Training Manual on Organizational Design

Training Manual on Organizational Design

The Hospital for Sick Children

What is Organizational Design?

A good way to understand organizational design is to think of the human body. The basic skeleton represents the formal structure; The connective tissue represents key linkages of the body; and the circulatory system represents the people and culture that bring the skeleton and tissue to life.

All these elements comprise a healthy and effective organization.

What is Organizational Design?

• It is the creation of roles, processes, and formal reporting relationships in an organization.

• It is the way in which you set up your business to best meet your business objectives.

8 Reasons Why It is Important

• Company Leadership: Organizational design sets forth reporting relationships and lines of authority reaching from the executive level to the front line.

• Company Culture: The grouping of employees in various departments and the managerial hierarchy influences the way employees interact with each other on the job.

• Future Growth: Organizational design choices made in the early stages of a business can either help or hinder growth plans.

8 Reasons Why It is Important• Adaptability: Organizational design choices can develop

distinct competitive advantages. Savvy business owners continually monitor changes in their industries and markets, looking for opportunities to adapt and develop new competitive advantages.

• Communication: Organizational structure enables the distribution of authority. When a person starts a job, he knows from day one to whom he will report.

• Evaluating Employee Performance: The linear structure of functional and product organizational structures allow supervisors to better evaluate the work of their subordinates.

8 Reasons Why It is Important

• Goal Achievement: Organizational structure allows for the chain of command. Department leaders are in charge of delegating tasks and projects to subordinates so the department can meet project deadlines.

• Decision Making: Most companies either have a tall or flat organizational structure. Flat structures enable small companies to make quicker decisions, as they are often growing rapidly with new products and need this flexibility. Large organizations often have many tiers or echelons of management.

SickKids Org Structure (HR)

SickKids Org Structure- An Analysis

• Divisional structure• Simple Structure• High level of complexity is observed• High level for formality is observed• Communication is both bottom up, top down

and horizontal

How to Design your Org. Structure the Right way

If I were to ask you a random and seemingly strange question, “Why does a rocket behave the way it does and how is it different from a parachute that behaves the way it does?”

You’d probably say something like, “Well, they’re designed differently!

How to Design your Org. Structure the Right way

But if I were to ask you a similar question about your business, “Why does your business behave the way it does and how can you make it behave differently?” would you answer “design?”

Very few people — even management experts — would know the answer

How to Design your Org. Structure the Right way

• Ensure that your org. structure reflects your business strategy

• Business functions focused on effectiveness (sales, marketing, people development) should not report to functions focused on efficiency( customer service, administration)

• Business functions that are focused on long-range development (branding, strategy, R&D, people development, etc.) should not report to functions focused on driving daily results (sales, running current marketing campaigns, administration, operations, etc.).

How to Design your Org. Structure the Right way

• The autonomy to sell and meet customer needs should always take precedence in the structure — for without sales and repeat sales the organization will quickly cease to exist. At the same time, the organization must exercise certain controls to protect itself from systemic harm (the kind of harm that can destroy the entire organization).

Structure Done Wrong

Structure Done Wrong- Why?

First, this proposed structure was created based on the past precedents within the company, not the core functions that need to be performed in order to execute the new strategyThe second issue with the proposed structure is that efficiency functions (Tech Ops and Community Operations) are given authority over effectiveness functions (R&D and Account Management).

Structure Done Wrong- Why?

• Third, short-run functions are given authority over long-run needs. For example, Sales & Marketing are both focused on effectiveness but should rarely, if ever, be the same function.

• Fourth, it’s impossible to distinguish where the authority to meet customer needs resides and how the company is controlling for systemic risk.

Structure Done Wrong- Why?

• Third, short-run functions are given authority over long-run needs. For example, Sales & Marketing are both focused on effectiveness but should rarely, if ever, be the same function.

• Fourth, it’s impossible to distinguish where the authority to meet customer needs resides and how the company is controlling for systemic risk.

Structure Done Right

Structure Done Right-Why?At the bottom of the structure you’ll see an arrow with “decentralized autonomy” on the left and “centralized control” on the right. That is, your goal is to push decision-making and autonomy out as far as possible to the left of the structure for those functions closest to the customer.

Structure Done Right-Why?The GM Function: The first and most important thing to recognize is that, with this new structure, it’s now clear how to scale the business. The green boxes “GM Vertical #1 and #2” on the far left of the structure are called business units. The business units represent where revenues will flow to the organization. They’re colored green because that’s where the money flows.

Structure Done Right-Why?The PM Function: To the immediate right of the green business units is a black box called “PM” or Product Manager. The function of the Product Manager is to manage the competing demands of the different verticals (the green boxes to its left) as well as the competing demands of the other business functions (the grey boxes to its right) while ensuring high product quality and market fit and driving a profit.

Structure Done Right-Why?The Operations Function: To the immediate right of the Product Manager is Operations. This is the common services architecture that all GMs use to run their business. It is designed for scalable efficiency and includes such functions as Customer Service and Technology Infrastructure. They are geared towards short term efficiency

Structure Done Right-Why?The Engineering Function: Similar to Operations, Engineering is also short-run oriented and needs to be both effective and efficient. It is given less relative autonomy in what it produces and how it produces it due to the fact that Engineering must meet the needs of all other business functions, short- and long-run.

Structure Done Right-Why?The next core function is Marketing Strategy. Marketing Strategy is the process of aligning core capabilities with growing opportunities. It creates long-run effectiveness. It’s all about long-term innovation and nurturing and defending the vision.

Structure Done Right-Why?To the far right of the organization are the Administrative functions. Here reside all of the short-run efficiency or Stabilizing functions that, if performed incorrectly, will quickly cause the organization to fail.

Structure Done Right-Why?To the far right of the organization are the Administrative functions. Here reside all of the short-run efficiency or Stabilizing functions that, if performed incorrectly, will quickly cause the organization to fail.

STAR MODEL

It’s Time for an Exercise• On a chart paper, draw the current organization structure of your business

unit/client group (you don’t need to be 100% accurate)

• Flip the chart paper & map down the following information about your division/client group in brief :

• What is the business strategy of your division/client group?• Size of your division/client group?• What are the external market factors that affect your business unit/client group?• What are the internal factors that affect the operations of your business unit/client group?• What level of control is right for your unit/group?

• Draw a rough sketch of an Org structure that you feel encompasses all of those elements (take your time!)

• Share your learnings with the rest of us ☺

RECAP

Refer to the Org. Design Manual