Redesign Your IT Organizational Structure

Designing an IT structure that will enable your strategic vision is not about an org chart – it’s about how you work.

EXECUTIVE BRIEF

Analyst Perspective

Structure enables strategy.

Allison Straker

Research Director,

Organizational Transformation

Brittany Lutes

Senior Research Analyst,

Organizational Transformation

An organizational structure is much more than a chart with titles and names. It defines the way that the organization operates on a day-to-day basis to enable the successful delivery of the organization’s information and technology objectives. Moreover, organizational design sees beyond the people that might be performing a specific role. People and role titles will and often do change frequently. Those are the dynamic elements of organizational design that allow your organization to scale and meet specific objectives at defined points of time. Capabilities, on the other hand, are focused and related to specific IT processes.

Redesigning an IT organizational structure can be a small or large change transformation for your organization. Create a structure that is equally mindful of the opportunities and the constraints that might exist and ensure it will drive the organization towards its vision with a successful implementation. If everyone understands why the IT organization needs to be structured that way, they are more likely to support and adopt the behaviors required to operate in the new structure.

Executive Summary

Your Challenge

Your organization needs to reorganize itself because:

• The current IT structure does not align to the strategic objectives of the organization.
• There are inefficiencies in how the IT function is currently operating.
• IT employees are unclear about their role and responsibilities, leading to inconsistencies.
• New capabilities or a change in how the capabilities are organized is required to support the transformation.

Common Obstacles

Many organizations struggle when it comes redesigning their IT organizational structure because they:

• Jump right into creating the new organizational chart.
• Do not include the members of the IT leadership team in the changes.
• Do not include the business in the changes.
• Consider the context in which the change will take place and how to enable successful adoption.

Info-Tech’s Approach

Successful IT organization redesign includes:

• Understanding the drivers, context, and strategies that will inform the structure.
• Remaining objective by focusing on capabilities over people or roles.
• Identifying gaps in delivery, sourcing strategies, customers, and degrees of centralization.
• Remembering that organizational design is a change initiative and will require buy-in.

Info-Tech Insight

A successful redesign requires a strong foundation and a plan to ensure successful adoption. Without these, the organizational chart has little meaning or value.

Your challenge

This research is designed to help organizations who are looking to:

• Redesign the IT structure to align to the strategic objectives of the enterprise.
• Increase the effectiveness in how the IT function is operating in the organization.
• Provide clarity to employees around their roles and responsibilities.
• Ensure there is an ability to support new IT capabilities and/or align capabilities to better support the direction of the organization.
• Align the IT organization to support a business transformation such as becoming digitally enabled or engaging in M&A activities.

Organizational design is a challenge for many IT and digital executives

69% of digital executives surveyed indicated challenges related to structure, team silos, business-IT alignment, and required roles when executing on a digital strategy.

Source: MIT Sloan, 2020

Common obstacles

These barriers make IT organizational redesign difficult to address for many organizations:

• Confuse organizational design and organizational charts as the same thing.
• Start with the organizational chart, not taking into consideration the foundational elements that will make that chart successful.
• Fail to treat organizational redesign as a change management initiative and follow through with the change.
• Exclude impacted or influential IT leaders and/or business stakeholders from the redesign process.
• Leverage an operating model because it is trending.

To overcome these barriers:

• Understand the context in which the changes will take place.
• Communicate the changes to those impacted to enable successful adoption and implementation of a new organizational structure.
• Understand that organizational design is for more than just HR leaders now; IT executives should be driving this change.

Succeed in Organizational Redesign

75% The percentage of change efforts that fail.

Source: TLNT, 2019

55% The percentage of practitioners who identify how information flows between work units as a challenge for their organization.

Source: Journal of Organizational Design, 2019

Organizational design defined

If your IT strategy is your map, your IT organizational design represents the optimal path to get there.

IT organizational design refers to the process of aligning the organization’s structure, processes, metrics, and talent to the organization’s strategic plan to drive efficiency and effectiveness.

Understand the organizational differences

Organizational Design

Organizational design the process in which you intentionally align the organizational structure to the strategy. It considers the way in which the organization should operate and purposely aligns to the enterprise vision. This process often considers centralization, sourcing, span of control, specialization, authority, and how those all impact or are impacted by the strategic goals.

Operating Model

Operating models provide an architectural blueprint of how IT capabilities are organized to deliver value. The placement of the capabilities can alter the culture, delivery of the strategic vision, governance model, team focus, role responsibility, and more. Operating model sketches should be foundational to the organizational design process, providing consistency through org chart changes.

Organizational Structure

The organizational structure is the chosen way of aligning the core processes to deliver. This can be strategic, or it can be ad hoc. We recommend you take a strategic approach unless ad hoc aligns to your culture and delivery method. A good organizational structure will include: “someone with authority to make the decisions, a division of labor and a set of rules by which the organization operates” (Bizfluent, 2019).

Organizational Chart

The capstone of this change initiative is an easy-to-read chart that visualizes the roles and reporting structure. Most organizations use this to depict where individuals fit into the organization and if there are vacancies. While this should be informed by the structure it does not necessarily depict workflows that will take place. Moreover, this is the output of the organizational design process.

Sources: Bizfluent, 2019; Strategy & Business, 2015; SHRM, 2021

The Technology Value Trinity

All three elements of the Technology Value Trinity work in harmony to delivery business value and achieve strategic needs. As one changes, the others need to change as well.

How do these three elements relate?

• Digital and IT strategy tells you what you need to achieve to be successful.
• Operating model and organizational design align resources to deliver on your strategy and priorities. This is done by strategically structuring IT capabilities in a way that enables the organizations vision and considers the context in which the structure will operate.
• I&T governance is the confirmation of IT’s goals and strategy, which ensures the alignment of IT and business strategy and is the mechanism by which you continuously prioritize work to ensure that what is delivered is in line with the strategy.

Too often strategy, organizational design, and governance are considered separate practices – strategies are defined without teams and resources to support. Structure must follow strategy.

Info-Tech’s approach to organizational design

Like a story, a strategy without a structure to deliver on it is simply words on paper.

Books begin by setting the foundation of the story.

Introduce your story by:

• Defining the need(s) that are driving this initiative forward.
• Introducing the business context in which the organizational redesign must take place.
• Outlining what’s needed in the redesign to support the organization in reaching its strategic IT goals.

The plot cannot thicken without the foundation. Your organizational structure and chart should not exist without one either.

The steps to establish your organizational chart - with functional teams, reporting structure, roles, and responsibilities defined – cannot occur without a clear definition of goals, need, and context. An organizational chart alone won’t provide the insight required to obtain buy-in or realize the necessary changes.

Conclude your story through change management and communication.

Good stories don’t end without referencing what happened before. Use the literary technique of foreshadowing – your change management must be embedded throughout the organizational redesign process. This will increase the likelihood that the organizational structure can be communicated, implemented, and reinforced by stakeholders.

Info-Tech uses a capability-based approach to help you design your organizational structure

Once your IT strategy is defined, it is critical to identify the capabilities that are required to deliver on those strategic initiatives. Each initiative will require a combination of these capabilities that are only supported through the appropriate organization of roles, skills, and team structures.

Embed change management into organizational design

Change management practices are needed from the onset to ensure the implementation of an organizational structure.

For each phase of this blueprint, its important to consider change management. These are the points when you need to communicate the structure changes:

• Phase 1: Begin to socialize the idea of new organizational structure with executive leadership and explain how it might be impactful to the context of the organization. For example, a new control, governance model, or sourcing approach could be considered.
• Phase 2: The chosen operating model will influence your relationships with the business and can create/eliminate silos. Ensure IT and business leaders have insight into these possible changes and a willingness to move forward.
• Phase 3: The new organizational structure could create or eliminate teams, reduce or increase role responsibilities, and create different reporting structures than before. It’s time to communicate these changes with those most impacted and be able to highlight the positive outcomes of the various changes.
• Phase 4: Should consider the change management practices holistically. This includes the type of change and length of time to reach the end state, communication, addressing active resistors, acquiring the right skills, and measuring the success of the new structure and its adoption.

Info-Tech Insight

Do not undertake an organizational redesign initiative if you will not engage in change management practices that are required to ensure its successful adoption.

Measure the value of the IT organizational redesign

Given that the organizational redesign is intended to align with the overall vision and objectives of the business, many of the metrics that support its success will be tied to the business. Adapt the key performance indicators (KPIs) that the business is using to track its success and demonstrate how IT can enable the business and improve its ability to reach those targets.

Strategic Resources

The percentage of resources dedicated to strategic priorities and initiatives supported by IT operating model. While operational resources are necessary, ensuring people are allocating time to strategic initiatives as well will drive the business towards its goal state. Leverage Info-Tech’s IT Staffing Assessment diagnostic to benchmark your IT resource allocation.

Business Satisfaction

Assess the improvement in business satisfaction overall with IT year over year to ensure the new structure continues to drive satisfaction across all business functions. Leverage Info-Tech’s CIO Business Vision diagnostic to see how your IT organization is perceived.

Role Clarity

The degree of clarity that IT employees have around their role and its core responsibilities can lead to employee engagement and retention. Consider measuring this core job driver by leveraging Info-Tech’s Employee Engagement Program.

Customer & User Satisfaction

Measure customer satisfaction with technology-enabled business services or products and improvements in technology-enabled client acquisition or retention processes. Assess the percentage of users satisfied with the quality of IT service delivery and leverage Info-Tech’s End-User Satisfaction Survey to determine improvements.

Info-Tech’s methodology for Redesigning Your IT Organization

Insight summary

Overarching insight

Organizational redesign processes focus on defining the ways in which you want to operate and deliver on your strategy – something an organizational chart will never be able to convey.

Phase 1 insight

Focus on your organization, not someone else's’. Benchmarking your organizational redesign to other organizations will not work. Other organizations have different strategies, drivers, and context.

Phase 2 insight

An operating model sketch that is customized to your organization’s specific situation and objectives will significantly increase the chances of creating a purposeful organizational structure.

Phase 3 insight

If you follow the steps outlined in the first three phases, creating your new organizational chart should be one of the fastest activities.

Phase 4 insight

Throughout the creation of a new organizational design structure, it is critical to involve the individuals and teams that will be impacted.

Tactical insight

You could have the best IT employees in the world, but if they aren’t structured well your organization will still fail in reaching its vision.

Blueprint deliverables

Each step of this blueprint is accompanied by supporting deliverables to help you accomplish your goals:

Communication Deck

Communicate the changes to other key stakeholders such as peers, managers, and staff.

Workbook

As you work through each of the activities, use this workbook as a place to document decisions and rationale.

Reference Deck

Definitions for every capability, base operating model sketches, and sample organizational charts aligned to those operating models.

Job Descriptions

Key deliverable:

Executive Presentation

Leverage this presentation deck to gain executive buy-in for your new organizational structure.

Blueprint benefits

IT Benefits

• Create an organizational structure that aligns to the strategic goals of IT and the business.
• Provide IT employees with clarity on their roles and responsibilities to ensure the successful delivery of IT capabilities.
• Highlight and sufficiently staff IT capabilities that are critical to the organization.
• Define a sourcing strategy for IT capabilities.
• Increase employee morale and empowerment.

Business Benefits

• IT can carry out the organization’s strategic mission and vision of all technical and digital initiatives.
• Business has clarity on who and where to direct concerns or questions.
• Reduce the likelihood of turnover costs as IT employees understand their roles and its importance.
• Create a method to communicate how the organizational structure aligns with the strategic initiatives of IT.
• Increase ability to innovate the organization.

Executive Brief Case Study

IT design needs to support organizational and business objectives, not just IT needs.

INDUSTRY: Government

SOURCE: Analyst Interviews and Working Sessions

Situation

IT was tasked with providing equality to the different business functions through the delivery of shared IT services. The government created a new IT organizational structure with a focus on two areas in particular: strategic and operational support capabilities.

Challenge

When creating the new IT structure, an understanding of the complex and differing needs of the business functions was not reflected in the shared services model.

Outcome

As a result, the new organizational structure for IT did not ensure adequate meeting of business needs. Only the operational support structure was successfully adopted by the organization as it aligned to the individual business objectives. The strategic capabilities aspect was not aligned to how the various business lines viewed themselves and their objectives, causing some partners to feel neglected.

Info-Tech offers various levels of support to best suit your needs.

DIY Toolkit

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful."

Guided Implementation

"Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track."

Workshop

"We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place."

Consulting

"Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project."

Diagnostics and consistent frameworks are used throughout all four options.

Guided Implementation

What does a typical GI on this topic look like?

A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization. A typical GI is 8 to 12 calls over the course of 4 to 6 months.

Phase 1

Call #1: Define the process, understand the need, and create a plan of action.

Phase 2

Call #2: Define org. design drivers and business context.

Call #3: Understand strategic influences and create customized design principles.

Call #4: Customize, analyze gaps, and define sourcing strategy for IT capabilities.

Call #5: Select and customize the IT operating model sketch.

Phase 3

Call #6: Establish functional work units and their mandates.

Call #7: Translate the functional organizational chart to an operational organizational chart with defined roles.

Phase 4

Call #8: Consider risks and mitigation tactics associated with the new structure and select a transition plan.

Call #9: Create your change message, FAQs, and metrics to support the implementation plan.

Workshop Overview

Contact your account representative for more information.

workshops@infotech.com 1-888-670-8889