Deloitte’s recently released study found that in 2016, the top priority for talent managers is organization design. As the study reports:

After three years of struggling to drive employee engagement and retention, improve leadership, and build a meaningful culture, executives see a need to redesign the organization itself, with 92 percent of survey participants rating this as a critical priority. The “new organization,” as we call it, is built around highly empowered teams, driven by a new model of management, and led by a breed of younger, more globally diverse leaders.

Organizational Design

In our current economy, organizations are changing or being forced to change for many reasons. Among the driving forces of change are a.) Global business, b.) The gig economy and c.) work habits and priorities of Millennials. While globalization continues to place pressure on organizations to adapt (e.g., to working in different languages, cultural systems and currencies), the gig economy demands organizations to rethink how employees are recruited, trained and evaluated. Combined with the influences of the global economy and growing importance of contingent workers, Millennials continue transform the workplace both on a technological level and with their new values, which include different expectations about scheduling, benefits and career mobility. Combined these factors are prompting a growing number of business leaders and talent managers to turn their attention to organizational design.

The Principles of Organizational Design

To explain organizational design, the authors of Deloitte’s report resort to a surprising but evocative example. As they explain, “In his book Team of Teams, General Stanley McChrystal describes how the US military’s hierarchical command and control structure hindered operational success during the early stages of the Iraq war. After watching Al-Qaeda disrupt his army and win battles, McChrystal’s solution was dramatic: Decentralize authority to highly trained and empowered teams and develop a real-time information and operations group to centralize information and provide all teams with real-time, accurate data about war activities everywhere.”

What’s the take away? It’s simple. McChrystal didn’t change the formal structure of the military but created a new structure that “allowed for dynamism and flexibility within the overall organizational structure. This new structure enabled officers to quickly move from their administrative positions to mission-oriented projects for a set purpose, knowing that they would once again have a home to return to within the larger organizational structure after the mission was completed.”

But what does this look like in business? While difficult to encapsulate, organizational design does have a certain set of core principles:

• Move people into customer, product or market- and mission-focused teams, led leaders who are experts in their domains but not necessarily professional managers.
• Let managers make decisions within the context of a broader business strategy or plan.
• Turn organizational silos into information and operational centers where information is shared not hoarded.
• Encourage people to mentor and teach across teams—create synergies across divisions.
• Move workers from team to team so everyone is cross training.
• Even shift your senior leaders into other roles (e.g., take a strategy expert and put them on a team focused on communication or culture).

How Organizational Design Holds the Potential to Transform Organizations

Turning one’s attention to organizational design has myriad of impacts. Most notably, when one focuses on organizational design, disciplinary silos breakdown, the possibility of collaboration expands and cross training becomes the norm. The result is heightened innovation and a radical decentralization of decision-making processes. As the Deloitte study concludes, however, the shift to organizational design has specific implications for HR: “For HR, the implications of such changes to organizational design can be profound. Job titles and descriptions, to cite an example, are becoming more flexible and broad to account for an individual’s potential to be deployed to a variety of teams.” For this reason, the study emphasizes:

HR organizations will need to adapt to address the concept of administrative and operational control as companies switch from highly functional and hierarchical models to project-based organizations in which employees are constantly embedded in teams and ecosystems that form teams.