Organization Design

Today's business climate is characterized by rapid technological change, disruptive competitors, non-traditional labor markets, economic and political uncertainty, and complex regulations. Organization design is a discipline ideally suited to helping organizations not only adapt to these conditions, but also achieving sustainable high-performance. Organization design inititaives target changes to core organizational components, such as structures, processes, and technical and social systems as a means of increasing performance. A key concept in organization design concerns the degree to which an organization matches or is compatible with its operating environment. This idea is based on two distinct, but interrelated types of fit. Internal fit refers to the alignment of an organization’s numerous components to its strategy. External fit describes the alignment of the organization to various attributes of its operating environment (e.g., competitive, economic, regulatory, political, and social). While only components within the orgaization are manipulated during the design process, internal and external factors need to be addressed to achieve complete alignment. This is an important point and not one realized by enough business leaders. Organization designs that reflect high internal and external fit enable competitive advantage while those that are misaligned do not. Note that organizations in dynamic environments may be required to frequently adjust design components in response to external changes (e.g., a decrease in external fit).