Q&A

As consultants we have been privileged to collaborate for more than 30 years with managers redesigning their organizations. While every case has been different, one common thing strikes us: the struggle during many such an exercise to get to effective outcomes efficiently. For example, we regularly observed the “mental LIFO” (Last-In-First-Out) phenomenon: one of the more intellectually curious executives becoming enamored with a hot concept extolled in a popular management magazine or at a conference, and then relentlessly pushing the concept to their colleagues as the magic solution. Unfortunately, magic is rare in business, and one should look at complex organization design issues through more than one lens. There is not a single best design. To arrive at a reasonably good design, one should go back to basics, asking all the right questions and considering viable alternatives. Doing so without wasting precious time requires a comprehensive and hands-on framework. We looked around for existing frameworks but did not find any that we felt met the bill. Hence, we decided to document and share our own decades-long and varied experiences through this book. We trust that it enables managers to go about organizational design more confidently and successfully.

How to design a fit-for-purpose organization is an age-old question. Therefore, it is no surprise that countless books have been written on organization design, both by scholars and consultants. By nature, the former often focus on one specific design aspect, and may descend into abstractions of little immediate relevance to managers. Driven by fresh commercial opportunity, the latter tend to dramatize the significance of a temporary novelty – consider, for example, how the spotlight has shifted from “agility” to “resilience” lately. What is lacking on the market is a book offering a comprehensive, pragmatic, thoughtful, proven and timeless approach to organization design. We do not know of any publicly available framework that meets those criteria, even though organization design – or more accurately: redesign – continues to be high on the executive agenda. Executives are on the lookout for a design process that, on the one hand, stimulates nuanced debate on an often complex and emotionally charged subject, yet on the other hand ensures efficient progress toward clear and conclusive design choices. The Organization Design Guide intends to be that intellectually sound and hands-on guide.

Many easy-reading management books focus on the organizational impact of a momentarily hot topic such as digital, purpose, inclusion or resilience. Executives realize, however, that one flavor-of-the-year concern solely cannot drive a major organizational overhaul. Likewise, executives have long abandoned the illusion that one can infer, from anecdotes about the spectacular performance of a sample of today’s superstar firms, a generalizable and replicable recipe for the 99 percent of firms like theirs that are just “ordinary”; they know from experience that pulling off an organizational redesign requires hard work, boots in the mud. At the same time, executives have neither the time nor the interest in reading scholarly books that aim for 100 percent exactitude and completeness. Executives also realize that organizational design choices are contextual and strongly driven by their company’s specific historic path; they are no longer seduced by the seeming simplicity promised by the formulaic solutions on offer from commercial services providers. Finally, there are great books on change management and execution downstream of the fundamental design work, but executives also need a book that rehabilitates the hard core of organizational design, i.e., choices related to architecture, processes, culture, people and technology. The Organization Design Guide intends to overcome all those limitations. It provides executives with a reference approach for the (many) redesigns they undoubtedly will continue to manage in the future.

The Organization Design Guide is not written by hard-core disciples of any established school of thought in organization design, such as structural contingency theory or the Carnegie School – and we certainly did not aim to found a new school. Neither is the Organization Design Guide the result of studying existing theories and then eclectically borrowing and combining pieces from those theories that seemed directly relevant for managerial practice. The genesis of this book in fact is quite simple. We gradually conceived, developed and refined the design guide as we gained field insights and learnt lessons from our consulting work with clients. We also incorporated ideas that we gleaned from the desk research we conducted in support of articles that we have been writing for practitioner journals. Finally, we sat down and had a systematic lookback on the many major organizational design projects we have accompanied in all those years.

The Organization Design Guide is agnostic about organization models. Unlike some other authors, we do not advocate any generic model (front-back, helix, self-managed, …). In essence we follow a five-step logic leading to a tailored design that reflects both the company’s forward-looking objectives and its historic path. First, we define the aspired benefits of the redesign (e.g., shorten time-to-market) and the criteria that will be used to assess alternative design concepts. Second, we identify the relevant design variables (e.g., decentralization of activities) with which one can work to define alternative design concepts. Third, we determine and weigh the factors (e.g., the heterogeneity of customer demands by market) that should influence the choices for each of the design variables. Fourth, we combine alternative sets of reasonable choices for each of the design variables to arrive at a couple of alternative design concepts. Finally, we assess and rank each alternative using the design criteria, then select the one that appears best, and then detail the chosen design. It is no rocket science. It is a matter of the CEO (or whoever else leading the redesign) being clear about the objectives, having open-minded and respectful discussions, and assuming full ownership throughout the process.

The book is written primarily for busy managers who nevertheless want to take a bit of time to think themselves critically about organization design rather than use a simplistic, superficial and/or faddish book or article from a commercial services provider. In other words, the book should appeal to business managers across the cascade, i.e., from the CEO (= level N) down to business heads at, say, level N-3. The latter are included because CXOs may involve lower-level managers in the redesign work, or even delegate parts of the work to them. Furthermore, the organization redesign principles and process are also relevant when the scope is not company-wide but limited to a particular division, department or function.

The book will also help members of boards of directors ask the right questions while they supervise or even approve major organizational redesigns led by the CEO. In addition, the book should be of interest to providers of professional services (consulting, executive search, legal, marketing, …) who want to be able to give a first-line response to clients raising questions related to organizational design, so that those clients do not have to call immediately on the established organization consulting firms.

While the book targets professional readers in the first place, it should also be of interest to teachers and students in management and business administration. The book or selected chapters could serve as recommended or supplementary reading for MBA-level classes on organization design.

In addition, the book offers a testable framework with an explicit description of building blocks, interrelations and criteria that can become the subject of academic research exploring cause-effect relations and understanding the impact of contextual variables that affect those relationships. Likewise, the introductory and concluding chapters include thought-stimulating material, such as an adapted version of the “rugged landscapes” metaphor, an expansion of the “dominant logic” concept, the notion of the “polydextrous organization”, and the new concept of “organizational hysteresis”.

Some self-professed thought-leaders claim that hierarchy has become a totally obsolete concept. They advocate a fully decentralized, networked, self-managed or even boss-less organization. They point to the necessity of business agility, employees’ quest for autonomy, and the enabling role of technology.

Of course, it should be abundantly clear that organization design is about much more than just formal managerial structures consisting of boxes, layers and reporting lines. In fact, of the nine design variables included in our framework, only three are about structure-related choices: the primary vertical axis, the role of the corporate parent, and centralization vs. decentralization. The other six are about choices related to lateral coordination, governance, processes, culture, people, and technology.

But going from there to a hierarchy-free organization makes little sense. Recent literature points to the continued relevance of “hierarchy”. For example, Markus Reitzig in his recent book Get Better at Flatter wisely starts off with the notion that “flat structures can be very powerful and potentially superior to hierarchical firms under certain conditions.” The Journal of Organization Design’s recent special issue about “Designing Flat Organizations” contains articles such as “Deflating the rhetoric around flat firms”. Magazines such as MIT Sloan Management Review and Harvard Business Review have recently called for a renewed attention to the critical roles of middle managers. And we like to quote Stephen Bungay’s perceptive statement that “When hierarchy is not explicit, it emerges on its own, based not on the needs of the organization, but on power.”

Much of the current management literature is indeed about “change management” and “execution”. And the maxim that “culture eats strategy for breakfast” has a sequel saying that “culture eats organization for lunch”. We do not question that smart change management is all nice and needed. However, no degree of change management can make up for essentially flawed design choices upstream. To begin with, flawed design choices will of course lead to unsuccessful outcomes: At the end of the change process, one will find that the new design does not deliver the aspired benefits, and a lot of resources, time and energy will have been wasted. In addition, flawed design choices will lead to a needlessly long and painful change process, as the flaws will gradually become visible to a growing number of people, and possibly even pit people against each other. It pays, therefore, to devote a bit more time to in-depth thinking about meaningful and acceptable design choices, rather than rush into change.