Organization design is the process of constructing and arranging an organization’s structure, processes, systems, practices, and rewards programs as a means to achieve its purpose and goals. To design an organization requires wide knowledge on a diverse range of concepts, research, and approaches on economics, information technology, logistics, management, and psychology. It also involves analysis of available designs and frameworks derived from existing organizations, and redesigning these to effectually meet the prerequisites of the organization.

An organization design is created on the belief that employees have the genuine desire to contribute to the overall objectives of the organization that they work for but, one way or the other, certain barriers have deterred them from doing so. An organization design therefore aims to align employee motivations to the organization’s interests so that the each employee will have the capacity to make effectual decisions every day they report to work. The design consists of a continuous executive process that has short-term, long-term, and routine changes that can either be small-scale or large-scale.

Components of an Organization

The design starts by creating a strategy, which is essentially a set of guidelines obtained from the mission and vision of the organization, with due consideration to its values, beliefs, and principles. The creation of a strategy requires planning, which primarily involves the five organizational components mentioned below:

• Structure – This component refers to the hierarchical concept of subordination in the organization which will influence how it will operate as a whole, and how each department and each job position can function.
• Processes – This component refers to the systematic means by which an organization defines, organizes, and carries out its operations and will include strategic measures to improve organizational performance, the use of frameworks, and intellectual property.
• Systems – This component include methods and tools used by the organization in order to implement their processes, as a means to achieve its overall objectives.
• Practices – This is the culture or the behavioral patterns that are part and parcel of the organization.
• Rewards Programs – This component comprise of the incentives and recognition programs that will recompense an employee or group of employees for a job well done, as well as a means to encourage others to improve their performance.

The 4 Prerequisites of an Organization Design

Before any organization can create a successful organization design, there are four prerequisites that need to be carefully analyzed and considered. These are: customer definition, creative tension, core performance measures, and commitment.

Customer definition involves being able to accurately identify market position to enable the organization to create a strategic positioning analysis. Creative tension is the main source of power by which an organization and its leaders derive their energy from, and is a basis for success in the organization because it promotes creativity, overcoming obstacles, and the sharing of information. This can be rooted from four sources, which are: coercive influence, reward influence, personal influence, and leadership influence. Core performance measures include measurable characteristics that are designed for the organization to define individual, group, and organization performance in relation to its objectives. Commitment involves having the responsibility to help the people in the organization perform well in order to work towards achieving the overall objectives and goals, and make them accountable for the outcome.

The Importance of Organization Design

A well-constructed organization design helps to improve productivity, creativity, and communications. When there is a poorly constructed design, it is almost guaranteed that productivity level in the organization will be low in spite of having the most qualified employees and the best organization goals. When communication channels are not properly established, two departments can work effectively as separate entities but when there is a need to collaborate with each other, that is when problems start to come in. How an organization functions as a whole and as individual units, how businesses processes are created, how the people in the organization work and collaborate with each other, and how deserving employees are rewarded—these are all important facets that will ultimately determine the success of an organization. Each of these is taken into account in an organization design to ensure that every aspect, every move, and every decision made within the organization will be done to achieve its overall purpose and goals.