Organizational Architecture

Did you know that poor organizational structure has an impact of 18-23% of your people costs? This may sound staggering and scary – but the worst part is that this is not all!! There are other intangible losses that impact performance, communication, collaboration, retention, and culture. Poor organizational architecture has been one of the root causes for today’s great resignation wave – as it is estimated that only close 12-15% of organizations have clear role definitions!

In a recent poll I conducted across 100+ participants, the two key elements that came out were – lack of connection to purpose (34%) and too many layers leading to bureaucracy (30%). Lack of clear roles came a close third (26%) and what surprised me was that only 10% felt that structures and roles were not connected to outcomes.

In my extensive interactions with CEOs and HR leadership, we have come to realize that there are really two perspectives – a group that does not believe they may have a problem and another one who thinks it is not an important area to attend to! Both are wrong, dangerous, and detrimental to people, performance, and profits of an organization all leading to a toxic culture.

The misconceptions are many, but the key ones that have always surfaced include – structure is only on paper, structure does not translate into or influence the way work gets done and how it is measured, it is purely an activity for HR, structures do not tie into or drive performance, structures have changed over time based on personal choices, individuals, etc.

The relevance of organizational architecture has gained significant importance in the new ‘post pandemic’ phase we operate in and its is even more relevant as organizations and people migrate to a more ‘hybrid’ way of working. In the hybrid models, it becomes imperative to define what work gets done, why, where, by whom to what end. Everything around the structure needs review, such as, process, systems, technology, and empowerment! Every organization should spend time relooking at how work is organized!

That brings us to the key point of understanding the difference between organizational architecture, organizational design, and structure.

Organizational structure

It is the framework for work allocation, coordination, and reporting in an organization. It can also act as a foundation to define functional operating procedures.

Organizational design –

This is where process, procedures, workflows, structure, and systems are defined. The design also focusses on seamless flow of work, technology, manageable layers, and spans of control for various positions.

Organizational architecture

Is more strategic in nature and brings together both design and structure to ensure that it aligns and enables the strategic objectives and purposes of the business, connecting them to the structure, systems, process, and people (skills & competencies) to ensure sustainable & scalable performance. All of these come together to define the culture.

It is very critical to define the organizational architecture and from there evolve into design and structure that is supported by clear roles, responsibilities, and accountabilities.

Organizational architecture should address the following connections:

  • Strategy & Purpose – this defines why we are in the business, where we intend to get to and how. It is imperative that the organization and its people are all working together and in tandem to help meet this vision.
  • Structure & People – defining how work gets done and by whom. Building lean, agile yet resilient structures that can ensure clear accountability, responsibly and empowerment by linking the type of people skills, competencies and capabilities that are needed not just for today, but also for the future.
  • Processes & systems – ensuring that the process and systems within the organization are agile, efficient, and simple to use, supporting the effective functioning of the organizational design. Many a times organizations and people fail as they are not backed by strong processes, systems, and technology
  • Performance & Metrics – Ensuring that the various roles and jobs clearly know how their performance contributes to the meeting of the strategic objectives, clear measurable deliverables and the rewards that go with it. This typically is the weakest link and can potentially break the entire design.
  • All these connections ensure building the desired culture for the organization that typically determines whether people stay and grow or growl and go! Many leaders seldom make the connection of retention to the pitfalls of their organizational architecture!

While there are many models for organizational design, each of them could come with their pros and cons. The most important aspects that we should not miss (but often miss) clarifying are:

  • Competing priorities – typically in matrix relationships, we need to ensure that the arms of the matrix are well defined, accountabilities are well articulated, and inter-connections are strong. The governance mechanism for tracking priorities should be open & transparent.
  • Role definition – Poor role design and definition is one of the key reasons for increased employee attrition (turnover). This not only causes confusion of what is expected of people but more importantly has huge imbalance in workload distribution and improper consolidation of roles.
  • Lack of ownership – if the structure is not aligned to strategy & purpose, there is no ownership or a sense of belonging for the people who perform the roles. Not only do they feel a sense of ‘not knowing how I make a difference’ but also fosters a culture where key elements of work just does not get done, affecting the customer and the organization’s growth.
  • Communication – the structure should not only allow top-down cascading of critical information, but also bottom-up and across the organization. With these multi-directional open & transparent channels of communication, helps organizations learn, respond, react and fosters empowerment.
  • Teamwork & Collaboration - when priorities are clear and everyone is working to a common purpose with shared objectives, we eliminate bureaucracy, politics, silos and bitterness – often these affect the operative levels in an organization leading to poor overall results
  • Accessibility – excessive spans of control make bosses and leaders completely inaccessible. This not only delays decisions being taken, but more what is more concerning is that organizations do not take decisions at all! If all decisions hinge on the availability and approval of the managers, then takes a huge toll on the responsiveness of the organization to both its people and customers

Typically, those who believe that their organizations are best designed (which most think they do) get just the results they get and not what they would like to! Organizational design and structures should not be static but should be agile enough to accommodate changing business priorities, environment, and employee expectations – a most recent example that we have all lived through is the effect of the pandemic and the growing evolution of hybrid work and worklife balance.

Often, it is difficult to identify these issues when you are embedded in the problem – one is seldom able to determine if there is a problem with the structure or if they are the problem! - It is time to assess your organizational architecture through external eyes to bring in an alignment of purpose / strategy to what work gets done where, how, by whom and what is the measure of required success! If one takes time to step back and think of the factors affecting your organization meeting its full potential, one is sure to find a solution that works!