Organizational Design

Organizational design “refers to the deliberate arrangement of key components within an organization, including reporting relationships, coordination mechanisms, and decision-making processes, to achieve collective goals efficiently and effectively.”^[1] Put simply, organization design is about “how to organize people and resources to collectively accomplish desired ends.”^[2]

One well-known framework for organizational design is the Star Model, which provides a structured foundation for companies to guide their design choices and address potential misalignments between goals and organizational structure.^[3] The model consists of five elements—strategy, structure, processes, rewards, and people—that form the points of a star, with alignment at the center linking these interconnected components. According to the Star Model, each design element should be consistent and mutually reinforcing, creating a cohesive and effective organizational design.

Strategy

Strategy defines the organization’s direction by outlining its goals and objectives in alignment with its core values and mission (Galbraith 2014). Key questions to guide strategic design include: What are the company’s main goals, and how will it achieve them? Which issues are most significant to its progress? How will success be measured over time? Strategy serves as the foundation of the design process, establishing priorities that shape how the other design elements are organized (Galbraith 2014).

Structure

Structure determines where decision-making authority resides within the organization, encompassing governance, specialization, organizational shape, power distribution, and departmentalization (Galbraith 2014). Essential questions for structuring include: What roles are responsible for key goals? Who participates in decision-making? Structure influences how tensions within the organization are addressed (Battilana and Lee 2014) and shapes how goals are tackled, whether collaboratively or within distinct groups (Battilana and Lee 2014; Pratt and Foreman 2000). While a hierarchical, centralized structure can enforce goals top-down but may hinder agility, a flatter, decentralized structure fosters quick decision-making and innovation, although it may pose challenges for larger or traditionally hierarchical organizations (Hales 1999).

Processes

Processes refer to the flow of information within the organization, including resource allocation and cross-departmental workflows. Important questions related to processes include: How are resources allocated? How does information move within the organization? What mechanisms exist to enable collaboration both internally and externally? Processes ensure that the necessary communication channels and resources are in place to support efficient decision-making and coordination.

Rewards

Rewards encompass systems that motivate and guide behavior toward organizational goals (Galbraith 2014). Questions to consider for reward systems include: How is individual and team progress tracked and assessed? How do rewards encourage attention to organizational priorities? Effective reward systems align employee efforts with company goals, motivating productivity and engagement. With a variety of reward tools available, companies must choose those best suited to their objectives and unique needs (Kaplan and Henderson 2005).

People

The People element includes employee mindsets, skillsets, and relevant human resource policies (Galbraith 2014). Companies should consider the following questions: What mindsets and skills are critical for success, and how can they be developed? What new talent is required, and how will existing talent be nurtured to align with organizational goals? This element ensures that the organization has the human capital needed to advance its mission and adapt to evolving needs.

Alignment

Alignment across design elements is crucial in the Star Model: “For an organization to be effective, all the policies must be aligned and interacting harmoniously with one another” (Galbraith 2014: 5). The connections between strategy, structure, processes, rewards, and people reinforce one another, creating a cohesive system that supports organizational goals (Kates 2009). Key alignment questions include: Are the five design elements consistent, interdependent, and reinforcing each other? Are there any areas where inconsistencies may hinder effectiveness?