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Principles of organisation design.

Organisation design is where the seemingly objective world of processes and KPIs meets the decidedly subjective world of people and culture, and as such can be one of leaders’ greatest concerns.

Many methodologies exist to design organisations, from functional ones, which put structures at the service of a strategy, to pragmatic ones, which constitute the arrangement of available people. Similarly, certain criteria help check for the suitability of this design, such as the average management span-of-control or the number of ‘layers’ between rank-and-file employees and the heads of the organisation. All of these approaches have their merits, and help to clarify ownership, optimise resource allocation, and enable collaboration.

Yet, organisation design is often difficult, lengthy, and frustrating for all involved. Indeed, a “good” organisation is not only efficient, but must also be perceived as legitimate by its constituencies. In other words, organisation design is the flip side of governance, and is therefore a political matter as it defines ways of “working together”.

Public institutions could be a source of inspiration, as they tend to prioritise legitimacy over efficiency, in contrast to most private sector organisations. Indeed, contemporary debates provide many accounts of what comprises good governance, starting with the American Revolution, arguably one of the greatest organisation redesigns in modern history.

The foundations of the American Constitution are well-known, defining principles of representation, separation of power, and the role of checks and balances. What’s more, the Constitution has formalised its debates in three ways, therefore giving them institutional value, and stimulating healthy reflections for private sector leaders:

The Connecticut Compromise – Besides deciding what the main governance bodies are and upon which principles of equality or equity employees and various entities are represented, what are the relations between reporting and decision-making processes?

The Bill of Rights and other amendments – Besides outlining policies for various aspects of the organisation, what is in place to protect employees from abuse within their hierarchy, or from unchecked processes?

The Federalist Papers – Besides socialising the organisation to ensure ‘buy-in’, how do you make sure that teams understand the ideology and spirit that presided over its design to ensure its resilience?

Those questions can help drive the organisation design process, keeping in mind that process management contributes to the perception of legitimacy and fairness of the end result.

“How does that apply to relatively simple organisations, with limited governance and processes in place?”, asked the Mouse.

Smaller or simpler organisations can go back to the roots of the American Revolution. Whereas they refused taxation without representation, in the present-day this can be reframed as: “no power without responsibility”.  

This legitimate demand summarises the tension at the core of all debates on organisation design. It can be understood both ways: power without responsibility leads to tyranny (or in the words of late British PM S. Baldwin, “the prerogative of the harlot throughout the ages”); responsibility without power leads to inefficiency, frustration, and the like. What’s more, the nature of responsibility and sources of power evolve over time, explaining why organisation design cannot be tackled as a one-shot initiative, and should remain a core concern of leaders who need to ensure that it can be debated safely. 

Nowadays, many regulations are being developed to improve corporate governance, tackling head on the various incarnations of the tension between power and responsibility, including for smaller organisations. At the minimum, one can hope that they will feed the debate on “corporate social contracts” underneath organisation design, instead of being perceived as a necessary evil.

Indeed, even if for some leaders, navigating the relations between legitimacy and efficiency or power and responsibility will come naturally as they see their role as a cultural one, for others, it will be a paradigm shift. Hence, there may be a more fundamental question presiding over organisation design. It has to do with the “Founding Fathers” themselves: “besides deciding on the level of centralisation in decision-making à la Hamilton vs. Jefferson, should governance empower the personality of leaders or aim to counterbalance it?”

Maybe a “good” organisation achieves both.

Baptiste Raymond - 06/2022.