What Is Organizational Development? +Examples, Goals (2021)

organizational development

In today’s volatile, uncertain, complex, and ambiguous (VUCA) world, businesses undergo regular change, creating a need for continuous organizational development (OD). The main goal of OD is to increase the efficiency and effectiveness of an organization. 

An example of this is tech giant Amazon, which has gained a competitive edge by investing in organizational development. It plans to invest $700 million in OD and retrain a third of its workforce by 2025, helping its workers transition into new, advanced roles by adapting to new technologies, working conditions, business procedures, and overall digital transformation.

There is a  high chance that you are already investing in organizational development without a long-term strategy. This guide will help you understand the goals & phases of OD, and how you can leverage it for your growth. 

What Is Organizational Development?

Organizational development is an evidence-based scientific approach to help organizations become effective and adaptive to change by developing, improving, and reinforcing strategies, structures, and processes. 

Since OD aims at organizational effectiveness, the variable outcomes can include financial performance, employee engagement, customer satisfaction, and overall change management. However, a noteworthy aspect here would be that though both OD and HRM (human resource management) are people-centric processes and often used synonymously, they are actually different. 

Difference Between Organizational Development & Human Resource Management

Organizational development is more holistic and strategic, whereas HR is operational and can be considered a subset of OD. If HR initiatives focus on people practices, OD interventions consider multiple inputs and tools that cut across the breadth and depth of the organization. 

For example, the implementation of a performance management system can be categorized as an HR activity. But, to consider it as organizational development, it needs to be aligned with other functions in an ordered and comprehensive way. Here, the HR department can play a vital role in reducing an organization’s  resistance to change by explaining the need for a performance management system, its benefits to employees/company, and asking for feedback and input on implementing such a system. 

Therefore HR has a vital role in organizational development, but unlike HR, OD often brings about a behavior change in the organization. 

What Are the Goals for Organizational Development?

Here are a few of the most important goals for organizational development:

1. Improve Productivity & Efficiency Across the Organization

85% of employees are disengaged at their workplace, costing $7 trillion in lost productivity, according to Gallup’s State of the Local Workplace. However, the organizational development process focuses on making the workforce more efficient and productive by equipping them with the required skills to succeed in constantly changing markets. 

OD also improves communication within the team to align employees with the company’s vision. Once employees feel empowered, they are motivated to give their best and are willing to take more ownership of their work.

2. Create a Culture that Embraces Change & Innovation

Organizational development leverages competitive analysis, market research, and consumer behavior to create innovative products and services. It positively impacts the organizational culture by creating a continuous improvement cycle through special committees and new business processes. Strategies are implemented and assessed for results and quality, thereby helping employees embrace change without any barriers

For instance, Google fosters a culture of ongoing learning through organizational development. New employees are aware that they need to learn continuously to keep pace with changing business dynamics and grow professionally. 

3. Higher Profit Margins

New development initiatives streamline organizational processes, as well as increase employee productivity and product innovation. The operational costs further decrease due to a lower employee turnover rate, resulting in substantial profit margins.

The 5 Phases of the Organizational Development Process

Organizational development is a complex and systematic process. OD practitioners implement the development initiatives in five phases:

5 phases of organizational development

1. Entry

The entry stage represents the first interaction between the consultant and a client to assess the situation & identify the problem. A data-driven approach results in a more profound understanding of the areas of improvement for an organization. This phase finally results in an engagement via a contract or a project plan to lay the ground expectations about the project scope for the organizational development process

2. Diagnosis

This phase deals with the problem investigation via a collaborative data gathering process between an organization’s stakeholders and the consultant to discuss the root cause of the problem, barriers, and the previously implemented solutions.

3. Feedback

The client receives the analyzed information via the consultant at this stage. The feedback phase also includes a review of preliminary agreements on the project scope and resources resulting in an action plan that outlines the change solutions to be developed and defined success indicators based on the information and data analysis.

4. Solution

This stage represents the development and implementation of solutions to rectify the problems identified in the first stage. The solution can include a risk management plan, communication plan, change management plan, & a training plan.

5. Evaluation

Post the implementation phase, the change outcome is assessed to determine whether the initiative meets the goal. In case of a change failure, the organization looks for the cause and makes adjustments to eliminate the obstacle. An OD practitioner can also include small pilot tests in this phase before the organization-wide rollout of the development initiative.

Examples of Organizational Development Interventions

Given the complexity of development initiatives, they often require external interventions for successful change implementation. Organizational development interventions are structured processes that help companies meet specific objectives, enable management, and improve overall organizational functioning. 

Typically, you can classify OD interventions as:

  • Human Process Interventions
  • Technostructural Interventions
  • HRM Interventions
  • Strategic Change Interventions

Human Process Interventions

Human process interventions are some of the earliest & most effective OD interventions related to interpersonal relations, group, and organizational dynamics.

  1. Individual Interventions: A particular employee is provided coaching or mentoring on interpersonal behaviors that are counterproductive. Individual interventions are required in case of new employees, internal role transitions, and performance improvement. 
  2. Group Interventions: Group interventions aim at the group’s content, structure, or process. They may be necessary because one part of a company is changing, restructuring a department, and communicating new job responsibilities to the relevant employees. These interventions may take the form of professional development coaching, employee training, or change management exercises.
  3. Organizational Interventions: Organizational interventions are essential in the case of organization-wide changes like new strategy implementation, new software rollout, structural changes, and a stronger shared vision. You can accomplish these interventions in the form of employee wellness programs or by roping in third-party experts. 

Technostructural Interventions

These programs are related to the organizational structure and technological changes. They are highly relevant due to the changing business dynamics.

These programs are related to the organizational structure and technological changes. They are highly relevant due to the changing business dynamics.

  1. Organizational Design: The organizational structure can include functional, divisional, matrix, process, customer-centric, and network structures. Significant activities in organizational design include engineering and downsizing. Such interventions involve evaluating current business processes, preparing the organization, and restructuring it around the new business processes.
  2. Total Quality Management(TQM): TQM aims at long-term organizational success through customer satisfaction. The organizations exercise quality control by being six-sigma compliant. Companies such as Toyota focus on increased employee involvement in continuously improving products, processes, and workplace culture to improve customer satisfaction.  
  3. Work Design: This intervention is essential to achieve optimum productivity via job enrichment, improving process efficiencies, or employee satisfaction. Exploring digital adoption platforms such as Whatfix can help work design as it helps employees learn in the flow of work via interactive walkthroughs. It further enhances productivity by offering self-serving contextual help & support. Sign up for a free trial of Whatfix today!

HRM Interventions

These interventions are mainly related to employee engagement, experience, and performance management. 

  1. Performance Management: Gartner suggests that 96% of managers are dissatisfied with their current performance management practices,and that making performance reviews forward-looking can improve employee performance by 13%. Techniques such as goal setting, performance appraisal, and reward systems can result in improved employee performance.
  2. Wellness Interventions: Employee wellness programs address social factors and provide a healthy work-life balance through stress management and employee assistance.  
  3. Diversity Interventions- This OD intervention technique aims to increase diversity by making employees of different ages, gender, race, sexual orientation, disabilities, and cultures feel included. 

Strategic Change Interventions

Organizational development interventions play a crucial role in successfully implementing changes that require a behavioral change in the organization. 

  1. Transformational Change: In this technique, the organization changes the core functioning of an organization. For example, Nintendo began its operations by manufacturing card games. However, it evolved continuously with the changing consumer preferences and switched to electronic toys before gaining a stronghold in the video gaming industry.
  2. Transorganizational Change: In this process, change management broadens its scope beyond a single organization and undergoes activities like mergers, acquisitions, and strategic networking. More often than not, a hostile takeover often results in the downsizing of an organization, requiring OD intervention more than ever. 
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Final Thoughts

With organizational development becoming necessary for organizational effectiveness and growth, it’s imperative to leverage human resources to manage change effectively. You need to humanize change management by improving change communication and paving the way for digital innovation

Schedule a demo with our experts to discover how Whatfix can assist you in rolling out change effortlessly.

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