5 golden principles in corporate organizational design

5 golden principles in corporate organizational design

5 golden principles in corporate organizational design

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“Organizational design” is no longer an unfamiliar term for a business. But why is it that less than 25% of businesses redesign successfully? 

In a challenging and volatile environment like the present, technology is constantly updating rapidly, the trend of globalization is still pervasive, social norms are always changing, etc. requires leaders to always be ready to adapt to any change to have a strong foothold in the market. And frankly, this adaptation often comes with a re-engineering of the organization.

A study from McKinsey & Company shows that: Less than 25% of companies succeed in re-engineering their organization, 44% “lose their breath” immediately after implementation, and a quarter fail to achieve their business and improvement goals. improve overall performance. Ron Carucci – co-founder and managing partner of Navalent – outlined 4 major problems businesses face due to organizational design errors (he has more than 30 years of experience working with solution executives). address strategic, organizational, and leadership challenges).

4 common mistakes when designing a business organization


Set multiple priorities

When conducting enterprise organizational design, leaders sometimes set too many priority goals or high-priority tasks in the organization or department. This causes ambiguity and difficulty in assigning tasks and managing resources and from there, leads to conflict in the organization.

To avoid this situation, the management needs to think carefully to set clear and specific goals and tasks, focus on the ones that have the greatest impact on the business, and achieve them first. Then, once those goals have been achieved, other goals can be included to ensure the organization’s sustainable growth.


Construction of inappropriate locations

Many leaders often assume that when too many employees resign, the problem here lies in employee retention. From that fact, the HR department of the enterprise often proposes many measures to encourage employees to stay: Increase salary, increase bonus. Introduce new positions with a lot of potential to make the employee’s career path clearer. Thus, the above solution will become effective if the main reason for leaving is overwork and pressure from superiors.

When the above measures are no longer attractive, the reason is certainly from the organization.

For example, top management decides to structure and consolidate some jobs – specifically finance, accounting, and purchasing – into oversized roles with many responsibilities.

Some positions are so narrow that employees are forced to work closely with others to get their work done. This kind of role design can easily overwhelm some employees, while others get stuck with too much coordination. In that situation, is clearly the best option.


Misidentification of the “range” of control

This is one of the most typical mistakes when conducting organizational design. When opening a survey with the question: “Is management ready to help when employees need it?” then most of the results returned are majority is: “No”. This shows that there is still a big gap between employees and leaders of many businesses, not really coordinating.

In contrast, managers also explain that they have to work through many layers above to make a good decision to secure resources. At the same time, there were too many reports from employees that they did not have enough time to approve.

To operate effectively, the personnel in the organization will need to be determined based on two factors: the type of work and the degree of coordination required with the work. With complex, high-risk jobs that require close supervision. With a standard job that tends to be repetitive, employees are often more self-directed, allowing the manager’s control to stretch.


Deviation metrics and incentives

In fact, it is a fact that the root of conflicts in enterprises is due to inaccurate measurement indicators or the business’s incentive measures that are not really appropriate. It is this that causes the competing divisions to lead to conflict.

Incentives and policies are important for aligning work between HR teams. They shape employee behavior by determining what is important to the organization and synchronizing tasks by ensuring that everyone is working towards a common outcome. Conversely, inappropriate measures and incentives can pull people in opposite directions and push them toward conflicting goals.


5 golden principiles in business organization design


The Principle of Specialization

This principle requires clarity and clarity in defining the functional roles of the organization. Each department will stand out to take on a certain role and function in the organization’s operating system such as marketing, human resources, production, etc. Ensuring specialization will allow members to focus on the field and do their best, and at the same time ensure the organization operates at the highest efficiency due to expertly executed skills and knowledge.


Principle of coordination

The design of the organization needs to ensure the connection between the parts. This principle allows individuals and teams from different departments to coordinate smoothly and easily communicate and share information in a number of specific activities. For some organizations, the way to coordinate will be determined based on some established norms. While others are flexible according to projects or based on work requirements.


Principles of Innovation and Adaptation

In a fast-moving world, this is an important test of a structure’s ability to adapt to change. Business leaders need to anticipate what external trends are likely to change the system, which are the most flexible, and which are the most “framed”. Often the “framed” departments will be at the leadership level, or the department is bound by many responsibilities and coordination policies. At that time, you will need to break down the leadership responsibilities and break down the departments into more specialized units, so that it is easier to change later.


Matching principle

Identify the key tasks that the front-line team must perform – the key tasks that are likely to create the greatest value for the company. Then make sure that you have a manager on your team responsible for this part of the task. At the same time, you will have to consider a team dedicated to performing this task, and where to place them so that they can bring out their best.

For most businesses, a redesign can lead to a more efficient organization, significantly improved outcomes (profitability, customer service, internal operations), employee empowerment, and more. rights and long-term commitment to the business and many other benefits. However, organizational design is not easy, and the most difficult thing is that leaders must realize when they need to redesign to patch holes in the business.


Principles of Control and Commitment

In decentralized organizations, performance accountability is important. The purpose of this test is to ensure that every entity has the appropriate controls in place over its operations, while emphasizing the importance of transparency in accountability, ensuring management’s control and commitment.

The next time your organization’s pain doesn’t go away despite your best efforts, ask yourself, “Is this a sign of an organizational design problem?” Step back and take a moment to observe the factors that are causing your problem, maybe you will find a solution that works.

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