Strategic Organisational Design and Governance

Earning good money in the long term and mastering global crises with an efficient organisation is not easy. Lowered barriers to market entry mean that new markets are opened up more quickly and also lost to third parties more quickly. The effectiveness of a new digital strategy requires a targeted adaptation of the company to the changing framework conditions in order to position the company for long-term performance. Flexibility and constant change are indispensable in the digital world and the organisation of tomorrow.

What is the best form of organisation? What does effective governance look like? De facto, there is no concrete answer to this question, because the organisational form and governance depend on the organisation’s environment and thus differ in each specific case. Before jumping too quickly to a particular organisational form, it is worth taking a step back and asking a different question first: What is the intention behind the introduction of an organisational form? What goal is being pursued?

It should be noted here that there is no one right form of organisation. Each organisational form has a specific purpose. In organisational development, we talk about collective responses that an organisation has to its environment, the way an organisation acts in its more or less complex and volatile context. The organisational form is a sub-segment of a larger complex that can be considered. Similarly, the skeleton of a body is only a part of the whole.

Figure 1: Three types of structure in organisations

If the formal structure is strong, this gives the organisation stability and consistent reliability. If the value creation structure is strong, this gives the organisation flexibility in adapting to the sales market and sets in motion continuous improvement. If the informal structure is strong, this gives the organisation adaptability to changing conditions and enables continuous change. To design organisations, this step is taken backwards. In the digital environment, for example, a high degree of adaptability is relevant, along with flexibility in relation to the sales market. Therefore, in such contexts, companies should focus very strongly on the value creation and informal structure and establish formal structures to a lesser extent. This also explains the flat hierarchies and the strong development of self-organisation in many companies that operate in digital contexts.

In the brown field approach, the existing customer, market and strategy fit as well as other framework conditions are examined. The Organisational Capability Assessment (OrgCap) reveals the transformation potential, which is then addressed by a transformation concept. In order to achieve long-term success in the volatile events of the digital economy, the market is responded to with procedural flexibility and organisational agility, which is secured by an adaptable organisation and learning governance.

In order to design a suitable organisation in the green field approach, the complexity of the context in which the organisation will operate is also evaluated and factors that are decisive for success are included. This is followed by the design process, which is oriented towards the principles of postmodern organisational design for companies in the volatile digital industry. One of the principles is, for example, the structural principle of “thinking in problems”, which consistently focuses on the customer. Because without customers there is no problem, without a problem there is no solution, without a solution there is no product, without a product there is no process, without … no company. Companies therefore come into being because of a customer problem.

Figure 2: Basic team structure resulting from “thinking in problems”

The difference becomes clear when this is directly compared to the traditional structural principle of “segmentation according to competences”. Here, the process is often segmented or divided – departments and responsibility ping-pong emerge. With “thinking in problems”, responsibility for the entire process, i.e. from customer to customer, remains in a dedicated team. Support from other teams is defined and assigned exclusively via sub-problems with complete transfer of responsibility regarding the solution of this sub-problem.

Figure 3: Traditional segmentation vs. thinking in terms of problems

Wird dieses Strukturprinzip konsequent im Unternehmen gelebt, entwickelt sich fast schon automatisch eine Organisation, die sich voll und ganz auf die Bedürfnisse des Kunden ausrichtet und sich immer wieder auf diesen flexibel anpasst. Die stetige Anpassung an Markt und Strategie erneuert immer wieder Strukturen, Prozesse und Werkzeuge und bedingt somit die Mitwirkung aller Menschen in der Organisation. Um das Risiko der Selbstüberlassung abzuschwächen, stellt ein Governance Prozess sicher, dass die Teams lernen diese Anpassungen selbstorganisiert durchzuführen. So können die Teams immer stärker mit absolutem Kundenfokus in klaren Rollen arbeiten, Spannungen wahrnehmen und diese operativ lösen oder in Absprache mit relevanten Beteiligten selbstständig die Governance innerhalb gesteckter Rahmenbedingungen anpassen.

Figure 4: The governance process for self-organised adaptions

But how is a goal-oriented organisational design determined? Figure 5 shows a structured process. Starting from a well-founded strategy, clearly defined capabilities are derived that an organisation needs in order to fully achieve the strategic goals. Based on these capabilities, clear processes are defined and aggregated. It is crucial that the granularity of the processes is successively increased in order to map the service portfolio precisely and comprehensively. Subsequently, these processes are transferred into an organisational structure or integrated into existing structures. In doing so, it is particularly important to ensure that dimensions such as geographical orientation and focus are taken into account. With this, the basic structure is defined and necessary management/IT systems are selected, which can ultimately be transferred into concrete specifications. In order to ensure that employees act in accordance with the strategic goals based on a common corporate vision, the next step is to create appropriate incentive systems and assign existing employees to the new organisational structure. Emerging competence gaps should be openly communicated and closed.

Figure 5: Systematic development of an organisation’s target design

Accompanying a goal-oriented organisational design, a robust and integrated governance has to be established as shown in Figure 2. This consists of three layers: structure, responsibilities and culture. First, structures need to be established for steering committees, policies and processes, reporting and communication, risk management and finally the use of technology. Based on a RACI matrix, for example, responsibilities and information obligations are defined. All this is ultimately based on collaboratively defined principles of interaction and values such as integrity and focus.

Figure 6: Governance structure of a lean and digital organisation

If the organisational design and corresponding governance are fully defined, this is a sound basis for successful implementation. Finally, it should be taken into account that experienced expertise in this area and preferably from a single source should be used for the planning and subsequent implementation. This is the only way to ensure consistency from strategy to operations.