The foundations of organizational structure can be traced to a deliberate process of design and configuration in which People, Practices, and Purposes are defined and implemented in a cohesive manner which achieves the business strategy.
This design process will result in the creation of five major structural components: Strategy, Structure, Processes and Capabilities, Reward Systems, and Human Resource Practices. These five components are the organizational value streams that provide a continuous flow of interdependent value from organizational mission through customer fulfillment. Interdependent flow is the key attribute of these values streams in that they complement, not compete, with one another.
From this structural core, various stakeholders will hold responsibility for developmental orchestration through several distinctive design phases that include: determining the design framework, designing the organization, developing the details, and implementing the design. The outcome of this is a set of organizational capabilities, or competencies, that are the skills, processes, technologies, and human abilities which enable the enterprise to effectively compete in the marketplace. These competencies must be aligned and orchestrated in a manner that support and optimize all ensuing business value streams.
This conceptual framework leans heavily on the initial structural component, Strategy, as holding a solid grasp on what the exact value proposition is that the enterprise will offer to the market. Every organization will offer a different value proposition, hence the design and implementation of every organization proves different. Even organizations that compete in the same vertical market, boasting products with nearly identical features, and drawing from identical labor pools, will foster contrasting cultures and strategies. The value proposition is further architected in terms of systems thinking; holistically reflecting a fractal organizational model in which these five core value streams that emanate from Strategy are repeated and scaled throughout the functioning organization. With this model in place, any function within the organization, from the most granular operational task to the boardroom discussion on the future, is predicated on the designed ability of the organization to quickly and organically absorb and respond to needed changes.
The difference between organizations is largely cultural and can be evidenced in how each of the five key components are designed and executed. These key components are:
Strategy – The values, vision, direction, and competitive advantage.
- The direction of the organization is determined at this point with the formal establishment of core and aspirational values, the clarification of market intent and metrics, and the vocalization of why this organization exists. This cornerstone effort is critical in assuring that leadership is in agreement of future direction and intent, clear on market parameters, and prepared to develop the measurable criteria that will ensure success.
Structure – Power and authority, reporting relationships, and organizational roles.
- The structure within an organization is what affords it the stability, order, and control necessary to provide replicability, scalability, consistency, and positive growth. Structure channels the collective energy of the organization and ensures governance is defined to mediate and moderate the flow of that energy.
Processes and capabilities – Networks, processes, teams, roles, and personnel.
- The workflows within and across the enterprise that enable effective communication and workflow are part of this interest. This includes the technical and social networks as well as formal and informal communication. The central focus here is the lateral ability of the enterprise to effectively and cooperatively further business objectives through the sharing of information, best practices, and organizational learning. An organization’s ability to adapt to changing business needs by leveraging cross-departmental effort is critical to adaptive success.
Reward systems – Goals, metrics, behaviors, compensation, and rewards.
- The defining of job roles and responsibilities along with the clear path towards achievable development and growth is the central focus of this interest. How a role is identified, how it’s supported, and the span of control that is within it are critical components of the intrinsic and extrinsic compensation scheme. How those roles reflect the values and vision of the enterprise in clear, actionable behavior terms is essential.
Human resource practices – Staffing and selection, performance, and development.
- It is essential to actively design the organization that you need to become. This means considering the entire organizational ecosystem and how each person is a critical touch point in the internal organizational experience as well as the external customer experience. The two run in parallel and are anything BUT insulated from affecting each other. Ensuring that your HR practices reflect the values and strategic emphasis of your organization in terms of performance feedback, rewards, and recognition is a critical step. Hiring the talent and supporting their continued growth is fundamental in ensuring balance in all five of your organizational design components.