©Paul Kearns, 2011

Principles of Organisation Design

I tried to find a good book on organisation design many years ago and they all seemed very
academic and sterile; as though the authors had never actually lived the problems that
organisation designers face. So I started to produce my own list of the lessons I had learned
and only formally compiled it in the 1st Edition of my book ‘HR strategy’ (2003). I then
continued to develop it further in the 2 nd Edition (2009) because the feedback was that
people found it very useful. I keep adding to it and will probably continue to do so.

Many of the principles and rules on this Checklist are broken on a regular basis by
organisations due to ignorance, politics and personal ambitions yet they can still offer a
useful anchor and reference point for anyone considering a re-structure. They are in no
particular order.

1. Organisation design should always start with a blank sheet and the design worked up
from strategic objectives. Even though reality rarely allows for us to start with a
‘blank sheet’ the pure, blank sheet design can still be used as a reference point.

2. The organisation should not be designed around the people, except on very rare,
exceptional and short term occasions, even though it usually is.

3. Avoid simplistic silos and ‘stove pipes’ of technical, operations, production, sales,
marketing, R&D and finance. Why not put some technical people in marketing as a
balance, or vice versa. Production people will have to produce what sales can sell,
but only at a given cost. It is better to get this dialogue working before the final
production design is agreed.

4. In organisations run primarily by a predominant group of professionals (e.g. National

Health Service, legal practices, engineering firms, pharma scientists, insurance
actuaries) there should be very distinct boundaries between the strategic,
operational and financial management of the enterprise and the
professional/technical delivery of services. (i.e. medical procedures, legal advisory
work, engineering, R&D). Ideally the roles should not be combined due to a potential
conflict of interest. Very few people are talented enough to be great at both jobs,
especially at the same time.

5. Someone should always be ultimately accountable for whatever the organisation

does so the most important question the organisation designer should ask is ‘who is
accountable for what?’

6. Accountability has to be matched by authority – no one will accept accountability for

something without having control or the authority to influence outcomes.

7. We need to be crystal clear about the difference between accountability

(somebody’s head ultimately has to be on the ‘block’) and responsibility (having to
carry out a task but without having to face the ultimate consequences) and ensure

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both are clear in each role. For example, a nurse might have the responsibility for
getting a consent form signed before surgery but it is the surgeon who is accountable
for the outcome of the operation; including the signing of the form.

8. Never give anyone power or authority in excess of their own capability, a very
obvious rule and yet one that most organisations break on a regular basis. This is a
warning to be vigilant and is meant to counter the Peter Principle - where everyone
rises to their level of incompetence.

9. Ambition and talent are not always equal and very rarely do the super-ambitious
have the talent to match. Never confuse the two when succession planning.

10. Organisation design is predicated on efficiency - roles should always be allocated to

ensure the work is done by the lowest cost, capable person.

11. Look out for ‘sore thumbs’ or odd roles ‘out on a limb’. They can usually be spotted
by having nonsensical or meaningless job titles.

12. All organisation design is political – effective design has to involve the effective
management of the politics and power bases and therefore requires well developed
influencing skills.

13. Organisations are not democracies. Some are more democratic than others but they
all need leadership and therefore a hierarchy of some sort. No apologies need to be
made because the only alternative to a series of reporting lines is no reporting lines
at all, otherwise known as anarchy.

14. All roles should have performance indicators attached but be vigilant in avoiding
conflicting performance indicators that discourage cooperation (e.g. quality of
research versus cost of research). Designing shared, value objectives (a combination
of output, cost, revenue and quality) are a guiding principle to follow.

15. The purpose of an organisation is to create value – not jobs. Job creation is a very
beneficial by-product of successful organisations creating a successful economy.

16. Don’t be seduced by terms such as the ‘virtual organisation’. It is a meaningless

phrase. ‘Virtual’ organisations may refer to geographically dispersed organisations or
those where electronic communication is the only link between various outposts.
These factors may present some operational difficulties but they are still real
organisations in every sense of the word and have to be skillfully managed.

17. An organisation chart should always aim to reflect reality, even though they rarely do
in practice. A title or position should never be an attempt to give credibility to
managers who cannot earn it for themselves. Regardless of who the organisation
chart says is in control, staff will generally deal with those who they regard as being
in control. The de facto organisation structure rules so why not have the courage to
get the chart to match it?

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18. Do not try to ‘con’ your employees into thinking they are more important by drawing
your organisational pyramid upside down. It is about as convincing as a magician’s
three card trick and insults employees’ intelligence.

19. Do not employ prima donnas or those too precious to accept open criticism. Premier
league footballers (or choose your favourite sport) come very expensive and do not
guarantee a winning streak: a point recently amplified by the atrocious performance
of many overpaid derivatives traders and senior banking executives.

20. Personal effectiveness should not be construed as organisational effectiveness. You

might employ a ‘brilliant’ product designer but that does not mean you will achieve a
brilliant or even acceptable profit margin on the goods they design. Brilliant
engineers have often cost their organisations dear even though their pure,
engineering excellence is unquestionable. Excellence still has to be fit for purpose.

21. Every time a new post is suggested the key question is how will this role add value?
If there is no clear answer you have not put enough thought into the decision.
Management layers only add value if they manage a higher value performance from
those who report to them.

22. A very rough (and I stress ‘rough’) rule-of-thumb for span of control is between 5 and
10 reports. Most managers can only cope with about 6 to 8 direct reports. More than
10 should set off a mild ‘alarm’ and more searching questions. Less than 5 begs the
question could two groups of <5 be managed by one person? A situation where
single person reports to someone should always be closely questioned.

23. The number of direct reports should be even smaller when each position is highly
technical.

24. Technical staff who understand the technology better than their boss tend to create
a dangerous situation and a very awkward relationship - beware.

25. Never appoint anyone in a managerial position purely on technical merit; another
obvious point yet a classic managerial fault. There is a very high probability that they
will not be a brilliant technician and manager and, when they realise that, they will
hide their managerial inadequacies behind a screen of over-elaborate, technical
expertise (and make everyone else’s life more difficult in the process).

26. The executive team should reach agreement on which are key positions. They should
be identified as such on an organisation chart and have successors identified. The risk
of losing key people should be closely and regularly monitored. You should go to the
ends of the earth to keep them because they will take so much of your potential
value with them (but see 19. above).

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27. Anyone suggesting a matrix organisation had better get the culture right first. Never
give anyone two bosses, no matter what the justification may be. This leads to all
sorts of political games and playing off priorities between one boss and another.

28. Organisation charts that change too often are a symptom of bad organisation design.
Some organisations change their structures so often that the latest chart is never up
to date. Every time the organisation structure changes it automatically means
everyone directly affected has a new role. No one can change their role that often, or
that quickly, and still be completely effective. HR-business strategists should counsel
against all changes unless they are absolutely necessary and where the ramifications
are fully considered.

29. There is no reason why the principles of empowerment or flexibility should be

constrained by an organisation’s desire to adhere to a principle of systematic control.
Even empowered employees have to be accountable to a higher authority ultimately.

30. Empowerment is actually more to do with the system than it is culture. Anyone can
have a great idea but they should not be empowered to try it out without putting it
through a system to check that it works. Innovation outside the system is as likely to
sap value as it is to add value.

31. Never appoint someone just because they are ‘the best of the available bunch’. If
you cannot get the right person into the right role then maybe you need to re-specify
or re-design the role.

©Paul Kearns v15/7/2010

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