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What Is Organizational Design?

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Organizational design refers to the way in which a company functions. Good organizational design aligns the company’s processes and management functions with its overall goals. Poor design can be most easily identified when a company utilizes traditional methods of organization rather than looking for innovative solutions.

The most effective way to organize a company depends entirely upon the company’s specific needs, functions, and goals. When considering the best design, one must first define the purpose of the company. All other features of the company’s organizational methods should center around fulfilling this purpose. A company whose purpose is centered around helping others, for example, would need a very different design than a company that is technologically focused. If both companies were to utilize the same design principles, one or both would be operating well below their optimum potential.

In addition to considering the purpose of the company, organizational design must also evaluate the skills and purposes of the individual employees. A creative company may thrive with a loose organizational system, ample opportunities for free brainstorming, and playful incentives. A company with more left-brained individuals may do better with a rigid, well-defined structure. Most situations will call for a unique blend of these methods.

A company’s organizational design also serves to define the chain of command and division of labor within the group. It determines who each individual reports to, what various departments are responsible for, and how everyone works together. The best designs typically allow for plentiful communication both between managers and employees as well as between various divisions of the company.

Many consulting firms specialize in organizational design. Their purpose is to look at a company’s performance, methodology, and

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