5 organisation design mistakes you’re probably making – and how to fix them

by Liz Hirst – Senior Director, Wharton BC

For the fourth quarter in a row CFOs have placed cost optimisation as their top near-term focus[1] signalling that cost reduction is staying firmly on the leadership agenda. Less than a quarter of organisation redesign efforts succeed in delivering the value they intend[2] – and yet 26% of organisations are anticipating redundancies in 2023[3]. This begs the question – can you deliver sustainable cost reduction and avoid costs creeping back in?

Through more than 20 years’ experience in strategic redesign, we have identified 5 common organisation design mistakes which limit leaders’ ability to drive long term, sustainable cost optimisation;

1.      Unconvincing and uncommunicated case for change. Too often organisation design is done in a darkened room. In an attempt not to worry people, you achieve precisely the opposite, increasing fear and speculation, heightening resistance and often resulting in the loss of top talent. It is critical to ensure there is transparency not just around the process but about the ‘why’. If you are looking to cut costs, be honest and explain why it is necessary. If you are seeking to fuel growth, be clear on the opportunities created for the organisation – where will you invest that freed up capacity, and why. Trust and inspire your people and you will find they are much more engaged with transformation and more likely to make it a success.

2.      Failing to put people at the centre. It is often stated that ‘people are our biggest asset’. In a world of AI, automation and an increasing war for talent, it is fundamental to treat employees as humans and to consciously bring them along the transformation journey. We believe in a people-centric approach to organisation design; involving employees in assessing what does and does not work today, giving them options and helping them shape the solution. It is also critical that leaders make themselves human, talking about the impact on their own roles and “walking the walk”, embracing and role-modelling change.

3.      Focusing solely on changing the organogram. What can I say? This doesn’t work. Too many leaders place insufficient focus on the behavioural change required to embed a new model. Without this there will inevitably be drift back to the old model, with costs and old ways of working creeping back in. Instead, leaders must focus on changing mindsets and defining how the new model works in practice, not on paper.

4.      Designing purely for cost. Cost driven designs often result in increased real-world cost. Sound crazy? It’s because if you forget about delivering customer value, employees will take it into their own hands, often introducing costly workarounds in the process. Instead, focus on the things that contribute to the delivery of customer value and design your organisation around these. Over time, this results not just in an improved customer experience but also in cost falling away as non-value adding activities are removed.

5.      No sustainable follow through. Transformation efforts often focus on short term gains and don’t embed the required ways of working to sustain the changes longer-term. Consider how budgeting processes, incentivisation, performance management and other processes drive certain ways of working. Think about individuals who refuse to change and the impact that has on culture. As you go through your design options, articulate the enablers and blockers to delivering the efficiencies associated with the new model and have the courage to act on them. Invest as much, if not more, time and resources in getting these right as the organisation design itself.

Interested in understanding a bit more? Why not drop us a line and let’s talk. We think it is possible to simultaneously reduce cost, enhance value and make it stick – and we’ve got lots of experience doing precisely this, with outstanding results, across multiple industries – check out one of our recent testimonials here.

[1] Grant Thornton CFO Survey, Q1 2023

[2] McKinsey

[3] Ayming UK