What is the difference between organisational structure and organisational design

Thus, the centralized structure has a top-down approach for decision flow. In such type of organizations, day-to-day tasks and the decision-making processes are delegated to the supervisors at the middle and lower level by the top management for fast and effective decisions and to improve efficiency. By letting the middle and lower level executives jump in the process of decision-making, the top management can focus on other major decisions. This also increases the responsibility and accountability of the employees.

For Example; M ark, the HR Manager at ABC Company, has to finalize a deal with a vendor at a job portal for hiring and, for this, he negotiates best prices with discounts to close the deal. If his organization is a centralized one, then he will first seek senior management permission to finalize the deal and wait for their approval. If there is a delay rendered by the management part, he might lose the deal.

However, if his company is decentralized, then, he has authority to close the deal all by himself with the vendor without seeking any approval from the management which, in turn, results in finalizing cost-effective and quick decision-making.

It clarifies different aspects like authority, the responsibility of tasks and its limitations, reporting structure, a flaw of information, etc. With the help of organizational design, one can identify and eliminate any kind of duplicity in work, inefficient work, poor customer dealing, blame games, obstacles in the decision-making process, shortfalls in systems, and processes which result in the decline of efficiency of the employees, lack of trust among superiors and subordinates, etc.

So, organizational design and organizational structure are interrelated to each other, yet have a slight difference. Also, they show a hierarchy of the staff i. In contrast, the organizational design represents the dynamic view of an organization. It is more of processes and methods which help in organizational structuring and restructuring for smooth and effective functioning. It is also based on change management whereby the organizational demands change their structure and functioning to meet needs for technological advancements, market factors, meeting regulations, customer needs and expectations, etc.

With the help of the organizational design, weaker systems of an organization can be identified and corrective steps can be taken to strengthen them. Poor organizational design or structure may result in serious downfalls in organizations i. The above-mentioned factors are further responsible for low productivity and turnover. Also, there are certain segments of organizational design which are known as the key elements. Largely, there are 6 elements of organizational design and structure:.

In this, the authority and power are delegated from top to bottom i. It gives clarity of the reporting structure in an organization. Let us have a look at the chain of command with a visual diagram:. In case of more tasks, the span of control will be wider. It also depends on other aspects like geographical location, the ability of the team and superior, the complexity of tasks, etc. Centralization refers to centralizing an organizational system where planning and decision-making authority is allotted either to a single person or the top management.

A decentralized organization is the one where planning and decision-making are handed over to middle or low-levels. Large organizations divide some of its functions based on the specialized areas and, so, subtasks are defined in different tasks. These subtasks are distributed among individual job roles. Formalization refers to the process of specifying or mentioning rules, procedures, and duties to the employees as an individual as well as to the teams, departments, units, and the whole organization by managers in written form too.

Formalization indicates the goals and vision of an organization, tasks, hierarchy and relationships, authority and responsibilities, different processes, and work methods. A formal organization emphasizes on job roles, responsibilities, and assigning work to the individuals as per the requirement of roles. These are controlled by rules and procedures. An individual can be assigned the role of different departments as well based on self-interest, skills, etc.

In rigid departmentalization, there is almost no interaction between different teams and each team works as per their area of specialization. In contrast, in loose departmentalization, the teams are free to interact with each other and can work together for common tasks.

Before you even start the design, you first take any consideration for people and titles off the table. You start with a blank slate and think through the functions the business must perform to succeed in its chosen growth strategy now and over time. What are those functions for your business? In addition to supporting the chosen strategy, a good structure should 1 clarify the purpose and accountabilities of each organizational function; 2 place each major and minor function in its correct location relative to other functions by balancing effectiveness and efficiency, short range and long range, autonomy and control; 3 clarify the key performance indicators KPIs of each role; and 4 identify which people are accountable for performing different functional roles.

In a picture, a sound organizational design will look something like this below. And careful: it might look like an org chart at first but there are some major differences:. A sample structure using sound design principles. Note that every structure is unique. Prior to this organizational redesign, the company had stalled out in its growth trajectory and the culture was deteriorating. The team was suffering from role confusion, unclear accountabilities, a lack of real strategic priorities, and stalled execution.

Revenues and profits were flat for several years prior. Much of this has to do with getting the structure right. In the structure above, each large grey box represents the major functions of the business.

The smaller beige boxes represent the primary sub-functions within those domains. The blue boxes under each major function capture some of the high-level KPIs for that functional area.

Calling out the KPIs in the structure helps to bring clarity and focus to the structural discussion and ultimate adoption of new roles by the individuals involved. Only after the design is set up correctly for the chosen strategy—again, independently of the individuals involved—should you assign accountability for each function.

What matters at this conceptual stage of the design is that a single person, whether as a dedicated role or wearing a temporary hat, is held accountable for the success of that area of the business. Also, notice that each function in the structure has a PSIU code. This shorthand code allows the company to have a shared definition of some key management requirements for each role, as well as the type of leader who is best suited to own it. It helps tremendously with hiring and creating role alignment and satisfaction among the staff.

While there is an art form in facilitating a process to help the team opt into their new roles in the structure, the first step is always to create teamwide recognition and commitment to the right strategy and structural design before addressing who is will be taking on which roles and hats.

Organizational design takes a holistic look at the company with a view to identifying inefficient workflows, such as communication breakdowns and steps that don't add value. These might include:. Organizational structure is the static representation of organization.

Whatever type of structure a business is using, you should be able to draw it out in the form of a diagram. The organogram structure — that's the posh word for a corporate structure chart — provides an easy way to visualize the relationship between one job function and another, the ranks of team members, managers and leaders, and the various chains of command.

Organizational design, on the other hand, is a dynamic representation of organization. The term refers to the procedures for structuring and restructuring an organization, its processes and workflows to make sure the business is continually operating at its best. The main point about organizational design is that it's an ongoing process. The economy, market forces, the regulatory framework, customer tastes, the rest of the external business environment — these things all have power to impact a business, and they are constantly changing.

So, the business may need to change, too. Organizational design provides a structured way for tweaking the systems that are no longer working with a view to reducing costs and strengthening performance in the light of new external conditions.

Organizational design is one area where consultants have their own proprietary process for diagnosing the weak areas in a business. For small businesses who are going it alone, the Galbraith Star model is a useful tool. This model seeks to design an organization by asking and answering questions in five core areas that are depicted as the five points of a star: strategy, structure, processes, rewards and people. What are your goals and objectives, mission, vision and values? What are your competitive advantages, and what value do you offer to customers?

This is where you decide the products or services to be provided, which markets you will serve, and your unique selling proposition. How will power be distributed centralized versus decentralized structure? Will you organize around functions, divisions, products or in a matrix structure? For most businesses, structure goes hand-in-hand with strategy as together they represent the building blocks of the organization. How will you allocate budget across the various functions?

How will you document and standardize procedures to make sure the product or service gets into the hands of customers? What are the performance metrics for each process? How are they evaluated? What reward systems are necessary to motivate staff and keep them aligned to the goals of the organization? For example, will you offer promotions, bonuses, stock options, commission or performance-based pay?

This section looks at the company's recruitment, promotion, training and development strategies to ensure they are producing the talent you need to implement the strategy. As the Star model indicates, organizational structure is only one facet of an organization's design. This is significant. Many companies spend too much time drawing up an organizational chart and too little time on rewards, processes and people, ignoring the fact that each point on the star must work harmoniously with the others.

The Star Model and organizational design, in general, can be used to overcome some of the limitations associated with an organizational structure. All the options have pros and cons associated with them.