Situations that Trigger Org Design

Org design work is triggered by a surprisingly short list of fundamental situations. Looking back at past work, whether at the enterprise, division, or function level, I have found that it has been initiated by four primary situations.

Growth. This is design initiated by new value creation situations, typically driven by opportunities or challenges within three broad factors:

• Customer. For example: new segments, markets or vertical opportunities or preference/expectation changes that impact how customers are served.

• Competitor. For example: competitors offer new value, innovation, pricing pressures, cost structure pressures.

• Market Forces. For example: macro / micro economic conditions (e.g., inflation, recessions, fuel costs, interest rates); geo-political conflicts or political policy; state or country-specific regulation; supply chain issues; natural disasters, pandemics or a crisis; or disruptive technology innovation.

Growth indicates ongoing viability; organizations that create or capitalize on opportunities to bring new value or benefits to those they serve will thrive.

Scale. Growth adds complexity faster than most organizations can organically absorb. A model that worked at 200 people breaks at 800. Roles and core workflows are clear when an entire function consists of 5 people; both become blurry when that function has a team of 40 with two layers of management. Decisions that used to happen naturally in a doorway now require 2-hour meetings. Spending is necessary to secure growth opportunities, however it’s common for organizations to add cost commensurate with growth. This does not scale; more than harming profitability, it increases complexity, ultimately creating a performance issue.

Performance. This is design driven by some degree of an optimization, productivity or performance issue. This broad category ranges from turnaround to important operating inefficiencies that could worsen and compound toward a significant performance risk.

For example, a significant downturn could present as a flattening then decline in sales; or a clinical phase 3 trial result that ends a pipeline path that lost $800M in capital investment. Less dramatic examples are either emerging or persistent performance issues worth fixing. These performance issues often manifest and are characterized as:

• Cross-functional coordination or cooperation challenges.

• Alignment issues (e.g., role ambiguity, duplication of effort).

• Too many management layers and/or spans of control creating drag.

• Decision making pain; too long, too revisited, too escalated, pocket vetoed, or poor quality.

• Accountability issues; insufficient drive for results and holding people accountable.

• People or Talent issues; involuntary turnover, high-performers leaving, key roles with no qualified incumbents or talent pipeline, inability to attract the capabilities the strategy requires.

M&A Integration. Good design takes mergers and acquisitions beyond the fundamentals (e.g., rationalizing ERPs). To accelerate and realize the value, this situation requires designing a coherent operating model that reflects the strategic value proposition of the combined entity.

Intersections between the two legacy structures almost always create confusion. The more complex the integration, the more likely design work will be necessary at the strategy, structure, workflow, role, culture, and governance to ensure the new organization operates like a well-oiled machine.

Secondary Triggers

Clients have presented several other situations, but I would categorize them as secondary triggers. After further discussion and discovery, it becomes evident that these secondary triggers are driven by one or more of the primary situations. The most common examples:

• New Leader. New leaders bring new directions and strategies, new performance expectations, and fresh eyes on where the organization is and isn’t working. That combination almost always surfaces a redesign need — which usually traces back to one or more of the primary situations. Leadership transitions are also natural inflection points. The incoming leader has a window to make changes; the best ones use that window with purpose.

• Culture Change. After a robust discussion about what led to this conclusion and why it would be desirable to change the culture, it almost always leads to one or more of the primary situations.

Situational Design Leadership

Org design is often a mix of proactive opportunism and reactive responsiveness. The best leaders do both. They proactively look for opportunities to innovate and continuously improve to drive growth and they also respond when the organization gets off course.

The best of the best do org design work regularly and systematically – for the right reasons, at the right time, and with the right discipline. Over time, these organizations become culturally high-performing as they continuously and deliberately evolve and adapt to these primary situations so their organizations can thrive.