What Is Organization Development?

Building Company-Wide Productivity and Health

What Is Organization Development? - Building Company-Wide Productivity and Health

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Your business isn't a machine, so try a more human approach to fixing it.

Manufacturing high-value products such as, say, automobiles, is a risky business, with high costs, complex design challenges, and the whims of fashion to deal with.

So a company that's struggling might choose a variety of conventional approaches to improve its market position, such as opening up new territories, developing new products, or advertising more aggressively. Or, it could try a different tactic for survival and growth: using OD (organization, or organizational, development).

This is what Chrysler® did in the early 1990s, as reported at the time, and analyzed later by car trade expert and OD practitioner Dr David Zatz.

The company decided to find out why its sales and market share were shrinking, so it could tackle the problem at its root. It looked at all its processes, structures and relationships, and made changes at all levels. It consulted with its employees, suppliers and customers, and acted on many of their suggestions for improvement. And the outcome was dramatic: its overheads plummeted, it returned to profit, and its reputation soared.

In this article, we'll look at the principles that lie behind OD, and we'll explore how to get the best from it for you, your team and your whole organization.

OD Principles

OD is different from many other models for change, as it's based on the belief that organizations behave like complex living systems.

This means that each department, product and process in a business relates to, and impacts on, all the others. So a change to one area of a company can have an effect right across it. OD helps organizations to find out exactly how the parts connect, and avoid quick solutions that might do more damage than good.

OD assumes that an organization will go through natural cycles of growth and decay as a whole "body." It, therefore, encourages leaders and managers to avoid being complacent during times of success. Instead, they can look for opportunities to improve all functions, at all levels, continuously.

Lastly, OD recognizes that real living beings – people – are at the heart of every organization. In fact, it'll be the people who will make the change so OD prioritizes the ethics and humanity of the process, drawing on behavioral and social sciences. And it expects employees to take much of the responsibility for designing change rather than having it "done to them." Layoffs can still happen as a result of OD, but the people affected will likely understand the decision better than if they hadn't been involved.

Definitions

Physicist and social scientist Kurt Lewin is known as the "father of OD," even though he never used the term "OD" himself. His 1940s model of change in organizations comprises three phases ("unfreeze, change, refreeze") that can be repeated in cycles. Each phase of each cycle emphasizes skillful, active management of the change, and two-way communication about it.

The most famous early reference to OD itself is probably by Richard Beckhard, in his 1969 book, "Organization Development: Strategies in Models." He described OD as a planned, organization-wide effort, managed from the top down, to improve processes with the goal of increasing a company's effectiveness and health.

Nowadays, the term is used often in a wider and looser way. OD can be a strategic, organization-wide and centrally controlled program of change, lasting several months or years. Equally, it can be a low-key, tactical, continuous-improvement approach, perhaps focused on one department or team. And there's every variation in between, as appropriate to each individual organization.

One definition of OD that brings together these extremes of meaning is given by Matt Minahan, formerly of the World Bank and the OD Network:

"Organization Development is a body of knowledge and practice that enhances organizational performance and individual development, by increasing alignment among the various systems within the overall system. OD interventions are inclusive methodologies and approaches to strategic planning, organization design, leadership development, change management, performance management, coaching, diversity, team building, and work/life balance."

So, OD can reach far beyond departmental or management reporting structures. It can affect anything from corporate vision and mission statements to decision-making processes and communication methods, and to job design and workflows.

When and How Does OD Help?

Leaders will most likely turn to OD if their business is facing major change that's been imposed from outside. And an HR department might be keen to use OD approaches if it's addressing a difficult internal issue, possibly relating to company culture. For example:

  • The organization has experienced a merger or relocation.
  • The workforce has grown or shrunk considerably in a short time.
  • Employees' morale is low, or job turnover is high.
  • Feedback from customers is poor.
  • Suppliers aren't keen to deal with the company.
  • There's tension or miscommunication between departments.
  • The organization's future direction or purpose is unclear.

But leaders and managers can apply OD at any time, not just in a crisis. For example, you might want to increase respectable but middling profits, to make great returns. You might decide that "OK" customer service should, instead, be excellent. Or you could aspire to your product being at the top of the review rankings.

So OD can benefit both the "bottom line" and the productivity and health of your team. Co-workers will likely feel more motivated, work closer with other teams, and know that they are trusted in the wider organization. You'll want to stay around longer if you're happier and more involved, so retention rates should rise. And you'll all be more open in the future to change, and to confronting and solving problems.

Who's Responsible for OD?

Businesses that are planning a one-off program of major change will likely hire consultant OD practitioners. Your organization might have its own OD specialists, in-house. And general HR and L&D practitioners could receive OD training, so that they can support the approach.

In all but the most localized cases, senior leaders and HR make the ultimate decisions, and HR/OD professionals implement them. But they collaborate closely with managers and team members to ensure the best outcome. This means that you won't be a passive recipient of OD – you'll be part of it.

What's the OD Process?

One of the most popular forms of OD uses the action research model, as discussed by French and Bell in their book "Organization Development: Behavioral Science Interventions for Organization Improvement." The following phases are at its core:

1. Define the Problem

In all cases, it's important to define the problem carefully before anyone acts.

For example, you might have noticed that your team members' morale is low, so you think of holding a social event to cheer them up. But their slump could be a reaction to seeing negative coverage of the company in the media, as a result of a customer being injured by a faulty product. In this case, the problem is manufacturing quality and a party won't fix it!

But even useful change won't succeed unless everyone wants things to be different and believes it's possible. So, once you're certain about the reason for change, you'll need to check out your people's position, and judge what measures might increase their commitment.

2. Diagnose the Cause

Next, it's time to find out what's behind the problem, right down to "grassroots" level. For example, if the problem is a fall in sales, the company will likely ask questions such as:

  • Is there an issue with the product? Is it poor quality, unfashionable or priced too high? What led to this?
  • Is the sales team inexperienced, or lacking motivation? When and how did that come about?
  • Is there conflict between departments, or between the business and its suppliers? What impact does it have?
  • Are company systems or equipment holding back otherwise creative and skilled employees? How exactly?
  • Is there a new competitor on the block that's stealing customers? Is it offering a different product, lower prices, better service, or something else? What's changed out there in the market?

The investigation can quickly involve more areas of the organization than looked likely at the start, so be ready for you and your team to be asked to contribute. Use the McKinsey 7-S Framework to begin your diagnosis, and use Cause and Effect Diagrams, Flow Charts, and Root Cause Analysis to dig deeper.

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You might be involved in analyzing existing data, running focus groups, interviewing people one-on-one, or conducting surveys. Talking to people can give critically important context and insight that explain the bald facts and figures.

3. Design and Act

At last, it's time to act – but it might not be easy! You'll have thought of all sorts of solutions during the research phases, but so will other participants – and you might not agree with one another. This is where input from an OD practitioner can be particularly helpful. He or she could help bring everyone together in the design and implementation of a solution that's right for the whole organization.

Any OD "effort" will include improving structures, processes and culture, and aligning them to the organization's priorities. It will involve individual and team development. And there might be work to do on goal setting, appraisals or rewards, to help improve employees' performance and motivation. But the key to successful change is to tailor these interventions to your organization, department or team.

It's wise to pilot parts of a wide-ranging program before rolling out the whole thing, so your team might need some reassurance that this long-awaited change will happen. And remember that the process is cyclical, so there'll be opportunities for more change later.

4. Evaluate and Embed

In this phase, you and your team will likely take part in gathering evidence of the program's outcome. As in Diagnosis, there will be a range of methods to employ, informal and formal, personal and impersonal.

If the effort proves to have been successful, your leaders will adopt the change formally and then you'll play an important role in embedding it in everyday working life. If any parts of the program failed, or had unexpected results, you might be taken back to the beginning of the cycle to re-examine the problem and its causes, and to redesign the intervention. Keep in mind that the first action might have been the right one but its execution could have been flawed – but that would tell you there's another problem to deal with!

Key Points

Organization, or organizational, development (OD) is a change-management model that focuses on improving a company's performance and health by looking across its structures and functions, taking a human approach to processes and culture, and involving employees at all levels.

OD can be applied strategically to a whole organization or more tactically to smaller units, at a time of crisis or as continuous improvement. Many OD programs follow a cyclical action-research process: Define the Problem, Diagnose the Cause, Design and Act, and Evaluate and Embed.

You and your team could be involved at any point of a business-wide program, being asked to collaborate openly across functional and departmental boundaries, for the common good. You can also independently apply OD principles to situations within your team at any time.