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Everything You Need To Know About Organizational Development

10 min read

Culture Change

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What is Organizational Development?

The term organizational development is defined as a strategy of planned and systematic change achieved through influencing organizational structure, organizational culture, and individual behavior,

This perspective takes into account the processes and interactions between individuals, teams, organizations, technology, environment, and time, as well as the communication, values, and power dynamics that exist within organizations.

Organizational development 101: In order to achieve long-term success as a company, constant further development and adaptation to environmental factors is needed. Organizational management is the solution to the ever-increasing pressure of competition and the constant call for performance.

In this article, Digital Leadership will help you understand everything you need to know about the basics of organizational development.

Basics of organizational development

The concept of long-term improvement of working conditions and processes to increase employee motivation has been a focus for many years; but it is only now that the topic of organizational development is really getting the visibility and attention it deserves. Management and executives increasingly understand the value of a flexible organizational structure and culture for sustained alignment with volatile market conditions.

What is Organizational Development?

According to the dictionary, the term organizational development is defined as a “strategy of planned and systematic change achieved through influencing organizational structure, organizational culture, and individual behavior”. This perspective takes into account the processes and interactions between individuals, teams, organizations, technology, environment, time, as well as the communication, values, and power dynamics that exist within organizations.

What Are the Goals of Organizational Development?

There are two main goals of organizational development. Firstly, to increase the performance and productivity of the organization. Secondly, to enhance the development of the individual members of the organization through decision-making freedom and personal responsibility. Continuous investment in human capital is crucial in order to progress within a company.

Why Do We Need Organizational Development?

One of the main purposes of organizational development is the humanization of the working environment. Optimizing processes result in better working conditions for employees. This brings many benefits: different departments can work together more smoothly, resources can be used more effectively and conflicts can be reduced or even mostly avoided.

The core characteristics of organizational development

  • The constant process of change and development: Organizational Development is an ongoing participatory process that sets intermediate goals, but is a constant learning process.
  • Planned form of change: Organizational development is always a concrete decision and not a random occurrence. It can use different tools and models and always needs an organization-theoretical concept.
  • Involves employee participation: Successful culture change through organizational development requires constant employee involvement. This can be achieved through workshops and frequent communication.
  • Goal: Increase of the efficiency of the organization and improvement of the working conditions: Organizational development can help maintain competitiveness through increasing productivity and bettering working environments.
  • Can be accompanied by consultants: Classic organizational development projects are usually accompanied by experts. They need competencies in the field of psychology of operational strategy development and systemic organizational development.

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Basic methods and procedures of organizational development

Organizational development can involve various methods. They are fundamentally different in their processes and it’s important to have a differentiated understanding of dynamics and interactions in the system. Working with hypothesis loops is therefore a central building block in this approach.

organizational development procedures
Organizational development procedures

Classical Procedures in Hierarchical Organizations

The Bottom-Up Method

The Bottom-Up Method

The bottom-up method of organizational development insists that a change of habits in a hierarchical organization is best done from the bottom up. According to this method, the lowest management level and associated employees have the broadest knowledge of what changes are necessary and where to start. This method is usually highly accepted among the workforce. That being said, there is a likelihood that the necessary know-how for more radical restructuring is lacking.

The Top-Down Method

In the top-down method, organizational development measures are decided by the top management levels and passed down to the next level. Managers carry vision and values into the company culture and can therefore act as a “good example”. This method is great for strategic alignment. However, this approach often generates strong resistance during implementation.

The Counter-Current Method

The counter-current method of organizational development is often seen as the best approach for successfully developing a company’s culture and processes. For this method, the bottom-up and top-down methods are combined, thus offering many benefits while canceling out the disadvantages. Suggestions for improvement from lower-level employees are implemented, while the management shapes the corporate culture at the same time.

How to Create Innovation is a practical and comprehensive workbook for students, innovators, designers, government, and corporate leaders who appreciate and are curious about the pace of innovation and emerging technologies. It challenges the status quo of our mindsets and beliefs and provides the strategic approaches required for the next part of the journey. Leverage the UNITE Innovation & Transformation framework to build your own story and create a world worth living in! www.digitalleadership.com/createinnovation

The phases of organizational development

In order to implement a change project sustainably, different phases must be passed through from gaining knowledge to change. The stages and connected timeframes are strongly dependent on the initial situation of the organization.

The 3-Phase Model By Kurt Lewin

Kurt Lewin’s 3-phase model is the most widely used model to describe the processes of organizational development projects. The model was established in 1947 with the focus on social change processes of all kinds. The 3-phases describe the inherent dynamics of persuasion and are to this day considered a guideline for change management projects.

Conventional Approaches in Organizational Development

  • Phase 1: Unfreezing: In the first phase of unfreezing, the desired change is brought to light. Information and plans are shared, and upcoming developments are discussed. This phase is important so everyone feels involved and receives support where needed.
  • Phase 2: Moving: In the second phase, new processes and structures are introduced. In this phase of organizational development, constant monitoring by those responsible should take place. It’s important to also ensure that employees generate learning gains through training and workshops.
  • Phase 3: Refreezing: In this phase, the company adopts the new behaviors and processes, which then need to be solidified and become the new normal. After an organizational development project has been completed, close monitoring must be carried out to determine whether new processes are working and being maintained.

Organizational Development Processes – A Modern Approach

The markets and the environment in which companies operate are inherently dynamic. This is why the approaches to organizational development are also subject to constant further development. Thus, more current understandings of an organizational development process highlight four different phases.

  1. Preliminary Phase: In the preliminary phase, a need for change develops within a company. This can be due to external influences such as changing customer needs, but also due to internal causes such as changes in social conditions. In this phase, including everyone in conversations is crucial.
  2. Diagnosis phase: The diagnosis phase starts by collecting all available data on the organizational structure, working climate, work processes, communication and on the behaviour of managers and employees. The data thus obtained is communicated to all those affected, discussed and analysed. This results in initial improvements.
  3. Development phase: The knowledge gained for change is implemented in the development phase, usually through working groups with all employees involved. For this phase, it is of enormous importance to combine both company and employee interests in order to gain acceptance for further developments.
  4. Stabilization phase: The final phase, also known as the stabilization phase, serves to ensure that the new behaviors of those involved are actually maintained and that a relapse into old patterns is prevented. The new structures must be stabilized through training measures and discussion rounds. Finally, an evaluation of the success is carried out.

Well-known strategies of organizational development

Today, many different organizational development strategies are used. Similar to psychology, they focus on different approaches and ways of solving problems. Due to the individuality of each organization, different strategic approaches are required. In the following we’ll be introducing four of them:

The Systemic Organizational Development

The concept of systemic organizational development assumes that change and further development cannot work only from a single aspect, but that the entire system with its own individual patterns and people must always be considered. For this method, the consultants would provide their expertise and develop the solutions from “within”.

The Agile Organizational Development

The implementation of agile organizational development is a long-term and complex process, which requires fundamental knowledge of agile methods and values. The main goal is for these to be deeply anchored and lived in the staff and management. Methods such as collegial leadership or self-organization are used here, which offer a high degree of freedom.

The Integral Organizational Development

The strategy of integral organizational development is characterized by a balanced development of the following areas: Processes/Structure, Competencies, Mindset/Attitude and Culture. This approach always emphasizes the importance of balanced and synchronous development to achieve maximum effectiveness.

Diversity-Oriented Organizational Development

A diversity-oriented organizational development strategy focuses on the opportunities and benefits of a diverse and varied workforce. The goal here is to effectively leverage the different facets, knowledge levels, and competencies of employees at all levels. Through providing equal opportunities, an increase in the motivation and satisfaction of employees is also achieved.

Organizational Development Change Management: Definition & Demarcation

In practice, the lines between organizational development and professional change management blur, and they are sometimes even used synonymously. In the following section, Digital Leadership would like to provide clarity and distinguish between the definitions.

What Is Change Management?

Change management refers to the planned management of change processes from an initial state to a target state. Change management encompasses all aspects of implementation, from planning, management, and control to stabilization. The main task is to implement change in a targeted and active, strategically clever and, above all, effective way.

What Is the Difference Between Organizational Development and Change Management?

The main difference between organizational development and change management is the core focus. Organizational development strives for long-term development from within through the culture and competencies of the employees. A change project is usually driven by outside factors, for example a shortage of resources or changed corporate structures. Change management always has a clear start and endpoint as well as a concrete target.

For more detailed insights into organizational development and examples on how to create change within your company, have a look at the Digital Leadership UNITE Innovation & Transformation model called The Paradigm Shift in Organization & Leadership. It helps you understand the paradigm shift in organization and leadership that needs to happen in order to keep up with accelerating technological change today. Get access to the 50+ UNITE Innovation & Transformation Models which are fully OpenSource and entirely free to download! https://digitalleadership.com/UNITE.

The UNITE Business Model Framework: A Framework for Innovation Success

How to Create Innovation includes a number of canvases that focus on value creation and finding the right business model to meet your customer segment and customer needs. The framework is built to inspire drastic changes that help you find a competitive advantage. Our hope is that your company grows through business model innovation, and so we again encourage you to look deeper into our website and the book.

Here is a summary of the key ingredients of the Business Model Framework:

Business Model framework
The UNITE Business Model Framework
Designed By: Digital Leadership AG

Business Models

The centerpiece is the Business Model Canvas, which covers the six main areas of a Business Model (the Operating, Value, Service, Experience, Cost, and Revenue Models).

The eXtended Business Model Canvas adds the immediate business context, including Business Drivers, customers, and the team, as well as the Unfair Advantage.

Detailed Models

A Business Model can be broken out into its numerous aspects. Depending on what challenges you face, you can zoom in on your area of interest using an appropriate tool or canvas:

  • Your Business Intention and objectives as well as your Massive Transformative Purpose summarize your drivers and give direction to what you do.
  • The Value Proposition Canvas details the central components of your offering (the product or service).
  • To dig into your Customer Segments, work with data-driven Personas.
  • The JTBD Customer Job Statement and Job Map frame the JTBD of your customers.
  • The Business Model Environment puts your Business Model in a market context composed of emerging trends and disruptive forces.
  • The Innovation Culture Canvas helps you understand and consciously shape a culture that supports innovation.
  • The Innovation team structure enables you to draft a team structure for your innovation initiative.
  • Using learning and growth metrics, you can measure progress at the initial stages of development. These metrics help you focus on what really matters instead of creating a detailed business plan that will not really help you. Later on, you can expand the financial aspect of the Revenue and Cost Models with a full business case.
  • The Operating Model Canvas helps you think through the Operating Model.
  • Business Capability Map: A Practical Business Approach

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