What Is Organizational Development? (With Importance)

Updated August 22, 2023

Organizational development, also known as OD, is a process that may help enhance a company's workforce by offering structure and value to the company and its employees. This can enable human resources employees to create employee interventions and identify answers to workplace challenges. Learning to combine organizational development strategies with HR practices may help you develop inclusive plans that foster engaged, collaborative employees. In this article, we answer the question "What is organizational development?", explain its importance, explore its advantages, review tips for integrating it with HR, and list OD specialist skills.

What is organizational development?

If you're interested in HR, you may have encountered the question, "What is organizational development?". Organizational development is a process that offers ideas and solutions for enhancing the employee experience and expanding a business. It applies behavioural sciences, including psychology and sociology, to improve strategies for attracting and keeping employees. The technique includes analyzing data and doing research to discover departmental and leadership strengths and shortcomings. Once recognized, companies may use coaching, conflict management, and leadership development to improve skills and reduce liabilities.

Why is organizational development important?

This process is important because it ensures that both the organization and its employees benefit from efficient operations. When integrated with HR practices, OD helps offer the data necessary for a comprehensive analysis of a policy's effectiveness. Additional reasons the process of organizational development is essential for human resources and a business include:

Enhancing organizational effectiveness

Human resources may maximize employee potential using organizational development, which places people in positions that promote and support their contributions. This process helps them evaluate departmental and executive performance to identify discrepancies. It aligns employees with the organization's objectives and promotes business values via training and feedback.

Promoting commitment and loyalty

Placing people in roles that optimally use their abilities may increase employee morale and corporate loyalty. Providing employees with challenging duties and responsibilities fosters an engaging environment in which they may feel valued and indispensable. Regular training and education help individuals understand their job responsibilities and how to develop them.

Improving talent acquisition

When businesses concentrate on acquiring employees, they may have a competitive advantage. Employee abilities may contribute to product value or provide a distinctive service. For instance, a fashion business may want to employ exceptional designers who provide certain materials or styles. The company may use the OD process to guide the recruiting, training, and retention of talented designers.

Monitoring market response

The process of organizational development depends on data to inform its choices. Assessing the demands of the employer and market situations can help develop relevant business strategies. This process may involve a benefits package evaluation, such as adding gym memberships to the company's health insurance programs.

What are the advantages of organizational development?

Organizational development is a process that supports HR objectives by evaluating and mitigating obstacles to enhance performance, output, or outcomes. Here are the primary advantages of organizational growth for human resources:

Engages employees in decision-making

This process may encourage management to solicit employee input and communicate openly so that individuals are aware of their job duties. It involves comprehending employee requirements and providing the resources necessary to execute job duties. OD may, for instance, involve a yearly or quarterly survey to employees to assess their job satisfaction and professional objectives.

Focuses change on an area

The process of organizational development highlights areas or departments that may need modification. It involves studying the area's process or technique, finding potential remedies, and predicting the outcomes. For example, an evaluation may reveal that accounting productivity declines after 2:00 p.m., following the final lunch break. OD intervention may involve moving major duties to the morning in attempts to increase performance.

Focuses on collaboration

Organizational development incorporates all departments to create cooperation and enhance communication, outcomes, and progress. OD assessments might find areas where change might be helpful and informs relevant departments so they can act on it. For instance, a study on the industry may suggest that competition is entering the market. HR may react by defining a recruiting plan and influencing marketing for promotion, accounting for budget approvals, and providing proof for stakeholders regarding the importance of employing emerging talent.

Determines interventions

Interventions may help identify redundant processes and combine them for greater efficiency. It may also indicate the need for training or education for employees or leadership. Interventions assist employees in doing their duties more effectively, learning the company's objectives and purpose, and fostering teamwork. Examples include training in sensitivity and team building.

What is the difference between organizational development and human resources?

The primary differences between organizational development and human resources include:

Organizational development

The process of OD aims to enhance system performance via data analysis and mediation. It acts to develop behavioural techniques that enhance employee performance and business outcomes. Additionally, OD:

improves HR systems and processes
helps employees function better
exacts meaningful change
offers professional development
educates leadership on best HR practices
gains a competitive advantage

Human resources

Human resources departments ensure compliance with regulations. They also enforce company rules and procedures for employment and termination. Additionally, HR:

mitigates employment-related risks like turnover
focuses on processes
is compliance-oriented
monitors employee diversity
reduces labour costs
promotes employee safety

Tips to integrate OD with HR

When human resources integrate OD, they may create a strategic, fully-developed department that can better serve its employees, which is beneficial to the company as a whole. Here are a few tips for combining organizational development principles into HR practices:

Consider the entire company

The business' objectives serve as the basis for an HR strategy. To link HR strategy with the business, you might analyze the company's objective or goal. For instance, a company's main purpose may be to minimize expenses, and HR might coordinate its strategy to reduce employment costs by enhancing employee retention. Another business may emphasize its handcrafted goods, prompting HR to seek exceptional artists.

Rely on data and analysis

Data collection and analysis play a vital part in determining the effectiveness of HR policy. Understanding and analyzing key performance indicators (KPI) and key performance drivers (KPD) may assist HR in evaluating the overall operation to see how departmental policies are affected. For instance, a retail business may find that 78% of one-on-one contacts with store employees result in a sale. HR reacts by transferring competent staff from other jobs to the retail floor to improve customer service and increase sales.

Ask effective questions

Data provides quantitative proof of essential changes, but it doesn't explain their reason. For instance, data may indicate that staff retention has decreased by 12%, but does not explain why. The analysis starts with the formulation of questions designed to unearth the specifics of the underlying data to examine its impact. Ask questions that get the following answers:

Why the data changed: Analyze hiring practices, benefits packages or compensation strategies.
When the data changed: Analyze if the event is unique or corresponds to a company or competitor event.
How the data changed: Analyze the job market, job trends or competitor strategies.

Conduct assessments

Committing to regular assessments can help you stay current on HR policies and how they may affect the business. You can monitor for changes in the market or job trends to make predictions about employee needs for the future. Regular assessment and intervention may help improve employee retention and keep the company competitive.

Examples of organizational development specialist skills

These are some of the most important skills that organizational development specialists require to succeed in their tasks:

Software competency

Businesses use a wide range of software programs to simplify operations, decrease repetitive tasks, and boost productivity. Development professionals that are proficient with these platforms might have a greater understanding of the tools their customers use and a deeper understanding of the efficiency of organizational operations. If organizations are not using these technologies, development professionals may help with introducing new programs and staff training.

Interpersonal skills

Organizational development experts work with different types of professionals every day. This may involve colleagues in their own organizations or personnel from client companies. Interpersonal skills are often necessary for organizational development professionals to establish personal relationships and influence decision-making.

Verbal and written communication

Two of the most crucial aspects of an organizational development specialist's work are collecting data on organizational effectiveness and developing strategies to boost performance. During the process of data collection, they may conduct interviews, which often need strong verbal communication and note-taking abilities. When managing teams, presenting data, or counselling business leaders, verbal communication may also be essential.

What Is Organizational Development? (With Importance)