To a certain extent, organizations have a certain momentum of their own and develop even without targeted measures – but unfortunately not necessarily in the desired direction. Influence can be exerted through professional organizational development. There are very different interpretations of the tasks and goals of organizational development. Given the different perspectives and roles of those involved, this is hardly surprising. In this article, I share my understanding of organizational development and how it specifically contributes to positive business development.
Organization and development
In the German language, we are good at combining words together to form a new concept. Thus, the term organizational development is composed of the two parts organization and development. Therefore, I would like to start by presenting my view of organizations and then go on to discuss what I believe are the most crucial points in development.
Companies have an organization vs. companies are organizations
Already the interpretation of the term organization can be done from different points of view: The instrumental concept understands organization as a means for the efficient management of companies – “The company has an organization” . This is contrasted with the institutional usage, which describes an organization as a goal-directed social system that is linked to its own motives and goals. (Vahs, 2019)
As is often the case, none of these views is wrong per se. In the model I use, an organization can be described in terms of different factors, which combines both approaches. I call these organizational factors.
Organization factors
On the one hand, there are the people who are inside the organization-essentially employees who help the company fulfill its social purpose in the first place. But other people are also connected to the organization. For example, shareholders or supervisory board members.
All these people are linked together through a structure. This includes both the formal structure and informal networks that exist between people. Of course, there are also processes – both formally defined and lived. They describe how value is created and the nature of the division of labor to achieve goals. Furthermore, the company has resources. These are tools, fixed assets, the knowledge available in the company, usable technology, funds, energy, available (working) time and so on. Thus, this factor is comparable to the classical production factors, extended by a knowledge factor.
In addition, the organization can also be defined by the chosen strategy. This refers to the target image or target state to which the activities within the organization are oriented. Sub-aspects such as product and pricing strategies can also be grouped under this heading.
The culture of an organization describes the existing patterns of thinking and behavior as well as values and shared assumptions and beliefs. It is particularly evident in the way we communicate internally and externally, in decision-making, and in the way we approach challenges and resolve conflicts. Culture, along with the other factors, thus contributes significantly to the success or failure of strategies and the adaptability of the organization. All these factors in the company interact with each other.
Market factors
Another important aspect of organizational development is the environment or market in which the organization is located. Here, too, essential factors can be found for description. These are, for example, society, including the labor market and social trends, political framework conditions, available technology or state of the art, the availability and cost of capital. In addition, there are other organizations in the surrounding area. In particular, this includes suppliers, customers, competitors and partners, e.g. sales or development partners. The external factors also interact with each other.
External influences now act on every company. There are several systematic ways of looking at this. For example, Porter’s Five Forces or STEP analysis (with all its variations). I use a mixture of both approaches in my presentation and describe the market environment through the factors: politics, technology, society, capital, customers, suppliers, partners and competitors.
In this context, the term capital does not refer to the capital already available to the company in the form of equity and debt, but to influences such as the availability of capital in the market (private capital, subsidies, loans, etc.) as well as the ease of access and the costs and risks associated with the chapter (in particular interest rates, maturities, exchange rates).
Dynamics and mutual interactions
The organizational environment – and thus the market factors – are constantly changing. This has a direct impact on organizational factors. Changes in the environment create opportunities that you want to take advantage of or risks that you want to avoid or reduce. The social influence on the organizational factor people is also of great importance and influences the perception of one’s own role and demands on the work within an organization. In order to respond to these changes, companies must adapt the organizational factors, since the market factors can only be influenced by an organization to a limited extent, if at all.
Nevertheless, the environment also reacts to changes in one’s own organization. Competitors and suppliers will (have to) react to changes. The political environment can also be affected by a change in certain companies or industries. For example, in the form of state support for companies in times of crisis. Another way of influencing the business environment is through advertising and marketing, lobbying and industry associations.
Management approaches serve to regulate the system
Overall, therefore, there is an interaction between the individual company factors, the individual market factors and also between the market and the company. The task of management is to perceive this interaction and respond accordingly. You can think of it like a technical control system that continuously makes adjustments to achieve or maintain a defined system state.
In companies, it is the management approaches and systems that take over this regulation and influence the organizational factors. This includes approaches such as: Human Resource Management, Quality Management, Process Management, Knowledge Management, Risk Management and many more.
The presentation outlines the organizational and market factors as well as the management approaches.
Organizational and market factors as well as management approaches and systems as essential elements of organizational development
Develop organizations in a targeted way
Through the described interaction, a form of development inevitably takes place in organizations. The goal of professional organizational development is to accompany these change processes. On the one hand, this is done through the perception of market factors and the identification of the opportunities and risks described. Based on this, hypotheses need to be developed: What adjustment of organizational factors is necessary to put the organization in the best possible position in the given environment? This consideration gives rise to strategic change projects that need to be planned and implemented in a controlled manner. In particular, it is necessary to examine whether the existing management approaches meet the new requirements and what adjustments are necessary.
Key success criteria are the speed of implementation, the sustainability of the change, the gain in new knowledge, insights and experience of the employees, and the funds and working time invested.
Successful organizational development therefore requires, in particular, a full understanding of the organization and its environment, structured project and change management, the will to want to change the status quo, and sufficient resources. It is also supported by, among other things, cooperative collaboration – independent of departmental boundaries, stable processes in day-to-day business, and transparent systems for measuring progress.
Therefore, when I provide support in organizational development projects, a structured analysis of the project and the organization always takes place. Change readiness assessments can support this approach. How to do that I have described in the article “Is your organization ready for change? This is how you find out!
Image source:
Petar / stock.adobe.com
Own illustration
