A new org chart is not organisation design

Under time and cost pressure in particular, there is a temptation to start with the most visible levers. Management layers are reduced, teams merged or functions centralised. That can certainly produce short-term effects.

What comes out at the end is a new org chart – often before it has even been settled how the organisation is actually supposed to work in future. In the long run, though, such a structural adjustment is frequently not enough.

Because at its core an org chart can really only show one thing: who sits where in the organisation?

An org chart shows structure – but not how the organisation works

Precisely because it is so easy to take in, an org chart creates transparency about hierarchies, organisational units, functions and reporting lines.

Many of the questions that decide in day-to-day work whether an organisation actually functions, however, it does not answer:

• Who actually does what?
• Who really carries responsibility for which topics?
• Who is allowed to take which decisions?
• How do functions work together at their interfaces?
• Which processes sit in which area?
• Where are which resources and capabilities needed?

Anyone who merely moves boxes around therefore changes the formal structure, but not directly – and above all not in a structured way – how the company works.

Organisation design starts with the strategy

When a new org chart is called for, the first look should not go to the existing structure but to what the business requires.

At the beginning stands the question: which organisation does the company need in order to deliver its strategy?

And beyond that: which markets and customer groups are to be served in future? Where should growth come from? Which capabilities are needed for that? Where does it take closeness to the customer, and where standardisation?

The org chart then visualises part of that target picture.

That turns a reorganisation into more than moving boxes around: into a conscious decision about how a company will create value, take decisions and deploy its resources in future.

Five elements have to work together

An effective organisation design looks at several dimensions at the same time:

1. Structure

How is the company sensibly divided into manageable areas? Which functions, teams and management levels does it take? And which tasks are organised globally, regionally or locally?

2. Roles and responsibilities

Who takes on which tasks and carries responsibility for what? Where do responsibilities need to be clearly separated – and where are they deliberately shared?

3. Resources and capabilities

Which capacity and which capabilities are needed in the individual areas? And does today’s distribution of resources actually match the strategic priorities?

4. Processes and collaboration

How does work run across functional boundaries? Which interfaces have to be designed deliberately so that responsibilities are clear and no unnecessary coordination loops arise?

5. Governance and decision rights

Which decisions are taken by whom? Where does it take clear decision rights, committees or other steering mechanisms – and where would these merely create additional coordination?

These elements interlock directly.

A new structure achieves little if it remains unclear for important topics who is allowed to decide.
New responsibilities do not help if processes still follow the old organisation.
And strategically important areas cannot fulfil their role if they lack the necessary resources or capabilities.

The org chart is the result – not the starting point

For employees, what matters in the end is not only which area or which manager they are assigned to.

They need to understand which tasks and responsibilities they have, which decisions they are allowed to take, with which areas they work together and how, and which processes they are involved in. Equally, there needs to be clarity about which rules apply, where relevant information can be found and what room for manoeuvre exists.

The org chart thus represents an important part of the organisation. What is decisive, though, is the overall picture behind it: structure, responsibilities, decision-making paths, processes, collaboration and the necessary resources and capabilities all have to fit together.

Three takeaways on organisation design

• The org chart is not the starting point. First it has to be clear what the business will need and how the organisation has to work to deliver it.
• Organisation design has to be thought through as a whole. Structure alone is not enough. Roles, responsibilities, decision-making paths, processes, collaboration, resources and capabilities all have to work together.
• A new organisation has to make sense in day-to-day work. Employees need to know what changes for them, which rules apply and which information they need in order to work in the new organisation.