What is Organizational Development?

A Complete Guide

DEFINITION
Organizational development is a critical and science-based process that helps organizations build their
capacity to change and achieve greater effectiveness by developing, improving, and reinforcing
strategies, structures, and processes.

There are a few elements in this definition (adapted from Cummings & Worley, 2009) that stand out.

• Critical and science-based process.

OD is an evidence-based and structured process. It is not about trying something out and seeing
what happens. It is about using scientific findings as input and creating a structured and controlled
process in which assumptions are tested. Lastly, it is about testing if the outcomes reflect the intention
of the intervention.

• Build capacity to change and achieve greater effectiveness.

Organizational development is aimed at organizational effectiveness. It, therefore, has a few

(business) outcomes. These can differ between organizations, but usually, they do include financial
performance, customer satisfaction, organizational member engagement, and an increased capacity to
adapt and renew the organization.

• Developing, improving, and reinforcing strategies, structures, and processes.

The last part of our definition states that organizational development applies to changes in strategy,
structure, and/or processes. This implies a system-approach, where we focus on an entire organizational
system. This can include the full organization, one or more locations, or a single department.

Organizational design has become more crucial over time. Today’s world is characterized by
Volatility, Uncertainty, Complexity, and Ambiguity (VUCA). This VUCA world requires new agility from
organizations, and organizational development is the means to that end. In organizational development,
the main stakeholders are both internal and external to the company. Management and employees are
internal stakeholders. External stakeholders include customers, investors, suppliers, communities, and
governments. Globalization leads to a much greater interconnectedness and opens organizations to
world-wide opportunities and threats. On top of that, IT is redefining how traditional business models
work, creating innovative companies with the ability to scale their services to a worldwide audience in
the timespan of only a few years. Just a year after launching, Facebook hit one million registered users.
A few years later, Snapchat hit 10 million active users in its first year. This exposes incumbents to
disruption.

Finally, business systems become better at measuring relevant data, changing the way success is
measured. On top of that, advanced people analytics can help to further drive organizational outcomes.

THE GOALS OF ORGANIZATIONAL DEVELOPMENT

 These goals vary between organizations. In corporate companies, increasing profits is likely to
be a chief concern. Within charities, the cultural values are of high importance. And in health services,
adaptability is central to maintaining good functioning.

If there would be one central goal, it would be increasing the organization’s competitiveness.

Competitiveness is the idea that every organization has unique resources and competencies that
help the firms to win in the marketplace. This can be the people (a business leader like Elon Musk, or the
Google team), an innovative product (SpaceX), superior service (Four Seasons Hotels), or culture
(Zappos). It can also be how reactive the organization is to changing market demands. If you’re the first
to capitalize on an opportunity, for instance, it may solidify your revenue in the next five years.

The goal of OD is to develop these aspects, as they can help a business win in the marketplace.

This means that organizational development differs from the incidental change process. OD
focuses on building the organization’s ability to assess its current functioning and tweak it to achieve its
goals. It is, therefore, a continuous process, whereas change processes are often temporarily. This also
emphasizes the relevance of OD. In this VUCA world, change is becoming a constant factor. OD is an
integral approach to ensuring this constant change.

Organizational Development interventions

• Human Process Interventions - are change programs that relate to interpersonal

relations, group, and organizational dynamics.
• Technostructural Interventions - refer to change programs aimed at the technology and
structure of the organization.
• Human Resource Management Interventions - These are organizational development
techniques that focus on the way the individual is managed. Many of these are part of
HRM functions.
• Strategic Change Interventions - These organizational development techniques focus on
the change processes that shake the organization to its core. The OD department plays a
crucial part in executing on this change.
How Human Resources and OD relate
HRM focuses specifically on people practices, OD takes a more holistic approach. Using
tools like organizational design, individual and group interventions, work design, and more
traditional people interventions, OD can operate at all levels of the organization. These levels
are organizational, group, and individual. However, the focus is always on strategic themes,
whereas HR is often a lot more operational.
Sometimes, OD functions are in the HR function, but not always. Sometimes it’s part of
a services department, corporate strategy, or internal consulting. External strategy consultants
also frequently utilize OD techniques in change management projects.
Both HRM and OD have their roots in the business strategy – the mission, values, and
vision of the organization. Both outline the actions needed to implement that strategy in their
respective fields. In addition, many early people analytics initiatives originate from the OD
department.
Understanding OD means you can identify which elements of core HR functions need to
be focused on, to support the organization, in becoming more efficient. OD provides an
integrated way of approaching these challenges.

The Organizational Development Process

1. Entering and contracting - The first step starts when a manager or administrator spots
an opportunity for improvement. There are different events that can trigger this,
including external changes, internal conflicts, complaining customers, loss of profit, a
lack of innovation, or high sickness absence or employee turnover. These events are
usually symptoms of a deeper problem.

2. Diagnostics - Diagnostics is the second phase of the process. The OD practitioner tries to
understand a system’s current functioning. They collect information needed to
accurately interpret the problem, through surveys, interviews, or by looking at currently
available data. All of this is aimed at trying to find the root cause of the issues. According
 to Cummings & Worley (2009), effective diagnosis provides the systematic knowledge of
the organization needed to design appropriate interventions.

3. Data collection and analyzing - In the third phase, OD practitioners collect and analyze
data. Data collection methods include existing data from work systems, questionnaires,
interviews, observations, and ‘fly on the wall’ methods.

4. Feedback - In this phase, it is key for the OD consultant to give information back to the
client in a way that’s understandable and action-driven.

5. Designing interventions - After providing the client with feedback, an intervention

needs to be created. This intervention should fit the needs of the organization and
should be based on causal knowledge of outcomes. In addition, the organization needs
to be able to absorb the changes effectively.

6. Leading and managing change - The next phase is about executing the change
intervention. Estimations put the failure rate of change between 50-70%. Even though
this is not entirely true, no one can doubt that change is hard.

7. Evaluation and institutionalization of change - Once a system has been implemented,

opportunities for improvement start to show. Implementing these will lead to a better
user and employee experience.