CHAPTER 53

Organizational Design Practices That Can Make or Break Your Organization

David C. Forman

The third decade of the 21st century is off to a difficult and perilous start. Enormous strains have been placed on society, organizations, and individuals by the COVID-19 pandemic, a struggling economy, assaults on democratic institutions, rising global tensions, the spreading of intentional disinformation, and the continuing quest for social justice. As painful as these experiences have been, the worst action would be to pretend they did not occur, were an aberration, or were just simply bad luck. Let’s examine what we can do.

The world during the COVID-19 pandemic can be characterized by three interacting factors:

•  Change is occurring at an unrelenting pace. Stability has vanished as we are buffeted by a growing legion of factors and forces, many of which are not controllable.

•  The world is a smaller place—we are not just interconnected but interdependent. Just consider the impact of supply chains that extend around the globe. We need a bigger lens because something that happens in a remote part of the world can now affect us in a flash.

•  The future is hazy at best, given all the disruptions that can occur at any time. While we cannot predict what’s going to happen, it is increasingly incumbent on leaders to anticipate and prepare for possible futures now, or else be caught flat-footed again and again.

So, what do we do? How do organizations adapt and respond to these conditions in this increasingly unsettled world? Thankfully, respected leaders and researchers have given these challenges some thought. In Talent Wins, Ram Charan and his colleagues (2015) share three pieces of advice for how to succeed in an economy that has “decimated predictability.”

•  Put your best people in positions that contribute significant value.

•  Free people from bureaucratic structures designed for a different age.

•  Provide opportunities for people to continue to learn and expand their skills.

When Satya Nadella, the CEO of Microsoft, discussed the pandemic and its lessons for his company, he observed that the last six to nine months of 2020 had constituted the world’s largest experiment for remote work ever conducted (Whittinghill 2020). His primary insight: “Going forward, we are thinking about productivity in an organization as being defined by the combination of three things—collaboration, learning and well-being.”

In Humanocracy, Gary Hamel and Michele Zanini (2020) underscore the challenge to create rejuvenated organizations that are as amazing as the people inside them. The culprits, they believe, are the bureaucratic barriers that are equivalent to a tax on productivity. They argue that organizations need to be more innovative, adaptable, inspiring, and resilient. A truly resilient organization overcomes barriers and is characterized by:

•  Rushing out to meet the future

•  Changing before it had to

•  Continually redefining customer experiences

•  Capturing more than a fair share of opportunities

•  Never experiencing an unanticipated earnings shock

•  Growing faster than rivals

•  Having an advantage in attracting talent

These are great ideas and aspirations, but again, how do we get there? Choices will have to be made and prioritized, but this journey can begin by improving the capacity of our organizations to deal with difficult and unforeseen threats and by applying lessons from the discipline of organizational design.

The Purpose and Value of Organizational Design

Organizational design (OD) has been around for decades and is generally defined as building organizational capabilities to improve strategy, structure, processes, and outcomes. As the name implies, its emphasis has been on the organization and its collective talent, although it is often contrasted with more familiar human resource practices that focus on individual talent. Its focus on hiring and retaining the best and brightest people was advocated for in McKinsey’s groundbreaking book, The War for Talent (Michaels, Handfield-Jones, and Axelrod 2001). While there were some early dissenters (Malcolm Gladwell, for example), most people believed the approach made sense: Bring in a bunch of really smart people, surround them with traditional talent management practices, and the organization will prosper.

This approach seemed to work, but then warning signs emerged. Organizations began to see seismic failures revolving around very smart but dysfunctional people. In addition, there were numerous examples of how IQ and intelligence were not nearly as important to high performance as we thought (for example, Google’s Project Aristotle). There is also now a growing recognition that “the way we have always worked isn’t working” in a world of constant change, interconnectedness, and hazy futures. Problems include declining productivity, once-successful management models becoming barriers, waning innovation, and organizations failing to change as fast as the world around them (Hamel and Zanini 2020).

Dave Ulrich predicted this future in his book Victory Through Organization—Why the War for Talent Is Failing Your Company (2017). His view—backed by research—was that by improving the workplace, the workforce can flourish. He argued for building organizational capabilities to improve innovation, enhance collaboration, reduce bureaucratic barriers, and open participation for all. By focusing on these organizational capabilities and strengthening how people worked together, Ulrich said, the return would be four times greater than just developing individual talent. This is an incredibly significant finding that heralds the increased meaning and value of OD to organizational success.

Michael Arena (2018) reinforced these findings when he said it is not enough to bring in the best people, but to bring out the best in all people. He believed in creating organizations where the genius is not what happens inside people’s heads, but between or among them as they work together. It is about providing opportunities for any person to do extraordinary things.

6 OD Practices for Turbulent Times

This new emergence of OD coincides with the realization that improving the workplace is the surest and most viable path to achieving organizational success. The OD Practices Model depicts specific areas that, when accomplished together, can have the most enduring impact and chart the truest course through turbulent times (Figure 53-1):

•  Results-based accountability. It is impossible to be a high-performance organization without getting results. Leaders at all levels need to be accountable to themselves and their colleagues for producing results and outcomes for employees, stakeholders, and citizens alike.

•  Strategic alignment and focus. Given the pace of change, it is easy to get out of alignment and do things that don’t benefit the organization. Huge amounts of talent and energy can be wasted.

•  Culture and values. What does the organization stand for? What value does it bring to employees, customers, and citizens? Culture is the most effective governance system because it determines how people act and perform better than any set of rules and regulations.

•  High-performance-workplace practices. What are the secrets of high-performing organizations? There are none. The keys to unleashing talent are evident but not well practiced.

•  Flexible, agile, and resilient structures. Gary Hamel once said that “communities outperform bureaucracies every day of the week.” In this ever-changing world, strength and advantage are gained by creating more access, transparency, and opportunity for all, not just a select few.

•  Learning mindset. Learning has now become a survival skill—we all need to be learners and embrace the challenge to keep adapting and growing, regardless of our previous experiences and role within the organization. As Will Rogers once said, “Even if you are on the right track, you’ll get run over by standing still.”

Let’s look closer at each area in the model.

Results-Based Accountability

It is fitting that this discussion of the OD Practices Model starts at the end. Traditionally, HR and L&D professionals have shied away from impact and results because they are, as the thinking goes, difficult to measure and control. Instead, L&D and HR often measure what is easy to measure, and this is precisely why they have not been more influential in affecting organizational performance. HR and L&D analytics primarily track activity and efficiency, not effectiveness and impact. Business leaders care about effectiveness and results, and so must we.

There are at least five ways in which organizational practices can drive business results. These business outcomes are described more completely in Fearless Talent Choices (Forman 2020).

Optimizing Talent

Jim Collins introduced the notion that people are not your most valuable asset; the right people are. This has been extended to the 6 Rs: Are the right people in the right job with the right skills—for the right cost—in the right place at the right time? Another way to operationalize this lever is to ask: Are our best people working on the most important projects? This parameter should be true wherever talent is expected to perform, whether on athletic teams, dramatic productions, orchestras, or even business endeavors. There needs to be an extraordinarily strong fit between what is required for success and the talent deployed. If not, individuals and organizations will suffer.

A business impact. The cost of losing a valued employee is 1.5 times the fully burdened yearly salary of that individual. For an individual earning $100,000 fully burdened, this equates to a cost of $150,000 to the organization for lost productivity, extended timeframes, and more out-of-pocket expenses. If the employee who leaves is a high performer (not just a capable employee), then the cost skyrockets by a factor of five to $750,000.

Cost Savings

It is important to streamline processes so that waste, inefficiencies, old practices, and extra costs are identified and eliminated. Because cost savings hit the bottom line quickly, they are spotlighted by executives and are usually the easiest business impact to identify. Among possible examples:

•  Reduced participant travel and expenses

•  Smaller footprint (location costs)

•  Fewer recurring costs (such as room rental and instructor fees)

•  Changing delivery platforms

•  Fewer people

•  Restructured benefit programs

A business impact. For global organizations, a huge cost savings can be realized by replacing expert global staff from headquarters (expatriates) with qualified local talent. A fully burdened expatriate compensation package can cost 20 times more than capable local talent.

Productivity Improvements

Productivity pertains to doing the same or better work, faster. It is an efficiency measure that can be influenced by automation, intelligent technology, smarter and more committed employees, informed practices, and better methods. A key workforce factor is how quickly employees can become proficient, especially in such a rapidly changing world. One surprising example is to have an open talent marketplace and hire more internally. Why is this the case? Because internal hires get up to speed faster and more efficiently than external hires. They become “ready” 33 to 50 percent faster than their external colleagues.

A business impact. The most meaningful leading indicator of productivity improvement is engagement. Since Gallup’s pioneering work decades ago, findings have been remarkably consistent: Productivity varies by level of engagement. On a four-point engagement scale in which being engaged is level 3, productivity increases or decreases by at least 20 percent per level. When this finding is monetized over the entire workforce, the impact of poor engagement can be in the millions of dollars.

Better Outcomes

This outcome pertains to improving business performance in such areas as revenues, profits, innovative new products, product quality, brand credibility, supply-chain effectiveness, quality of new customers, and faster time to market. These outcomes are hugely important to all stakeholders and business leaders, and one of any leader’s first activities should be to list the business outcomes that are most meaningful to that organization. These outcomes should be closely related to the strategic alignment assessment, which also focuses on the critical priorities of the organization.

A business impact. While not all organizations get involved in mergers or acquisitions (M&As), they are an example of the huge impact that talent and organizational practices can have on business results. In 2018, more than $4 trillion in M&A activity was reported. Interestingly, many (70 percent) of these transactions fail to achieve their intended objectives, and a primary reason is poor human factor integration. Fully 30 percent of M&A failures can be ascribed to this purpose, which translates to a $1 trillion loss for businesses.

Leveraging Communities, Resources, and One Another

One of the great frustrations of leaders is that organizations rarely learn from past mistakes and are less than the sum of their very capable parts. They yearn for a company where the genius happens among people and social capital becomes a vital competitive advantage.

A business impact. When connections and collaboration occur, the power of professional networks and connections become apparent. People with robust and extensive professional networks are 25 percent more productive than people who do not have these connections. This makes sense. If you do not know the answer to a simple question, you Google it. If you need more nuance, thoughtfulness, and wisdom, you talk to people you trust. The network boost of 25 percent is a huge multiplier that few people embrace. As the great Satchel Paige once said, “Ain’t none of us as smart as all of us.”

These results need to be firmly in mind because the ultimate outcome of OD practices is to improve organizational performance. Now, we can turn to other parts of the OD Model to see how to unleash talent to achieve organizational success.

Strategic Alignment and Focus

It is easy for organizations to think they are working on mission-critical projects and initiatives. But often they are not. When a car is out of alignment, it wanders all over the road. When an organization is misaligned, tremendous amounts of resources, talent, and energy are wasted. It is not just about “doing things right”; it is more about doing the right things in times of instability and limited resources. Use “line of sight” tools and techniques to ensure a close linkage to strategy and competitive positioning and to remove barriers that affect performance. Focus on the consequential few priorities, as opposed to the inconsequential many. Be able to answer the question, “What will we stop doing to achieve better alignment?” Instead of just having a “to do” list, also have a “to stop doing” list.

One significant barrier is the amount of time spent in meetings and monitoring mobile devices. Doshi and McGregor (2015) estimate we devote two days a week to these activities. This equates to 40 percent of our available time being wasted or poorly used. Some organizations are adopting practices that, for example, limit meetings to 30 minutes, restrict the number of participants in meetings, ban meetings on certain days, schedule meetings only in afternoons, turn off email servers at 7 p.m., and prohibit email during vacations and holidays. See the handbook website ATDHandbook3.org for two tools you can use to check for strategic alignment.

Culture and Values

Every organization has a culture and set of values that influence how decisions are made and people behave. The real question, however, is whether the default culture is the desired culture. There is often a sizeable gap between the two—especially when comparing the answers from business leaders and employees.

Cultures can be intentionally changed with diligence and perseverance. It takes the hard work of everyone, not just leaders. In the past, many believed that culture was determined by CEOs and managing directors, so why bother trying to change it? However, in today’s more open, transparent, and horizontal organizations, culture becomes everyone’s business. Among the key players that affect culture are leaders, customers, employees, stakeholders, supply chain partners, and citizens.

Culture also needs to work for both the organization and the individual. Favoring one side over the other will not endure. And culture needs to strike a balance between the soft stuff and the hard stuff—between soul and rigor—because both are key contributors to organizational success.

Each organization responds to pressures and contexts differently, and each has its own traditions and legacy, so cultural values will and should be different. Visit ATDHandbook3.org to see an example of an embracing culture’s values and ways to assess and develop them.

High-Performance-Workplace Practices

What do we know about high-performing workplaces? In turns out, quite a lot. More than 30 years of research has provided remarkably consistent findings about the characteristics of workplaces that lead to productive, engaged, and energized employees. While it is always useful to add more to this body of knowledge, there is much that can be done right now. Consider what we know:

•  People have three primary intrinsic motivators: autonomy, mastery, and purpose (Pink 2009).

•  The top three reasons people leave companies are a poor relationship with their direct manager, little opportunity to grow and develop, and lack of meaningful work (Forman 2015).

•  The Gallup 12 questions that define engagement have remained relevant and meaningful 20 years after their first unveiling.

•  Doshi and McGregor (2015) have identified three characteristics of high-performing cultures: play, purpose, and potential.

•  Bersin (2014) characterizes the “simply irresistible organization” as one with irresistible work, great management, a fantastic environment, growth opportunities, and trust in leadership.

•  The Human Capital Institute (2017) highlights the importance of purpose, growth opportunities, flexibility, personal balance, and collegial networks in improving engagement and performance.

•  Zak (2017) has identified eight management behaviors that generate trust and lead to high performance: recognize excellence, provide challenging assignments, enable people to have discretion in how they do work, encourage job crafting, share information broadly, intentionally build relationships, facilitate whole-person growth, and show vulnerability.

•  The World Economic Forum (2019) highlighted the top four reasons people join and stay with organizations: good relationships with colleagues, effective work-life balance, good relationships with superiors, and ample learning and development opportunities.

It is important to observe that these studies, unlike popular coverages of best places to work, do not focus on perks such as having a dry cleaner at work or the highest pay package. They all address intrinsic motivators that enable people to work more productively. If these qualities are genuinely embedded in the workplace, the data suggests that the impacts on people will be significant. Context matters, so one organization’s short list will be different from another’s, but the data is clear that these qualities are the ones that count (Figure 53-2; Forman 2020):

•  Purpose. People want to belong to an organization that provides meaning to others. They seek significance, a higher purpose, and value beyond a paycheck. Chip Conley (2007) refers to this as moving from “a job to a career to a calling.” The organization should have multiple bottom lines.

•  Growth opportunities. Skills and experiences are the new currency valued in the marketplace. People want to sharpen their skills and become better candidates for their next job, either within the organization or elsewhere. Continue to provide opportunities for people to grow and gain new experiences.

•  Flexibility and choice. Provide choices, options, and flexibility for people to make their own decisions. Open opportunities for all to participate and contribute, such as crowdsourcing innovation, bureaucracy-busting suggestions, or providing opportunities for anyone to participate in community work projects.

•  Collaborative networks. People want to collaborate with colleagues, build a sense of community, and grow their professional network. This becomes a huge source of learning, growth, and next steps, and enables the organization to learn from its successes and mistakes. The value people bring to the organization is directly related to the breadth and depth of their professional networks.

•  Meaningful touchpoints and recognition. It is extremely difficult to keep connected and reward performance in a fast-changing world. But simple formal and informal steps can have a major influence on performance. Have frequent huddles—not meetings—to keep teams informed and working together. You get what you reward.

•  Personal balance. This has been a time of incredible tension and stress. Energy, attention, and will are all exhaustible resources. We must find ways to rebound, rejuvenate, and replenish to ensure we are making the best use of our time, talent, and energy. For example, try to limit meetings to 30 minutes, take a 20-minute morning walk outside, don’t schedule appointments before 10 a.m., monitor your own time, and only check e-mail twice a day. (For more examples, refer to Forman 2020.)

•  Serendipity. Who says that work must be boring and dull? Think about ways to incorporate fun, quirkiness, and unconventional approaches. Some examples include new product idea bake-off, company garden, employee film festival, and roast-the-leaders lunches.

Each of these qualities, reinforced and nurtured by a culture that values reciprocity, trust, and transparency, leads to what Gary Hamel (2012) has called an “opt-in organization—one in which people want to come to work and are proud to be associated with.” Companies that achieve this opt-in status are, on average, 40 percent more productive than their counterparts who did not (Mankins and Garton 2017).

Flexible, Agile, and Resilient Structures

There has been a dramatic shift in organizational structures because the times demand it. Previously, most organizations were designed to enhance control, compliance, predictability, and efficiency. Top-down, command-and-control organizations of the 19th and 20th centuries were well suited to these goals and extremely successful. But the world is different now, and these vertical bureaucracies have been too slow and cumbersome—what was once a strength is now a weakness.

Instead, cross-disciplinary and self-governing teams are on the rise. These teams are business and customer focused, enable contribution by all, are built for experimentation, are open and transparent, and change as fast as the world around them. They are resilient and always looking for challenges, and rush out to meet the future. Today more than 80 percent of the work is done in medium to large organizations and emanates from teams, and yet they are largely ignored (Buckingham and Goodall 2019). Individuals may win trophies, but teams win championships.

A key aspect of high-performing teams is psychological safety (Edmondson 2018). Each team member must be respected, listened to, free to challenge conflicting views, and participate equally. Make psychological safety an important part of cultural values going forward to benefit from the agility and responsiveness of fast-moving teams.

Learning Mindset

Learning is now a survival skill. It is not a nice to have; it is a requirement given the continual uncertainty and changing conditions we all face. Technical information has a diminishing half-life and what we learn in university is out of date by the time we graduate. The only remedy for this condition is that learning becomes the most critical meta skill. Leading organizations have clearly recognized this shift. For IBM, the number-one criterion for an effective hire is a propensity to learn.

The danger is that some people may believe that they are beyond learning. They are likely successful, knowledgeable, and in an advanced position in the organization, and they may think that learning and schooling was something they did a long time ago. But this view is now a sure path to obsolescence and obscurity.

Instead of technical skills and specific experiences, the emphasis needs to be on meta skills that endure and guide future learning. Each organization’s list of meta skills will vary, but this example is from Fearless Talent Choices (Forman 2020):

•  Gritty learning mindset

•  Learning velocity

•  Curiosity

•  Anticipating change

•  Resilience

•  Influencing others

•  Systems thinking

While several of these meta skills seem like personal traits (for example, curiosity, resilience, and influencing others), there are ways to improve them even if you are not naturally good at asking questions or persuading other people. Visit the handbook website at ATDHandbook3.org for a tool you can use to assess these seven learning meta skills.

Final Thoughts

Organizational design is experiencing a renaissance. There is growing recognition that the smartest and most direct path to high performance is to enhance the workplace so the workforce can flourish. The six OD practices discussed in this chapter are all extremely important. If one or two are less than effective, the organization and its talent will suffer, and results will be less than desired. But when these six practices are working together, there is a synergy that is extremely powerful. There are no guarantees in this turbulent and volatile world, but the wisdom and experience in these OD practices are a great foundation to build upon.

About the Author

David C. Forman has spent the last four decades focused on improving the knowledge, skills, and performance of people. As a learning scientist, business leader, chief learning officer, author, and adjunct professor at the Pepperdine Graziadio School of Business, David has been recognized all over the world for his actions, courses, and writings. He has worked closely with such business clients as Apple, IBM, FedEx, Ford, American Express, SAP, Prudential, Deloitte, PwC, DuPont, and Allstate Insurance. In the nonprofit arena, David has worked with The Ford Foundation, Children’s Television Workshop, Cedars Sinai Hospitals, Johns Hopkins University, AID, and many governmental agencies. David’s latest book, Fearless Talent Choices, is a global bestseller. You can reach him at [email protected] and learn more about what he does at fearlesshr.com.

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