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High-Impact Organization DesignResearch: In Brief
Overview
The traditional idea of organization design as an infrequent activity conductedby siloed experts or consultants is increasingly disconnected from reality. In
today’s world of work, organizations are constantly confronted with disruptionsborne from economic, political, demographic, and technological changes thatrequire agile design solutions. It’s no wonder that 68 percent of respondents inour High-Impact Organization Design survey said their companies had undertakena major transformation or restructuring in the past 18 months, and more thanone-half of those surveyed reported they engage in frequent redesign efforts.1
The success of all these efforts is a function of organization design maturity—which research shows is a relatively rare quality. Only 8 percent of organizationshave attained the highest level of organization design maturity, but those that havereport significantly better financial, operational, and workforce outcomes thanorganizations at lower maturity levels.2 This article presents select organizationdesign principles that can help companies determine their path to matureorganization design.
In This ArticleWhy organization design improvement is crucial to your organizationaSelected findings from our High-Impact Organization Design researchaThe journey to a highly mature organization design capabilitya
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RESEARCH ARTICLE
David Mallon, Vice President & Chief AnalystBersin, Deloitte Consulting LLP
Timothy Davis, Senior Research AnalystBersin, Deloitte Consulting LLP
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High-Impact Organization Design Research: In Brief
What Leaders Need to KnowThe constantly changing environment in which companies operate hasbecome the norm, not the exception. Nearly one-half of respondents (46percent) in our High-Impact Organization Design survey described thenature of their workplace as “highly unpredictable.” Only 13 percentcharacterized their company’s business environment as “calm.”3
Yet most leaders do not believe that their organizations can successfullynavigate their way through the changes ahead. Most of the respondentsin our survey (57 percent) said they are not confident that they canredesign their companies quickly in response to change. This echoes amajor finding from Deloitte’s 2017 Global Human Capital Trends survey of10,000 executive employees: 88 percent of respondents said building theorganization of the future was important, but only 11 percent of thembelieved they understood how to do so.4
The solution to this conundrum is organization design, which pioneer JayGalbraith defined as, “the deliberate process of configuring structures,processes, reward systems, and people practices and policies to create aneffective organization capable of achieving the business strategy.”5 Buildingon that foundation, a few of the insights revealed in our High-ImpactOrganization Design research include:
Organization design doesn’t stop at organizational•boundaries. This is the strongest finding of our research. High-performing organizations are 19 times more likely than theirlow-performing counterparts to regularly evaluate the degree towhich their design is appropriate given the current externalenvironment.Adaptability is the proper goal of organizational design. This•
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High-Impact Organization Design Research: In Brief
finding reveals a clear trend in high-performing organizationsleaning toward building flexibility and agility into the organization.They’re doing so by reimagining the work and the workforce—andby creating more team-based and networked structures capable offast decision-making and agile response.High-quality designs must address decision rights and•governance. To adapt to change nimbly and efficiently, decisionrights and governance must be clearly defined and transparent.Otherwise, decisions can become stumbling blocks instead ofenablers.
The Journey to Organization Design MaturityIt is useful to segment the journey to organization design maturity intofour progressive levels (see Figure 1). These levels are defined and drivenby five factors:
The ability to create designs that are inclusive of the external•environment and ecosystemThe development of data infrastructures and analytics capabilities•that can sense and make sense of what is happening in the worldThe incorporation of intended behaviors in designs•The degree to which designs grow and empower people•The use of customer-driven, team-based structures•
All of these factors contribute to organizational adaptability.
Characteristics of High-Maturity OrganizationDesignThe small group of organizations that have attained the highest level oforganization design maturity—Level 4—continuously sense and analyzethe environment in which they operate.6
They use the insights derived from this activity—along with significant inputand representation from a wide set of stakeholders—to inform ongoingfluxing within the organization and to cocreate design changes.
Figure 1: The Organization Design Maturity Model
* The white circles to the right of each maturity level indicate the percentage of surveyed companies at that level.
Source: Deloitte Consulting LLP, 2019.
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Copyright © 2020 Deloitte Development LLC. All rights reserved. Not for distribution. Licensed material.
High-Impact Organization Design Research: In Brief
At this level of maturity, there is a solid connection between designdecisions and the purpose, strategy, and outcomes of the organization. Allof the respondents at Level 4 in our High-Impact Organization Designsurvey (versus only 29 percent of Level 1 respondents) say that thestructure of their organizations supports the achievement of theirstrategy.7
Leaders at Level 4 use all the levers at their disposal in their designs. Theyplace special emphasis on decision-making rights and governancebecause they intend to create designs that enable and supportempowerment, influence, and transparency. There’s also a consistentfocus on learning, innovation, and collective success in workforceexperience, as well as an emerging workforce mobility that enables theflow of talent wherever it is needed.
In Level 4 organizations, teams are how work gets done. The voice of thecustomer informs team composition and activation, and team compositionis fully integrated with career and workforce development.
As a result, Level 4 organizations enjoy a host of benefits (see Figure 2),including consistently hitting financial targets and achieving high levels ofcustomer satisfaction. Even better, companies in higher levels oforganization design maturity (Levels 3 and 4) report a three-year revenuepremium of 23 percent over organizations in the lower levels of maturity(Levels 1 and 2).
Figure 2: Outcomes—High-Maturity vs. Low-Maturity Organization Design
Source: Deloitte Consulting LLP, 2019.
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High-Impact Organization Design Research: In Brief
Looking AheadIt’s time to evolve from the project-based, equilibrium-seeking approachto organization design. Traditional methods need to be replaced with newpractices that leverage ongoing organization design practices to enablecompanies to continuously flux with the environment. Today, this ability tocontinuously adapt is a competitive advantage for a few organizations.Tomorrow, it will be the table stakes required to get into the game.
Key TakeawaysAOnly 8 percent of surveyed companies have attained the•highest level of organization design maturity—but they reportsignificantly better financial, operational, and workforceoutcomes than organizations at lower maturity levels.High-performing organizations are designing more team-•based and networked structures that are capable of fastdecision-making and agile response.Mature companies are 19 times more likely than their lower-•performing peers to regularly evaluate the degree to whichtheir design is appropriate, given the current externalenvironment.Organizations at the highest level of organization design•maturity continuously sense and analyze the environment inwhich they operate.In addition to other positive outcomes, organizations in the•upper levels of organization design maturity (Levels 3 and 4)report a three-year revenue premium of 23 percent overorganizations at Levels 1 and 2 maturity.
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High-Impact Organization Design Research: In Brief
EndnotesSix Top Findings for Designing Tomorrow’s Companies Today, Deloitte Consulting LLP / David Mallon and Timothy Davis, 2019.1.High-Impact Organization Design: Maturity Model, Deloitte Consulting LLP / David Mallon and Timothy Davis, 2019.2.Six Top Findings for Designing Tomorrow’s Companies Today, Deloitte Consulting LLP / David Mallon and Timothy Davis, 2019.3.2017 Deloitte Global Human Capital Trends: Rewriting the rules for the digital age, Deloitte Consulting LLP and Deloitte University Press,4.2017, https://www2.deloitte.com/us/en/pages/human-capital/articles/introduction-human-capital-trends.html.Designing Dynamic Organizations: A Hands-on Guide for Leaders at All Levels, Jay Galbraith, Diane Downey, and Amy Kates / AMACOM, 2001.5.High-Impact Organization Design: Maturity Model, Deloitte Consulting LLP / David Mallon and Timothy Davis, 2019.6.Six Top Findings for Designing Tomorrow’s Companies Today, Deloitte Consulting LLP / David Mallon and Timothy Davis, 2019.7.
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Publication Date: September 26, 2019
