It is common sense that any organization redesign calls for a robust, focused approach before diving headfirst into any aspects of business transformation. However, how does this work?
At ON THE MARK we follow a tried and tested model to ensure redesigns are done right. But before this, we need to answer the question, “Is a review needed?” Only then can we look into how to evaluate a business organization design.
How to Evaluate a Business and When Is It Necessary to Review Organization Design
This is an important question leaders need to think about continuously. Key indicators and metrics can tell you whether you need to look at your design and operating model. The same indicators and metrics used to steer a business are also closely linked to an operating model, and are a good sign you need a review.
To highlight a few:
- Market share
- New customers
- Reduced operating costs
- Bringing new products to market
- Change in Strategy
- The cultural aspects – metrics directly related to the internal operation:
- Levels of engagement scores
- Retention scores
- Cycle time
- Customer satisfaction
Let’s dive into an example.
Say your organization has changed strategy, followed by a weak quarter performance and also a decrease in customer satisfaction. These are strong indicators that a review is needed. It is clear the business is moving in the wrong direction, but why is this happening? Critically looking at your organization design and knowing how to evaluate your business can locate these pain points, highlighting them to leaders and stakeholders injecting a level of dissatisfaction with the current design and also creating a pull for change.
Starting the Organization Design Evaluation
Once you identify the need to review your current organization, the first phase of the redesign can begin. At OTM, we use our Design Cycle (above) and call this phase Current State Review. This phase takes our customers around each point of OTM’s Applied Star Model to answer the question “Is the organization fit for purpose?”
The Current State Review invites our customers to identify and then review the current design comprehensively. Looking at their current strategy, performance, customer experience, value stream, structure, management mechanisms, social system and culture (image below). A key output of this phase is to inform, educate and engage leaders as well as stakeholders about the workings of their current business. This leads them to answer the question, “Is there a need to change?”
So, What’s Next?
When customers complete the Current State Review, they are left with an answer to the question, “Are we fit for purpose?” If yes, they have a detailed review of the organization which can be used as a baseline next time around. If no, they have a detailed blueprint of the current organization — which leaders can take apart, piece by piece, when designing the new one.
The next phase of OTM’s design cycle uses and builds on this work and is called the Foundation Phase. Its purpose is to identify the new business direction and then translate it into a set of requirements, parameters and constraints for the future organization design and operating model.
Here are a few tips to take into account when thinking about the new design:
Look Through The Lens Of The Customer
Putting in a new design and operating model by itself will not increase market share. Let’s say you have to grow new products, get them market quickly and it must also be based on what your customers are saying. If that is the case, then you need a design an organization that listens to customers, putting them at the heart of the organization. Do this, all while making sure the design has a quick innovation process unburdened by today’s operation.
Evaluate Your Competitive Difference
Companies must have differentiating features to succeed in the marketplace. Do you compete on an operational excellence model? A customer intimacy model? Or a products & services leadership and innovation model?
Knowing how to evaluate your business organization design is the most effective way to find out if it is ‘fit for purpose’. The evaluation provides an in-depth, detailed analysis of the current organization — which is invaluable to leaders. A redesign may not always be the answer, but getting to the source of a problem is the only way to know this.
More resources on business organization design and transformation:
- Infographic on what is organization design
- Learn why organization architecture is only part of the picture.
- Learn about the various types of organization design models that differentiate you from your competitors.
(Originally published May 2017)
ON THE MARK’s experience and passion for collaborative business transformation that’s supported by pragmatism, systems thinking, and a belief in people is unparalleled. OTM has been in business for 27 years and is a global leader in organization design consulting.
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