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Levels-Based Organization Design – Why Does it Matter?

Updated: Mar 3, 2023

How the organisation is designed and implemented has a tremendous impact on its efficiency and effectiveness. Clear definition of accountabilities and authority, a right number of work levels, proper division of labour, and better matching of people to positions are more conducive to high performance than incidental, undefined structures and unrelated activity patterns.

Organizations shall be as flat as possible, but not flatter. There are actual differences in the complexity of work that are manifested in terms of organizational levels. Each level or work is characterized by its own, unique logic ­– the underlying principles, beliefs, and assumptions that shape and guide the behavior and decision-making on that level. Levels-based Organization Design appreciates these differences and takes them into account in designing an adaptive organizational structure. The more complex the environment, the more sophisticated the organizing logic and respective structure that are adaptive in that context.

The key principle that guides Levels-based Organization Design is “requisite alignment” – that capability matches complexity at all scales. This core principle is manifested in the following precepts:

  1. Strategy fits the environment.

  2. Structure follows strategy.

  3. Roles specify the structure.

  4. People match with their roles.

There is often a mismatch regarding one or more of the above points, compromising effective functioning of the organization.

Strategy Fits the Environment

Strategy is often disjointed from the environment. Either the environment has evolved so that strategy has not kept up with the changing reality, or the strategy is misguided to start with, not recognizing the complexity and contingencies of the environment. The first step – that actually precedes any organization design work – is thereby the calibration of strategy. Our “Strategy Calibration Workshop” is a tool to this end.

Structure Follows Strategy

Organisation structure is often out of sync with strategy. The precept “structure follows strategy” means that the organisational logic and structure match with the strategic requirements. Addressing this precept entails outlining the new structure of the organisation in line with the strategic intent. This includes functional decomposition, vertical layering, and cross-functional relationships. Our Organization Redesign service helps in this regard.

Roles Specify the Structure

Role definitions are often inadequate, outdated and/or too rigid. Once the high-level structure is aligned with the strategy, it is specified in terms of required work roles, role relationships, accountabilities and authorities. This work is driven by questions such as: what value do the roles bring, what resources do they manage, what is the nature of challenges, what is the discretionary space of the roles, what are their internal and external relationships, what is the time frame of the roles, and what are the required personal capacities (reasoning, influencing, skills, knowledge)? An online tool that helps analyze and design work roles is Organisational Role Appreciation (ORA) by Bioss that Edisto represents in Finland.

People Match With Their Roles

The capability and competences of individuals are not always in line with the challenges of work. Poor alignment results in bad decision-making, escalating costs, and decreased responsiveness to change. Matching the capability with the requirements of work complexity on an ongoing basis ensures reliable judgments, cohesive organisation, and long-term business viability. Career Path Appreciation (CPA) by Bioss is a powerful research-based instrument of high predictive validity to measure a person's work capability. Dr. Korhonen of Edisto is a certified practitioner of CPA.

Capability matches complexity at all levels.
Figure. Requisite alignment

Why Levels?

Complexity organizes itself in levels. According to the Law of Requisite Variety, the variety of the controller needs to be at least as great as the variety of the system or situation to be controlled (Ashby, 1952). The control of variety cascades through a hierarchy of “algedonic loops” at largely autonomous levels, each with its own “metalanguage” (Beer, 1972). To requisitely absorb environmental complexity, an effective organization needs to operate in expressive-enough metalanguage (i.e. logic) at a high-enough level of complexity to deal with the variety in its environment. The variety of functional affordances at its disposal would be incorporated in roles with increasing discretionary space, which, in turn, must be filled by people with requisite capability.

Proper organization design is conducive to intended outcomes and high performance. It is logical and communicable to all stakeholders. All too often, the organization structure is not intentionally designed, or the design is misplaced. The structure may be difficult to understand, and the organisation chart may not correspond with reality. Constant reorganizations are often reactive, driven by conflicting personal and business needs. They are aimed at fixing poor performance, but reactive manoeuvres seldom help the organization to attain its true goals.

“Level-headed” Organization Design makes sense. The first principles from Cybernetics provide a rational and objective point of departure for optimizing the organization‘s design vis-à-vis its strategic context.


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