What is Organisation Development and why is it important?

Written by Nic Frank and Matthew Emerson

If you ask any founder, business owner or manager whether they wanted to improve their organisation’s performance, achieve sustainable profitability and growth, in most cases the answer would likely be a resounding “yes”. If you also asked the same collective the question of “what is organisation development or organisation effectiveness?”, most would probably look at you perplexed and would not be able to give you a straight or easy answer. Perhaps this is not surprising when there are multiple different definitions of “organisation development” (OD) in business literature.

As a start-up or relatively young business, the effectiveness of the team is usually quite easy for the founder/leader to see and as the business develops through its early stages of growth, performance is directly attributed to a small number of people and preparedness for your future is core to developing a fledgling business. Every successful business reaches a stage of growth where the complexities of the organisation surpass the capacity or capability of a single individual to accurately assess their organisation’s effectiveness and subsequently business performance is somewhat harder to measure, analyse, develop and most importantly, predict.

“OD has grown to become one of the most critical practices an organisation needs to embrace to maintain its levels of performance within a rapidly changing environment” (CIPD)

What is Organisation Development?

Despite OD sounding like an abstract concept it is in fact very practical, pragmatic and business outcome focused. The primary purpose is to develop the organisation as a whole. Whilst the focus may differ depending on the organisation, the benefits typically might include, improved customer satisfaction, financial performance – increased profits or profit margins – employee engagement, increased market share, engraining ethical or cultural values, or the more general organisation capacity for agility and adaptability.

The Organization Development Network use Richard Beckhard’s 1969 definition of OD being an effort that is planned, organisation-wide, managed from the top, increases organisation effectiveness and uses behavioural-science knowledge through planned intervention in organisation processes.

OD considers an organization as an holistic system composed of separate parts. Creating great organisations involves seeking to operate a business as effectively as possible to maximise the organisation’s resources whether they be people capabilities or technology efficiencies. By improving the performance of the organisation in a sustainable manner means that the business overall is more competitive. Pursuing that goal requires a deliberate and continuous focus on developing and improving organisational processes, systems and strategies. It is not a temporary change intervention but ensuring that the organisation is continually transforming by moving forwards and evolving.

Historically, OD has referred to intentionally planned and systematic organisation wide efforts to increase efficiency, although in more recent times this has also included adaptability and agility. At the core of OD is building capacity and capability for delivering change and long-term benefit to the company. It is an applied science that is evidence based using a structured and strategic approach to deliver specific goals. OD recognises that if you leave things to chance then an organisation is unlikely to be productive or effective. It draws from broad interdisciplinary research across such varied fields as behavioural science, industrial and organisational psychology, industrial sociology, communication, cultural anthropology, economics, political science and systems theory.

Key to enabling organisational success is aligning the structural, cultural and strategic realities of your organisation to match the needs of a rapidly changing complex business environment. To achieve this, OD offers a set of processes and tools to manage desired changes across all departments (e.g., Finance, Marketing, Business strategy, IT, Supply chain management etc).

A typical OD initiative first involves a process of discovery to review and diagnose problems that if solved achieve strategic goals, thereby increasing the effectiveness of the organisation. This is then followed by identifying and designing an appropriate intervention and implementing that. Followed then by measurement and evaluation. As already stated, OD is not simply incremental change but involves assessing current capability, making changes and taking actions through an ongoing and continuous, systematic, field-based enquiry process leading to measurable outcomes.

Organisation Development Needs Analysis (or ODNA) is a process for planning your organisation development needs by:

  1. Clarifying where you are now and where you want to be
  2. Assessing the gap between them
  3. Identifying the challenges or obstacles in your way
  4. Developing a plan for bridging the gap

Conducting a thorough analysis of your organisation needs – what does it look like to achieve outstanding business performance – assessment of your capabilities / effectiveness against your future ambition and development or implementation of new solutions to ensure people can fulfil their collective potential and perform effectively in pursuit of your goals.

Analysis and assessment involve visible parts of the business such as the operating structure, the strategic goals and reward structures but also the invisible parts, including cultural aspects such as beliefs, attitudes, social networks relationships, and underlying values. Of course, you then need to ensure this is monitored and developed as your business continues to grow but having completed the foundation work will allow you to more easily measure, appraise, change and monitor future developments.

In high performance businesses, leaders go beyond clearly articulating a strategic framework of mission, vision, values and goals (although these are important). Leaders design effective structures and processes that enable their teams to be at their best and engage people to learn areas of strength and behavioural preference. In the current working world, leaders must combine goal-orientation, people-orientation and task-orientation to guide the development of their business.

The reality is that your organisation probably does some form of OD already because most businesses recognise that having good business processes, technology infrastructure and creating highly functional and performing teams leads to better overall performance and results. Consequently, common institutional OD change initiatives to improve effectiveness involve managing planned changes of information technology, data systems and business process change.

Additionally, very confusingly a subset of OD is called organisational development. This involves supporting employee behaviour to facilitate organisational learning, knowledge management and overall effectiveness. Organizational development as a process includes methodologies and achievements in strategic planning, organizational design, leadership development, coaching, diversity and work and life balance at both a group and individual level. Such OD change initiatives understand organisational interdependencies and are not to be confused with Learning and Development (L&D), Training or Leadership and management development that typically are focused at the individual rather than at the whole system or enterprise level.

Organizational development, like human development, undergoes stages during business growth and development. This recognises that businesses have cycles of development characterized by adversity and learning through and overcoming them. Like human development, organizations need a level of care and attention that you would give a person during their stages of development so they grow-up in good health. This is an important area because although OD involves adapting processes and structures, it is ultimately underpinned by change that impacts employees.

How to improve your Organisation Development

Organisation development may involve undertaking activities such as:

  • Organisation climate Measuring the mood or “personality” of the company; attitudes or beliefs or features and characteristics such as leadership, openness of communications and participative management that influence the environment. This may also be used to understand different climates within the same organisation.
  • Organisation culture Identifying the underlying norms, values and behaviours of a company, often embedded through common acceptance rather than direction. Assessment gives you a basis from which to highlight areas of strength or mis-match against your intended culture and allows you to focus on changing specific collective behaviours where required.
  • Organisation strategies. Through root cause analysis, problem identification, solution design planning and implementation to facilitate change. Co-ordinated activities that will develop your organisation to be wholly aligned with your business outcomes.

Why is Organisation Development important?

Organisation development strives to leverage the internal employee talent and diversity to improve organisation productivity, creativity and problem solving. This may deliver such benefits as continuous improvement of work processes, product innovation, better communication, employee development, specific product and service behaviours and improved profit/ company growth. Consequently, typical interventions might focus on people processes (e.g. team or cross-team level), organisation structures (e.g. team and job design), Human Resource Management (e.g. performance management, well-being, diversity) and strategic change (e.g. transformation, continuous improvement, M&A).

Over the next decade it is expected that core capabilities to support organizational development will be emotional intelligence, being flexible and adaptive, an ability to set goals and execute on them, to self-learn and improve continuously. Companies with employees with such a mindset will  a stable and profitable business.

The importance of being deliberate and intentional about the development of your organisation in order to maintain performance and competitiveness becomes ever more critically important in the complex and rapidly changing environment that businesses now operate in. Industry disruption, exponential technological development, globalisation and possibly a shift towards re-localisation have provided a backdrop of constant volatility, uncertainty, complexity and ambiguity. We now also have a global pandemic to contend with and never have we seen such wide-scale upheaval to social and commercial norms.

Blackmore Four are a management consulting company, offering specialist advice and tailored solutions to businesses looking to sustain or improve the effectiveness of their organisation. Our approach is based on a deep understanding of human behaviour at work and an ability to identify and address the specific leadership and organisation development needs of your business. We work with ambitious business leaders to achieve outstanding levels of performance through periods of growth or significant change.

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