List of Organizational Design Principles and the Benefits
By Indeed Editorial Team
Published November 8, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Effective businesses are typically able to react to changes in the market and economy. By creating a productive organizational design, a business can react to changes with minimal disruptions. Learning more about organizational design principles can help you create an effective design to meet the needs of employees, clients, and other stakeholders. In this article, we discuss organizational design principles, explain their benefits, provide you with a list of principles to consider, and explore some methods to evaluate your design.
What are organizational design principles?
Organizational design principles create a systematic approach to help a company establish the structures and regulations that guide it toward reaching its goals. Creating an organizational structure typically focuses on improving a company's technical and human aspects. In many companies, these principles result in a more efficient corporate design, creating better internal operations and improving business profitability and customer service. A successful organizational design typically includes the following aspects:
Strategy: why the business exists and its competitive advantage
Structure: the hierarchy design of the business
Systems: the process for rewarding employees, submitting departmental reports, or allocating resources
Processes: the technologies and methods employees use to do their jobs
People: the type of talent the company can hire within its departments to meet various goals
Culture: the styles for collaboration, communication, or management
Benefits of organizational design
Here's a list of the benefits of an efficient organizational design:
Clarity in operations
Adopting an efficient organizational design is important for every organization, regardless of size. It clarifies a company's daily operations and the process of making key decisions and other activities. A practical design provides an overview of each stakeholder's role. This helps employees understand their responsibilities, the timeframe to complete specific projects, the tasks to prioritize, and who they can contact when they need help. A good organizational design can significantly affect efficiency, particularly in large corporations.
An organization with an efficient design can take advantage of growth opportunities more easily. An excellent organizational design encompasses a technological infrastructure. It's also beneficial when a manager is considering hiring a new employee. The organization's design stipulates specific measures to follow when hiring new people.
Adaptability to change
A key feature of an effective design is the ability to respond to a changing marketplace and industry conditions. Many company leaders prefer to focus on existing operations, but the best design allows space for new trends. Ideally, a practical design is flexible enough to allow for any adjustments when necessary.
8 organizational design principles to consider
Here's a list of the eight principles of organizational design that can impact how management and employees interact with one another and divide responsibilities:
1. Work specialization
The principle of work specialization is a key element of organizational design. A manager typically delegates various responsibilities to employees. An employee's skills, qualifications, job role, and abilities determine how a manager can delegate their work. For example, asking an accountant to prepare a list of materials a company requires to maintain production isn't efficient. When everyone in the organization follows the work specialization principle, the employees can complete their tasks quickly with high quality.
Employees can also enjoy working for an organization when they perform work they like to do. It's beneficial for managers to be aware of their employees' skills when following the work specialization principle. The manager can also take a risk by delegating work to employees with less experience to discover their hidden talents or give them a chance to grow.
2. Unity of command
A company's communication hierarchy is the focus of the unity of command principle. The communication hierarchy outlines the relationship between an organization's leadership and its employees. It's important for every employee to report to their immediate manager when discussing daily activities. The unity of command principle creates a proper flow of information within a company. For example, the managing director can instruct the marketing manager, and the marketing manager reports directly to only the managing director. A marketing manager can have authority over a sales manager, who is in charge of their sales representatives.
In most organizations, authority flows from top levels, such as executives and management, to lower levels, such as customer service or sales representatives. This flow removes any communication gaps and provides responsive feedback, with each department in the company following the same flow. This principle helps establish coordination throughout the organization.
3. Control or supervision
The control or supervision principle focuses on the number of employees a manager can work with efficiently. It's important for the manager to be able to supervise the employees who report to them. The number of employees a manager oversees depends on their competence and abilities, along with the work of the team. The following describes the span of control a manager may have in their role:
Wide span of control: This happens when a manager oversees a large group of employees efficiently. A wide span of control can occur in environments where work is repetitive, communication is excellent, employees require little help, and teams respond promptly.
Narrow span of control: This happens when a manager oversees a small group of employees. A narrow span of control works when the team requires continuous supervision, they have less coordination, there's some miscommunication, or the job requires specific specialization.
4. Coordination of departments and compartments
A larger organization comprises various departments and compartments. This design principle allows the teams within each department or compartment to focus on specific tasks. It's important to coordinate the various activities in the company, so each department or compartment can work together efficiently. Here are the differences between a department and a compartment:
Compartments: This refers to the group of professionals who each come from different career paths and specialties. These professionals use their skills to complete a project together.
Departments: This refers to the group of professionals with similar skill sets in a company. Each individual typically has the same duties in the department and uses the same practices to achieve a goal.
5. Balance of responsibilities
It's important for managers to ensure every employee has an equal amount of work. Having a balance of responsibilities helps to reduce the chances of conflict among the team members. It also ensures the company uses the employee's time and skills effectively. This principle usually benefits employees because it can provide everyone with equal opportunities to perform.
6. Functional definition
A clear definition of responsibility and authority between leadership, management, and employees can be key. If there's no clear definition of specific responsibilities, there's a possibility that the work can remain incomplete. For example, a restaurant may require someone to turn off all the electrical appliances at the end of the day. If this responsibility goes unassigned, the restaurant can't hold an employee accountable if the electrical appliances stay on throughout the night. Telling everyone their responsibilities can ensure that they complete their work without delay.
7. Simplicity of communication
Simplifying the authority of communication throughout an organization can result in less confusion among employees about who they can approach when facing challenges. Creating simplicity means clearly delegating authority in an organizational design. For example, a customer service representative reports to a manager, but the manager doesn't report to the customer service representative. Having a short chain of command can reduce confusion and delays in the decision-making process. This can also reduce any coordination and communication challenges throughout the company.
8. Adaptability to change
Being able to adapt to change is beneficial for an organization. Creating an organizational design that's flexible enough to adapt to certain circumstances is important. For example, it's important for an employee to know who they can report to when a manager suddenly isn't available. Flexibility allows an organization to grow faster than a company that's not ready for change.
Evaluating the effectiveness of an organizational design
Using the principles of organizational design can result in an effective organization. This means the company can achieve its goals. Evaluating an organizational design can help you identify improvement areas. Here are some approaches you can use to evaluate an organizational design:
Resources-based approach: This approach assesses an organization's effectiveness on whether it can get the resources it requires for high performance.
Internal process approach: This focuses on an organization's production process and determines its effectiveness using internal economic efficiency.
Goal approach: This focuses on assessing an organization's effectiveness by monitoring how well it can reach its operational goals.
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