What Is Organization Design? Types, Principles & More


Most people think integrity means being honest. While this is true, the word has another meaning that’s important to project management: the state of being whole and undivided. In a sense, you could call organization design the approach to creating integrity in your organization.

For example, a building that has no integrity cannot stand. In the same way, a project that isn’t part of a larger organization design may struggle to succeed. Let’s define organization design and its different types and principles.

What Is Organization Design?

Organization design is a process for structuring and running organizations. It takes a holistic approach to the work done in an organization including team formations, shift patterns, reporting, decision-making, communication methods and much more. The purpose of organization design is to help an organization excel at what it does and help meet its goals. That can mean everything from a large-scale reorganization to subtle shifts in structures and systems.

Organization design often comes into play as an organization is growing or, conversely, if it’s downsizing. Either of these shifts requires a company to reexamine how it does business. Other reasons that prompt organization design includes a change in leadership, strategy or the marketplace in which the organization operates.

Why organization design is implemented is to improve how the organization works. That can mean everything from pinpointing inefficiencies to making better, faster decisions. Organization design can improve the quality of the goods or services that an organization produces, increase profits and strengthen relationships with its customer base. Internally, it can make for safer working conditions, a happier, more motivated workforce and better prepare the business for future challenges.

Creating and implementing organization design is considered to be a project, something that is more successful with project management software. ProjectManager is project management software that helps organize, monitor and report on project planning. Our Gantt charts collect all of your tasks, link dependencies to avoid bottlenecks and even filters for the critical path. You can set a baseline to track your actual progress against your planned progress in real time to keep on schedule. Get started with ProjectManager today for free.

ProjectManager's Gantt chart
ProjectManager’s Gantt charts help you implement organization design. Learn more.

Principles of Organization Design

You have one chance at organization design and it takes a lot of time and effort. If you don’t get it right, you’re not going to reap the rewards. This makes it important to know the principles of organization design and how to move through the process correctly.

Every organization is different, of course, but they all share certain commonalities. While these 10 guiding principles may alter slightly depending on who’s applying them, they remain a fair roadmap for leaders who are looking to recalibrate their organizations to attain some of the many benefits possible from organization design.

  1. Free Yourself From the Past: The organization has to look reflectively at itself, its purpose and how changes to those foundational pillars will affect clients, employees and investors. As you begin to explore changes, think about how they can differentiate you from the competition and how these changes will play out over the next few years.
  2. Design With Knowledge of Your DNA: In order to know what to prioritize in organizational design, step back and identify the universal building blocks of your organization. All organizations can be divided into tangible or formal elements such as how decisions are made, how data is processed and how work is divided. Businesses also have intangible or informal elements such as how people act and are inspired to contribute.
  3. Fix Your Structure Last: The organizational chart of the company might seem like the logical first step, but you want to create a bridge that will carry the organization from the old ways to the new ways. It’s a common mistake to think that you can simply jump from one structure to another. That structure is the final step after you’ve done everything to support it and the changes it will initiate.
  4. Use Your Top Talent: You make a change by empowering the people in your organization, so no matter what structural changes you plan on making, you want to identify the strengths of your key performers and make sure they are empowered to collaborate and facilitate those changes. The leadership team is responsible for successful organization design.
  5. Know What You Can Control: It’s important to list the constraints that are slowing you down as an organization and the sacrifices that you’re always making. Know your limitations before any attempt to execute a new organization design. You should also be aware of the regulations, supply shortages and customer demand that are out of your control but don’t spend too much time focusing on the things that you can change.
  6. Promote Accountability: You want to keep everyone accountable for their jobs which requires transparency and clear communications, not micromanaging. This is likely the single most important change you can make to your organization. If communication flows without obstruction and everyone is taking responsibility for their work, the structure you design is going to work better.
  7. Benchmarking Isn’t As Important As You Think: There can be problems with tracking what competitors are doing. While it can help optimize your design and expose hidden issues, it also short-changes your unique capabilities. It’s not productive to compare your organization to others that might have a different value proposition or capabilities. If you must benchmark, focus on select elements rather than the whole organization.
  8. Organization Design Should Fit Company Purpose: Every organization is different and the right structure for your organization will likely not fit another. When designing the organization, make sure it aligns with your purpose and is consistent across the organization.
  9. Don’t Neglect the Intangible Elements: It’s easy to focus on the tangible elements of organization design, such as decision rights and the organization chart, but that won’t get the results you want. Instead, balance the tangible with the intangible if you want to get things done. The tangible is important but without addressing how people think and act in that structure, you won’t change anything.
  10. Build on Your Strengths: One of the best ways to implement successful organization design is to build on your strengths. Often the organization’s design is so far from the organization’s core values and strengths that it’s destined to fail. Make sure to find the organization’s strengths and build on that foundation.

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Types of Organization Design

Just as there isn’t one type of organization, there isn’t one type of organization design. These various organizational structures are a framework for the organization to distinguish power and authority, roles and responsibilities and determine how the information will flow through the organization. Let’s take a look at some of the more common organization design structures that support organization design.

Hierarchical Structure

This is a pyramid-shared organizational chart with the CEO or manager on top and each level descending in the chain of command until the base is entry-level employees. This defines authority, shows everyone to whom they report and clarifies the career path. However, a hierarchical structure can slow down innovation and make those at the base of the pyramid feel as though they are outside the process.

Functional Structure

As in the hierarchical structure, those with more authority and responsibility are placed at the top of the chart and it then descends by responsibility. However, the organization is determined by skillset and function in the company, with each department managed independently. This gives departments a sense of self-determination and the structure can be easily scaled. But a functional structure can also create silos in the organization and block interdepartmental communications.

Horizontal or Flat Structure

The opposite of a hierarchical structure, the horizontal structure is popular with startups and other organizations in which there is not much distance between management and employees. It encourages less supervision and more involvement from everyone in the organization. Employees feel ownership and take more responsibility. It fosters communication and speeds the delivery of new ideas. However, there can be a lack of supervision that causes confusion and is difficult to maintain at scale.

Divisional Structure

As the name implies, each division in the organization controls its own resources as if an independent company within a larger organization. Each division has its own marketing, sales and IT teams. The structure lends itself to larger organizations and allows them to be more flexible, quickly responding to market changes and customer needs with a customized approach. It can also create duplicate resources, wasting time and energy. Communication can be difficult between divisions, too, leading to internal competition within the larger organization.

Matrix Structure

This grid-like structure is great for cross-functional teams that are created to serve special projects. This structure helps connect otherwise disparate parties. The matrix structure also helps managers easily find team members for whatever project they’re leading and provides a more dynamic view of the organization. Employees are encouraged to use their skills beyond those applied to their original role. It can create conflicts between managers in different departments.

Team-Based Structure

As the name suggests, this structure organizes employees by teams. This is against what’s considered to be a traditional hierarchical structure and is ideal for a more problem-solving, collaborative environment where employees have more control. This can boost productivity and performance, breaking down the silo mentality in favor of more transparency. It also allows for lateral moves throughout the organization and provides less managerial supervision. It’s a great fit for agile project management and scrum teams. It does tend to make promotional paths less clear.

Network Structure

This structure works well for organizations that don’t have their services centralized. They work with vendors, subcontractors, freelancers, offsite locations and satellite offices. To bring some order to this seemingly chaotic mix, a network structure helps open communications between those involved over an old-fashioned hierarchy. It visualizes the various onsite and offsite relationships in the organization, fosters a more flexible environment and helps everyone understand the workflow so they can collaborate more freely. It can still be complex, though, and makes it difficult to know who has authority over what.

How ProjectManager Helps After Organization Design

Regardless of what type of organization design you apply in your company, ProjectManager is the one work and project management tool you’ll need to connect your hybrid teams and help them boost productivity. Our multiple project views mean you can work how you want to, whether in a more traditional, hierarchical structure, a flat, agile structure or a hybrid version.

Visualize Workflow With Kanban Boards

We’ve already shown you the Gantt chart which is great for a hierarchical structure, but that’s only one of our multiple project views. For a flat or team-based structure, you’ll want to use kanban boards to manage backlogs and collaboratively plan sprints. Managers get transparency into the process and can reallocate resources as needed to avoid bottlenecks and keep teams working at capacity.

A screenshot of the Kanban board project view
Track Progress and Performance in Real Time

It’s not enough to have the tools to fulfill the dictates of the organization design you have, you need to monitor your work to make sure it’s meeting your expectations. Our software delivers real-time data for more insightful decision-making. Get a high-level view with our live dashboard which tracks six project metrics. There’s no setup required and the dashboard automatically calculates data for you. For a deeper dive into the data, there’s one-click reporting, which can be filtered to show only the information you want to see. Then, share it with stakeholders to keep them updated.

ProjectManager’s dashboard view, which shows six key metrics on a project

Whatever organization design you use, communication is key. Our software is collaborative to the core, making it simple to share plans, files and more. You can comment on tasks and get notified by email and in the app when anything is updated. There’s a single source of truth that keeps everyone working together and productively.

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ProjectManager is award-winning software that connects hybrid teams and fosters greater efficiency. It facilitates organization design of all types, whether teams are together or distributed, regardless of skill set or department. Join teams at NASA, Siemens and Nestle to deliver success with our tool. Get started with ProjectManager today for free.