10 common org design mistakes, and what to do instead

Organization design is the art (and science) of matching every ingredient of your business to fit your strategy. A good organizational design is THE differentiator between the organizations that execute their strategy and the ones that fail to deliver.

Organization design is also the answer to why most strategies fail. In order to make systems level change, you have to address the whole system. Here are the most common mistakes we see around organization design, and what to do instead.

1. Assuming that org design = org structure

We see a lot of clients putting most of their energy behind defining the structure of their organization, e.g. what functions, roles, reporting structure, work scope. Defaulting to reorganization is usually how leaders think of driving change.

When a client says, “We need to do a re-org,” the role of a responsible organizational designer is to gently push back and ask, “What are you actually trying to achieve? Is there another way to accomplish these goals? Let’s look at this together.”

Reorgs are certainly the most visible types of change, but they are incredibly disruptive. What’s worse, they’re often the least effective way to drive most of the outcomes that leaders actually want.

Our suggestion? Think holistically. Seek ALIGNMENT.

To understand what we mean by this, take a look at the BOxD framework for org design. We call it the “Org Design Sandwich.”

Your Strategy and Culture are the bread, sandwiching the “meat” (or hummus and avocado) of your organization’s design. Your strategy will determine the kind of organization you need to have. Whether that’s at the company level, or maybe even just your revenue organization, the business strategy is what drives the shape and design of your organization.

Culture is the foundation of your sandwich. Any time you bring people together, a culture will begin to form organically. The question is, does the culture align and enable your strategy, or does it actually contradict your strategy?

Looking at the whole design of your organization, you can see that Structure is only ONE small piece of the organization design puzzle.

Consider the crucial questions we’re missing when we only examine the structural component:

  • How will functions actually work together across groups to get things done?
  • What are the things that will enable them to succeed (tools, rituals, policies, physical and virtual environments)?
  • How are people measured on success, and what behaviors are rewarded?
  • Who are the people who are actually executing on your strategy?

Your goal as a strategic leader is to create alignment between ALL of the ingredients. Using structure as a proxy for org design is sadly the most common conflation we see in the field, from seasoned leaders and org design practitioners alike.

2. Jumping to structure without a clear business strategy.

Especially when there’s a new leader in place, we see leaders feel the need to drive change by shaking up the structure immediately.

If you’re a new company starting to grow, don’t assume that you need to start adding headcount! Consider first what your strategy actually is. Then translate the strategy to the capabilities the organization needs to execute that strategy.

Capabilities are anything that an organization needs to do well to drive results. Human abilities, processes, technology, and assets. Let’s look at an example of two companies in the business of food, with very different strategies that require very different capabilities.

McDonald’s is a global fast food restaurant chain. French Laundry is an exclusive restaurant that caters to foodie elitists in Northern California. Both of these brands are in the business of food, but their business models are completely different.

McDonalds wants to rotate customers in and out quickly. Their capabilities include a strong supply chain, solid onboarding processes to address inevitable staff turnover, and really good mass media promotion to keep the McDonald’s brand fresh in customers’ minds.

By contrast, French Laundry wants to create a one-of-a-kind premier experience. Among the capabilities needed are top chefs, great relationships with local farmers and wineries, and the ability to generate word of mouth with good PR.

Executives with Type A personalities, take note! A winning strategy WILL require your ability to make tough trade offs. You cannot be good at everything. Even the biggest players have limited budget, time, and goodwill from their people. Prioritize what you need to do REALLY well, versus what you need to do at par with competitors.

3.Designing roles around individuals

Given the realities of the labor market, it’s understandable that leaders tend to look around their company to see what existing talent pools they can draw from.

As a result, sometimes companies can end up creating weird Frankenstein roles that don’t make sense for their business strategy. This makes succession planning a nightmare, because it’s very difficult to replace people. Plus, if the role is too bloated and removed from what the market actually says it should do, people will have a hard time finding new jobs with the same title and you’ll only be able to retain people who want to build their resume.

What should you do instead? Design for the ideal business state. Design for the capabilities your organization needs, and THEN hire for those capabilities.

Think of the Four B’s to make this work in your operating reality:

  • Build – Assess and fill the gaps you need to move your current talent closer to the organizational capabilities you’ll need for the future.
  • Borrow – Contract part time work. Engage fractional executives until you can afford to hire full time roles.
  • Buy – Hire the right talent into the company, at the right price.
  • Bye-bye – Let go of other talent to make room for the talent you actually need.

Nobody is working with unlimited budgets. The reality is that there’s an opportunity cost to every hire.

What to do, for example, when you’ve found a terrific candidate with exactly the right experience, but your leadership team wants to go with a more junior internal candidate who’s asking way under market rate for the same position?

What we want leaders to understand is that by saving $25k in an annual salary, you may end up spending this 10x in management, mentorship, development, and missed opportunities. It’s wonderful to incorporate development and mentorship into your strategy, and we don’t discourage it! In this scenario, we’d simply want to invite the leadership team to consider the impact on their strategy and the timescale of execution.

4. Benchmarking heavily against other businesses

“What are other companies doing?” When we hear this question, we hear, “I’m scared we don’t really know what we’re doing, so please show me how others have done it.” Totally understandable, and we have a lot of empathy for leaders of new companies taking on big competitors.

What we want to do is encourage leaders to empower themselves to build based on THEIR OWN strategy and THEIR OWN culture. It WILL be unique. You can’t take the culture of Goldman Sachs and apply it to a credit union. You must build your organization based on what your company is trying to do, and how you plan to win in your market.

5. Promoting excellent performers to leadership without support

Slow down! Before you start promoting people who are technically excellent, define your leadership expectations based on… you guessed it, your strategy.

If you can’t bring in people who are already experienced, you have to be patient and factor this into your strategy. Go slow to sustain speed. Provide new leaders with coaching, mentorship and training before you throw them into the deep end.

Another important note– make it enriching to be a really valuable individual contributor. Does growth only happen by managing teams? Not everyone is meant to be a people leader, and not everyone wants to be. Allow space for growth outside of the typical ladder climbing framework to ensure that everyone continues to play to their strengths.

6. Creating target spans of control across the company

We often see this when companies go through mergers & acquisitions. Leaders will get to work trying to rationalize between the two types of organizations, right-sizing everything according to rigid formulas. For example, the target span of control is 1 manager to 10 people, and then this is applied broadly across every organization at the company.

Conventional notions about span of control came about from the manufacturing industry, where work is highly standardized and predictable. Team sizes can range from 3-5 people to 20+, so how do you know what the right number is for your organization?

A formula for team size is possible, but you have to determine it based on the nature of the team’s work, their operating context, and manager profiles. Generally speaking, the more complex and varied the work is, the smaller the teams should be to remain effective. When leaders are more experienced, they can generally handle larger teams.

7. Taking a “peanut butter” approach to layoffs

It’s layoff season, and a common theme we’re seeing is that leaders across the board are asked to cut 5% of their budgets. The danger of this is that you’re potentially going to cut into muscle when you’re trying to trim the fat. This is where you really need to align capabilities with your strategy so that you can make informed decisions about how to recalibrate work, roles, and the overall organization.

8. Tracking only typical business metrics

If you’re telling someone that you want them to do X, but your scorecard is Y, which do you think they’ll focus on? Y. That’s the thing that’s tied to their pay. Anchor on the desired behaviors and mindsets that are going to drive the desired business outcomes.

For example, let’s say your sales team’s renewal rate for clients is very high, but they’re consistently missing revenue targets. Because their sales people were incentivized to prioritize renewals (not overall revenue growth), they kept going after repeat clients versus hunting for new business.

Important to say here is that you should avoid measuring everything. This will get too noisy and distract from driving strategic behaviors. Think about those strategic trade offs we mentioned before. Based on that, pick one or two critical metrics that are actually going to drive progress on executing the strategy you’ve already defined.

Once you’ve determined your company level metrics, you’ll want to make sure they are translated down into your organization so that everyone at every level is pulling in the same direction.

Yes, this should translate to every team and every single role! The reality is that you have human beings making decisions at every level of the organization. Don’t you want them to be properly incentivized to self-manage behaviors that will drive progress on strategic goals?

9. “Declaring” a new culture and relying on an internal marketing campaign

We see this a lot with companies going through business transformation. Leaders announce, “OK, starting today we’re going to be a more collaborative, inclusive organization!”

There’s usually a lot of energy behind a big internal marketing campaign, with all the executives buzzing about it. But then… nothing really changes. Very frustrating, no?

What should you do instead of (or in addition to) making this big announcement? Treat culture change as a change in your organization’s design.

You need to examine and reevaluate each ingredient of your design: how the company is organized, how roles are designed and who gets to make decisions, changing how people collaborate. That is where you’ll actually see the needle move on culture change.

10. Forgetting how slow and hard change can be

One of the biggest mistakes we see in the wake of big changes is that leaders don’t give the people in their organization time to settle. At BOxD we like to use the William Bridges model to remind ourselves of transitions to illustrate the bumpy, human path of change:

Being a change agent is a very different skill set from leading day to day. Bring people in to co-create changes that will affect them. Repeat the message more times than you think you have to. Give people space and time to grieve what’s gone and celebrate what’s new.

Drop us a note to get customized, expert advice about how to design your organization to scale and flex with the times.

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