Lean Organization Design

Person drawing a Organization Design Chart

While organization design/structure is often identified as an obstacle to delivering better performance, it can actually serve as a performance driver. There are major opportunities to be seized if organizational designers and decision-makers understand flow and think of the work as a system.

Applying an understanding of Flow Efficiency (optimizing the flow of work across all functional island in a business process) versus Resource Efficiency (optimizing the flow of work inside a specific functional island) can be a breakthrough in making organization designs more effective.

If you only consider factors that are visible on a process or design map, then it is likely that you are not going to be successful. We need to go beyond traditional analysis by examining the enablers of performance.

Resource efficiency versus flow efficiency map

In the case above, inspired by Niklas Modig, the organization design is critical to achieving better performance.To achieve this, the organization designers and decision-makers need to understand how the work works as a holistic system, instead of simply trying to optimize each functional island. As well, there are a number of other challenges and opportunities:

Challenge #1: Scope

There is an emerging consensus that many organization design projects are too large, too ambitious, and too complex to succeed, leading to a failure to deliver the desired business outcomes. The more complex, the more moving parts, the more difficult to implement successfully.

Opportunity: An organization design project with tighter scope can reduce complexity, effort required, change fatigue, and human change management. To do this, first clarify and unpack the problems to be solved by the design.

Challenge #2: Unclear Problems to be Solved.

The problems that the org design needs to resolve are often unclear to both the Client and to HR, and are often based on a “wish list” approach rather than a focused business problem-solving approach – resulting in more change than truly required. This results in organization designs that are broader and deeper than required, causing excessive change and reducing chances of success as they are harder to explain, not based in a clearly communicated rationale, and lack the perception of fair process.

Opportunity: By understanding the “problems to be solved” of the client’s organization design change request, and by unpacking those problems with the client, often it becomes clear that an organization’s real problems can only be solved in part by org design changes.

More often the root cause problems that cannot be solved by Org Design (e.g. Mindsets, Trust and Psychological Safety, Skills, Tools and Technology, among many others) can and should solved with other stakeholders properly equipped to deal with them. That is to say that the CHRO should involve the CIO and the COO (Chief Operating Officer) to address collectively the people, technology and process issues that underly the “org design” problem. But instead, the CHRO gets the blame when org changes do not work out.

Challenge #3: No Perfect Design.

Organization designs frequently do not acknowledge the reality that there is no such thing as a “perfect” design – all designs have their upsides and downsides, but rarely are the downsides properly identified and mitigated. This can cause decision paralysis, extend the amount of time it takes to arrive at a decision, create fear and uncertainty and mistrust toward the decision-makers. Plus, it can tolerate sub-optimal designs.

Opportunity: As there is no “one-perfect design”, there is an opportunity to identify the countermeasures required to make each design achieve its desired purpose, or solve the target problems. With this countermeasure analysis, an organization can more confidently make decisions and proceed to implementing the new design, as they have identified and planned to address risks before they come to pass. This reduces fear, creates trust and can lead to better-executed designs.

In short, there are valuable lessons that organization designers and decision-makers can take from fields of Systems Thinking, Lean, Design Thinking and Agile/Scrum. Applying these approaches can increase the success of organization design changes, as well as the credibility of the Organization Design community as equal business partners.

In this content area we cover:

What is Lean/Systems Thinking and how can they help improve organization design?
Why Organization Design solutions are often over-delivered
The costs of over-delivery
How to apply Lean principles to assess a current state;
- How to use evidence to identify waste
- Understanding process flow, backlogs and the three main decisions of Lean
- Understanding value demand versus failure demand/preventable work, and quantifying cost of the latter
- How to identify and improve the flow of value to the client
- Principles to design simplified, streamlined processes that flow
Understanding how organization structure and functional islands prevent flow, and what to do about it
Creating an effective problem statement with your client
Determine interrelationships between causes and root causes, and invisible but high-impact causes
Identifying the Jobs to be Done of the Org Design solution
Applying the Five Org Design Tests (Lean Test, Fit /ImplementabilityTest, In/Out of Value Stream Test, Combined vs Separate Disciplines Test, Matrix Test) to better understand gaps and to mitigate them
Using Lean/Agile/Scrum techniques to rapidly implement improvements
Assessing the success of the organization design project, and incorporating that learning into ongoing design projects.

References

Modig, N. & Ahlstrom, P. (2019) This is Lean. Resolving the Efficiency Paradox Stockholm, Sweden, Rheologica Publishing p. 9

OPTIONS:

One-hour talk
Group/team multi-day training workshops
Consulting engagements to work side-by-side with you to improve your ability to unpack the business problems to be solved by organization design, and to create better designs using Lean, Systems Thinking and Agile/Scrum principles.

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TIP

Start by identifying, with your client the principal problems that the organization design solution should solve, then the root causes. Which of these causes can be solved by an org design solution versus by different non-org-design solutions – e.g. behaviours, incentives, etc.?