Organisational Design


Organisational design is both the process and the outcome of shaping and aligning all the components of an enterprise toward the achievement of its goals.

The design must be driven by the work required to achieve the strategy. The purpose for which a group exists should be the foundation for everything its does — including the way it organises itself.

The organizational structure defines the formal relationships between people and their roles and their responsibilities. The chosen organisational structure should give people the appropriate authority and accountability to execute their tasks with minimum administrative overhead.   Clarity around roles and accountabilities should be a key outcome of effective organisational design.

Most Western organizations are designed as bureaucracies where authority and responsibility are arranged in a hierarchy.  Activity is typically organized within sub-units that may be functional (eg the sales or accounting department), product-based (eg the electronics division) or geographical (eg the Asia-Pacific region). 

Different organisational structures have different strengths and weaknesses.  For example:

  • Functional Organizations reduce duplication of activities and encourage technical expertise, but they can foster narrow perspectives and be it can be difficult to assign accountability for cross-functional outcomes.
  • Divisional Organizations organised along product or geographical lines generally provide enhanced accountability for performance and streamlined decision-making, at the expense of some duplication of activities.  Some economies of scale can be lost, and rivalry between divisions can develop.
  • Matrix Structures attempt to capture the best of both the functional and divisional worlds, but can increase the degree of power conflict within the organisation and creates confusion for the employees who have two bosses.  It can slow decision-making.

Lateral and informal relationships can be used to get around some of the issues with the formal hierarchies.  Dotted-line relationships, temporary teams, communities of practice and liaison roles can all help avoid the silo-thinking that will naturally develop within sub-units of an organisation.