Organizational Architecture describes the fundamental shape and design of a company or business unit, along with the mix of people (e.g., generalists and specialists) and skillsets needed. By “shape” we mean whether it is tall or flat (i.e., how many layers, and where), and how many discrete organizational units there are. By “design” we mean:
- How personnel are grouped — by activity or function? By process, product, customer type, geography?
- To what degree is the organization centralized, distributed, or federated?
- Who reports to whom? How are individual and unit roles defined?
The best structure will not guarantee results and performance, but the wrong structure is a guarantee of nonperformance. All it produces are friction and frustration. The wrong organization spotlights the wrong issues, aggravates irrelevant disputes and makes a mountain out of trivia. It accents weaknesses instead of strengths.— Peter F. Drucker, Management: Tasks, Responsibilities, Practices (1974)
Many circumstances may necessitate adjusting the organization’s architecture:
- A change in business strategy or business models (e.g., in/outsourcing)
- The introduction of new products, services, markets, or business processes
- Pressure on the cost structure
- Changes in senior management
- Mergers or acquisitions
- Changes in the business environment, such as new competitors, new technologies, or a different regulatory regime
And sometimes, even with no material change in the business itself, an organizational change can help re-vitalize a business (for example by re-focusing attention on customers or enabling changes in personnel).
We help our clients design organizations that most effectively support their business strategy — thus improving the likelihood of successful execution. We do so by working collaboratively with business and functional leadership to:
- Translate the organization’s vision, strategy and goals into the requirements for organizational architecture
- Specify the shape and structure of the organization (by business line/unit, by function, by region, etc.) based on the requirements of the strategy and the business environment
- Define the key roles (including their scope), primary activities and/or assets and skillsets best suited for each subunit
- Define the appropriate size and staffing model for new or restructured organizations
In many cases, organizational change — done well — acts as a catalyst. It helps to energize personnel (especially key employees) and can dramatically improve business results.
Client Engagement Examples
Strategy, Organizational Architecture and Governance need to be aligned for the organization to succeed. A good strategy that is poorly executed due to ineffective operating governance or an unsuitable organizational structure is likely to fail (or at least underperform). A reorganization that doesn’t take into account dynamic strategy is less likely to meet its objectives; and operating governance, to ensure the right people are making the right decisions, must take into account the organizational architecture and the strategy.
Any of these elements may need to change due to new competitors, changed regulations, different input costs, new technologies, or any of the other myriad ways the business environment is continuously evolving. That doesn’t mean they all must change or that they must change together — successful companies carefully evolve as the environment changes, and we can enter in any of these practice areas to begin to make improvements.
We employ distinctive techniques (such as business wargaming and organizational simulations) across all our practice areas, as well as proprietary frameworks and processes.