Organization design and organizational DNA

Just as you can understand an individual’s personality, so too can you understand a company’s type — what makes it tick, what’s good and bad about it. At PwC's Strategy&, we take a holistic view to an organization, considering its traditional corporate operating models to the formal and informal elements that impact its success.

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Organization design and new operating model

Organization design is tightly influenced by the company’s strategy and its people and culture. First, you must determine the right role of corporate (or headquarters) for your business. There is no “one model fits all” — but rather a range of models with progressive degrees of corporate or headquarters’ involvement:

  • Financial holding company: Create and enforce a disciplined management model
  • Strategy and oversight: Add value in the linkages between business units
  • Active staff involvement: Provide guidance to business units via expertise
  • Operationally involved: Make key decisions for business units

The right answer for you depends on the relatedness of the businesses.

Next, you need to determine where to put each element of the corporate center’s work. Should they go to the business units, outsourcing, elimination, to a strategic partner, or to a Shared Services group? While there are no simple answers, there is a good place to start — a sliding scale of key questions:

  1. Is it needed for governance, consistency or fiduciary responsibility?
    If the answer is yes, then the responsibility clearly lies with the corporation. If not:
  2. Is it a core capability?
    If yes, it belongs in the business unit. If no:
  3. Do business unit customers need the service?
    If no, then it can be eliminated. If yes:
  4. Does it provide a competitive advantage?
    If yes, it belongs in the business unit. If no:
  5. Can someone else provide the same service cheaper or better?
    If yes, then it should be outsourced, or go to a partner. If no:
  6. Are there demonstrable economies of scale?
  7. If yes, it should be turned over to a Shared Services unit. If no, it should be embedded in the business units that need it.
Organizational DNA

Why is it that some organizations can bob and weave and roll with the punches — consistently delivering on commitments — while others can’t leave their corner of the ring without tripping on their own shoelaces? To answer that question, you have to look beneath the surface at the organization’s DNA. Organizational DNA is a metaphor for the underlying factors that together define an organization’s “personality” and help explain its performance. Organizations fall into seven company types (e.g., passive-aggressive, fits-and-starts, outgrown, overmanaged, just-in-time, military precision, resilient) and we provide insights on how to keep what’s good and fix what’s wrong.

The distillation of years of experience studying how companies organize and execute, the Organizational DNA Framework was developed by Strategy& to give organizations an easy, accessible way to identify and remedy the roadblocks that impede results. We take a holistic view to an organization, considering the formal and informal elements that make up its existence and impact its success.

The four pairs of Organizational DNA building blocks include formal and informal elements:

  1. Decisions and norms: Decisions describe the underlying formal mechanics of how and by whom decisions are truly made while Norms represent the unwritten rules of how we do things around here.
  2. Motivators and commitments: Motivators are the objectives, incentives and career alternatives available to employees within an organization while Commitments are the unwritten aspirations that drive and motivate people for the organization and themselves.
  3. Information and mindsets: Information describes how performance is measured, activities are coordinated, and knowledge is transferred while Mindsets describe the deeply held beliefs that employees apply when processing information.
  4. Structure and networks: Structure represents the formal organizational model, including “lines and boxes” while Networks are informally connected groups of individuals used to communicate, make decisions or obtain support.

Research shows that enterprises fail at execution because they go straight to structural reorganization and neglect the most powerful drivers of effectiveness — decision rights and information flow elements. Our work has shown these two traits are twice as powerful in driving organizational effectiveness. All of these areas need to be addressed together to ensure success.

If you would like to diagnose your organization’s DNA, please visit our Organizational DNA Profiler®.

The Katzenbach Center

The Katzenbach Center focuses on the development and application of innovative ideas for organizational culture and change, based on a guiding philosophy of client-based innovation. The Center promotes new thinking on achieving breakthroughs in higher performance, developed through active collaboration with clients and thought leaders around the world.

Organizational culture empowers and challenges companies in today’s business world. A culture that supports strategic and operational goals can fuel performance and spark innovation and differentiation. If the culture opposes the company’s strategy, however, the results can be disastrous. Many business leaders understand that culture plays an important role in their businesses, but most have difficulty understanding how to use culture to improve performance.

We believe that it is best to work with and within an organization’s existing culture. By focusing on useful elements of the existing culture, leaders can identify key behaviors that will bring them closer to their cultural aspirations. A culture intervention program can deploy both informal and formal levers to promote these behaviors, which will shift mind-sets and drive long-term performance impacts.

For further information, please visit the Katzenbach Center.


Our thought leadership

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Your strategy is only as good as your company's ability and willingness to execute it. The key to unlocking that potential? Your organizational DNA—the combination of formal and informal traits that determine your company's identity and performance.
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As companies evolve away from traditional hierarchies, a major cultural shift is required.
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All too often, companies unintentionally create their own worst crises. With a little awareness of your organizational DNA, you can avoid that fate — and the headlines that go with it.
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The methods used by celebrity chef Jamie Oliver to promote health in a West Virginia city can also be used to raise organizational performance.
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Start using it instead — to reinforce and build the new behaviors that will give you the high-performance company you want.
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Nearly all companies have some master motivators at the front line. Pride builders are able to achieve exceptional performance with their teams by fostering pride in the work each team member does.
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Every enterprise has an informal as well as a formal organization. The case study approach reveals how top organizations balance both formal and informal elements to achieve outstanding results.
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Strategy&’s pioneering research into the challenges of enhancing an organization’s execution strategy is getting prominent attention.

read more people and organization strategy thought leadership >