What is Organizational Development? A Complete Guide

You have likely heard of organizational development (OD). But what exactly is it? In this complete guide, we will delve into what organizational development is, its goals, examples of OD, and the OD process. By the end of this guide, you will have a solid understanding of organizational development.

Contents What is organizational development? A definition The goals of organizational development 18 examples of OD interventions How Human Resources and OD relate The organizational development process Organizational development certification FAQ

What is organizational development? A definition

Organizational development is a critical and science-based process that helps organizations build their capacity to change and achieve greater effectiveness by developing, improving, and reinforcing strategies, structures, and processes.

There are a few elements in this definition (adapted from Cummings & Worley, 2009) that 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.

Organizational design has become more crucial over time. Today’s world is characterized by Volatility, Uncertainty, Complexity, and Ambiguity (VUCA). This VUCA world requires new agility from organizations, and organizational development is the means to that end.

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.

Globalization leads to a much greater interconnections and opens up organizations to world-wide opportunities and threats.

On top of that, IT is redefining how traditional business models work, creating innovative companies with the ability to scale their services to a worldwide audience in the timespan of only a few years. Just a year after launching, Facebook hit one million registered users. A few years later, Snapchat hit 10 million active users in its first year. This exposes incumbents to disruption.

Finally, business systems become better at measuring relevant data, changing the way success is measured. On top of that, advanced people analytics can help to further drive organizational outcomes.

The goals of organizational development

We already touched briefly on the goals of organizational development. These goals vary between organizations. In corporate companies, increasing profits is likely to be a chief concern. Within charities, the cultural values are of high importance. And in health services, adaptability is central to maintaining good functioning.

If there would be one central goal, it would be increasing the organization’s competitiveness.

Competitiveness is the idea that every organization has unique resources and competencies that help the firms to win in the marketplace. This can be the people (a business leader like Elon Musk, or the Google team), an innovative product (SpaceX), superior service (Four Seasons Hotels), or culture (Zappos). It can also be how reactive the organization is to changing market demands. If you’re the first to capitalize on an opportunity, for instance, it may solidify your revenue in the next five years.

The goal of OD is to develop these aspects, as they can help a business win in the marketplace.

This means that organizational development differs from the incidental change process. OD focuses on building the organization’s ability to assess its current functioning and tweak it to achieve its goals. It is, therefore, a continuous process, whereas change processes are often temporarily.

This also emphasizes the relevance of OD. In this VUCA world, change is becoming a constant factor. OD is an integral approach to ensuring this constant change.

18 examples of OD interventions

Organizational development is complex. It is a technical field, and so are the interventions. Using the work of Cummings and Worley (2009) as a basis, in this section, we will go through 18 organizational development interventions. This list is far from exhaustive. It aims to help you grasp this vast topic better, and understand how OD relates to core HR functions.

Typically, a classification of OD interventions would include human process interventions, technostructural interventions, HRM interventions, and strategic change interventions.

Human Process Interventions

Human process interventions are change programs that relate to interpersonal relations, group, and organizational dynamics. These are some of the earliest and best-known OD interventions.

1. 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.

2. 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.

3. Third-party interventions. Third-party interventions are often used when there are conflicts. Not all conflicts are bad, but bad conflicts should be resolved quickly. The third-party intervention helps to control and resolve the conflict. Often, the third party is the OD consultant.

4. Team building. Team building is the best-known OD intervention. It refers to activities that help groups improve the way they accomplish tasks. Examples of team-building activities are volunteering, team sports, and Pictionary.

5. Organizational confrontation meeting. A confrontation meeting aims to identify problems and improvement targets, and set priorities. It is a starting point for addressing identified problems, across your organization.

6. Intergroup relations interventions. Intergroup interventions are aimed at diagnosing and understanding in-group relations. Similarly, problems are identified and priorities and improvement targets are set, before working on the identified issues.

7. Large-group interventions. These interventions are somewhat in the middle, of confrontation and intergroup interventions. The aim is to bring a large number of organization members and other stakeholders together. Internal and external stakeholders work together collaboratively. Large-group interventions may address organization-wide problems, or implement changes of structure or direction. For example, if you run a care home, you would seek feedback from service users, relatives, and staff on ways to improve the quality of life for residents. This could be starting new activities or changing the menu options. They are often referred to as “open space meetings”, “world cafes”, “future searches”, and “appreciative inquiry summits”.

Technostructural Interventions

Technostructural interventions refer to change programs aimed at the technology and structure of the organization. These are becoming increasingly relevant to today’s technological landscape, with rapidly changing markets.

8. 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.

9. 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.

10. Work design. All work should be done in order to achieve outcomes. These outcomes vary across organizations. Work can be designed to achieve an outcome as quickly as possible. Or, emphasis may be placed on employee satisfaction (which can lead to a higher quality of outcome, but often this is more costly). Depending on which approach your organization chooses, the skills needed will differ. Designing work in a way that leads to optimum productivity is called work design.

11. Job enrichment. Job enrichment is part of work design. The goal here is to create a job that is interesting and challenging for the person doing it. Examples of factors to be taken into account are skill variety, task identity, autonomy, and feedback.

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.

12. Performance management. Good performance management includes techniques such as goal setting, performance appraisal, and reward systems.

13. Developing talent. This includes talent management practices like coaching & mentoring, career planning, development interventions, and management and leadership development.

14. 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.

15. 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

These organizational development techniques focus on the change processes that shake the organization to its core. The OD department plays a crucial part in executing on this change.

16. 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.

17. 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.

18. Transorganizational change. Transorganizational change involves change interventions that move beyond a single organization. This includes mergers, allying, acquisitions, and strategic networking. A common type of transorganizational change is when a company buys, or merges with, a competitor.

As we mentioned, this is not an exhaustive list. Techniques like financial planning, long-range forecasting, integrating technology, workforce planning, and designing appraisal systems can be added, as well as many, many more.

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.

What’s clear is that the OD techniques we listed above are very powerful. For an HR professional, there are huge benefits to mastering them. The term OD emerged in the 1960s, as a way to describe managing the behavioral aspects of people, within organizations. Understanding OD means you can identify which elements of core HR functions need to be focused on, in order to support the organization as a whole, in becoming more efficient. OD provides an integrated way of approaching these challenges.

The organizational development process

There’s a lot involved in organizational development processes. We will break the core aspects of OD processes down into seven steps. These steps outline how OD relates to human resource management functions. This might seem quite familiar to you – this process is not unlike the people analytics cycle. That cycle involves a problem being detected, data gathered, analyzed, presented and new policies being implemented.

Let’s take an example to follow throughout these seven stages. The x-ray department in health services spans three hospitals in a city, all run by the same organization. For decades, the organization has recruited administration staff to work at each specific hospital. However, when there are sickness absences, often no staff are available to cover. This means that the organization spends a lot of money on agency staff.

1. Entering and contracting

The first step starts when a manager or administrator spots an opportunity for improvement. There are different events that can trigger this, including external changes, internal conflicts, complaining customers, loss of profit, a lack of innovation, or high sickness absence or employee turnover. These events are usually symptoms of a deeper problem.

The first stage is about scoping out the problem. This usually happens in a meeting between the manager and the OD members. In the case of external OD consultants, this stage is more formal.

In the admin team at the three hospitals, the problem is not having enough staff to cover sickness in each hospital. The staff are only trained to work at one particular hospital. The secondary problem is the high cost of this, due to needing to frequently hire agency staff.

2. Diagnostics

Diagnostics is the second phase of the process. The OD practitioner tries to understand a system’s current functioning. They collect information needed to accurately interpret the problem, through surveys, interviews, or by looking at currently available data. All of this is aimed at trying to find the root cause of the issues. According to Cummings & Worley (2009), effective diagnosis provides the systematic knowledge of the organization needed to design appropriate interventions.

At the three hospitals, the OD practitioner would look at HR and financial records. This would provide data on sickness levels and the costs of using agency staff.

There are different organizational development models used to run these diagnoses. Below you see three IPO models, with a clear input, a (change) process, and an output. They help to structure different design components of the organizations (note the resemblance to Galbraith’s star model). This model clearly shows different design components that play a role at different organizational levels (i.e. organizational, group, and individual).

3. Data collection and analyzing

In the third phase, OD practitioners collect and analyze data. Data collection methods include existing data from work systems, questionnaires, interviews, observations, and ‘fly on the wall’ methods.

The OD practitioner may decide to interview employees in the admin team about why they take sickness leave, and if any aspects of the organization impact on doing so.

Data collection is often time-consuming and critical for the success of a project. Important factors to keep in mind are confidentiality, anonymity, a clear purpose, observer-expectancy bias, and a Hawthorne effect.

Observer bias is the tendency to see what we expect to see. The Hawthorne effect refers to the famous Hawthorne studies where subjects behaved differently purely because they were being observed.

Another effect to keep in mind is a regression to the mean. This refers to the phenomenon that arises when there’s an extreme situation, or outlier, that returns to its normal state. So a consultant would be brought in when things are really bad, with the situation decreasing in severity simply because time passes by. In this situation, the situation is less likely to go from really bad to even worse, than from really bad to just bad – hence regression to the mean.

4. Feedback

In this phase, it is key for the OD consultant to give information back to the client in a way that’s understandable and action-driven.

Information needs to be relevant, understandable, descriptive, verifiable, timely, limited, significant, comparative, and spur action. Techniques like storytelling and visualization can be used to do this in an effective way.

The OD consultant could present via slide-show, their key findings to management. They could also provide a detailed report, which management can delve into more deeply, before deciding which changes to implement at the hospitals.

5. Designing interventions

After providing the client with feedback, an intervention needs to be created. This intervention should fit the needs of the organization and should be based on causal knowledge of outcomes. In addition, the organization needs to be able to absorb the changes effectively.

A major part of the change process is defining success criteria for change. Only when these criteria are well-defined, progress can be measured.

A possible intervention which the organization could implement at the three hospitals is training all current staff to work across all hospital locations. Any new staff would be trained to work across all sites as well. The criteria for success would be less usage of agency staff, and more in-house employees covering sickness across the hospitals.

6. Leading and managing change

The next phase is about executing the change intervention. Estimations put the failure rate of change between 50-70%. Even though this is not entirely true, no one can doubt that change is hard.

Effective change management revolves around motivating change, creating a vision, developing support, managing the transition, and sustaining momentum. Well-known change models include John Kotter’s eight steps to transforming your organization.

At the hospitals, it is likely that not all staff will want to shift from working at one site to working across three. Some staff could quit. There will need to be thought given, to how management will convince staff to come on board to support this change.

7. Evaluation and institutionalization of change

Once a system has been implemented, opportunities for improvement start to show. Implementing these will lead to a better user and employee experience.

These incremental changes characterize the rapid evolution of technology. Change is becoming a constant factor, which means that it is near impossible to just implement technology and be done with it. Systems evolve and this requires a constant implementation.

The need for all staff to work across three hospitals, may require the organization to find a way to reduce travel costs for employees. This could be via paying staff a bit more, to offset the added costs, or introducing a low-cost or free shuttle bus for staff.

Lastly, effective interventions measure their own success and are created in a way that enables comparison between the state of affairs before and after.

Conclusion

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.

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.

FAQ

What is organizational development? Organizational development is a critical and science-based process that helps organizations build their capacity to change and achieve greater effectiveness by developing, improving, and reinforcing strategies, structures, and processes.

What is organizational development in HR? Organizational development in HR involves changes and improvement of the processes and structures that are part of HR’s responsibility. These include processes and systems related to performance management, talent management, diversity, employee wellness, and so on.

What is the goal of organizational development? The ultimate goal of organizational development is to increase the organization’s competitiveness in order to create a business that wins in the marketplace. This can be done through increasing profits, margins, market share, morale, cultural values, or other sources of competitive advantage.

What is the difference between HR and OD? There are many OD interventions that relate to HRM. These include performance and talent management interventions. However, where HRM focuses specifically on people practices, OD takes a more holistic approach, looking at individuals, teams, and organizational systems.