In the 1980s, business leaders were fascinated by “Kaizen”, a Japanese term meaning “continuous improvement”. Kaizen was one of the secrets behind the incredible industrial success of Japan at the time. Although Kaizen is no longer discussed in boardrooms, its older iteration – organizational development – is still essential for companies willing to go the extra mile to achieve excellence. 

What Is Organizational Development?

Organizational development (“OD”, also known as “organization development”) attempts to improve an organization’s capabilities by coordinating the optimization of strategy, workplace skills, structure, motivation, management, and assessment processes. 

Organizational development involves numerous disciplines such as learning and development, psychology, social sciences, human resource management, innovation, research design, and organizational behavior. OD is a long-term effort, and although it is a linear process, most organizational development programs incorporate feedback loops that involve a continuous cycle that returns to the initial phase.   

Why Is Organizational Development Important?

Organizational development requires the cooperation of a company at every level, with a focus on detecting and resolving problems. This unrelenting effort can result in many advantages.  

Constant strategic adaptation

There is truth to the maxim: “The only constant is change”. Whereas some organizations tend to review strategy on a periodic basis, a company involved in organizational development will frequently update its strategy to reflect a constant flow of recommendations that emerge from the process. This mindset will result in an organization that has change management as a familiar initiative, as opposed to companies that need to implement change management quickly (and therefore less effectively).  

Increased communication

Organizational development affects everyone from production line workers to senior executives. Along the entire organizational hierarchy, staff members provide input regarding potential areas of improvement. This flow of information can benefit communication throughout the company. 

Growth of skill levels

Organizational deficiencies are sometimes a matter of insufficient training, and many OD programs lead to the implementation of learning and development initiatives. In themselves, such initiatives increase the competency level of workers. Additionally, L&D programs increase employee satisfaction and retention.

Improved output

Whether an organization sells a product or service, an effective organizational development program can result in a higher level of output, both in terms of quantity and value. 

Trends in Organizational Development

As the nature of business is constantly evolving, so the methods and ideas behind OD are changing. Here are a few major trends currently affecting OD implementation:

AI and data analytics

Recognizing patterns in how a company operates is an essential aspect of improvement. Combined with artificial intelligence, data analytics has the ability to search for trends in massive amounts of information collected by the company. In addition, there are specific analytical tools for different types of activities. For instance, HR teams can use people analytics to support the personnel-related functions of a change program.

The remote workplace

According to the US Bureau of Labor Statistics, approximately 28% of employees work from home (WFH) at least on a part-time basis. This represents a significant challenge for an OD process. Because it is a new pattern of work, the effect of WFH on productivity has yet to be determined. Similarly, any changes that a company suggests for or against WFH are likely to be based on speculation instead of facts because long-term consequences are not yet known.

Agile methodologies

Although they were first created for software development, agile methodologies are now being applied to a wide range of business functions. By incorporating agile into OD, companies can adapt quickly, try new concepts and strategies rapidly, and deal with challenges more effectively. The human resources department is no exception, with agile concepts enabling HR to collect feedback and make staffing changes faster than ever before.     

What Are the Main Challenges of OD, and Their Solutions?

As with any change-oriented process, organizational development faces a number of challenges:

Resistance

One of the main reasons for organizational development is to move the company to a higher level of productivity and skills. However, there will always be employees who resist that change, both openly and passively. OD can also result in interpersonal conflict. Both of these issues require the close participation of management.

According to the Harvard Business Review, the average employee in 2022 underwent 10 planned enterprise changes, whereas in 2016, this number was 2. As a result, only 43% of employees supported enterprise change in 2022, compared to 74% in 2016. This is called a “transformation deficit”, where constant organizational change creates a sense of fatigue and frustration. Besides being a detriment to an organizational development process, a transformation deficit can also lead to poor engagement rates and even an increase in employee turnover.  

A main source of transformation deficit is that companies don’t explain the reasons for a change. This is reflected by survey results from Oak Engage, which show that the main factor behind resistance is lack of trust (41%). To address this, organizations should be open about why changes are being made and include employees in the process. 

Continuity

Unless there is a serious crisis that requires an immediate overhaul, organizational development can cause disruptions to the standard working day. A poorly implemented organizational development process adds hours to the schedule and can misdirect employee efforts towards areas unconnected to productivity. 

The consequence of this can be seen through the transformation deficit. When workers get tired of constant changes, they start thinking about moving elsewhere (54%), while approximately half of them also feel tired and under stress. 

To avoid these effects, organizations should make sure that employees take advantage of “proactive rest.” The HR team should arrange for initiatives such as:

• Days without any scheduled meetings
• Solidly fixed working hours
• Temporary breaks from intense projects
• Organization-wide days off work

Plus, these measures need to be promoted by leaders and appropriate for the individual needs of employees. If a company-wide break is held while certain employees are at a conference, then those employees should still get a day off when they return.

Effectiveness

A change initiative might start at the top, but getting the message through to all levels can be difficult. It is important to constantly monitor the status of the organizational development process to ensure it is working as intended. 

At the heart of this issue are managers. Various messages can come from senior executives, but it is the direct managers who are in constant contact with employees, and who are optimal for discussing organizational development initiatives. In addition, direct managers have the best ability to designate change-related tasks to various team members because they tend to know what skills each person has. 

Given enough time (because managers also feel pressure during periods of change), managers who enable their people to deal with the organizational development process can increase the “sustainable performance” of teams by 29%. 

How to Create an Organizational Development Program

The first stage of an organizational development program involves setting up the organizational infrastructure that will manage the process. There are organizational development specialists who can administer such programs, although many companies employ their own human resources staff for this purpose. In either case, the outline of the organizational development program must be presented early in the process to management in order to receive their approval and commitment to provide resources. The outline will touch on subjects including the hypothetical organizational problem (subject to change during a later phase), a timeline for program execution, resource requirements, and personnel involved. Once this initial phase is complete, most organizational development programs follow this process:

Assessment

First, the collection of data is based on the initial definition of the problem. Interviews are conducted with stakeholders throughout the organization, as well as accounting personnel who can provide a quantitative description of the problem. 

At this point, the organizational development manager might discover that the original problem definition was not valid. This might require revision of the first program stage, and almost certainly the assessment phase. 

In any case, one critical aspect of any OD process is goal setting. Simply stated, the objective of organizational development is to solve a problem. But when does the team know that the problem has been solved? Considering that some organizational changes take years to complete, goal evaluation can take a long time. In such complex situations, it is advisable to use (see below for more information):

• Popular organizational development models
• The services of an OD consulting firm
• An employee who is a certified organizational development practitioner

Formulation

Data from the assessment phase is processed and analyzed, and a plan of implementation is developed. Refinements to the initial organizational development project plan might be required. At the end of this phase, the OD team should have an action plan ready, as well as a set of current performance benchmarks and future goals. 

Implementation

The resources for the action plan are sourced and the development initiatives are carried out. Coaches, mentors, and trainers are identified and set to work observing, recommending, and instructing. Experts and consultants can be hired to assess current methodologies and provide recommendations. Change plans are organized to cover, for instance, communication, roles and responsibilities, training, and risk management. Changes can be affected through ‘interventions’, where the development needs of the individual, group, and organization are addressed and corrected. This can include, for example, production problems, skill gaps, organizational changes, and pending opportunities. 

Evaluation

Next comes a continuous process of evaluating the efficacy of the organizational development program. This is a common juncture for the occurrence of feedback loops by which stakeholders analyze progress to date and, if required, repeat the organizational development process for remaining areas of weakness or new issues. 

What Is Organizational Development in HR?

The human resources department plays a crucial role during the various steps of an organizational development program. HR is usually in charge of L&D programs that improve professional skills. An organizational development program will also affect setups related to people management issues like motivation and assessment. Finally, on a macro level, any recommended changes to organizational behavior resulting from an OD initiative will be the responsibility of HR.

An OD Practitioner’s Required Skills

Organizational development is dedicated to improving specific aspects of a company’s abilities. Whenever challenges are encountered, they are addressed through change management. This is a skill in itself and carries with it numerous skill elements. These include communication skills, problem-solving, critical thinking, and time management.  

Organizational Development Certification

The necessity of constant change has led HR-based learning institutions to provide courses in OD process management, leading to certification. By obtaining professional-level instruction, experts can turn their organizational development initiative into a competitive advantage. Some of the leading OD certification courses include those provided by AIHR, the Institute of Organization Development, and the Association for Talent Development.

Top Organizational Development Consultants

Even though OD can be a continuous process, it often helps to at least get started with a specialist consulting firm. These range in size from multinational companies such as PwC, Bain & Company, and Boston Consulting Group, all the way to local firms that specialize in certain industries. Keep in mind that OD can be an intense and long-term process, so working with an affordable and responsive consultant is essential. However, as technology-based solutions become more common, and once you have an idea of how the process works, it becomes easier to handle OD independently. 

Examples of Organizational Development

Each organizational development initiative is focused on a major company function, which in turn, affects basically everything that the company does. Here are some of the main tasks that can be the subject of organizational development:

A revised R&D process

This can be an effort to implement new techniques, a requirement for the invention of a new product, or a way of troubleshooting issues that arise over time.

A new organizational culture

Especially with the influence of younger generations, companies are realizing the benefits of consciously adopting an organizational culture that fits their operational and moral goals. 

Reskilling and upskilling

L&D programs are an integral part of OD and are a classic example of a long-term objective that empowers an organization with a solid core of skills.

A Note on Skills

Almost any organizational change will require new skills. For instance, a revised R&D process might demand a new programming language or learning how to use a certain technology. Similarly, changing organizational culture will almost definitely involve upgrading soft skills. Finally, because change is led by managers, it is likely that leadership development programs that focus on abilities related to change management will need to be implemented. This is even more so if OD is continuous, in which case a continuous professional development (CPD) program should be set up.  

OD Interventions and Examples

The ‘vehicle’ for implementing OD is called an intervention. This is a structured process where the building blocks of an OD plan are made. There are four basic examples of OD interventions:

Human resources

This involves changes to organizational functions that are essentially the domain of HR, such as issues related to DEI, employee development, and employee assessment.

Human processes

The goal of an intervention in this case seeks to improve interpersonal communications and dynamics.

Technological structure

These are aimed at altering the way people interact with the technological aspects of their work by, for example, changing workflows.

Strategic

This is a transformational change that can result, for instance, from a merger or a restructuring.

Organizational Development Models

The extent of an OD program can easily lead to disorder. To keep things manageable, several models have been developed to keep practitioners and the organization on track. These are some of the most commonly used models:

Greiner’s Sequences

Greiner outlined OD as a process that occurs in a certain order. It also happens as a sort of stimulus-response cycle, where external pressure forces the organization to change, which in turn causes various changes within the company.

Lewin’s Three Stages

Also used in change management, Lewin’s model proposes that an organization stop a certain process, analyze and adapt it, and then make it a fixed element again within its operations.

Leavitt’s Interactive

In this organizational development model, organizations consist of four subsystems (people, structure, technology, and tasks), which are all affected when one element is changed. 

About Growthspace

The Growthspace precision skill development platform is a talent management solution that changes the world of employee learning and development with a scalable, technology-based approach unlike any other. If you want to finally see what employee L&D programs can really do for your organization, contact us.