Choosing the right organizational design is an important, if not the most important, tool in efficient and effective service delivery. With business demands constantly evolving, changing market conditions, and competition for skills at a record high, how your organization is structured has never been more important. Getting it right requires an understanding of today’s business context, its technology implications, and the evolving dynamics of the partnership between the two.
Business context is rapidly evolving in almost every industry and much of this is the direct result of digital enablement. New business models and entrants are redefining what is required to compete in any sector. The ability to sense and respond to these changing market conditions is needed for businesses to survive. Unprecedented M&A activity is creating additional demands to combine assets, reorient product portfolios, and enter new markets. The impact on IT is an ever-expanding demand for new capabilities with the simultaneous pressure to reduce the overall costs of delivery. An effective organizational design defines the way in which the technology organization will work to meet these challenges.
Organizational Design Expertise
While many CIOs wait until a major event (like an M&A, divestiture, or business restructuring) to evaluate a new organizational design, Wavestone experts believe companies should undergo holistic, proactive organizational design assessments regularly. Depending on market dynamics, this could be every two, three, five, or even seven years. We recommend a structured process, starting with a full understanding of the design objectives according to business context and the technology landscape.
Every business is different, and there is no “one size fits all” solution to organizational design. Today, four archetypes are prevalent in the market: the functional organization model, process/lifecycle model, product-based model, and business unit/geographic replication model. Many companies choose a hybrid of two or more of the above. Furthermore, clients must weigh specific design parameters when creating organizational design, including:
Which business capabilities will IT own? Which IT functions are necessary? How much of the enterprise will IT need to consider? Most every business function has a technology component, so how will IT interface at this intersection?
How is the business organized? Is it structured around products, service lines, geographies, or other criteria? How do these teams measure success? If necessary, alignment to the business can be both horizontal and vertical.
Which functions will be centrally managed and which will be spread across different parts of the business (e.g., different business units or regions)? This is often a cyclical decision based on the maturity of the function.
Where should IT enforce the standardization of functions and processes? What functions will be more valuable if customized? Standards can drive costs down and efficiencies up, but resulting tradeoffs need evaluation.
Which functions and roles should remain in-house? Which functions can be outsourced? Mature sourcing practices can provide cost improvements as well as support transformation.
Where should each function be located in order to balance effectiveness and cost efficiency? Recent shifts in remote work and a growing list of locations with top talent offer more choices than any point in our history.
How should functions be grouped within an organizational model? Should organizational roles be specialized or generalized? Should resources be pooled or dedicated? Designing for the continuous improvement of teams and individuals is critical.
Which skills are critical for success? Are these new or existing skills? What are the key success factors for attracting, retaining, and developing talent? Part of this decision must be based on the talent you have, and an understanding that a portion of the talent you will need in the future must evolve from that same pool.
Which measures will best reflect achieving the desired outcomes? How will they be tracked and communicated? Measure what matters most.
Our experts know that increased expectations of shortened time-to-value and cost neutrality require the entire organization to operate efficiently. Market conditions, business structure, technology landscape, and geographic footprint inform design objectives and ultimately make selecting the design pattern itself a quantifiable decision. From there, the next steps are finalizing the details—using qualitative and quantitative analysis to determine specific job roles, staffing levels, budgets, and performance metrics. Wavestone’s team of experts guide CIOs and IT leaders through every step of this process and ensure they have the blueprint they need to enable a successful execution.