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An organizational structure is the hierarchy of an organization and how the components of this hierarchy work together to achieve the strategic objectives of the company (Ahmadya, Mehrpourb & Nikooravesh 2016). If the structure of the organization and the underlying design principles that construct it are not in alignment with the core purpose of the organization and its operating environment, then it is likely the organization will find it difficult to achieve its strategic objectives (Arabi 2007).
The key to profitable performance is the extent to which leadership, organization, jobs, and people are aligned. An understanding of the interdependencies of these business elements and the need for them to adapt to change quickly and strategically are essential for success in the high-performance organization. When these four elements are in harmony, outstanding performance is more likely.
The organizational design process is the pivotal connector between the business of the organization (e.g., top-level leadership and organizational strategy and goals) and forms of HR support (e.g., workflow process design, selection, development, and compensation). The strategy must continually drive structure and must reflect and enable effective leadership.
Benchmarking is the process of studying industry or competitive practices, functions, and products and finding ways to meet them or improve upon them. Companies from all different industries use benchmarking to gauge their successes and pinpoint their shortcomings. The general process of benchmarking involves identifying problem areas, selecting top competitors who excel where a company falls short, and making the necessary changes.
There are several key advantages to using benchmarking in an organization. However, it is important to benchmark the organizational structure against universal benchmarks. The downside of benchmarking your organizational structure against competitors is that you might inherit weaknesses inherent in their organizational structures. When benchmarking an organizational structure, pay particular attention to the following metrics;
It is important to note that benchmarking cannot be done in isolation. For an organizational structure review exercise to be successful, there is a need to follow the steps outlined below/
The baseline review should define the critical stakeholders and assess the company’s operations with regards to:
A value chain analysis should be conducted to identify the level of business complexity. Value chain complexity will inform the optimum number of reporting layers an organization should have. The value chain complexity can be determined by assessing the organization against the dimensions explained below:
Table 1: Dimensions for Value Chain Analysis
Dimension | Explanation |
Type of value chain | Assess the activities that the organization performs to deliver a valuable product for the market. |
Geographical footprint | The physical presence of the organization i.e. Local, regional, national, international or global |
Financial position | The total operating revenue amount |
Product portfolio | We assess the organization’s breadth of products and market position |
Brand | If its image and reputation are key business drivers |
Organizational design | If it has several functional departments, corporate services, and shared services |
Governance | The level of focus on quality, safety, cost reduction, control, efficiency, and best practices |
Strategic intent | The organization’s focus on value control, value creation, and improving efficiency |
According to the theory on the level of work complexity, work in organizations occurs in distinctive layers of increasing complexity that can be distinguished from one another. The work required in each layer, called stratum is qualitatively different from work in another layer. The level of work in a stratum, according to Jaques is the “target completion time of the longest task, project or program assigned to that role”.
Link each organizational layer to a specific time-horizon and differentiate by clearly defined work-themes, discretionary capabilities, and varying time-spans for review as shown in figure 1 below. Measure the level of work according to the individual’s time-span of discretion, i.e. the time horizon measured in months or years. The longer this period, the greater the scope and responsibility.
Figure 1: Stratified Systems Theory
Source: Weatherby (2017)
Assess the nature of all jobs within the current organizational structure. Assess the nature of work and how it is divided into roles. Each role is to be analyzed using a role description profile covering:
Functional Alignment is one of the techniques for examining the leanness of a structure. Functional Alignment enables you to quantify a population by its location, functions, and professional classifications. For example, in some organizations, jobs in finance, HR, logistics, engineering, and other generic occupations can be found scattered across a wide range of territorial locations or business units.
Conventional business reporting rarely provides any analysis from this perspective, when such data is exposed for the first time it can reveal a worrying profile of jobs scattered randomly without process logic or functional theme. This can be the key to opportunities for making the organization leaner by realigning the structure so that the same or similar jobs are given more effective managerial cover and perhaps assembled into more robustly designed and effective processes. The ideal proportions are usually thought to be in the region of 70% (Core) and 30% (Support).
There are key elements that should be considered when designing the appropriate structure:
Carl Tapi is a Consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. https://www.linkedin.com/in/carl-tapi-45776482/ Phone +263 (242) 481946-48/481950 or cell number +263 772 469 680 or email: carl@ipcconsultants.com or visit our website at www.ipcconsultants.com
This article was written by one of the consultants at IPC
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