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Support Your Digital Transformation with Organizational Design to Ensure a Success!
“Successful transformation starts with recognizing that technology, however amazing, is fungible. It’s everything else in your organization that matters”.
The goal of digital transformation (DX) is to improve customer experience (CX), increase operational effectiveness, and develop new goods and services. Digital technologies are throughout this process, enabling the marketing, sales, product, customer service, operations, and finance teams to collaborate more efficiently and offer more interesting goods, services, and customer interactions.
Business strategy is the first step in digital transformation. Goals for products, services, marketing, and sales give the organization the fundamental framework and data they need to succeed. The executive team then establishes the framework for developing alignment and a realistic plan for digital transformation that can quickly change to reflect emerging marketing and technological trends.
However, the crucial element that determines the success of organization’s digital transformation is not the ability of utilizing the technology but modifying the organization to align it with its business strategy.
This is where organizational design plays a crucial role in digital transformation.
Organizational Design
What is organizational design?
Organizational design is a model that enables organizations to advance in complex business environments by creating a direct alignment between the organization and its strategy and business model, (Deloitte, n.d.). Organization design is the process of determining the structure and operation of organizations (Armstrong, 2009). Aligning an organization's structure with its goals in order to increase efficiency and effectiveness is the process of organizational design (the University of Southampton, 2021). It may be initiated due to a new mandate, the need to enhance service delivery or business processes.
All business operations, including crucial elements like the division of employees into various departments and the formal managerial hierarchies within an organization, are built on the foundation of organizational design. Smart early-stage organizational design decisions can lay the groundwork for success, enabling an organization to forge a solid corporate culture, expand in response to rising demand, and adjust to market changes.
Organizational Design is More Than Designing a Structure
Optimizing the arrangements for managing the business' affairs is the main objective of organization design. But achieving the "best fit" between the structure and the circumstances in which the organization operates is another major goal of organizational design. Organizational design is more than designing a structure. According to Armstrong (2009), organizational design involves:
• Clearly state the overall objectives of the organization, or the strategic goals that direct its operations.
• Specify how the work should be structured to accomplish that goal, considering the use of technology and other work procedures.
• Specify as precisely as you can the main tasks involved in completing the work.
• Arrange these tasks logically to prevent needless repetition or overlap
• Make sure that activities are combined, and that teamwork and cooperative effort are achieved.
• Include flexibility in the system so that organizational structures can quickly respond to changing circumstances and difficulties.
• Make information quickly available throughout the organization.
• Clearly define each organizational unit's role and purpose so that everyone involved understands how it contributes to achieving.
• Clearly define each person's responsibilities, powers, and roles.
• Take into consideration each person's needs and goals
• Create jobs that maximize an employee's abilities and skills while also fostering high levels of intrinsic motivation for them.
• Create an organizational development plan and put it into action to make sure the organization's various processes function in a way that promotes organizational effectiveness.
• Create teams and project groups as needed to handle particular project-related processing, development, professional, or administrative tasks.
Organizational Design: The Star Model™
A relevant example of organizational design is the Star Model™.
What is the Star Model™?
The Star Model™ was developed by Jay R. Galbraith in 2011. It is a set of planned policies that can be controlled by management and have an impact on employee behavior. The Jay Galbraith Star Model assists businesses in creating the organizational structure required to uphold their value propositions and business models over time. It recognizes that the organization must change over time in response to shifts in strategy, market forces, or other aspects of the external business environment. The formal organization is thus treated as an ongoing design challenge.
The five components of the Star Model—Strategy, Structure, Processes, Rewards, and People—should be linked and aligned to successfully influence the choices and actions of your organization. As a "center of gravity" holding the five areas together, the business model is positioned in the center of the star.
The Star Model™ was developed by Jay R. Galbraith in 2011. It is a set of planned policies that can be controlled by management and have an impact on employee behavior. The Jay Galbraith Star Model assists businesses in creating the organizational structure required to uphold their value propositions and business models over time. It recognizes that the organization must change over time in response to shifts in strategy, market forces, or other aspects of the external business environment. The formal organization is thus treated as an ongoing design challenge.
The five components of the Star Model—Strategy, Structure, Processes, Rewards, and People—should be linked and aligned to successfully influence the choices and actions of your organization. As a "center of gravity" holding the five areas together, the business model is positioned in the center of the star.
The Application of the Star Model™ to Digital Transformation
1. Strategy
Set direction using your mission, goals, and objectives. The strategy outlines in detail the products or services to be delivered, the target markets to be reached, and the value to be provided to the client. Additionally, sources of competitive advantage are listed. The most important activities are determined by strategy, which serves as the foundation for choosing the best trade-offs in organizational design.
2. Structure
Establishes the location of decision-making. Depending on the characteristics of the business model, the ideal organizational structure will be determined. Structure policies can be subdivided into specialization: type and number of job specialties; shape; distribution of power; departmentalization. These choices must be closely aligned with strategy because they serve as the fundamental pillars of an organization in many ways.
3. Processes
The organization's proposed structure for information and decision-making flow. Processes can be horizontal or vertical. Business planning and budgeting processes are typically vertical processes. The needs of various departments are centralizedly gathered, and priorities for budgeting and resource allocation are determined. The workflow is the focus of horizontal processes, also referred to as lateral processes. Examples include developing new products or entering and fulfilling customer orders.
4. Reward Systems
Encourage team members to be motivated by the organization's goals by influencing their motivation. Managers should use incentives and rewards to encourage employees to behave in a particular way. To have an impact on the strategic direction, the reward system needs to be compatible with the structure and procedures. Only when reward systems are used in concert with other design decisions do they make sense as a whole.
5. People and Policies
Employers can shape and define the attitudes and abilities of their workforce through recruitment, promotion, rotation, training, and development. The right combinations of human resource policies produce the talent needed by the organization's strategy and structure, producing the abilities and perspectives required to carry out the selected course. Human resource management practices also strengthen an organization's capacity to carry out its strategic objectives.
The tendency when looking at organizational design and Digital Transformation is to see how Digital Transformation needs to be best structured within the organization to accomplish its transformative activities and goals. It is important to remember that organizational design provides the structure for business processes and the framework for an organization to deliver its core qualities.
Reference:
Armstrong, M. (2009). Armstrong’s Handbook of Management and Leadership: 2nd edition. United
Kingdom: Kogan Page Limited.
Galbraith, J. R. (2011). The Star Model™. Available at
http://www.jaygalbraith.com/images/pdfs/StarModel.pdf
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