Designing an Effective Organization Structure January 2009 - PowerPoint PPT Presentation

Designing an Effective Organization Structure January 2009

Effective organization design considers five, interrelated components • Clear vision and priorities • Cohesive leadership team 2. Decision • Clear roles and accountabilities -making for decisions and 1. Leader- • Organizational structure that structure ship supports objectives • Organizational and individual talent necessary for success 5. Culture • Performance measures and incentives aligned to objectives • Superior execution of 4. Work programmatic work processes 3. People processes • Effective and efficient support and systems processes and systems • ‘High performance’ values and behaviors • Capacity to change Source: Bain & Company organizational toolkit and Bridgespan analysis 2 TBG 090115-OCW-Org Design Structure

Principles of effective organizational design • Consider all five components of the “wheel”: A 1 common misstep is to focus on structure alone (boxes and reporting lines) as the solution • Align the five components to one another : One 2 element that “doesn’t fit” can limit the performance of the whole system • Align strategy and organization to one another: 3 Organizational strengths and weaknesses influence the range of feasible strategies; in turn, organizations should evolve with any new strategic direction 3 TBG 090115-OCW-Org Design Structure

When structures are ineffective . . . Likely root causes Decision- Work Symptoms of an Leadership making & People processes Culture ineffective organization structure & systems Lack of coordination: work unfinished, teams isolated, out-of step Excessive conflict : Needless friction among internal groups Unclear roles : Functions overlap and/or fall through the cracks Gap in skills or misused resources : Missing or underutilized skills or resources Poor work flow : Disruptions, cumbersome processes Reduced responsiveness : Slow reactions to environmental shifts Conflicting communications: external stakeholders confused, complaining Low staff morale : lack of confidence or drive; poor teaming Note: “People” causes of excessive conflict are typically related to poor performance measures or incentives, not lack of talent or skill per se. Source: Strategic Organization Design: An Integrated Approach, Mercer Delta Consulting (2000); Interview with Peter Thies, Equinox Organizational Consulting; Bridgespan analysis 4 TBG 090115-OCW-Org Design Structure

Basic principles of effective structure • No “right” answer : There’s no silver bullet; every structure has strengths and weaknesses . . . • But a better answer : However, there is likely to be a “better” structure for a your strategy and stage of development –Analysis can help determine alternative structures that will support the strategy • Making necessary compromises : Given the organization’s strengths & weaknesses, compromises in structure are often necessary –The final structure is likely to be a “hybrid” of the “best” options • Managing tradeoffs : Whatever structure is selected, it’s essential that the organization manage its inherent weaknesses or tradeoffs –The “levers” that help manage these tradeoffs are the other 4 elements of an effective organization (processes, people, leadership, and culture) 5 TBG 090115-OCW-Org Design Structure

Structures have two components: groupings and linkings of activities • How individuals, jobs, functions or activities Grouping are differentiated and aggregated • Optimizes information flow within the group but typically creates barriers with other groups • Mechanisms of integration used to coordinate Linking and share information across groups • Enables leadership to provide guidance and direction across the organization An optimal structure balances differentiation (through grouping) with integration (through linking) Source: Strategic Organization Design: An Integrated Approach, Mercer Delta Consulting (2000); Interview with Peter Thies, Equinox Organizational Consulting; Bridgespan analysis 6 TBG 090115-OCW-Org Design Structure

We tend to spend 90% of our energy on grouping but very little on linking because: • Grouping decisions are usually the essence of the change in structure (new units or reconfiguration of old units) • Grouping is equated with the new hierarchy • People’s jobs (especially those that have changed) are the result of new grouping decisions • People (incorrectly) assume that most organizational problems are caused by having the wrong grouping Bridgespan’s organization diagnostic data reveals that coordination and linkages are the #1 structural problem facing nonprofits 7 TBG 090115-OCW-Org Design Structure

Five grouping models to consider Type Common in . . . • Functional • Single-program organizations; most frequently used by our clients • Geographic • Multi-site organizations; frequently used by networks • Program (“product”) • Multi-service organizations and Foundations • Customer/Market • Small organizations with narrow customer focus, or large nonprofits where programs/customers align • Matrix • Large and sophisticated nationwide and/or global organizations Most organizations end up with a “hybrid” structure, combining elements of different models but with one dominant approach 8 TBG 090115-OCW-Org Design Structure

Functional model Executive Director • Organized around key functions or Description departments Finance and Programs Fundraising Administration • Organization is small and/or has single Most programmatic focus appropriate • No need to manage across a large geographic when: area Cons Pros Ways to manage cons • Develops depth of skills in a • Functions can work at • Requires clarity of vision particular function or counter-purposes if they and priorities, translated into department (most jobs are have different priorities measurable departmental functional in nature) and measures and individual’s goals • Focus on function rather • Ensure staff see their role in • Promotes functional than overall organization serving customers through innovation, scale and lower or beneficiaries processes costs • Processes across • Ensure key work processes functions can break are defined, including roles • Simple, easy for each down; individuals unclear across departments department to understand on their role their core responsibilities, • Cross-functional • Make decision-making explicit and to hold them decisions get pushed up (e.g. RAPID tool) accountable for ED resolution Source: Peter Thies, Equinox Organizational Consulting and Bridgespan 9 TBG 090115-OCW-Org Design Structure

Geographic model Executive Director • Organized around major geographies Description US Africa Asia • Organization is large with multiple programs, Most Program A Program B Program A often different across geographies appropriate • Local differences are critical for success (e.g. when: Support Support Support regulation, fundraising, economics) Pros Cons Ways to manage cons • Requires strong skills, • Focus on hiring, training, • Resources needed to particularly of geo head and best practice sharing succeed within a geography • Leads to functional • I.D. functions to manage are available duplication and potential globally (e.g. finance); • Allows greater customization loss of control create hybrid structure of programs or services by • Work processes and • Determine if any key region output (e.g., services) processes should be done in • Enables clear focus with may differ across geos common way accountability for results by • Creates confusion about • Make decision-making explicit geography who makes decisions (e.g. RAPID tool) • Enables focus on geographic • Organization becomes • Develop and reinforce funding sources heterogeneous; not a elements of common culture unified culture (if important) Source: Peter Thies, Equinox Organizational Consulting and Bridgespan 10 TBG 090115-OCW-Org Design Structure

Program (“product”) model Executive Director • Organized around major programs Description Afterschool Heath Care Aging programs programs programs • Programs are very different from one another Most (e.g. different customers, economics, etc.); Operations Operations Operations these factors are similar across geographies appropriate when: • Resources and skills needed to succeed by Support Support Support program are very different Pros Cons Ways to manage cons • Promotes depth of • Requires strong skills, • Focus on hiring, training, understanding within a particularly program and best practice sharing particular program area; heads promotes program innovation • I.D. functions to manage • Leads to functional commonly (e.g. finance); • Resources needed to duplication and potential create hybrid structure succeed within a program loss of control are available • Difficult to coordinate • Develop work processes and • Enables clear focus with common customers systems that enable accountability for program across programs management and tracking of results customers • Enables focus on funding • Organization becomes • Develop and reinforce sources which are often heterogeneous; not a elements of common culture program oriented (if important) unified culture Source: Peter Thies, Equinox Organizational Consulting and Bridgespan 11 TBG 090115-OCW-Org Design Structure