Agile Organization Design

What is Agile Organization Design?

It’s a powerful approach to designing organizations that allows for adaptability to customer demands. According to organizational design expert Jay Galbraith, there are five key components that make up an effective organizational design: strategy, structures, processes, reward systems, and people practices.¬†When these components are aligned and support each other, the organization is most effective, as people get a consistent message about the appropriate behavior.

But why should you care about organization design? 

Simply put, to achieve your business strategy, your organization must have the capabilities to support it. This includes the skills, competencies, and alignment of your employees. If your organization’s capabilities and strategy are incompatible, it becomes less effective. Imagine needing to respond quickly to customer requests to be successful, but your existing department structure and processes make even a small change to a product take months of decision-making and development. Your current capabilities would not support your new strategy.

So, what capabilities are required to be adaptable? 

There are three essential capabilities required for adaptability. 

  • First, the capability to switch between different types of work fast and at a low cost. 
  • Second, the capability to learn fast about the Value Stream, including user needs, product features, and market trends. 
  • And third, the capability to learn fast about the Product Organization, including short feedback loops on processes, organization design, technologies, and team capabilities.

Unfortunately, you can’t simply buy these capabilities. Instead, when an organization concludes that its current capabilities are no longer sufficient for success, the employees need to redesign the organization into one that allows it to build the necessary capabilities over time. An Agile organization design can help you achieve this goal by creating a flexible structure that supports your employees’ ability to learn to adapt to customer demands.

Looking to build an adaptable organization? 

The key lies in understanding your strategic focus and the required capabilities to achieve it. Let’s break it down.

First, consider your strategic focus. Is your organization product-centric, operations-centric, or customer-centric? Each focus requires a different set of capabilities and organizational design. For instance, a product-centric organization prioritizes innovation and new product development, while an operations-centric organization focuses on low cost, reliability, and efficiency. If you have a customer-centric focus, you need the capabilities to deliver high customer satisfaction and nurturing long-term relationships with customers.

Of course, larger companies often have a mix of foci, so it’s crucial to identify the capabilities required for each focus and design your organization accordingly. This is where Agile organizational design comes in – by combining your strategic focus with Agile principles, you can effectively deliver value.

So, how do you redesign your organization for adaptability? 

It starts with understanding your business strategy and clarifying the reasons for change. From there, you can determine the required organizational capabilities, assess your current organization, and create a design that facilitates the development of those capabilities.

But here’s the thing: most design decisions are speculative until you start working in the new organizational design. That’s why it’s crucial to have a culture of reflection and continuous improvement, regularly revisiting your design decisions, process, structure, and required capabilities.

To help guide you through the design process, the Creating Agile Organizations book offers 12 organizational design guidelines that cover typical challenges encountered in building an Agile organization. Ready to build an adaptable organization that can thrive in today’s rapidly changing business landscape? Let’s get started.

Looking for an Overview of the guidelines?

You can download the organization design cards here.

Summarizing

To summarize, a proper organizational design is critical to achieving your business strategy, and you need to redesign your organization when your capabilities and strategy are incompatible. Redesigning your organization involves rethinking its structure, processes, and people to ensure that they align with your strategy and capabilities.