show that something is amiss within our companies.
Despite significant time and money investments in their development.
5 fundamental causes of organizational problems
What is the reason for this? Based on my experience and discussions with colleagues, five main causes emerge:
- Lack of awareness of how change works.
- The impact of initiatives fades because they are not structurally anchored.
- Clinging to organizational designs that are no longer up to date or do not fit the organization.
- Focusing on employees instead of the system.
- Problems are viewed and solved in isolation instead of focusing on the overall system.
In summary, organizational problems arise when systemic relationships are overlooked, and change initiatives are not designed within the context of the overall system.
What is missing is the fundamental awareness that
organizations are designable, living systems.
Organizational Design vs. Organizational Development: What is the difference?
It took me a while to understand the difference. If you don't know it (yet), you are in good company. However, knowing the difference is advantageous.
The drawback is that there is no universally accepted definition for either organizational design or organizational development.
The advantage is that there are similarities on which I have based my definition.
What does Organizational Design mean?
Organizational design is a systematic approach that encompasses conscious, future-oriented work on the formal and informal structures of an organization. It is about designing an architecture of interaction.
Companies, vehicles, and buildings share a commonality: depending on their intended use and function, they necessitate distinct concepts and design approaches. The optimal interaction of the respective components is crucial in determining whether they can fulfill their intended function.
An industrial company functions differently from a software company.
Both types of companies consist of the same components, which are similar but fundamentally different from each other. Depending on how they are designed and connected, an architecture of interaction emerges. This is essential for the smooth operation of the organization.
Organizational design focuses on the architecture of the company, which in turn affects people's behavior.
What does Organizational Development mean?
Organizational development is a systematic approach that encompasses conscious, behaviorally based work on individual and organizational processes. It is about developing effectiveness in the interaction between people and the organization.
People behave differently depending on the conditions they encounter; it is context-dependent. They orient themselves toward the desired behaviors.
As long as the conditions people encounter remain unchanged, their behavior will not change, and change initiatives will remain ineffective.
Organizational development focuses on the behavior of people in organizations.
The difference that makes the difference
Organizational design has its roots in management theory and focuses on the system.
Organizational development has its roots in psychology and focuses on human behavior.
I have come up with the following metaphor as a mnemonic:
Organizational design is responsible for the architecture of the building. Organizational development brings life to the building.
It is the fundamental questions and challenges that distinguish the two approaches from each other.
The combination of both approaches ensures that companies remain both clearly structured and adaptable, humane, and thus future-fit.
They are two sides of the same coin.
Many companies are structurally underdeveloped
I want to clarify that this is not meant to be critical; it's simply an observation.
Most organizations have grown organically, evolved, but were never consciously designed.
Over time:
- their components have changed,
- new components have been added,
- and the challenges companies face today are different from those of a decade ago.
Without a conscious organizational design and development process, this dynamic can significantly impair a company's performance and adaptability.
Growth leads to adjustments without an overarching plan, and these in turn lead to a construct that resembles a construction site more than a well-thought-out organization.
- The components of the organization do not work together optimally. This results in unclear priorities and gray areas, which must be compensated for by additional effort on the part of employees.
- The overview is lost due to the multitude of different and uncoordinated components. This leads to losses in efficiency.
- Additional rules and processes are introduced for fear of losing control.Excessive bureaucracy leads to increased costs due to the need for monitoring compliance.
Many organizations are confronted with these symptoms, which are a manifestation of design problems.
Designing organizations means shaping the future
Today's companies face numerous challenges.
To effectively address these challenges, organizations must be adaptable, clearly structured, and capable of learning. This can only be accomplished through thoughtful and intentional design.
A future-fit organizational design enables:
- clear decision-making processes with decentralized responsibility
- flexible and adaptable structures
- clarity about tasks, roles, and collaboration
- clearly defined interfaces that enable smooth collaboration
- freedom for development and innovation within defined boundaries
Organizational design is not a one-time project, but a continuous process that begins with perceiving and understanding the organization as a designable, dynamic system.
Conclusion and outlook
The combination of organizational design and development helps companies effectively tackle current and future challenges.
Organizational design creates effective architecture. Organizational development enables effective collaboration.
This perspective forms the basis of my philosophy of holistic organizational design.
We need organizations that create real added value. Places where work is easier to accomplish and that offer space for encounters and collaboration.
What would your organization look like and how would it function if you could consciously design it?
In my next post, I will address the question: Organizational Design – the most underestimated leadership task?
