Regardless of size or industry, every organization needs an effective structure that supports its business strategy. Organizational design is a comprehensive process that aligns a company’s processes, people, and systems with its strategic goals to achieve business results. The purpose is to create a framework that allows businesses to improve efficiencies, streamline decision-making, and eliminate redundancies while adapting to new challenges.

“Organizational design goes beyond traditional restructuring, which often focuses on cost-cutting or downsizing,” said Daniel Hall, Managing Partner, London for DHR Global. “It takes a forward-looking approach, considering where the company wants to be in one to three years.”

“It’s not just about solving immediate problems,” added Tim Wiseman, Managing Partner, Leadership Consulting, for DHR. “It’s about building an organizational structure that can scale and evolve with the company as it grows.”

Key Triggers

Several key factors can prompt a company to revisit its organizational design. The most common triggers include:

• Mergers and acquisitions
• Rapid growth
• Change of ownership (such as private equity investment)
• The need to adapt to new technologies or business models

For example, when two companies merge, their organizational structures often need to be integrated in a way that preserves the strengths of each business while eliminating redundancies. Similarly, during periods of rapid growth, companies may find that their existing structures are no longer efficient and need to be redesigned to support larger teams and more complex operations.

Organizational Design Versus Restructuring

One of the biggest misconceptions about organizational design is that it’s the same as restructuring. While the two concepts are related, they’re not identical. Restructuring often carries negative connotations of layoffs or drastic cost-cutting, while organizational design is a thoughtful process that’s aimed at aligning a company’s people and structure with the organization’s long-term goals.

“Restructuring is often about cost reduction,” Wiseman said. “On the other hand, organizational design is about future-proofing the business. It’s about ensuring the company has the right people in the right roles to achieve its strategic objectives. In some cases, organizational design may result in restructuring, but the focus is always on growth and efficiency – not just cutting costs.”

Steps for Organizational Design

The process of organizational design typically begins with a thorough review of the company’s structure, goals, and challenges. This includes reviewing key business documents, analyzing financials, and interviewing critical stakeholders. The goal is to understand the company’s current structure, where it wants to go, and what changes are necessary to get there.

“We benchmark against other organizations that have successfully gone through similar growth stages,” Hall said. “This allows us to make informed recommendations that are tailored to the company’s specific needs, industry, and culture.”

Once the analysis is complete, the organizational design team develops a “future-state” structure – what the business should look like in one to three years to achieve its strategic goals. This may involve creating new roles, redefining existing ones, or even restructuring departments.

“It’s a guide to facilitate change management,” Wiseman said. “The goal is to build an organization that’s agile, efficient, and capable of meeting its future business needs.”

Benefits

The benefits of organizational design are numerous. First and foremost, it aligns the company’s structure with its strategic objectives, ensuring that every role and department is working toward the same goals.

“When you have the right people in the right roles, and those roles are clearly defined, the company operates more efficiently and effectively,” Hall said.

Moreover, organizational design can promote the smooth integration of cross-functional teams. Organizations often struggle with siloed departments that impede collaboration and innovation. With an optimized structure, companies can eliminate these silos, encouraging a more collaborative and transparent work environment.

Organizational design also enhances innovation by creating structures that are flexible and adaptable. Companies that are well-designed and future-proofed are better able to respond to market changes. Whether it’s a new competitor, a shift in technology, or a change in customer preferences, an agile business can pivot quickly and maintain its competitive edge.

Finally, organizational design improves employee engagement and productivity by clarifying roles, responsibilities, and reporting structures. When employees know exactly what’s expected of them and how their work contributes to their companies’ overall goals, they’re more likely to be motivated and perform at a high level.

To illustrate some of the benefits, consider the example of a private equity firm that sought to develop a governance structure that would support its goal of raising and deploying $85 billion by 2030. The firm’s existing structure was no longer effective for managing its expanding portfolio of companies, prompting it to seek assistance in redesigning its organizational framework.

At the completion of the design process, the firm received an 18-month implementation plan, which included senior executive searches and a change management program. The firm successfully implemented a new board and organizational structure. This new structure allowed the firm to manage talent, human resources, technology, and finance effectively across its portfolio. Moreover, another company bought the firm, creating a $100 billion global private equity leader.

Critical Success Factors

Successful organizational design relies on strong executive sponsorship. Without visible support and commitment from top leadership, it’s hard to implement the necessary changes and align the organization with the new strategy.

“Business conditions might delay or shift the priorities, but there needs to be a real commitment to take action,” Wiseman said. “If they don’t make necessary changes, the organization will lose significant traction.”

Additionally, strong alignment among the leadership team is essential for success. When executives and managers are unified in their understanding of the company’s strategic direction, they can communicate the necessary changes to their teams.

Building for the Future

As businesses evolve and expand, their internal structures must adapt to new challenges and opportunities. A thoughtful, detailed organizational design provides the road map to optimize a company’s structure, align it with strategic goals, and prepare it for long-term resilience and success.