Organization Design: The Secret to Scaling for Growth

"Hierarchy works well in a stable environment."

Mary Douglas, Anthropologist

Our world is in constant change. Digital disruption, industry reinvention, an endless pandemic, remote and hybrid ways of working, the toughest labor market in a lifetime, inflation, the Great Resignation / Migration / Realignment, every role changing rapidly, the metaverse, and more challenges hit us daily. Every company is trying to recruit and retain people, move them around quickly, build or find new skills, and combat stress and burnout. New products and services evolve quickly, and customers and employees look for more from our companies. The organization we had yesterday looks nothing like it does today. At the heart of these issues is a largely unsolved, massive problem:

How do we organize our company to be more responsive, agile, and scalable?

Take, for example, the tough labor market. If you are having trouble hiring, you could blame it on pay, inflation, or the great realignment. But what if something more fundamental is at the root of it? What if the work, job structure, and organizational model are not designed for success? To address these issues, we embarked on a year-long, broad-based study of organization design with 350+ companies and 76 organizational practices.

Organization Design: The Most Mysterious Management Topic

Our Big Reset groups (weekly discussions with hundreds of HR, Talent, L&D, and DEI executives from around the world) echo what we hear from our clients and members: Designing organizations for success is still a mystery, usually left to external consultants and experts as big projects in conference rooms. Based on our Global HR Capability Project (with participation from more than 8,000 HR leaders), the ability to drive change and transformation is the top development priority, yet 3 out of 5 HR practitioners are mere beginners in applying basic organization design principles to design the company for success.

Our Organization Design research shows more than 50% of companies are not effective in designing organization structures, and only 1 in 5 is effective in work design. Basically, people are just not very proficient with it.

What's going on? A look at the history of organization design can shed some light.

An Ancient Discipline, Ripe for Disruption

Organization design has been around for hundreds of years, with the earliest books going back to the 1700s. In the 1970s, Jay Galbraith developed the Star Model, showing that organizational structure is only one part of organization design and that rewards, culture, job design, and processes are all important. Despite this long history, we find through our research that fewer than 15% of companies have an organization design team, expert, or process—so there’s a lot of work to do.

A lot has happened since the 1970s—personal computers, smartphones, the internet, social media, data and analytics, remote and hybrid work, worker empowerment, and more. Today, we need a new, business-aligned model for organization design. 

A Framework for Business-Driven Organization Design

Our Organization Design Framework comprises seven major elements and 20 dimensions.

We explain each of these elements and dimensions in our Definitive Guide to Organization Design: The Journey to Agile. The basic premise: merely focusing on organizational structure and hierarchy, spans and layers, and management models is not enough. Companies need to start with the business itself (identifying strategy, culture, and leadership), then define the operating model (identifying the customers and what roles, governance, and metrics are needed), describe what work needs to be done to drive success (work composition, accountability and rewards, and skills and experiences), and only then define job structures and organizational models.

How are companies doing this? And where do you fit in?

The Organization Design Maturity Model

Based on in-depth statistical analysis and many hours of discussions with HR, OD, and business leaders, we developed our four-level Organization Design Maturity Model.

Companies fall into four distinct levels of organization design maturity, with level 1 the least impactful, and level 4 the most. These levels are found across industries, geographies, and organizational sizes (although there are some distinctions, with those industries that have been forced to operate in agile ways performing much better).

Only 11% of surveyed companies are at high maturity—agile and accountable. They start with the work itself, identify the outcomes needed for success, and then clearly define accountabilities, rewards, skills, and experiences.

Why Organization Design Matters

So, what practices matter most? We identified fifteen practices that have an outsize impact on business, people, and innovation outcomes. We call them “essentials” because without them very little else will matter. When they’re deployed, many of the typical approaches work well. But when they’re not, a focus on the right structures, organization design methodology, or job architectures simply won’t drive much impact.

What really matters is:

• Focusing on accountability and rewards for outcomes
• Designing a fit-for-purpose model
• Building flexibility into organizational structures and job designs
• Considering the employee experience in the design itself

Companies that use these strategies have much better business, people, and innovation outcomes.

Five Myths of Organization Design

As we evaluated all the practices, programs, and approaches of organization design, we were able to bust five common myths.

Myth 1: Organization design is an expert discipline, best left to consultants.

Truth: While organization design concepts matter, the art of applying them for your own setting matters more. In today's ever-changing world of work, every leader and HR practitioner need to be skilled to apply organization design principles to their unique needs.

Myth 2: A new hierarchy is the key deliverable of effective organization design work.

Truth: Starting with structure is putting the cart before the horse. How you operate matters more than how you organize. Work design, collaboration practices, and networks of teams are more impactful than carefully designed hierarchies or rigid job models.

Myth 3: Defining "who reports to whom" is critical.

Truth: Yes, managers are important. But the traditional model of combining people management and work management is based on the old notion of "management" and "labor." These two roles require different skills, experiences, and management approaches, so agile organizations split them.

Myth 4: Agile is about "the agile manifesto", applicable to agile software development.

Truth: Agile is for everybody. Leading companies like Telstra, Bosch, and Cardinal Health are not tech companies and apply agility and accountability to all their business practices, with amazing results for their people and their business.

"It completely changed us. We went from selling power drills to helping customers solve drilling problems," a Bosch executive told us about their agile transformation.

Myth 5: Defining accountabilities inhibts agility and flexibility.

Truth: Identifying what the accountable party will do to drive success is the most impactful practice overall. Clearly defining exactly one party (not several parties, or none) and rewarding success helps to be much more agile, especially if that party has the freedom to decide how to accomplish these results. Otherwise, there will be duplication and rework, or things will fall through the cracks.

For example, one large bank didn’t have an accountable party for customer experience, only for customer service—leaving behind topics like customer onboarding, products, online and offline experience, and pricing. Once the bank instituted a separate customer experience group to work across the entire bank, customer satisfaction improved by ten percentage points within six months.  

A New Approach to Organization Design

Organization design can no longer be a mysterious science reserved for a few elite external experts. Every businessperson and HR leader will need to learn about it to influence not only hierarchies (as they are not the key point of organization design), but also how the business and the culture work, as well as the operating models, work designs, skills, and jobs—and then determine accountabilities for outcomes.

Knowing this topic and understanding what levers to pull to solve real business problems will be the most important differentiator between failure and excellence for companies in years to come.

The new organization design approach is a complete paradigm shift.

The traditional model assumes a company acts like a machine that you can "fix" when something is not working. Today's organizations work like living organisms, constantly adapting to the environment and changing for the future - to help not just thrive today but scale for the future.

Where to Go Next

• Review the infographic, executive summary, and podcast about the new agile organization design approach.
• Read the full 75+ page Definitive Guide to Organization Design: The Journey to Agile (available publicly for the next 30 days and then reserved for Josh Bersin Company Members). You'll find a full description of the Organization Design Framework, the fifteen essential practices, a comprehensive Organization Design Maturity Model, action steps to operationalize organization design for the future, and case studies from companies like Bosch Power Tools, DCP Midstream, and Telstra.
• Join us for our in-person conference Irresistible on May 23-25 in Los Angeles to learn together with 400 HR, Talent, and L&D leaders to scale your company for the future.
• Participate in the Global HR Capability Project to assess your organization design capabilities and learn how to improve.
• Contact us to become a JBC Member for access to action-oriented, practical research, assessments and diagnostics, learning programs, community, and much more.
• Join 40,000+ HR professionals in the Josh Bersin Academy to learn more about change agility, design thinking, and human centered leadership in 25 certificate programs.
• Stay tuned for our new Superclass on Organization Design. It's coming soon.