3 Organization Design A

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Bennett Coaching & Consulting
Organization Consulting
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Organization Design
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Organization Development
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29 Pages
Presentations and Handouts for
Organization Development and Design
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(C) 2010 C.H. Bennett

“Basic Four” Axioms1
1. If one optimizes the parts of any system,

the result is less than an optimized whole
2. An organization’s results are exactly what management has

“designed” it to produce, although usually unintentionally.
3. “Business Results” are produced by

People Making a Choice To Take Action
(to behave)
4. Organizational units are systems.. their parts should “fit”

and can be consciously “designed” to do so. This design
influences the choices and action people are
able and willing to engage in.
It is helpful to think of these as the “Stealth Axioms”. Their

implications can “sneak up” on one. If one ignores or “doesn’t see”
the Stealth Axioms, the consequences are significant... for all in the
area.
1
From Wikipedia.. An axiom is any sentence, proposition, statement or rule that forms the basis of a formal
system. Unlike theorems, axioms are neither derived by principles of deduction, nor are they demonstrable by
formal proofs. Instead, an axiom is taken for granted as valid, and serves as a necessary starting point for deducing
and inferencing logically consistent propositions. In many usages, "axiom," "postulate," and "assumption" are used
interchangeably

(C) 2010 C.H. Bennett Four Axioms Page 1 of 1
Why Organisation Design?
Designing Organizations
When undertaking to improve the performance of a business, it is important to recognize that

the business results are actually produced by people, the employees! These people are
choosing to take actions and these actions produce the business outcomes. They are
influenced in the quality, timeliness, and appropriateness of their actions by the organization
system they work within. This organisation system is made up of strategy, objectives, work
processes, structures; and the various information, management, and HR systems.
It is helpful to think about an organization in a way that identifies and links these parts. A
useful definition follows. Each of the organizational “parts” elements is underlined.
An organization is made up of people, who are together to achieve some shared

purpose by the accomplishment of a task determined by this purpose. They are motivated by
reward mechanisms, coordinated through structures and linked by information and decision
processes.
At times, the various parts become outdated, or are made less appropriate because of a
change in strategy or in the work the people must accomplish for the business to be
successful. It is not unusual for different people or groups to have a particular interest in, or
responsibility for one or combinations of these parts. Thus, changes are often made without a
conscious consideration of the effect the changes might have on others in the overall system.
Typically the overall organizational system “just evolves”, rather than being consciously
chosen. (like a Maine farmhouse) This kind of spontaneous design is natural, however
intentional design can result in better performance.
Organizational systems are like all other kinds of systems. If one optimises any of the parts,
then the result is less than an optimised whole. Ideally, each part is crafted to “fit well” with
each of the other important parts. The process of making clear choices on each part while
maintaining an awareness of how the parts are fitting is called organization design. Each
choice is considered and reviewed and modified to ensure an optimum alignment to produce
the required business results. Each of these parts is like the links in a chain. If any one is
weak, or if they are poorly matched, the overall business is weakened and results are affected.
A “whole system” or “holistic” organization design is one in which leaders have chosen to
consciously optimise the connection of people to the needed work in a way that produces the
required results and produces the desired culture. The benefits of doing this include:
• Organizational capabilities are aligned with the desired business strategy
• The use of all resources is optimised
• Systems and structures are aligned to assure the desired culture
• Reduces “loss” form conflicting or ambiguous direction and practices
• Reduced process cycle-times
• People enabled to make the “right choice” about actions they take and work they do.

(C) 2010 C.H. Bennett Why Organization Design Page 1 of 3
Holistic Business Model ... Whole System Design
A “Holistic Business Model” is the result of such an approach. It is a term that describes a
complete set of modules that begins with strategy and ends with the identification of an
organisational system to most effectively connect the people to the work required by the new
strategy.
Successful business units understand the importance of defining a business strategy that
enables them to win in the current marketplace. This is part of completing a business model
that also includes determining value drivers, as a way to ensure the high-leverage operational
activities would be identified. Such businesses recognise that as the environment changes, or
technologies change, they must readjust their business strategy to be successful. At times
they do not recognise that it is also important to “readjust” or redesign the organisation that
operationalizes the changed strategy. The assumption is that a new strategy (or objectives)
suggests that new kinds of work and employee behaviours are required.
In other words, once a business has chosen a new strategy, reassessing the major processes
points out the critical work that must be done for the strategy to be successful. This work is
analysed for the high leverage work within the processes.. the value drivers. It is then
important that the business consider what is required from its people and HR systems to
ensure that the required kinds of new behaviours, attitudes, and culture are present as the
work is being accomplished.
A major change in business strategy usually suggests that the people need different skills and
levels of commitment. The HR systems then need to be modified to produce this change. The
work involved is to make choices and tradeoffs among the options for each of the elements or
parts of the organizational system so that they all fit well together to support the strategy.
These elements include:
• The processes To best arrange the work
• The org. structures To best support the processes
• The people Best suited to do the work
• Reward systems Encourage needed behaviours
• Info/Decisions systems To support all of the above
This cannot be done in a linear, sequential way. It is a “cut-and-fit” and “re-cut” kind of
process. For example, as the kind of work changes, the kinds of people are affected. This in
turn affects the kinds of motivation systems that may be required for the people. This in turn
has an impact on the kinds of work structures that may or may not be advantageous. Etc.

This, a modification of the “Hanna / Galbraith Model” is a useful way to depict these interrelationships
Compare Resulting Reality

Environmental Demands
the Realities
Barrels ROI
Business
Business Results Dollars HS&E
Situation
Group Competition Resulting Reality

Targets Employees
Gvmt. Economy Org.
Culture
Culture
Choices
Choices Norms/Practices
Business Observed
Strategy Org. Design
As Expressed Deduced Values
Elements
As Operating & Assumptions
Purpose
Objectives The Work
Goals To Be Done
WORK Tasks & Processes Management
"Designs" with
REWARD its day-to-day
PEOPLE SYSTEMS Choices
"FIT" Pay, Promotion
Skills, Numbers Satisfaction of These
Training Elements
These Are
Also The STRUCTURE INFO & DECISION
Levers for Reporting, Job Designs SYSTEMS Meetings, Policy
Change Functions Communications
The Five Elements of Org. Design

The Open Systems Model

System Boundary
s of ent Identifies what is and what is not
and ronm within the system
m i
De Env
the
Inputs • Individual Core Processes
Things the system • Group Core Processes System Purpose
must have & must • Technical Core Processes the reason the
accept from outside system exists
Outputs
Transformation Processes Things the system
produces & must
Work the system does to
get rid of
change inputs to outputs
Feedback Loops
Information from the outputs
that impact the inputs
Human Resources Open System Model Page 1 of 1

Compare Hanna / Galbraith Model

Environmental Demands
the Realities
Resulting Reality Barrels ROI
Economy
Bus ine s s Dollars HS&E
Business
Situation
Results
“Givens” of Competition Resulting Reality
Chartering Employees
Organization Government
Org.
Culture
Culture
Choices
Choices Norms/Practices
Organization
Observed
Direction Org. Design Deduced Values
Elements
Business Strategy & Assumptions
Purpose
Objectives
Goals The Work
To Be Done
WORK Tasks & Processes Management
"Designs" with
MOTIVATION its day-to-day
PEOPLE SYSTEMS Choices
"FIT" Pay, Promotion
Skills, Numbers Satisfaction of These
Training Elements
These Are
Also The STRUCTURE INFO & DECISION
Levers for Reporting, Job Designs SYSTEMS Meetings, Policy
Change Functions Communications
The Five Elements of Org. Design

Human Re source s 1
Hanna-Galbraith Model Page 1 of 1

1
“IMPROVING vs. RE-DESIGNING”
When considering improvements or major change in an existing organization, or process, the

diagram below offers a useful way to enhance the capability or performance levels that
will likely result.
It is quite normal to begin such a process with an understanding of the existing, or “as is” state.
Following that it is common to identify problems or outdated aspects and suggest
“improvements” to increase the desired performance. This approach is suggested in
“Approach #2 in the diagram below. It results in the “BETTER” position on the triangle
and does result in some level of improvement.
A useful alternative is to operate with “Approach #1”. This suggests: begin with a vision and
discussion of the “Ideal” to define the elements of what is really desired, without regard
(at this point) as to what is possible, or how it would be brought into being. Starting with
this concept develops energy and enthusiasm of creating something really great and sets
the bar for potential future improvements.
Having developed such a picture, the design team can then “Back It Off To Reality”. This is
represented by the “POSSIBLE” position below. Taking this approach results in a
significant gain over the Improvement approach. Knowing that we will consciously “back
off” from the ideal helps those who tend to discount the utility of working with a vision.
Many people have great difficulty defining what they really need or would like, if they
cannot see how it is possible to get it. Approach #1 helps these people get past this
stuck point

(C) 2010 C.H. Bennett Improve or Re-design Page 1 of 1
The Basic Steps in an Organization Design Process
A very high level overview of the basic steps and their usual sequence:
1. Education for participants on the theory, concepts, and models involved. This provides
participants with a road map of what will be covered and how the pieces will fit together.
Participants take the approach of “designing the ideal” and then “backing off to what is
realistic”. This produces a better result than starting with the current organization and
solving existing problems1.
2. The requirements or “Givens” of the governing body are explicated and reaffirmed. What
are the boundary conditions for the design and what is non-negotiable regarding what is or
is not to be produced.
3. A review of the “larger organizations” business strategies is conducted. As is a review of its

values and culture. 2 This ensures that everyone is on the same page with respect to the
capabilities required of the new organisation. A purpose statement is developed. It begins
to answer the question: “an organisation to do what and respond to whom?”
4. An environmental analysis is conducted. Key aspects of the environment are considered for
what is required and expected as well as the intended organizational response.
5. The values of the local organization are developed or reviewed with respect to the kinds of
work environment or culture that is desired. A mission statement is developed which
begins to provide a background against which many other decisions and choices are
considered.
6. All of the above is then taken as a backdrop as design principles and guidelines are
determined.3 This is accomplished through discussion, trial and error, and engagement of
others to create summary statements that express what the designers want to achieve. They
become the criteria against which conflicts and choices are considered as multiple design
options and choices are encountered.
7. “Big Rules” are determined. This is worked in parallel with the one above. The issue is to
determine the degree of freedom the organization has regarding the supporting design
elements and systems with respect to the larger organization. HR policies and processes are
an example. Also, choices must be made about the degree of freedom sub-units of the
organisation have in being alike or different from one another as that work is done.
1
See Bennett Paper “Improve or Redesign”
2
See Bennett Paper “Providing Organization Direction”
3
See Bennett Paper “Utility of Design Principles”

(C) 2010 C.H. Bennett Design Steps Summary Page 1 of 2
8. The basic kinds of “work” are identified. This is necessary to understand what capabilities
and characteristics are important in the people who will do this work as well as the kinds of
information systems that may be required.
9. Structure options are then considered.4 (how jobs are described, where department
boundaries are drawn, where authorities are placed, etc.) If the strategy and work of the
business has changed, new structure choices may be important to support the changes.
10. The qualities and characteristics needed of people to do this work are identified. This
begins to suggest considerations and requirements for selection and training.
11. If the project is to re-design an existing organization, a change management and transition
plan is developed to manage the shift from the old to the new.5
4
See Bennett Papers “Choosing Unit Boundaries” and “Considerations for Structure”
5
See Bennett Papers “Change Management Overview”,“Change and Transition Management” and others

(C) 2010 C.H. Bennett Design Steps Summary Page 2 of 2
Providing Organization Direction
This Paper: The words leaders use are important. Without precise and commonly understood definitions it
is difficult to communicate clearly with one another or to effectively implement intended elements of
organization operation, design, or direction. If we can’t be clear for ourselves, to each other, and to other
groups about what is expected and what we are trying to do, it is very hard to learn from mistakes, to detect
misdirected effort, or to enable other people/units to take appropriate action.
Unfortunately, the terms and definitions describing various components of organizational planning and
direction are not well standardized. They are used with a variety of meanings by different organizations,
academicians, and consultants. Yet it is important to provide a common definition for use by those who need
to work together to put them into practice; such as a management or design team. The definitions that follow
are not necessarily more “correct” than others, but they are suggested as a common set with which to work.
The model on the next page is a “roadmap” that illustrates the elements, relationships, and general sequence in
the development of overall direction for a complex organization by its leader and management team. Not all
may be possible or necessary for a given organizational unit. It is useful, however, to be as clear as possible
about what needs to exist, what is known to be missing, and the implications on organization effectiveness.
Overview: It is not typical that members of a leadership group will work to make direction of the kind
described below explicit. Many leaders assume that everyone should know why we are here; especially the
key managers. “They are mature adults; they can see what needs to be done.” However, this is often not the
case - they can’t. Or if they can, they are unable to agree on it. People and organization units have a way of
choosing, or drifting toward having their behaviors and resources support their own purposes or their
individual interpretations of what is “really important.” In the absence of clear common direction from
leadership, even well intended individuals will fill in the blanks with what makes sense to them. Having a
group (team) of interdependent leaders operating in this way is a recipe for confusion, disagreements,
resentments and lowered organizational effectiveness.
Another common assumption is that the needed consistent guidance of people will occur through the
interaction of manager with employee. This assumption tends not to recognize the diverse and changing
guidance that results from a diverse and change management force, who themselves, may not have clear and
consistent direction in the context of a diverse and changing business environment.
This is not to say that all answers should be provided from the top. It is to say that the general
intention, direction, major objectives and key boundaries need to be provided such that each sub-unit of the
organization has enough common guidance that more detailed plans can be developed that will integrate into
the overall desired outcomes. For “lower” sub-units of the organization, some elements such as Strategy,
Mission, and Philosophy may be less meaningful or useful. However their operation and interaction with other
sub-units will be greatly enhanced to the degree they have clear and common direction provided to them from
higher leadership.
A well-crafted Direction Package is an extremely powerful tool to motivate people and align their
individual efforts. This is true at all levels of a complex organization. It builds important consistency and
predictability into the organization without rigid rules or only depending upon a few key managers to make the
right things happen. Working together to develop such direction is also a highly effective task in the building
of relationships and mutual understanding within a management team. The effort required to produce clear
explicit direction from a diverse group of leaders, each with their own with implicit assumptions and opinions,
is quite significant and few leaders have the patience for it. “We don’t have time to sharpen the axe, we have
too many trees to cut down.” Creating a clear Direction Package is a “front end” investment of time and
energy that pays out in the form of less need to detect, manage, and correct the effects of second guessing,
conflicting norms, and people working at cross purposes. It is another example of “go slow to go fast” that
has great payoff.
Providing Organization Direction Page 1 of 8

A “Direction Package” Business

Sequence & Relationships Purpose &
“Givens”
Needs, Values & Environmental

Principles of Leadership Business Strategy& Limits, Expectations
Org. Mission & Business Conditions
Business &
Organization Objectives
Operating Management
Principles Philosophy Business &
Organizational Goals
“Big Rule” Inputs for Org.

Sub-units & Design Teams
Operating Procedures Direction for Design Principles Leadership Team

& Principles Each Unit for Org Elements Roles and Principles

Organization Direction: A description of the intended reason for which an organizational unit was
created and the major guidelines under which it can be expected to operate. A “Direction Package” is used
in organizational planning and operation. It is usually a set, made up of such elements as: Purpose,
Mission, Objectives, Goals, Management Philosophy, Design and Operating Principles.
The Direction Package communicates: “Here’s what we are here for, here is how we want
to accomplish that, and this is what you can count upon from your leadership”
Organizations exist to accomplish some purpose. If this purpose is to be effectively accomplished,

the choices and actions of the individuals within the organization must be guided within some reasonable
boundaries. In a simple organization (such as one person owner/boss and one employee) it is not necessary
to be explicit about direction since the owner can effectively influence and guide the subordinate in day-to-
day operation. As organizations grow and become more complex, this is not possible. Yet the need to
guide how people behave and what they work on still exists. Both the organization and individuals need
some form of predictability and structure to avoid random (albeit well intended) actions and priorities.
Typically organizations provide this guidance and control through specific job descriptions, targets, clear
rules, and norms of operation that develop over time.
This method of providing guidance and control has drawbacks, however. It tends to assume that the
boss can determine “one best way” and that the one best way will not need to change with changing
conditions. It also does not take advantage of the belief that people will invest more creative effort and have
more personal commitment if they know clearly what the intended objectives are and if they are allowed
some individual choice in how they contribute to them.
The elements making up the organization direction are intended to enable a move away from rigid rules
and assignments. This is accomplished by providing an explicit description of what is important (Purpose,
Objectives, Goals, etc.) and the general guidelines people should apply as they work to achieve what is
intended (Management Philosophy, Operating Principles, etc.). People are given the information they need
so that they will tend to make individual choices that are “organizationally most appropriate” for a given
context or set of circumstances. Thus people are focused in the same general direction, on what is
important, yet given some freedom and flexibility in the way they are expected to respond.
Business
Purpose & “Givens”
Purpose: A statement describing the nature and scope of the work to be done and the results to be
produced; the organization’s reason for existence.
The Purpose communicates: “This is the business we are in. We would not exist
except for this basic reason.”
The purpose statement is a to-the-point description of what the organization or unit was formed to
do; one that other units or organizations can readily understand and accept. The statement does not try to
capture strategies or special areas of accomplishment but simply describes the most basic productive
function. It stakes out the territory. It defines what is not included by not mentioning it. It is the foundation
upon which other components of design and direction are based. The purpose is usually “assigned” by the
next higher level of the organization; the one with authority to do so. The purpose would tend to be the
same, despite a changing environment or leadership team makeup. For an operating mine or

manufacturing unit the purpose may be quite obvious. For staff departments, however, articulation of
purpose will demand clear thinking as to what they are really in place to do. Most staff units do not develop
a clear precise purpose. As a result, they tend to overlap and/or spread into areas that were not intended or
necessary to the basic business. As organizational units grow and become more complex, the purpose may
become less obvious to the members. People will tend to forget or make their own assumptions unless the
basic reason for existence is kept very clear.
“Givens” : These are the hard numbers and specific expectations, which must be met if the
organization is to be allowed to continue its existence. The “higher” chartering authority should provide
them (but often fails to do so)
The Givens communicate: “If we want to survive, we need to at least deliver on the following;
otherwise they will change us out or pull our charter.”
Most organization units are created and allowed to exist by some greater authority. Quota defines
the necessary bottom line the organization was created to produce. Usually this is in the form of: defined
profit numbers, expected accomplishments, or minimum acceptable conditions. This is a specific form of
environmental expectation. It is in the organization’s best interest to work to have this be as explicit as
possible in order to have a meaningful gage for success. Without such clarity the unit experiences
frustration due to working on the wrong things or being measured against changing ground rules.
Environmental
Limits, Expectations
& Business Conditions
Environmental Expectations: The major pressures/demands/expectations of individuals, groups or

conditions outside of the organizational unit that could influence the accomplishment of the purpose,
mission and objectives.
The Environmental Expectations communicate: “This had better be planned for because we
are going to have to deal with it, like it or not.”
For an organization to survive it must find a way to get what it needs from its environment as
inputs. Equally important, it must find a way to ensure that the environment will accept the needed outputs.
It is not necessary to exhaustively map the environment for all potential influences, but the major
individuals, groups, and forces that can significantly impact the core processes of the business must be
identified. A determination needs to be made regarding the intended response of the unit before a realistic
mission and supporting objectives can be developed. Note: When considering such intended responses,
elements of operating and management philosophy often begin to reveal themselves in the discussion and
should be noted.
Another aspect of the environment is the set of characteristics and emerging dynamics of the
marketplace and key business competitors. An understanding of these is critical to the development of a
winning business strategy

Needs, Values &

Principles of Leadership
Values and Principles of Leadership: A summary of the key beliefs, values, and important principles
which guide the actions and decisions of the leader and management team in the conduct of the business.
The Leadership Principles communicate: “These are the kinds of people we are and here are
some of the standards against which we should be judged as we relate to others and conduct our business.”
In some cases, a framework for this has been established in the past for the overall company of
which the subject organization is a sub-unit. The organization would, therefore, be expected to adopt them
as a “given” for operation. Unlike what may be expressed in the “Management Philosophy”, these are not
negotiable and would remain constant, no matter how the management team might change. Like the
Environmental realities, these both limit and guide the selection of acceptable Business strategies and
objectives.
Business Strategy &

Org. Mission
Business Strategy: The strategy is that set of choices, decisions, and assumptions the leadership
makes to articulate their belief about how this business at this time in this environment can be successful in
the accomplishment of the business purpose.
The Business Strategy communicates: “This is how we expect to win in the marketplace”
The strategy is usually selected after a consideration of the strengths and weaknesses of the
organization, those of its main competitors, and assumptions about the evolution of key elements in the
business environment. The strategy is particularly important to be clear about as it sets the basic direction
and boundaries for the major organization objectives; which in turn govern priorities and the deployment of
major resources. It is useful to remember that when the business environment changes or major aspects of
the organization changes, then the business strategy will also likely need to change. And when the strategy
changes, the objectives and “design” of the organization to deliver it needs to be consciously adjusted.
Mission: A statement that mobilizes energy and captures people’s enthusiasm by virtue of its power in
describing the unique or distinctive contribution the organization’s leadership chooses to make to the
accomplishment of the purpose and the overall success of the business unit. It invites others to want to
become a part of the team achieving a noteworthy ideal.
The Mission communicates: “This is what makes us special in the way we want to
accomplish our purpose. Come and join us.”
The mission statement is the result of blending the individual needs of the leadership and the
realities of the environment with the purpose of the organization. It is a rather personal statement, which
needs to change over time as the leadership changes and the environment changes. And as the leadership’s
personal aspirations are influenced by their own and the organization’s past and current performance. It
describes the “kind of outfit we want to become;” “how we want to be known or remembered.”

The mission statement lends itself to being summarized or condensed into short phrases, slogans, images
and other devices that invite other people to tune into its essence and turn on to its intent. It gives people
something with which to identify, to carve on a plaque, or put on a belt buckle. Something they would be
proud to be associated with. This is in contrast to a purpose statement that is more a statement of fact that
may be hard to get excited about. The mission statement captures people’s attention with its zest and degree
of being provocative.
Business &
Organization Objectives
Objectives: Statements identifying the major areas against which the organization will allocate its
resources and prioritize its efforts that, if accomplished, will significantly move the organization towards
meeting its purpose and mission.
The Objectives communicate: “Let’s all look for ways to keep moving toward these key areas
and here is how we will know when we have arrived.”
Objectives identify the areas for particular focus and attention that are beyond the business-as-usual
requirements of the organization. They are not necessarily as quantifiable as goals, but are important new
beach heads to establish. Typically covering a 1-3 year period, they describe strategic positions to be
attained, or improvement and innovation efforts. Setting objectives forces an organization to say “of all the
useful, needed, and interesting things to do, these few are the ones which if achieved will significantly move
us towards or mission.” By omission, objectives define what should not get much attention or resources
other than normal running of the business or maintaining a satisfactory status quo.
A clear understanding of the “Givens” and Environmental Expectations is particularly important
in setting objectives. Otherwise, organizational resources and efforts will be taken up by responding to
demands that were not anticipated and the objectives become so much wishful thinking rather than a useful
mechanism for helping people set shorter term priorities.
Management
Philosophy
Management Philosophy: Statements that describe this leadership’s approach or intentions in regard to
dealing with the major groups or elements within the organization or in its environment. Like operating
principles, they assist in the making of choices that are “organizationally desirable.”
The Management Philosophy communicates: “This is what we want you to know about us
and what you can expect from us in key areas. This should also provide guidance in how this organization’s
sub-units should be designed and operate.”
An example of management philosophy statements might be... “When it comes to dealing with
First Nation it is expected that members of our organization will.........” “It is our intention at we deal with

employees such that they feel no need for external representation.” Some leadership teams find it helpful
to make some general statements of philosophy as a step toward developing operating principles. Such
statements can be a very useful way to “communicate publicly” what the organization stands for. Such a
public statement is a strong indicator of, and reinforcement for, commitment.
Operating Principles
Operating Principles : A set of statements that become a code of ethics for operating the business.
The set is criterion against which people can test future decisions and choices to assist adherence to the
mission. They support or help to create an intended culture.
Operating Principles communicate: “Whenever uncertain, look to these for guidance in
how to act and how to choose. These remind us of what we have said that is really important. We will
strive to have our behaviors be consistent with these stated intentions.”
Usually consisting of 8-12 statements, operating principles are derived from a consensus of the
leadership on what they believe is important to build into the fabric of the day-to-day operation. They are a
result of the team becoming clear with each other on a number of issues which normally engender a
diversity of opinion: their own values, beliefs about people at work, and how to operationalize a
management philosophy to accomplish the mission.
The intent of the organization is to have people act in ways that obtain desired business results through
the accomplishment of mutually beneficial choices and actions. Anything that unnecessarily restricts an
employee’s ability to understand the desired results or to problem solve barriers to them is counter to the
business interests. Rigid values, unpredictable management actions, and conflicting value systems among
leadership all unnecessarily restrict healthy problem solving and decision making by individuals and groups
in the organization. Principles are intended to remove the restrictions while still providing focus and
boundaries.
Business &
Organizational Goals
Goals or Targets: Goals are statements of short term, measurable and specific outcomes or results to
be achieved that fall logically within a given objective and are essential to meeting that objective
successfully.
Goals communicate: “This is what you can count upon us to accomplish. These will guide our
choices of how to set shorter term priorities and the allocation of resources”
Goals state clearly what will be accomplished, by whom, and by when. To achieve any objective,
numerous shorter results (some in sequence) must be achieved. These are stated in terms of goals. Each
goal having its own set of action plans, resources, and time frame. Tracking goals informs people of
progress and ensures that the day-to-day work is moving the organization in the right direction; meeting
objectives and fulfilling the mission and purpose.

Goals may also be appropriate in areas that fall outside of the stated objectives because it is
important to track accomplishment in a particular area of the business that does not meet the criteria for an
objective at that time. An example might be safety goals, even though safety may not be a specific area for
concern or major new action. A common problem occurs when goals are not set to support an objective
because it is then difficult to be specific regarding what should be accomplished or to measure progress. (an
objective for work team development without specific goals to move toward accomplishment is an example,
as is losing weight or learning Hungarian)
“Big Rule” Inputs for Org.

Sub-units & Design Teams
“Big Rule” Inputs for Others: These are made up of givens, expectations, and limitations that are
intended to both guide and limit choices in the design and operation of sub-units of the subject organization;
those at the “next level down.”
The Big Rules communicate: “You need to pay attention to these as you design and operate your
part of our organization.”
A senior management team or steering team normally develops these on a case-by-case basis as the need
arises to charter a new department or other sub-unit of the organization. This input provides a starting point
for the management or design team for that unit to develop its own version of a direction and/or design
package.

The Utility of Design Principles
The term “Organization Design” can be defined as: the making of conscious choices in
the selection and arraigning of the basic organization elements of: task (the work), people,
structure, reward, and other HR systems, to attain a defined organizational purpose in the most
efficient manner within the intentions of the organization’s values and strategy.
An effective design allows and enables the fullest contribution of employees to
organisational objectives. It does not cause this to occur. Leadership is the major factor
responsible for causing and encouraging the “full contribution” outcome. Full contribution is the
result of providing people with effective leadership as they go about their work within the context
of an excellent organization design. All the organizational “pieces” are in place and they “fit”
well with each other. (The “Galbraith” or whole systems design model, provided in other
documents depicts this concept.)
The tasks of the organization are accomplished through work processes, which are
suggested by the choice of strategy. Different strategies require different work processes.
Thus, first understanding the business direction1, strategies, and objectives is a necessary
starting point for making choices about the kinds of people to do the work, the kinds of
structures within which they operate, and the kinds of HR and other systems that will be
required to invite the behaviours necessary.
There are often difficult choices to be made by the design team from the many interacting
options that emerge as the elements are combined to produce the best fit. Developing a set of
design principles facilitates making the choices and trade-offs among these organization design
elements. These principles become “the criteria” against which choices are tested. They are
used to guide necessary individual decisions such that in the end, the best “overall” set of
choices. Such principles come from the culture and are often not explicitly stated. It is much
more effective, however, to make them explicit.
Many high performing organizations have a “philosophy” of operation that has been
consciously chosen to guide basic decisions. Shell has the “People Principles.”
Principles for design will often emerge as the result of a discussion regarding various values or
beliefs as choices on a continuum.
Examples include:
1. Commitment Oriented…………………….Compliance Oriented

2. Decentralized Structure…………………..Centralized Structure
3. Teams as Basic Unit………………………Individual as Basic Unit
4. Decisions at Lowest Level ………………..Decisions made by the Manager
Where Info and Expertise
Can Be Provided
5. Person Focused Management…………...Technical Focused Mgmt
6. Eliciting Commitment ……………………..Assuring Control
7. Risk Taking …………………………………Risk Averse
1
See Bennett paper “Providing Organization Direction”
The Utility of Design Principles Page 1 of 6

Principles can also be identified by asking questions, which look to some basic values or
cultural norms for their resolution. These are all choices management should make
consciously as part of designing an organization. They are difficult and complex choices. If
not made consciously, they will evolve none the less. Here are some examples of such
choices:
1. How Much Information Is Readily Shared? To Whom, By What Criteria

2. Authority Levels and Distribution of Authority? By level? By need? And for what purposes.
3. Responsibilities? Err on too much, or keep it comfortable
4. Span of Control? Broader if possible, or more traditional
5. Levels of Hierarchy? What is the real purpose or value added for each level
6. Control and Oversight? What purpose? Whose needs are being met?
7. Role of Supervisor? For control and required direction? Or for coaching and development?
What are the requisite qualities?
8. Staffing? As slim as possible, or "extra" to deal with development, learning, and
uncertainties?
9. Level Differentiation? What is the utility of visible distinctions such as titles, offices, etc?
10. Recruiting? From outside or inside?
11. Organization Structure Designs? To be comfortable and clear or to be flexible and
changing
12. Formality of Relationships? Dress, Manners, Written Materials, Presentations
13. Teams? Organizations built upon and encouraged? Or the individual is the basic unit.
14. Performance and Pay Policies? For knowledge? For the job?...For Contribution.
15. Rewarding For Group Performance? Is it there? Is it obvious?
16. Assumptions on Motivation? Intrinsic from the job and work environment itself or primarily
Extrinsic, from Pay, etc
17. Individual Discretion In Job? Built in and encouraged or limited and controlled
18. Tolerance for Risk Taking, Initiative? Required and Encouraged, or...Not Favoured,
Discouraged
Developing Principles
Thus, design principles can be thought of as “broad decisions, made in advance, to provide
ongoing guidance throughout the process of organization design.” Such principles are like a
compass that helps the group keep generally going in the desired direction. Principles are
usually in the form of a list that is developed and refined throughout the design process. When
the group is “stuck” on a particular subject or choice.. ask.. “what do our principles suggest in
terms of making this choice?”
One way to begin to develop a list of such principles is to start with the known or published
values of the larger organization as indicated before. Start with such a value or a general
principle from the larger organization. Then ask, “given this, what do we want to say about how
this plays out in our organization with this new strategy? What would you want to be able to tell
someone about what it would be like to work in this organization with this value or principle in
mind?” Do this for each of your values. The essences of the answers become the local design
principles to keep in mind as other choices are being made.
Another way to develop principles is to “pay attention to the discussions.” Throughout the
process of an initial organization design, there are many, often heated, discussions and debates

among the participants. Often, at some point in the discussion, a general sense of agreement
will emerge. This can be the time for an attentive participant to stand up and say something
like.. “that sounds like we just stumbled upon a principle” and write it on a chart pad for
refinement and agreement. In other words, the underlying principles of what is important to
people are often just below the surface of normal business discussions. A group can make it an
explicit expectation that members “watch” for such moments of agreement and take a few
minutes to determine if it is a useful principle that is assisting their consensus. In this way, a list
of principles can be developed through time and refined as they are utilized.
An Example Set of Design Principles:
Manage the Organizational Context, not Individual Activity

• Set a Vision
• Define Fundamental Principles
• More Empowerment, less command and control
• Build a supportive infrastructure.. Communication, goals, measurements
• Create and sustain an information-rich environment
• Stress Individual and Organizational learning
Expect and Provide Opportunities for Self-development and Self Management

• Increase confidence, competence and commitment
• Emphasize human as well as technical skills
Design Richness Into Individual Jobs

• Move from work as activity, to work as learning
• Provide smart machines
• Invest in intellectual capital - recruitment, training and development
• Emphasize the role of line managers in developing the talent of their people
Design Work Processes that Require Teamwork for Successful Completion

• Reward for knowledge and contribution NOT position in hierarchy
• Maximize learning across organization
• Design for Implementation
• Manage Interdependence
Hire and Encourage People Who Thrive on Change. People who :

• Are opportunity oriented
• Initiate change, not just respond to it
• Work effectively in conditions of uncertainty and ambiguity
Recognize and Reward Accomplishment of Work Teams as well as the Accomplishments of

Individuals
• Minimize force-choice rankings among individuals
• Establish review mechanisms for teams

Another Example: Shell Services International (SSI) Emerging Design Principles
1. Maintain the ability to leverage scale and share resources across customers; within a
customer segment and within SSI as a whole
2. Everyone works for the customer.. Service Delivery accountability is with Customer
segments, Operational Accountability with Infrastructure and Global Practices
3. Customer responsiveness will be ensured by empowering people to act; without long chains
of approval and command
4. Joint Planning… no surprises
5. There are no “Stand Alone” parts of SSI
6. “One-Stop-Shopping” for our customers
7. Customers will be clear on how our offerings integrate with each other
8. Resources are not owned by the Customer Divisions, although all customer work is done
there and under their direction. Unless it benefits the customer to have it executed
somewhere else e.g. as part of a shared service.
9. If it’s not scaleable and it can’t be carved out, it belongs in Cust. Segments.
10. If multiple parties are involved, align with the biggest
11. Design should make it very clear to customers where they go for what they need
12. Keep a balance between reducing Overhead and giving the needed level of support
GENERAL (Socio-Technical) DESIGN PRINCIPLES
The following are broad principles against which one may test options in the design of an
organization. The main thrust of these rather standard design principles is to free the creative
energies of employees and managers so they naturally contribute to furthering the goals of their
organizations, rather than devoting energies to the search for ways of getting work done and
goals achieved despite organizational hindrances, albeit unintended. The objective is an
organization within which everybody learns as they contribute, and that itself adapts effectively
to a changing business environment.
1. MINIMAL CRITICAL SPECIFICATION: (A builder doesn’t need to choose the colour of a

new house, until it is time to paint it and the home-owner is in the best position to make the
choice)
Don’t decide anything now that those closer to the action can decide later. Specify no
more than is essential at each stage of the design. This avoids closing options that could just
as well be kept open for others to determine later. More information will then be available and
those closer to the final design will have better data and be more committed to making their

choices work. At the design stage, what is useful to specify and put in place is not the complete
specification of the final system, but rather the conditions that make it possible for such a
system to develop. This implies deciding necessary conditions and objectives, but only the
minimal specification of methods.
2. DESIGN FOR FLEXIBILITY: (If it is not possible to design something perfectly in advance,
design it to be adjustable)
Avoid setting up unnecessary specialization or functional thinking in people and groups.

Particularly when the work is complex and changing, a range or variety of responses is required.
This is enhanced when each element or person has more than one function. This enables
performing the same function in several different ways by using different combinations of
elements and/or people. Provide people and units with multiple skills and responsibilities to
achieve multiple functioning, rather than encouraging an unnecessary level of specialty for the
simplicity of administration or tradition.
3. INFORMATION FLOW: (The windscreen of an automobile should be designed to optimise

the driver’s view, not the passengers)
Information is most needed by those who must act upon it. Information system design
needs to provide information first to the point (unit) where action on the basis of it is needed. A
group/organizational unit needs the right kind and amount of feedback in order to learn to
control the variances that occur in its spheres of responsibility, to ensure the quality of its output
is maintained, and to anticipate events that are likely to have an effect on its performance.
4. SUPPORT CONGRUENCE: (The tail should not wag the dog)

Apply the supporting HR systems (training, pay delivery, work measurement, performance
reporting, accounting) in ways that will reinforce the behaviours and attitudes required by the
core organization structure for effective performance of the basic work to fulfil the chosen
business strategy. Such systems are often designed to optimise their delivery and
administration, not for their impact on business results.
5. DESIGN AND HUMAN VALUES: (If some work is “undesirable” it can at least be shared
equitably)
Well-designed jobs are themselves, highly motivating. A prime objective of organization
design should be to provide a high quality of work life to its members. This implies providing
work that is reasonably demanding, has varied job content, learning opportunities, responsibility,
and opportunity for participating in significant decisions. Recognize that every person does not
evaluate these objectives similarly and they may not be achievable simultaneously.
6. CONTROL OF UNEXPECTED EVENTS: (Place a fire extinguisher close to the things that
get hot, not in the closet)
This is strongly related to the Information Flow Principle. Design so that upsets are
discovered and corrected close to their source. If unexpected events, which critically affect the

organization’s outputs, cannot be eliminated, they are best controlled as near to their point of
origin as possible. This minimizes reaction/correction times and communications links. It also
"builds in" feedback and tends to reduce the level of supervision and control needed. Another
positive consequence is that of providing people and groups with more "complete jobs."
7. BOUNDARY LOCATION: (Be clear about who is on which team and name the game being
played)
Create important whole units, which tend toward self-regulation. There should be a clear
purpose as well as obvious inputs and outputs. Departmental/unit boundaries are best located
to promote (not interfere with) the desirable sharing of knowledge, experience, and
responsibility. The more the control of activities within a unit becomes the responsibility of its
members, the more the role of a supervisor/manager is enabled to focus on boundary activities,
e.g., ensuring adequate resources, coordinating with other activities, and anticipating changes
imposed from outside.
8. GOAL ORIENTATION: (So, how does this group fit the larger picture?)
To be effective, design an organizational unit and its work to enable the members to relate
to the greater purpose or major goals of the unit. There must be an important "whole task."
These is necessary so that members are able to track and feel accountable for total
performance of the unit and are able to relate their own performance to this. It is also needed
for members to derive satisfaction from identification with a recognizable significant goal and for
the ability to develop efficient information systems.

PRINCIPLE OPTIONS - AN EXERCISE TO DEVELOP PRINCIPLES
The intent is to illustrate the range of values, assumptions, and beliefs present on
the design team, and to invite healthy discussion that results in general agreement on
principles to be used as a criteria when testing design options and choices
Provide your personal assessment of which item in each pair is more important
to emphasize to produce the desired business results, relationships, and culture
Mark Two Answers for Each Pair:

"X" for your view when considering your belief of what is desired or needed
and place an "O".. when considering where you believe most leaders of this organization are
Somewhat
Much More More Slightly More Slightly More Somewhat More Much More
Item # Emphasized Emphasized Emphasized Emphasized Emphasized Emphasized
1 Short Term Goals 1 2 3 4 5 6 Long Term Goals
Individual
2 Group Results 1 2 3 4 5 6 Achievements
3 Experimentation 1 2 3 4 5 6 Proven Methods
4 Good Efforts 1 2 3 4 5 6 Final Outcomes
5 Product Focus 1 2 3 4 5 6 Customer Focus
6 Predictable "Rules" 1 2 3 4 5 6 Rules Change
7 Manager Directed 1 2 3 4 5 6 Self Directed
Optimize the
8 Optimize The Whole 1 2 3 4 5 6 Parts
9 Steady Pace 1 2 3 4 5 6 Playing In Traffic
Facts In Your
10 Polite & Careful 1 2 3 4 5 6 Face
11 Coach, Coach, Coach 1 2 3 4 5 6 Coach, Change
Peer/Customer Manager
12 Evaluation 1 2 3 4 5 6 Evaluation
13 Info is Open 1 2 3 4 5 6 Info Is Managed

(C) 2010 C.H. Bennett Principle Options Page 1 of 2
Basic "unit" is a
14 Basic "unit" is a Team 1 2 3 4 5 6 person
Somewhat
Much More More Slightly More Slightly More Somewhat More Much More
Item # Emphasized Emphasized Emphasized Emphasized Emphasized Emphasized
Job descriptions are Clear Job

15 loose 1 2 3 4 5 6 Descriptions
16 Coaching 1 2 3 4 5 6 Managing
Attention on
17 Attention Is On the Unit 1 2 3 4 5 6 Processes
Producing &
18 Learning & Stretching 1 2 3 4 5 6 Solidifying
19 9/80 1 2 3 4 5 6 80/80/80
20 Info Sharing 1 2 3 4 5 6 Decision Making
Problem
21 Alternative Generation 1 2 3 4 5 6 Identification
22 Concensus 1 2 3 4 5 6 Vote
1 2 3 4 5 6
1 2 3 4 5 6
1 2 3 4 5 6
1 2 3 4 5 6
1 2 3 4 5 6
Above are examples... a design team should create their own set of options to
fit the existing objectives and context for the design or re-design work

(C) 2010 C.H. Bennett Principle Options Page 2 of 2
Principles Example - Initial Input and Design Principles

Developed for the HR Futures Project Phase II
Business Forces for Change

These drive the need for HR Futures II and similar projects in Shell
Major structural cost reduction
Clearly defined accountability
Tighter management control / governance
Globalisation and business integration
Business process simplification & standardisation
HR Futures Team - CMD Charter

Provides the foundation and requirements for HRF Phase II Project Team
By June 2004, recommend a new operating model and change implementation plan for the
overall HR function within Royal Dutch/Shell such that the key business drivers can be
achieved. Analysis and redesign should be done to the level required to demonstrate
where and how savings are realised and be supported by a formal investment proposal. In
parallel with this objective, work with EP and OP to recommend early payout solutions
through initial simplification of agreed HR processes.
Givens:
Shell People will be leveraged
Enhanced HR value-added capacity provided to Business Units
The HR function requires greater overall alignment and cohesion
The design of the HR function must clearly address the issues raised as unsatisfactory in the
HR audit
A Newly Branded Shared Operations will be utilised (including remote sites)
A commitment to exceed 150 M USD of costs eliminated by not later than 1Q 2008
High Level Design Assumptions

Design principles are developed based upon these
1. The need for professional HR expertise is increasing and is strategic to enable
improved business decisions & performance
2. The Group HR strategic intent continues to be a “business intimate” value proposition
vs. a shift to a “lowest-cost-based” HR model
3. Benchmarking indicates that shared services works and is necessary to achieve
required effectiveness and cost reduction
4. The HR function has the role to set standards and drive standardisation and
simplification of HR processes across the Group

(C) 2010 C.H. Bennett Principles Example Page 1 of 3
5. Decision-making within the HR function needs to be sharpened and simplified to

improve alignment, timeliness and accountability
6. The Group HR function must be reconstructed upon a lean, performance based design
to achieve the required HRF project results without sacrificing the ability to stay “close
to the business”
Major Design Conditions Required

These must be the reality for model to work
1. Businesses are willing to support the agreements and principles that underpin Shell
People and the new HR model
2. Group Shared Services are provided globally and not duplicated locally
3. Businesses adopt a new “Deep Business HR Generalist” model with specialty and
transaction work managed via a Newly Branded Shared Services.
4. Businesses will trade delivery proximity and local control for overall improvement of
cost and performance from a Newly Branded Shared Services
5. The Newly Branded Shared Services units will consistently deliver to agreed standards
6. The Newly Branded Shared Services will reduce cost structure while releasing capacity
for greater HR impact on business decisions.
7. This model assumes more of a joint-partnership relationship between Business and
Shared Services than the more typically assumed customer-supplier relationship. (The
term “customer” in the remainder of this document should be understood to mean “that
sub-unit which receives the output or services of another”.)
General Supporting Principles (Two Types)

Design principles are developed to serve as a basic criteria set, against which the many
varied and interlocking design choices may be evaluated. They are required to produce a
set of choices that are internally consistent and directionally supportive of the project
requirements.
Principles for the Design Process Itself:

1. Design begins with the question.. “does this (policy, process, group, role) really need to
remain?”
Example: Elimination is the ultimate in simplification
2. Design should only be to the level of detail needed to satisfy the mandate.
Example: The specific detail of redesigned processes will be left to their “new owners”
3. Design approach should balance an outside-in (external models) and inside-out
(internal process improvement) approach.
Example: Both external best practices and internal realities need to be considered and
integrated.
4. Exceptions to the future design should be designed as “transitional” with timelines
defined.
Example: Deviations of design for transition purposes are labelled as such and have a
“sunset” provision to avoid immediate degrading of the overall intended model.

Principles To Guide Operating Model Design Choices:

1. Boundaries need to be defined to enable operationalizing a clear purpose and
consistent strategy for success.
Example: Matrix and other dual hat / dual customer structures should be minimised.
2. Design should enable a strong linkage to the primary customer
Example: Each individual and each unit should have one clear primary customer type.
3. Overarching model should reduce structural duplication, (including cross-business) and
simplify governance, structures, and roles to facilitate alignment, enhance decision-
making quality and speed, and improve cost effectiveness.
Example: Individuals and sub-units with similar purposes and customers should be
managed by one leader.
4. Design should reinforce an “enterprise first” based HR decision model (vs. the current
“standard policy” based mindset) in the delivery approach.
Example: Standard principles enable needed context uniqueness while standard policies
require constant exception management.
5. Simplicity, cost, and customer focus should be key design criteria.
Example: HR Leader and business “preferences” should not result in sub-optimising the
overall design of units and roles.
6. Sub unit structures should enable clear comparisons with external options in terms of
expertise, delivery, and cost.
Example: All but Business HR and Corp Centre could be outsourced if needed.
7. Design should promote manager/employee self-service. This should enable self-
sufficiency and lessen the dependence on HR for routine matters.
Example: Business Unit HR must not be the interface with self-service features for
business managers.
8. HR systems and structures should enable greater HR Business unit decision-making.
Example: Business Unit HR Roles include transfer of capability to line managers.
9. HR strategy and system design should allow for variation due to compelling business
reasons.
Example: Although incentive pay may be generally eliminated below certain levels, it may
be appropriate to be applied differently for sales roles.
10. Wherever possible an HR service will be shared.
Example: Enterprise-shared is the default assumption
11. Look to organisationally separate “strategy”, “design / engineering” and ”delivery” of a
process.
Example: Each requires different skill sets and have different customer types.
12. Structures and units should be designed to be supportable by requisite governance,
hierarchy, and roles to address tighter decision making, control, and risk management.
Example: Geography, time zones, key customer type, and numbers are considerations
developing organisational boundaries as they have a major impact.
13. A Leadership Model based on constructive conflict, requires a mechanism for timely
closure, decision resolution, and accountability for execution.
Example: Consider a large leadership council for tension and viewpoints and a
separate “executive team” to make the final decisions.


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Bennett Coaching & Consulting

(C) 2010 C.H. Bennett

“Basic Four” Axioms1

1. If one optimizes the parts of any system,

2. An organization’s results are exactly what management has

3. “Business Results” are produced by

4. Organizational units are systems.. their parts should “fit”

It is helpful to think of these as the “Stealth Axioms”. Their

Bennett Coaching & Consulting

Why Organisation Design?

When undertaking to improve the performance of a business, it is important to recognize that

An organization is made up of people, who are together to achieve some shared

Bennett Coaching & Consulting

Holistic Business Model ... Whole System Design

Bennett Coaching & Consulting

Compare Resulting Reality

Group Competition Resulting Reality

The Five Elements of Org. Design

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The Open Systems Model

Human Resources Open System Model Page 1 of 1

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Compare Hanna / Galbraith Model

The Five Elements of Org. Design

Hanna-Galbraith Model Page 1 of 1

“IMPROVING vs. RE-DESIGNING”

When considering improvements or major change in an existing organization, or process, the

Bennett Coaching & Consulting

The Basic Steps in an Organization Design Process

3. A review of the “larger organizations” business strategies is conducted. As is a review of its

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Bennett Coaching & Consulting

Providing Organization Direction

Bennett Coaching & Consulting

Providing Organization Direction Page 1 of 8

A “Direction Package” Business

Needs, Values & Environmental

“Big Rule” Inputs for Org.

Operating Procedures Direction for Design Principles Leadership Team

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Organizations exist to accomplish some purpose. If this purpose is to be effectively accomplished,

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Providing Organization Direction Page 3 of 8

Environmental Expectations: The major pressures/demands/expectations of individuals, groups or

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Providing Organization Direction Page 4 of 8

Needs, Values &

Business Strategy &

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Providing Organization Direction Page 5 of 8

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Providing Organization Direction Page 6 of 8

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Providing Organization Direction Page 7 of 8

“Big Rule” Inputs for Org.

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Providing Organization Direction Page 8 of 8

The Utility of Design Principles

1. Commitment Oriented…………………….Compliance Oriented

The Utility of Design Principles Page 1 of 6

1. How Much Information Is Readily Shared? To Whom, By What Criteria

The Utility of Design Principles Page 2 of 6

An Example Set of Design Principles: