Designing Organisations

I’m designing an organisation again this week, which will make about 7 in my career so far.  It’s a fun job, but not as fun as designing products and service offerings.  When I’ve designed products I’ve always felt that I have great creative freedom, specially when designing for software development.  When you design an organisation there aren’t many variables that you can use and most of them are heavily constrained.

I decided to write this post to describe the process that I try to follow, some of the steps in this process will seem too obvious to be worthy of mentioned, but unfortunately that’s not the case.  I’ve seen many other organisation designs that have struggled because they missed these steps.

1. Business purpose, this is a critical step, it’s all too easy to define an organisation in purely technical terms.  Organisations exist to meet some business need, not to service some technology, or functional activity.  Defining a business purpose provides much more scope for creative thinking in the design because you don’t immediately constrain yourself.  For example you could see your purpose as ‘managing SharePoint’ or you could see it as ‘enabling high performance individuals and teams’, ‘providing corporate intranets’, ‘providing a platform for enterprise application development’.
2. Accountabilities, once you know the business purpose you need to understand the bounds of the organisation, it’s scope of accountability.  Clear accountability is very useful in organisations, we don’t want to loose focus and energy in fights over turf.  I like to define the accountability in one sentence, and then break that down into about 5-10 bullet points.  The accountabilities should clearly relate to the purpose.
3. Challenges, once you know your purpose and accountabilities you need to refine your understanding of the challenges that you will face, these should mainly be customer focussed, but internal challenges are valid.  This is key to designing the next steps, for example it will affect what you decide to outsource or get from internal service providers, or where you will put the emphasis in shaping the organisation.
4. Responsibilities, the difference between accountability and responsibility is key.  responsibility is what your part of the organisation will DO, it’s often different to what it’s accountable for.  Almost all organisations will be accountable for activities that it’s not responsible for delivering, because it chooses to outsource them, or get them from an internal service provider.  In order to describe the relationship between accountability, responsibility and contribution to activities you are going to need a RACI.  You want this RACI to be very simple at this stage and to focus on the R and A.  Normally I will have a lifecycle on one axis of the RACI and the different parts of the organisation and it’s stakeholders on the other.
5. Shape, now you need to start to design the shape of the organisation, considering how you will carve up the accountabilities/responsibilities.  You also need to consider which activities will be centralised and which will be global/regional, product/function, technology/business.  For example activities that directly serve the business purpose of the organisation (things customers buy) can be global verticals, whereas shared services common to all verticals might be horizontals, giving you a matrix organisation.  But breaking activities out into horizontals needs to be done with care, it looks efficient but as it fragments the organisation it adds complexity and reduces integration.
6. Structure, now you have a rough shape your need to decide on structure and reporting.  Do you want areas of the organisation to be flat or hierarchical, hierarchy adds complexity but adds management bandwidth for integration.  You need to decide which roles will have people and which will be individual contributors who draw on other parts of the organisation for resources as an when required.  You need to decide which roles need to be direct reports and which are better left in service organisations and dotted in.
7. Culture and skills, it’s important at this stage to look at your business purpose, accountabilities, challenges and responsibilities and ask yourself what type of culture do you need and what type of skills do you need to succeed. 
8. Visualise, the process I’ve describe above is hard work and quite complex, but the end result (if done right) should be simple and obvious.  You need to make sure that you can successfully visualise and hence communicate the link between the purpose of the organisation and the way you have designed the organisation to execute that purpose and meet it’s challenges.
9. Select individuals, finally you need to start building the team, always bearing in mind, cultural fit, skills mix, the right balance between different personality types, the need for colocation, languages, being close to customers etc.

Then the fun starts, designing an organisation is 10% of the job, building the organisation and turning it from a bunch of talented individuals into a collection of well integrated high performance teams is the other 90%.

One little tip: keep the team going through the steps above as small as possible, and then test your design in one to one discussions with a wide variety of stakeholders.  Don’t pick your management team first and get them all in a room to go through this process (very painful experience).

The photo is of Buttermere, the location for a great team building hike we went on a few years ago as part of building a great team.