The design of the organizational structure goes beyond the definition of the organizational chart. The organizational design has as its goal the alignment of the organization with the business strategy and must define scope, roles, directives, processes, interactions, capabilities, and management practices.
The common error committed by companies is to NOT consider the relevant factors of the current state of the organization and to jump directly into the organizational design. They design their structures without considering the current state of the organization, or they assume that the current organization can execute the strategy, while this may not be possible.
If management does not place importance on this subject, or does misunderstand its role in the organizational structure for the strategy, it causes:
- Disorder in the management of objectives—the strategy is made inoperative in terms of those responsible
- Confusion between priority and importance—strategic directives do not translate into objectives aligned with clear incentives and rewards
- Decision-making gray areas—conflicts between areas and assignments among executives
- Failed results due to lack of commitment and duplicated efforts among areas
- Assignment of responsibilities that do not exist or that are inappropriate
- Not making the necessary organizational adjustments to strategy changes as a reaction to some factor that management or associates detect
When the organization is aligned to strategy…
- The lines of authority, communication, assignments, and function distribution are directed to a single objective within the hierarchical framework
- The form and measurement of roles, governability, and responsibilities are delegated, controlled, and coordinated within an established limit: everyone knows their duties and responsibilities
- Information flows naturally between different management levels; there is no confusion
- The company understands the scope and capabilities of the current organization, the environment and its restrictions
- It perfectly understands what the organization is and where it is going