Organisational Design

What organisational design is

Organisational design (التصميم التنظيمي) is an organisation’s deliberate choice of its structure: how work is divided into jobs and units, who reports to whom, where decisions are taken, and how many rules are written down, so that the structure fits what the organisation wants to do, its size and the nature of its work. It is a body of decisions. The chart the designer draws is a trace of those decisions and not their origin.

Design can be confused with drawing. Someone who draws boxes and connectors between titles has not yet designed anything. Design begins when a question is answered: why does this department report to that one, and what changes in the flow of decisions if that is altered?

The questions organisational design answers

Design decisions can be reduced to questions that recur in every organisation. This is a division we adopt for the sake of explanation, not a rule to be cited, and each question has a term that covers it in detail:

• How finely is the work divided? An employee may take a small set of tasks and repeat them, or take work from start to finish. That is the subject of job specialization, which carries a visible gain and a cost that shows later.
• On which axis are jobs grouped? They can be grouped by specialism in departments that serve the whole organisation, or by product, market or region in units that stand on their own, as in a divisional structure.
• How many people report to each manager? The number of subordinates one manager supervises directly is the span of control, and from it follows the number of management layers.
• Where is the decision taken? The right to decide may move from the top to lower levels under a written rule. That is decentralized management.
• How many rules are written down? The extent to which work is run by written rules and procedures is formalization.

The questions are connected. A narrower span adds layers. Added layers slow decisions if decisions stay centralised. Tighter rules can make up for the lack of closeness between those who decide and those who carry out. No question is settled without looking at its neighbours.

How span of control changes the number of managers

Take an organisation with 120 operational employees and compare two decisions about span of control, using hypothetical figures.

• A span of 8. 120 ÷ 8 = 15 direct managers. Those 15 need 15 ÷ 8 ≈ 1.9, that is two managers, and then one manager above those two. The total is 15 + 2 + 1 = 18 managers, and three management layers.
• A span of 12. 120 ÷ 12 = 10 direct managers, and one manager is enough for them. The total is 10 + 1 = 11 managers, and two layers.

The difference between the two decisions is seven managers and one whole layer. But the figure does not settle the choice by itself. A wide span gives fewer layers, a faster decision and lighter supervision of each person. A narrow span gives closer supervision and lengthens the path of a decision. So other questions are asked. Is the work of these employees similar or varied? Does the direct manager take decisions or pass them upward?

What organisational design is built on

The designer does not start from a blank chart. The designer starts from questions about the organisation itself:

• What does it want to do? An organisation that wants speed in adapting to changing demand needs a different structure from one that wants consistency in a repeated service.
• What is its size and how many sites does it have? The written procedures it needs change when sites multiply, because the work can no longer be run by personal knowledge alone.
• What is the nature of the work? Routine repeated work accepts fine division. Work that changes with each case needs wider decision authority for the person who carries it out.
• Who holds the knowledge? If the knowledge is held by those who carry out the work, moving the decision to the top takes it away from the people who know.

These questions serve diagnosis and are not rules to apply as they stand. The answers become real positions in the headcount plan, the approved list of funded positions for a set period. Design settles which roles exist, and the headcount plan shows how many are funded.

How organisational design differs from its neighbours

• The wider effort. Organization development is a planned, continuing effort to raise the effectiveness of the organisation by working on structure, processes and behaviour together. Design is the decision about structure alone, so it is one part of what that effort works on. A new structure laid over old processes reproduces the problem under different names.
• The human side of the transition. Change management is how people move to the new arrangement. An excellent structure can be designed and still fail in practice because nobody managed the people’s move to it.
• The recording document. The organizational manual is an internal document that describes the administrative units, their reporting lines, their tasks and the limits of authority at each level. It is a record of what the design decided, and it is not the design itself.
• The matrix. A matrix organization is one particular form of structure in which an employee reports to two parties at once, a manager for the specialism and a project or product manager. It is one possible answer to the grouping question, and it is not a synonym for design.

How the design process runs

The process runs in consecutive steps, and it goes wrong when one step is put ahead of the one before it:

1. Identify the indicator. What is working badly today, written in a form that can be monitored, such as the length of the wait for a particular decision.
2. Set the criteria. What is to improve, and what may be allowed to slip a little in return. No structure achieves everything together.
3. Propose two alternatives or more. Someone who has set out only one alternative has not designed. That person has endorsed what was first imagined.
4. Judge each alternative by the same criteria. The same design questions are put to each, so it can be seen where each improves and where each costs.
5. Write down the decision rights. Who decides each type of decision, and up to what limit.
6. Pilot in one unit. If possible, and then review against the expectations that were written before the change.

When organisational design is reconsidered

Design is not reopened because the chart is old. It is reopened because indicators have appeared in the flow of work:

• Decisions that climb because nobody below can settle them. Authority does not sit where the information sits.
• Work duplicated in two places. Two units do it without either knowing about the other.
• Dangling responsibility. An outcome for which nobody is held to account because three parties touch it.
• Growth that has changed the size. A structure designed for twenty employees cannot be carried over as it is to two hundred.

The indicator is recorded before the solution. Someone who starts drawing a new structure without writing down the indicator that called for it will not know whether things have improved.

Where human resources fits in organisational design

Design is not left to the human resources function alone, and in our reading the decision belongs to senior management. Human resources nevertheless has work of its own in it. It translates the structure into described jobs, sets what each job requires by analysing what is actually done in it, places the jobs on the grade scale, and moves existing employees into the new positions through written procedures.

The human resources function is itself something to design: which of its activities are carried out from a central point and which are placed closer to the departments. The HR operating model is the answer to that question: the way the human resources function is itself organised. Designing the organisation and designing its human resources function are two different decisions, even though one may follow the other.

Where the effect of design alone stops

Design changes who sees what and who decides what, but it does not change what is rewarded or what people are held to account for. If an organisation moves the right of decision to the branch manager and then penalises every error in a decision taken in good faith, the manager returns to passing decisions upward regardless. A flattened structure does not create dialogue between departments if its incentives are competitive.

A small organisation is not excluded. In an organisation of twelve employees, design may be a single decision: may the accountant authorise an expense up to a certain limit without going back to the owner, and where is that limit? The question is as small as the organisation, but it is still a design question, and writing down the answer saves everyone a question that would otherwise recur every week.

Mistakes in organisational design

• Designing around people. A job is drawn to fit whoever holds it today, and when that person leaves the job has no meaning. The job is designed around what the work requires, and only then is the question asked of who suits it.
• Drawing boxes without decision rights. The chart shows who reports to whom and does not show who decides what. It needs a table that allocates roles on each task, stating who carries it out, who answers for it, who is consulted and who is informed. A RACI matrix is a table of this kind.
• Copying another organisation’s structure as it stands. It suits that organisation, with its size, its work and its sites, and it need not suit yours.
• Constant redesign. Restructuring every year keeps everyone waiting for the next structure instead of doing the work in the current one.

Is there an ideal structure for an organisation of a given size?

In the sources we reviewed, we found no reference that prescribes a single structure for a particular size or sector. Any figure that circulates for a span of control or a number of layers is therefore taken as an assumption for calculation, not as a standard.

What can be said is that a choice is tested by its result. Specific expectations are written before the change takes effect, such as the time a decision takes from request to answer and the number of cases that climb to a higher level, and they are compared after a stated period. Without that test, the judgement of a structure remains an impression.

This is an explanation of the concept, not legal advice.