Introduction to Organizational Development (OD) - PDF

INTRODUCTION TO ORGANIZATIONAL DEVELOPMENT (OD) Week 2 28 September 2024 First Semester, AY 2023–2024 Instructor: ANGELITO S. BUHAY (ANDY)  Organizational development is a critical and science-based process that helps Definition of...

INTRODUCTION TO ORGANIZATIONAL DEVELOPMENT (OD) Week 2 28 September 2024 First Semester, AY 2023–2024 Instructor: ANGELITO S. BUHAY (ANDY)  Organizational development is a critical and science-based process that helps Definition of organizations build their capacity to OD change and achieve greater effectiveness by developing, improving, and reinforcing strategies, structures, and processes. A few elements in this definition stand out. Critical and science-based process. OD is an evidence-based and structured process. It is not about trying something out and seeing what happens. It is about using scientific findings as input and creating a structured and controlled process in which assumptions are tested. Lastly, it is about testing if the outcomes reflect the intention of the intervention. Build capacity to change and achieve greater effectiveness Organizational development is aimed at organizational effectiveness. It, therefore, has a number of (business) outcomes. These can differ between organizations, but usually, they do include financial performance, customer satisfaction, organizational member engagement, and an increased capacity to adapt and renew the organization. These are not always clear- cut. Sometimes it is about building a competitive advantage, in whichever way we define that. We will explore these outcomes later in this article Developing, improving, and reinforcing strategies, structures, and processes The last part of our definition states that organizational development applies to changes in strategy, structure, and/or processes. This implies a system-approach, where we focus on an entire organizational system. This can include the full organization, one or more locations, or a single department. In organizational development, the main stakeholders are both internal and external to the company. Management and employees are internal stakeholders. External stakeholders include customers, investors, suppliers, communities, and governments. The goal of OD is to develop these aspects, as they can help a business win in the marketplace. The OD Process OD interventions Human Process Interventions Individual interventions. These interventions are targeted to the individual, often aimed at improving communication with others. An employee is coached on interpersonal behaviors that are counterproductive. Group interventions. These interventions are aimed at the content, structure, or process of the group. The content is what the group is focused on. The structure is how a group is designed to act on the content. The process is the way in which the group carries out its core tasks. For example, a contact center focuses on taking complaints from customers. The contact center has a hierarchical structure with a director, managers, and customer service staff. The contact center’s process is to record as quickly as possible, all complaints. Only a certain percentage are escalated to management depending on how serious and complex, a complaint is. Technostructural Interventions Organizational (structural) design. The functional structure of the organization is key to how it will operate. You are likely familiar with the classical hierarchical organizational chart. This is referred to as the functional structure. Other structures are divisional, matrix, process, customer-centric, and network. Key activities in organizational design are reengineering and downsizing. This involves rethinking the way work is done, preparing the organization, and restructuring it around the new business processes. Total quality management. Total quality management is also known as continuous process improvement, lean, and six-sigma. It grew out of a manufacturing emphasis on quality control. It places customer satisfaction as central to the long-term success of an organization. To achieve this there is a strong focus on total employee involvement in the continuous improvement of products, processes, and workplace culture. Companies such as car manufacturer Toyota and phone manufacturer Motorola, use this intervention. Human Resource Management Interventions These are organizational development techniques that focus on the way the individual is managed. Many of these are part of HRM functions. Performance management. Good performance management includes techniques such as goal setting, performance appraisal, and reward systems. Developing talent. This includes talent management practices like coaching & mentoring, career planning, development interventions, and management and leadership development. Diversity interventions. Diversity is a source of innovation. This includes age, gender, race, sexual orientation, disabilities, and culture, and value orientation. These OD intervention techniques are aimed at increasing diversity. Wellness interventions. Employee wellness interventions include stress management programs, and employee assistance programs. They address social factors and aim for a healthy work-life balance. Strategic Change Interventions Transformational change. This is a process that involves changing the basic character of the organization, including how it is structured and the way it operates. For example, Nintendo is famous for video games. However, the company was founded in 1889 to create card games. Due to changes in consumer interests, Nintendo shifted to electronic toys, and later video games, from the 1970s. Continuous change. Continuous change is an intervention that enables organizations to improve gradually, by making small incremental changes. A popular example is the learning organization. This approach places more importance on learning from mistakes and failures, than punishing them. How Human Resources and OD relate You can see that there are many OD interventions, relating to Human Resource Management functions. Policies such as performance management, goal setting, appraisal, and talent management practices are all important in achieving effective organizational development. However, whereas HRM focuses specifically on people practices, OD takes a more holistic approach. Using tools like organizational design, individual and group interventions, work design, and more traditional people interventions, OD can operate at all levels of the organization. These levels are organizational, group, and individual. However, the focus is always on strategic themes, whereas HR is often a lot more operational. Sometimes, OD functions are located in the HR function, but not always. Sometimes it’s part of a services department, corporate strategy, or internal consulting. External strategy consultants also frequently utilize OD techniques in change management projects. Both HRM and OD have their roots in the business strategy – the mission, values, and vision of the organization. Both outline the actions needed to implement that strategy in their respective fields. In addition, many early people analytics initiatives originate from the OD department people analytics  This guide has provided a strong grounding in the complex area of organizational development. A barrier to organizational development is how confusing this area can be for managers. HR is at its core about people, and how best to utilise people for the benefit of an organization. This is where HR professionals have a head-start in understanding OD. Conclusion OD is centrally concerned with assisting an organization implement strategy, to its peak ability. This is done via the engagement and optimization of human resources. So, we can see that knowledge of OD enables improvement within the HR department. And improvements among staff, will result in organizational wide improvements. History and relevance of OD The history of Organizational Development (OD) reveals a much older tradition of organizational science than the conventional wisdom would suggest. By the 1960s and 1970s OD became self‐confident and dynamic. This period was not only highly experimental but established the principles of OD for much of the twentieth century. By the end of the twentieth century new images of OD had occurred and much of the earlier thinking had been transformed. This review illustrates some examples under a series of themes that have had a major impact on the discipline of OD and on the wider thinking of organizational theorists and researchers.  Benefits of Organizational Development  Organizational Development (OD) aids in pinpointing operations requiring modifications, leading to a comprehensive management plan Optimization that assesses needs and potential changes. This optimization of Operations enhances productivity and efficiency, promoting innovation and increasing profitability.  Through OD, businesses streamline their processes, optimizing the use of resources. This enhancement results in an Improved increased output from the same Efficiency or even fewer inputs, reducing waste and operational costs and improving efficiency.  OD promotes increased communication and collaboration, resulting in multi-dimensional solutions to business needs. The Improved chosen solutions will likely meet Effectiveness their objectives through careful consideration and thorough research.  OD assists in communicating a vision for future operations, aligning talents with this vision, Positioning and identifying skills gaps to bridge. This readies the for Future organization for future growth. Expansion  OD enables an organizational structure assessment for flexibility and the identification of resource Exploration of needs. It also strengthens Market processes to accommodate new market opportunities. Opportunities  OD provides employees the skills to meet new market requirements. Balancing an organization’s strengths and Capacity weaknesses ensures the effective Building use of resources.  OD promotes a culture of continuous improvement and innovation, reducing operational Improved errors and ensuring high-quality outputs. This enhances product Operational quality and boosts employee Quality morale by fostering a sense of accomplishment.  OD creates a win-win scenario for all stakeholders by elevating productivity. Suppliers benefit Increased from heightened demand, Value for investors enjoy higher returns, and employees gain from skill Stakeholders enhancements and professional growth opportunities.  Organizational Development significantly influences cost reduction within a company. It does this by fostering an enjoyable work environment, thus improving employee retention and Cost reducing the cost of constant recruitment. Additionally, by promoting a culture that Reduction values continuous improvement, OD helps to increase productivity and efficiency, thereby reducing operational costs and wastage.  With OD, organizations can identify, hone, and leverage their unique resources and competencies. This is vital for standing out in the Increased saturated marketplace. By fostering Competitiveness innovation and aiding in strategic decision-making, OD empowers businesses to build competitive advantages that lead to market leadership and business success.  Organizational Development enables organizations to scrutinize and reassess their operational processes. It Improved highlights any inefficiencies or duplications and provides insights into Process potential process combinations that can streamline operations and enhance Integration efficiency. This aspect of OD optimizes the workflow, leading to improved performance and productivity.  Change is constant and often unavoidable in the business landscape. OD helps organizations to adopt a Ease of proactive approach toward change. By encouraging the active engagement of Embracing stakeholders and preparing them for future alterations, OD ensures that Changes transitions are smooth and less disruptive. This helps to maintain organizational stability and continuity during periods of change.  Organizational Development allows for data-driven planning and management of growth. Businesses can make informed decisions about the future by Enhanced analyzing sales projections and market Process demand. This ability aids in resource allocation and operational adjustments, Sustainability ensuring sustainable growth and relevance in the evolving marketplace.  One crucial benefit of OD is improving communication within organizations. OD provides leaders with the necessary tools to express their future vision clearly. This transparent Enhanced communication rallies support from Communication stakeholders, motivating teams and fostering a unified effort towards achieving common organizational goals. This leads to a more engaged, motivated, and effective team.  The culture shifts towards continuous improvement and nurtures a learning mindset that Fostering includes rewarding success, Organizational sharing knowledge, and ongoing training and Development. Learning OD versus the forms of Organization The five forms of business organizations Sole Partnership Corporation proprietorship Limited Cooperative liability company Partnership You can classify a business partnership as either general or limited. General partnerships allow both partners to invest in a business with 100% responsibility for any business debts. They don't require a formal agreement. In comparison, limited partnerships require owners to file paperwork with the state and compose formal agreements that describe all of the important details of the partnership, such as who is responsible for certain debts Advantages of partnerships Easy to establish: Compared to other business structures, partnerships require minimal paperwork and legal documents to establish. Partners can combine expertise: With more than one like-minded individual, there are more opportunities to increase their collaborative skillset. Distributed workload: People in partnerships commonly share responsibilities so that one person doesn't have to do all the work. Disadvantages to consider Possibility for disagreements: By having more than one person involved in business decisions, partners may disagree on some aspects of the operation. Difficulty in transferring ownership: Without a formal agreement that explicitly states processes, a business may come to a halt if partners disagree and choose to end their partnership. Full liability: In a partnership, all members are personally liable for business-related debts and may be pursued in a lawsuit. An example of a partnership is a business set up between two or more family members, friends or colleagues in an industry that supports their skill sets. The partners of a business typically divide the profits among themselves. Corporation A corporation is a business organization that acts as a unique and separate entity from its shareholders. A corporation pays its own taxes before distributing profits or dividends to shareholders. There are three main forms of corporations: a C corporation, an S corporation and an LLC, or limited liability corporation Advantages of corporations Owners aren't responsible for business debts: In general, the shareholders of a corporation are not liable for its debts. Instead, shareholders risk their equity. Tax exemptions: Corporations can deduct expenses related to company benefits, including health insurance premiums, wages, taxes, travel, equipment and more. Quick capital through stocks: To raise additional funds for the business, shareholders may sell shares in the corporation. Disadvantages include Double taxation for C-corporations: The corporation must pay income tax at the corporate rate before profits transfer to the shareholders, who must then pay taxes on an individual level. Annual record-keeping requirements: With the exception of an S- corporation, the corporate business structure involves a substantial amount of paperwork. Owners are less involved than managers: When there are several investors with no clear majority interest, the management team may direct business operations rather than the owners. Common examples of corporations include a business organization that possesses a board of directors and a large company that employs hundreds of people. About half of all corporations have at least 500 employees Sole proprietorship This popular form of business structure is the easiest to set up. Sole proprietorships have one owner who makes all of the business decisions, and there is no distinction between the business and the owner Advantages of a sole proprietorship Total control of the business: As the sole owner of your business, you have full control of business decisions and spending habits. No public disclosure required: Sole proprietorships are not required to file annual reports or other financial statements with the state or federal government. Easy tax reporting: Owners don't need to file any special tax forms with the IRS other than the Schedule C (Profit or Loss from Business) form. Low start-up costs: While you may need to register your business and obtain a business occupancy permit in some places, the costs of maintaining a sole proprietorship are much less than other business structures. Disadvantages include Unlimited liability: You are personally responsible for all business debts and company actions under this business structure. Lack of structure: Since you are not required to keep financial statements, there is a risk of becoming too relaxed when managing your money. Difficulty in raising funds: Investors typically favor corporations when lending money because they know that those businesses have strong financial records and other forms of security. Some typical examples of sole proprietorships include the personal businesses of freelancers, artists, consultants and other self-employed business owners who operate on a solo basis Cooperative A cooperative, or a co-op, is a private business, organization or farm that a group of individuals owns and runs to meet a common goal. These owners work together to operate the business, and they share the profits and other benefits. Most of the time, the members or part-owners of the cooperative also work for the business and use its services Advantages of a cooperative Greater funding options: Cooperatives have access to government- sponsored grant programs, like the USDA Rural Development program, depending on the type of cooperative. Democratic structure: Members of a cooperative follow the "one member, one vote" philosophy, meaning that everyone has a say, regardless of their investment in the co-op. Less disruption: Cooperatives allow members to join and leave the business without disrupting its structure or dissolving it. Disadvantages include Raising capital: Larger investors may choose to invest in other business structures that allow them to earn a larger share, as the cooperative structure treats all investors the same, both large and small. Lack of accountability: Cooperatives are more relaxed in terms of structure, so members who don't fully participate or contribute to the business leave others at a disadvantage and risk turning other members away. Many cooperatives exist in the retail, service, production and housing industries. Examples of businesses operating as cooperatives include credit unions, utility cooperatives, housing cooperatives and retail stores that sell food and agricultural products. Limited Liability Company (LLC) The most common form of business structure for small businesses is a limited liability company, or LLC, which is defined as a separate legal entity and may have an unlimited amount of owners. They are typically taxed as a sole proprietorship and require insurance in case of a lawsuit. This form of business is a hybrid of other forms because it has some characteristics of a corporation as well as a partnership, so its structure is more flexible. Advantages of an LLC Limited liability: As the name states, owners and managers have limited personal liability for business debts, whereas individuals assume full responsibility in a sole proprietorship or partnership. Pass-through taxation: Owners of LLCs may take advantage of "pass-through" taxation, which allows them to avoid LLC and corporation taxes, and owners pay personal taxes on business profits. Flexible management: LLCs lack a formal business structure, meaning that their owners are free to make choices regarding the operation of their businesses. Some disadvantages include Associated costs: The start-up costs associated with an LLC are more expensive than setting up a sole proprietorship or partnership, and there are annual fees involved as well. Separate records: Owners of LLCs must take care to keep their personal and business expenses separate, including any company records, whereas sole proprietorships are less formal. Taxes: In regards to unemployment compensation, owners may have to pay it themselves. Common examples of limited liability companies include start-ups and other small businesses. Family-owned businesses and companies with a small number of members may operate as an LLC because it is a flexible business model that allows members to be active or passive in their roles. References: https://www.aihr.com/blog/organizational- development/#:~:text=Organizational%20development%20is%20a%20critical%20a nd%20science- based%20process,developing%2C%20improving%2C%20and%20reinforcing%20s trategies%2C%20structures%2C%20and%20processes. https://www.emerald.com/insight/content/doi/10.1108/02621710010371865/full/html https://upraise.io/blog/organizational-development-benefits/ https://www.indeed.com/career-advice/career-development/forms-of-businesses  - End – Thank you for your participation…