How do you know whether your organization needs a re-design?

One of the most difficult – and most fundamental – tasks for a business leader is to recognize whether it’s time to introduce a change now – such as a re-design of the formal structure –and whether it is best to wait and do it later.

If you do it too early – before there is a real need – there may not be sufficiently strong momentum to carry the change through, or you simply waste time and money introducing a change that addresses a problem that does not really exist.

If you do it too late, you miss out on the potential benefits that the change could have brought. Key employees may leave as they become frustrated with the lack of resolution of important issues. You may even loose out to competitors who are already making the required adjustments in their respective organizations.

One may err both ways, but most of the leaders I have worked with have been rather cautious people, so at least in my personal experience, waiting too long seems to be the main risk.

So the key question becomes: How do you know when the organization is in need of – and ready for – a re-design?

The first thing to realize is that although organization design decisions are made by senior managers, senior managers rarely have a complete picture of what is going on in their organization. So it’s crucial to create a good understanding of the current situation and consider how people at various levels of the organization view the current challenges.

At the same time, one usually cannot ask people directly about whether it’s time for a change or what their preferred model would be. Or rather, one can certainly ask, but one may not know whether one can confide in the results.

Organization design is about the context of work, which can either hinder or faciltiate the achievement of key organizational objectives. The influence of organization design factors is not always obvious, however.

It’s a bit like asking customers what features they want in a future product. Some customer may be able to answer but many won’t be able to imagine what the features should be or even why they need the product at all before they have seen and tried using it.

In addition, there’s the political issue: Most leaders are aware that the opinions that are communicated may be colored by the personal interests of the people that voice them. This is particularly important in organization design because any proposed change will typically influence the roles and career oppurtunities of the very same people that are involved in the process.

At the same time, it is possible to infer from other information that we collect whether there is a need for a re-design. This requires relevant data and getting some support from people with skills in data analysis and diagnosis.

There’s a range of information sources available in most organizations that one should make use of. First of all, one should look at the data that is already being collected. I have found that the results from employee surveys, customer feedback, and cost benchmarking exercises often point to challenges that can be traced back to organization design choices. Yet many companies fail to utilize the information they already have when they consider a re-design.

How we interpret the quantitative data is still a somewhat subjective process. In more well established, scientifically based professions, there are norms that one can rely on in interpreting quantitative data. A physician knows what the range of normal blood pressure is, or the typical reading for an infection indicator, and can use this knowledge to decide whether there is a need for treatment. Yet as Elliott Jaques once pointed out, we are not at the stage where we have this type of knowledge about organizational indicators.

However, one can also turn it around: Instead of looking for an objective indicator, one may consider these types of judgments as relative. For example, if you know which strategic goals your organization has set, you can then ask what capabilities you need to achieve these objectives, and to what extent the current organizational structure facilitates or hinders the development of these capabilities (If you want a more specific example, look up on page 76 of my book where I show how such assessments can be carried out.)

The best people to answer these kinds of questions are mid-level managers and employees in key positions. They are the ones who feel the consequences of the current design and who can best judge the prospects for achieving the strategic goals that top management has set.

It is possible, in this manner, to build a fairly solid foundation for making a decision. There will always be an element of personal judgment in these cases, but the quality of the judgment will be enhanced significantly if is informed by data that is collected and analyzed in a systematic manner.

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