Consulting

Organization Design: Creating Real

Value in a Constantly Changing Enterprise
On October 23, 2007, Deloitte Consulting LLP (Deloitte Consulting) When asked what type of event represented the most recent impact
conducted a webcast for HR executives on ways to create enterprise on their organizations, 30% of webcast participants cited a change
value by aligning organization design with fundamental business in executive leadership, following by M&A activity, and cost reduction
strategies. Three knowledgeable and experienced Deloitte Consulting programs. Jennifer Radin noted that for every type of marketplace
professionals led the discussion on this important and timely business event—from implementing a new business model to managing risk
topic—Jennifer Radin, Principal and leader of Deloitte Consulting’s and compliance to improving productivity—there are organizational
Organization Strategies service line, and Roger Walters and Bhushan implications that need to be evaluated with an eye to their ultimate
Sethi, both Senior Managers in the Human Capital service area who impact on organization design. “When we talk about organization
focus on organizational strategy. The essence of their message to design,” Radin said, “we are referring to the structural elements that
webcast participants was that as business strategies evolve in an drive business strategy and bring the strategy ‘to life,’ making it part
organization, so should the various elements of the organization of people’s behavior.” She further explained that this includes defin-
that support those strategies evolve. However, the speed of change ing core business capabilities, the operating model of the company,
in today’s business world makes this a complex challenge, including reporting relationships, career competencies and pathways, and job
disruptions caused by M&A activity, growth initiatives, compliance with design. Organization design, she emphasized, is about helping the
new regulations, and cost reduction measures. What is needed, the business achieve its business objectives and deliver value—it’s not
panelists suggested, is an enterprise-wide framework for flexible and about boxes on an org chart. She said, “Ultimately, organization
dynamic organization design—and HR leaders need to play a big role design is a critical lever to executing business strategy and releasing
in that design. talent. Some of the ‘harder’ benefits include speedier decision mak-
ing, improved metrics and measures, and increased profitability. And
Figure 1. What is the most recent event that has affected your there are ‘soft’ benefits, too, such as value in reputation, quality, and
organization? customer satisfaction. This capacity to deliver on the business strategy
(Votes received: 114) is key to competitive
Figure 1. What is the most recent event that advantage.”
has affected your
Globalization (new market
organization?
entry or global resourcing)
(Votes received: 114)
7.9% Figure 2. In response to these challenges, how often do you
Merger, acquisition,
Merger, acquisition, Globalization
evaluate and (new market changes in your organization design?
implement
and or/divestiture
and/or divestiture entry or global resourcing)
(Votes received: 121)
7.9%
22.8%
22.8% Never Every time
Merger, acquisition,
0.8% 4.1%
Change in and or/divestiture
executive Rarely
22.8%
leadership 17.4%
29.8% Change in
Often
Cost reduction
executive
27.3%
program
leadership
17.5%29.8%
Cost reduction
program
17.5%
Change in
competitor Change in regulatory
landscape environment
10.5% 12.3% Change in Sometimes
competitor Change in regulatory
50.4%
landscape environment
10.5% 12.3%

Audit . Tax . Consulting . Financial Advisory.

Despite the importance of organization design as described by Radin,
50% of webcast participants, in response to an online poll, said their
companies only “sometimes” evaluate and implement changes to that
design on the heels of executing a marketplace response. Presenter
Bhushan Sethi said that building a value-driven organization design
requires addressing a number of individual drivers of organization
performance. He recommends viewing the organization as a system
that comprises structure, processes and policies, technology, people,
etc. He noted that, because all of these parts are interconnected
and/or interrelated, a change in one will impact one or more of the
others. Additionally, the system is impacted by the external environ-
ment and its “triggers,” such as industry trends, regulatory changes,
convergence. The company’s response to external challenges results
in “inputs” to the organization design that help drive specific design
components—the mission and values of the organization, for instance.
As these inputs influence the organization they also help drive certain
“outputs,” such as business performance, people metrics, and share-
holder value.
6 Steps to Effective Design
Sethi listed key steps to executing an effective organization design:
1. Aligning organization design with business strategy—Develop
a true and deep understanding of organization objectives and
capabilities.
2. Build an operating model—It must align effectively with business
metrics and define future-state capabilities.
3. Build high-level org design—Create a representation of the
different high level functional roles, supporting processes, and
decision-making frameworks.
4. Develop detailed org design—Add detail to the high-level design
around structures, reporting relationships, job descriptions, and
competencies.
5. Develop impact assessment plan—Make a plan that will address
further changes in people, processes, technology, customer/ven-
dor relationships, locations, and regulations.
6. Transition and evolve the organization—Implement the plan and
re-evaluate it on an ongoing basis.
On the last point, Sethi noted that a major goal should be to build
organizational flexibility to enable an organization to be responsive to
rapidly changing circumstances, whether it’s about entering new mar-
kets, spinning off unprofitable businesses, conducting a joint venture,
outsourcing work, etc. “Organization design doesn’t have to be top-
driven,” he noted. “If there are improvements to be made, they can
be made by employees and leaders alike. It’s about identifying and
resolving organization design issues and being responsive to change in
the external environment.”
More Strategic Role for HR
Noting that 43% of webcast participants indicated in a poll that their
HR function is brought in to support job design, competencies, roles
and responsibilities, and metrics, Roger Walters joined the discussion
to talk about the much more strategic role that HR is playing today in
business strategy and design. “Businesses are beginning to require
that HR develop a deep understanding of the organization’s aspira-
tions, hopes, and strategies,” Walters said, “and to consequently
help structure a people strategy that will achieve those objectives. HR
should be seen as a strategic business partner with the business needs
of the company.”
Figure 3. What has been HR’s role in organization design at your
organization?
(Votes received: 105)
HR proactively identifies the need
for organization design and drives
HR is not the effort
involved 6.7%
12.4%
HR is brought in to
support the job
HR is engaged design, competencies,
to support job roles and
evaluation, responsibilities
compensation and metrics
and staffing 42.9%
38.1%
In the future, Walters says he sees HR starting to play a leading and
highly active role as an overall facilitator of the entire organization de-
sign process due to the importance of aligning people metrics with op-
erating targets and driving value overall. This, too, will contribute to
the need for fluidity and flexibility. “In the role as strategist, HR leaders
will bring both business and organizational experience and knowl-
edge, help mitigate organizational issues brought on by constantly
changing business issues, and continue to focus on delivering strategic
organizational value and performance through effective organization
design, talent management, leadership, and change development,”
Walters concluded.
Key Takeaways
The presenters suggested HR executives think holistically about the
elements of business strategy and leadership, organization and job
design, and decision rights. Ask yourself, “How is my organization
structure affecting the value and results of my business? Does my
organizational design allow the achievement of strategic goals and
objectives? Are roles and responsibilities well defined and under-
stood? Are common capabilities and processes grouped together to
deliver an efficient execution? Are decision-making processes well
defined, clearly understood, and most important, are they followed?
What actions do I need to take to help facilitate the profitablity of the
organization? What role must I play in enabling this to happen?”
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