Organisational Design: Myths and Best Practice

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A perspective from EDAC’s South African partner Bioss SA

Organisational design can be described as a systematic process to unlock the “logic” required within an organisation to optimise and deliver value-add through the clarification of an organizations’ strategic intent (i.e. vision, mission, core competencies, competitive advantage, and key business result areas) and the careful planning and execution of interventions which focus on the logical alignment of business processes, the grouping of responsibilities, allocation of authority, the levels of work, job profiling and binding units together structurally (Verwey, A; du Plessis, F, Geldenhuys, W, 2013).

Organisational Design Principles

When it comes to designing socio-technical systems, there are several things to consider. First, always remember the purpose of the exercise: to change your organisation’s behavior in order to execute your strategy. To achieve this, you’ll have to juggle a large number of disparate concerns and competing priorities.

Ultimately, every decision you make should be considered in relation to the purpose of your business. And with this firmly in mind, there are four basic organisation design principles.

The Impact of Organisation Design

Organisational design involves implementing organisational structures and systems that align to an organisation’s core strategies. Often organisation redesign happens because a business is growing or needs to downsize. However, it may also be because of a change in leadership, strategy, or due to changes in the organisation’s wider environment in which it operates.

Many executives acknowledge the importance of organisational design and how it can significantly contribute to overall organisational success. Our experience has, however, shown that in most cases organisational design is very rarely viewed in a holistic, integrated and interconnected way. Various myths still exist with regards to organisational design, such as:

  • It should be based on common sense, since no or little knowledge exists on how to design the optimal organisation,
  • It can be done on the back of a cigarette box at the speed of lightning,
  • It only involves rearranging boxes, titles, reporting lines,
  • It is all about drafting organograms,
  • It does not require shifting of mindsets, frames of reference, behaviour, and
  • It must be designed for (or around) the people and expertise we have. 

As a best practice, BIOSS SA suggests that the process of organisation design follows a number of steps as outlined in the table below:

                     Step                                                         Description
1.     Build the senior team Organisations are managed and led from the top. It is critical to have a leadership team that has the individual and collective capability to position the organisation appropriately in its competitive landscape.
2.     Design Corporate Strategy From a levels of work perspective a key issue is to determine the required level of complexity of the organisation. Positioning the organisation at an inappropriate level of complexity can spell disaster over the short term (too high a level) or long term (too low a level). An accurate awareness of what is required to compete successfully is a pre-requisite.
3.     Determine the structure required to implement strategy and design the working relationships between functions These are the steps where the organisation so often become arbitrary rather than requisite. There is an entire science behind these two steps that will be expanded upon below.
4.     Ensure that you have the right people in the right roles, now and in the future With a clear understanding of the levels of complexity of the various roles, their groupings into functions and an articulation of the interdependencies, the organisation is now in a position to do detailed work design. The purpose is to define clearly the required contribution (outputs) of each role, as well as the human capabilities and competencies required to perform the role to expectations. This step links to Talent management.
5.     Manage performance and ensure managerial leadership The purpose of Performance Management is to improve performance and not to justify increases and promotions. Performance Management is therefore different to consequence management.
6.     Strengthen the roles of Managers Similarly, with the emphasis on leadership, we forget that organisations (work and people) need to be managed.
7.     Build the compensation system The compensation system should be more than just job grading, evaluation and competitive benchmarking. Develop a compensation and reward system that will drive the behaviours desired.

For more information on how EDAC’s products can assist with organisational design please email