Org Chart Overhaul
7 Steps to Future-Proof Your Organizational Structure for Tomorrow’s Challenges
Organizational transformation and growth are only possible with intentional organizational design. And while this process often involves restructuring, simply creating a new organizational chart is not enough.
An organization operates like a living system, where various interconnected performance levers — roles, systems, processes, culture, leadership, and talent — all work together. Shifting one lever affects the others. For example, if a company shifts its strategy from serving customers based on geography to focusing on product needs, merely adjusting the organization’s structure in isolation will create a misalignment of talent. Structure alone cannot support this shift. All performance levers must be aligned to work together in harmony.
So where should leaders start? Before focusing on the performance levers, the first step is to define the strategy that will drive the organization’s design. From there, it’s critical to assess your organization’s current design and what needs to change to drive the strategy forward.
To set up your organization for sustainable, long-term success, resist the urge to implement a new org chart from the top down. Instead, adopt a value-based approach to organizational design and implementation, as outlined in this seven-step framework.
STEP 1: Define a Clear Vision and Strategy
Clarifying your organization’s vision and business strategy is essential to designing a future-state organization. If your leadership team has already defined and aligned on a vision and strategy, you’re ready to move forward. If not, begin by creating a strategy map that defines:
- The shared vision of a future state. What will be different for customers/clients, and what does that mean for the business and employees?
- The strategy. What are the choices, priorities, and trade-offs that leaders make to move the organization toward its vision?
This process of defining the vision and strategy builds alignment among leader . And when communicated in a compelling way, it will mobilize the entire organization to move forward together.
Whether you’re shaping a functional or enterprisewide strategy, aligning on a clear business strategy — such as customer-centered growth, operational efficiency, or product innovation — sets the foundation for a new organizational design. It’s important to engage key decision-making leaders from the start to ensure alignment and ownership throughout the process.
Best practice: Clarity drives execution and results. Be as specific as possible when articulating your strategy. Define the measurable changes that will occur and the timelines (e.g., “We will launch three market-disrupting products by 2030”).
STEP 2: Assess Your Organization’s Strengths and Gaps
Once you’ve aligned on your business strategy, the next step is to identify the capabilities your organization needs in order to achieve that future-state vision. Start by answering the question: What do we need to do exceptionally well to execute our strategy?
Next, you need to understand the organization’s current strengths and gaps in relation to those future-state capabilities. This requires a deep dive into your current state to assess
where you excel and where improvements are needed. Keep in mind that organizations are like living systems, and the strengths and gaps are interconnected across several performance levers, including roles, processes, culture, structure, leadership, and talent.
As your strategy evolves, each of these levers will be affected by the changes you implement. That’s why assessing the current state of each lever is critical for shaping your future-state organization. The output of this assessment will be a report that provides an objective overview of the organization’s strengths and gaps.
Best practice: Share these findings with key stakeholders early on to prepare the organization for change. Make it clear that realigning the organization goes beyond creating a new org chart. It’s about realigning the entire system to support the strategy.
Resist the urge to implement a new org chart from the top down. Instead, adopt a values-based approach to organizational design and implementation, as outlined in this seven-step framework.”
STEP 3: Determine Your Design Objectives and Principles
Building your future-state organization model starts with assembling an all-star design team. This team should include leaders who own key parts of the strategy, subject matter experts, and key influencers who will champion the change and rally others.
When selecting members of this team, balance the need for expertise with the power of informal influence. Because the design process can be somewhat messy, ensure that members can hold discussions in confidence and act in the interest of the organization rather than focusing on personal agendas. Make sure to include any key voices whose perspectives would be valuable in shaping the future state.
Bring the design team together for a series of working sessions. Start by determining your design objectives and success measures. To pinpoint these objectives, ask the question: What do we need the organization’s design to enable in our organization? Consider whether the change is primarily focused on driving innovation, strengthening customer relationships, or increasing efficiency.
From these objectives, you can identify the design principles that will guide the design process. These are the essential “musts” and “must nots” for the design. They might include statements like:
- Must promote integration across teams to prevent silos.
- Must improve the recruitment and retention of talent.
- Must build capabilities to meet the needs of the next 10 years.
- Must drive efficiency and enable us to scale.
Best practice: Design principles ensure your organization’s values are reflected and prevent unintended consequences in the design. For that reason, it’s critical to share these principles with key leaders, gather their input, and ensure alignment.
STEP 4: Design the Operating Model and Leadership Structure
Organization design, at its core, is about organizing work in a way that makes the most sense for the strategy you’re seeking to achieve. The operating model serves as the blueprint. It should include governance considerations, high-level business process flows, and ongoing business activity groupings required for each design objective (e.g., client/customer relationship functions, technical and expert functions, and operational functions).
For example, an operating model framework can group activities by the type of value needed to optimize innovation, expertise, and customer experience. Here’s how activities might be organized:
Center of Expertise
Objective: Bring technical expertise, knowledge, and consistency to programs and services.
Activities:
- Provide technical expertise.
- Identify and establish best practices.
- Design and build programs and policies.
Outcomes:
- Enhanced service innovation.
- Proactive response to changing needs.
Shared Services
Objective: Minimize involvement and time spent by other functions on transactional activities.
Activities:
- Deliver transactional and process-driven activities.
- Build and continually improve transactional processes.
- Manage efficient delivery of transactional services.
Outcomes:
- Increased efficiency with decreased cost.
- Improved service quality.
Relationship Management
Objective: Provide exceptional customer experiences.
Activities:
- Provide support to customers and users.
- Act as a key contact to customers and broker services from Centers of Expertise and Shared Services.
- Gather input on customer needs from these groups.
Outcomes:
- Stronger customer relationships.
- Improved client satisfaction.
Building the operating model from these activity groupings ensures maximum impact, efficiency, and employee engagement. The groupings look different depending on your business strategy and org design objectives. The design team will lead the process of defining the operating model through collaborative working sessions.
Once the operating model is in place, you’re ready to build the org’s leadership structure. This should be derived directly from the activity groupings. Typically, a small group of leaders from the function or division, along with the HR function, will lead this process. The broader design team is not involved in this step because they typically have a vested interest in the structure itself.
Begin by presenting two to three leadership structure options that meet the design objectives and reflect the activity groupings. Use a facilitated dialogue to identify the pros and cons of each option, and choose the structure that best supports the business strategy.
At this point, communication and change management become critical. Share the leadership structure with the design.
team to re-engage them in the process. The way you communicate with the design team will set the tone for how the broader organization will be informed.
Best practice: Incorporate change management and communication practices throughout the organization design process. By doing so, you’ll help prevent resistance to change and ensure quicker alignment and support.
STEP 5: Develop Future-State Roles
Once the operating model is designed, bring your subject matter experts and design team back together to develop the future-state roles. Start with the high-level business process flows outlined in your operating model. Then, dig deeper to define the work processes, systems, and roles that drive success in the new structure.
Just as the operating model is built around activity groupings, roles should be designed for maximum productivity and job satisfaction. One effective approach is to align activities based on whether they create, protect, or deliver value. For example, in the box on page 21, the values-based role design framework aligns activities to roles based on whether the activities create value (drive innovation and growth), protect business value (ensure quality and stability), or deliver value (execute business functions).
To craft roles using this values-based framework, create a “responsibility matrix” that defines roles according to their place in work processes. Include design team members and other subject matter experts to ensure accuracy and relevance. Resistance to change often comes to the surface during this role design process. For that reason, engage those closest to the work to foster alignment and ownership.
Before finalizing the new organizational structure and changing roles, host working sessions with executive stakeholders to refine roles and ensure they align with the organization’s goals.
Best practice: A well-designed role should focus primarily on one — or two, at most — of the value types. If a role spans all three categories (value creation, protection, and delivery), it likely includes too many competing responsibilities, limiting the person’s effectiveness.
STEP 6: Plan for Implementation
Now that the strategy, structure, processes, systems, and roles are defined, shift your focus to determining your organization’s staffing and talent needs. Start by having HR leadership work with team leaders to determine the number of roles and full-time employees needed to support the new structure. Conduct a workload analysis to properly size the organization based on strategic objectives along with the current and anticipated workloads. Additional talent needs will emerge over time, but this initial assessment provides a strong foundation.
Once your staffing needs are clear, plan for how you will select current talent for new roles and identify roles that require new external talent. For some employees, the shift will be minimal, requiring only slight role adjustments. Others may face significant changes that demand new skills and competencies. A thoughtful, values-driven approach to managing these transitions will be essential.
To guide implementation, create a change plan that includes:
- Identifying impacted groups and when they’ll experience change.
- Anticipating employee concerns and key questions.
- Providing structured support, such as role-based learning, job aids, mentoring, and change ambassadors.
After finalizing the sizing plan, talent selection strategy, and transition plan, share them with key leadership for feedback. From there, refine the plan and prepare to move to full implementation.
Best practice: Consider a co-creation approach to building your implementation, transition, and change plans. Involving employees in the process increases engagement and fosters a two-way dialogue that strengthens buy-in.
Make it clear that realigning the organization goes beyond creating a new org chart. It’s about realigning the entire system to support the strategy.”
STEP 7: Activate the New Org Design Plan
The difficulty in implementing your new organizational design will vary based on its complexity, but a structured approach ensures a smooth transition. Keep these tips in mind:
- Launch the leadership team first. Establish alignment and shared ownership. Consider a facilitated offsite where leaders can focus without distractions.
- Roll out changes by level. Announce staffing decisions in a cascading manner based on level. Then move quickly to provide necessary support.
- Align key people practices. Adjust learning programs, rewards, performance management, and career development to reinforce the new design.
- Activate the new org design. Support the transition with change management, clear communication, and ongoing operational support.
Best practice: Building ownership and engagement requires setting people up for success. Ensure your systems and processes are in place before asking employees to take on new work or new ways of working.
Carol Henriques is a principal and client partner at TiER1 Performance. She previously led organizational transformation efforts inside large telecom and pharma companies and directed consulting teams at Andersen and Deloitte.
Gina Max is a seasoned executive with almost 30 years of experience in HR and leadership roles. She currently serves as senior vice president and chief people officer at Knauf North America.
CASE STUDY: The 7 Steps in Action
When Knauf Insulation North America (KINA) set an ambitious 10-year strategy aimed at doubling revenue, the global company realized it needed new opportunities for product, market, and customer growth — and it needed to rethink its org structure. KINA partnered withTiER1 to create this seven-step process to transform its organizational design to support this goal.
In Step 1, to shift the strategy focus from running the business to growing the business, KINA created a clear 10-year vision, focusing on customer intimacy as the primary competitive driver.
Next, in Step 2, an assessment of KINA’s current capabilities revealed key gaps that needed to be addressed for growth, including these shifts in mindset:
- Away from creating products and toward providing innovative customer solutions.
- Away from cost management and toward pursuing new revenue opportunities.
- Away from risk avoidance and toward new possibilities.
- Away from viewing failure as unacceptable and toward embracing it as a learning opportunity.
Through assessment, we identified gaps in KINA’s business strategy capabilities, plus several new capabilities to support these mindset shifts. We grouped these capabilities into three themes: customer listening, strategy activation, and business diversification. We embedded sustainability in each capability to ensure long-term success.
In Step 3, we engaged a cross-functional team of senior leaders to establish design objectives related to KINA’s four principles (customer centricity, people engagement, sustainability, and profitable growth).
In Step 4, we designed the future-state operating model. Using the values-based alignment framework, we outlined the anticipated activities to be completed in each business activity (manufacturing, sales, etc.).
In Step 5, we designed future-state roles by function. To enable operating units to focus their energy on growth, we decided that KINA’s supporting functions (HR, finance, IT, legal, etc.) would remain centralized but with customization to support growth.
In Step 6, we developed a road map for implementation, outlining required capabilities, structures, roles, and talent needs.
In Step 7, KINA’s CEO announced the new structure to the organization and the reasons for the change.
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