Organizational Architecture

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)

Organizational Architecture requires consistency with strategy (including the value proposition and business model) for the strategy to thrive; and it needs to be consistent with operating governance as well (for example, decision rights and roles within the structure must mesh).

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

Re-Organizing to Jump-Start Growth

SITUATION:

Under new leadership, this brand name, $1.5b formerly non-profit company was looking to increase revenue, improve operating margins and drive a “profit & loss” orientation deeper within the organization by being more commercially focused and market-responsive globally. They were organized in an ad hoc, organic fashion, without clear accountability throughout the various operational units.

SOLUTION:

We worked with the executive team to determine an effective organizational structure (based on their strategy and goals) that enabled them to successfully grow and transition to a customer-orientation by:

Diagnosing the dislocations, misalignments, and inefficiencies in the existing organizational structure
Developing a set of plausible organizational options and defining a set of evaluative criteria
Conducting a series of workshops with the executive team to assess the various options and specify a better structure
Performing an analysis of the skillsets required for the new organization and determining where gaps exist, while creating an extensive organizational transition timeline

RESULT:

Early results are very promising. Surveys indicate that personnel are energized by the increased customer focus and revenue is up for the first time in many years.

Organizing for Effectiveness

SITUATION:

This leading technology company determined that its Enterprise Architecture capabilities were one of the keys to its future competitiveness. It was mandatory that their infrastructure be cost-effective, flexible, and able to facilitate rapid responses to market demands.

SOLUTION:

We worked in tandem with both technology and business executives to:

Define the key strategic goals and requirements of the organization — aligned directly with corporate business goals
Devise structural options which meet these requirements and assess these structural options for capability, manageability and feasibility
Draft the primary activities, staffing model, and both leadership and individual roles and job descriptions needed for the organization to be successful
Execute — implement the new organizational structure, roles, responsibilities and job descriptions; remove staff with skill-set mismatch, interview/hire new skill-sets (including a new CTO)

RESULT:

The new organization is the catalyst for substantial changes being made to enhance the company’s competitive position — including efforts to reduce costs and complexity as well as improve stability.

A good strategy will struggle without appropriate governance; governance without good strategy is just ritual; and neither is effective without the right people in a suitable structure.

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.