Unit 36-LO1 Evaluate the importance of organizational design to the delivery of sustainable performance-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Organizational design is the process of systematically identifying and addressing the most important aspects of organizational structure, culture, systems, responsibilities, and accountabilities in order to achieve desired outcomes. The success of any organization depends on its ability to deliver sustainable performance.

Designing organizations to be more efficient in their use of resources can help companies reduce costs while increasing productivity or quality. Organizations that are designed with sustainability in mind will create a stronger business strategy and better serve customers over time.

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Organizational design (OD)

Organizational Design as a historical concept

In the 1960s, all companies started to create “organizational diagrams” or what we now call organizational charts.

The idea was to define roles and the priorities between people. What a designer would do in these different disciplines (marketing, engineering, advertising) lined up this hierarchy. This led to designers at top of their fields (strategic design) being hired as consultants — in other words, those who were formerly just copywriters or commercial artists were elevated based on their work experience with so-called “design thinkers.”

Eventually, graphic designers began making templates for these organization charts without considering that it often isn’t necessary to have a designer to create these.

What is contemporary OD all about?

Organizational design is the process of designing the structure, mechanism, and policies of an organization to increase effectiveness.

Organizations are often difficult to change because of their size, complexity, and cultural adaptation. Organizational design involves designing how human beings work in an environment that fosters effective production or job performance while satisfying individual needs for safety, leadership, status recognition, responsibility, and rewards.

Some focus areas in organizational design include team-building exercises such as brainstorming sessions; incentive programs (e.g., parental leave); executive/management training (cumulative knowledge); continual evaluation feedback; task delegation strategies based on strengths or personality preferences; commitment contracts (highly monitored goal-setting).

Designing organizations to meet strategic aims

Organizations need to be designed in such a way that they meet the strategic goals of their stakeholders. This article provides some guiding principles for designing organizations and making sure they are meeting your goals.

Designing an organization is no easy task, but there are some key guidelines to follow when you’re setting up your company:

  • make sure it’s aligned with strategy;
  • don’t overdesign – pick 3-5 signature strengths and build on them;
  • take time to get buy-in from all levels of the organization;
  • use metrics like employee engagement, customer satisfaction, or marketplace share as indicators of success.

Once you know what’s working well and what isn’t, then you can make adjustments accordingly for the next phase in your organizational design plan.

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Considering the impact of the external business environment on OD

It’s important to consider the environmental factors that are out of an organization’s control- so they can be mitigated or planned for now so as not to have a negative impact in the future.

It would be important to know if the questioner works for a small company or a large company because there could be implications related to that decision.

For instance, in smaller companies, there is often less hierarchy and more movement between teams which could allow individuals more opportunity than someone in a larger business. Conversely though, in smaller companies, it may be harder to take on projects because of staffing limitations and lack of resources (i.e., office space).

Sustainable performance

Understanding that an organization must be designed and structured in such a way that sustainable short and long-term objectives are achievable. There are many ways to create sustainability and for any organization, it is always going to be different depending on the particular needs of the business.

The first step, as with anything related to sustainability, is making sure you have all the necessary dimensions in place. Many organizations get very far down the line before realizing they need one particular little thing to complete their strategy.

For example: if your goal is to make money but you haven’t counted how much parking space your company has available then you may find yourself in a tight spot when someone important comes into town looking for somewhere safe to park their car. You can’t offer them efficiently-parked cars if you’ve never considered what parking is available in the first place. So take the time to make sure you have all the facts and dimensions covered.

OD is part of a process where sustainability is a key factor of, and to, the process

Solving issues of sustainability is a key factor in the OD process and to the business or organization.

Organizational development always relies on creating sustainable processes for all stakeholders involved, and thus sustainability should be considered an important element in any plan. This means that if it is not considered during the decision-making process, then the company or organization may want to look further into providing a more sustainable work environment. By considering all aspects of sustainability within one’s work environment, it can help create a system that will support good decisions for years to come (Yagil).

OD ultimately strives towards ensuring that organizations are producing goods and services that will sustain their profitability while maintaining respect for people as well as environmental concerns.

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Agile organizations

An agile organization is one that can meet customer needs efficiently, effectively, and consistently through adaptation to a dynamic environment while continuously improving capabilities.

Agile organizations understand that constant variability, rapid innovation, and changing business needs are characteristics of today’s business environment. These forces cause organizations to constantly evolve and become more adaptive, which means that although an organization’s purpose may remain stable, the actions taken within an organization must adapt to ongoing change.

What are the characteristics of an agile organization?

Characteristics Of An Agile Organization:

  1. Flexible working hours: An agile organization allows people to work when they choose and with the flexibility, they need to do their jobs effectively. This frees up employees’ time and energy so they can fulfill tasks even before they have been fully created.
  2. Maximize worker satisfaction: Agile companies understand that delivery cycles are inevitable, allowing managers to adapt their roles according to the needs of the moment.
  3. Expansion of capacity: An agile organization provides its employees with the resources they need to take on more work and perform more effectively. Employees who have “optional extra” training and skills can bring them to the organization as capacity becomes available. This prevents oversights that lead to slow and inefficient delivery. 
  4. Open communication: Agile organizations encourage collective action, both traditional and social media to actively engage employees throughout all sites of the organization. Getting input from people on a regular basis is essential to increasing creativity and innovation while improving time efficiency as well.
  5. Teamwork and collaboration between all employees: Agile organizations view teamwork as a means to achieve certain results. Increased transparency represents making work relevant for each employee by incorporating the needs of others into their own work by practicing focused teamwork with cross-functional collaboration.

How are these implemented giving consideration to the existing people, processes, and culture?

In order to be successful, any shift towards Agile needs to balance the people, processes, and culture.

Fortunately, this is not as difficult as it might initially sound. Effective process improvements need to take into account affecting change in three areas:

  1. People & social dynamics – how the changes may impact individuals of various power/status within the organization.
  2. Process definition – how different aspects of an Agile implementation will work together for a given context or environment.
  3. Cultural gestalt – how an organization’s existing cultural norms will come into play with adopting agile techniques.

OD theories and models

Change theories have been used to explain how organizations react to change in their environment.

McKinsey’s 7S model is one such theory–according to this model, the structure of an organization can be divided into seven components called “seven effects”, or simply 7D.

The typologies of change heavily influence how a company achieves the best performance possible during a time of change, as well as what is expected from employees and managers.

Transformation/transactional OD takes a more neoclassical approach, by addressing Pfeffer and Lawler’s ideas about motivation arising from asymmetrical power relationships between employees, employer, and society at large (which they labeled transactional-transformational).

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