What is organizational development?

Organizational development (OD) is a data-backed process that allows organizations to use analytical findings as the framework for change. By using these business insights correctly, an organization can achieve greater effectiveness in its processes, strategies, and structure.

In simple terms, it’s taking the available resources to make the company function the most streamlined and productive it can be.

It acts as the overall driver of how a company functions from its people to its operations to its outcomes. In other words, organizational development is the decision-making process for all aspects of a company.

Five stages of organizational development

The process of OD practitioners designing and implementing organizational development strategies is separated into five stages: entry, diagnosis, feedback, solution, and evaluation.

1. Entry

Entry is the initial stage of organizational development that focuses on identifying problems, opportunities, and situations. Usually, at this phase, stakeholders develop a project plan that details the scope of work (time, budget, and resources).

2. Diagnosis

Diagnosis is the fact-finding phase, done with the help of assessments. It's a group-based data collection process between stakeholders, senior executives, management, and even third-party consultants.

3. Feedback

Feedback represents the return of information sent back to the learning management system, mostly sent out in the form of surveys. Stakeholders can now parse through the data to get a better understanding of the situation and possible solutions.

Once this phase is complete, team members can begin putting together a plan that outlines the changes to be made along with success indicators that can determine the effectiveness of applied changes.

4. Solution

The solution stage in organizational development revolves around the designing, development, and implementation of the proposed solution. These solutions are meant to correct problems, close gaps of knowledge, and improve the performance or effectiveness of the organization.

An output from this stage would include a plan of communication, training program or curriculum, assigned tasks for team members, and how these actions will be evaluated.

5. Evaluation

The final stage in organizational development is evaluation. This is the continuous process of collecting formative and summative evaluation data to determine if the change is meeting or surpassing organizational goals.

End results typically include evaluation reports that point out recommendations for ongoing improvements.

Human resources versus organizational development

You may wonder if organizational development isn’t just another term for human resources. These two terms are in fact different. Human resources focus on managing employees from pre-onboarding to reviews to firing.

While organizational development focuses on making every part of an organization more efficient including employees. And while an HR manager may use manuals and surveys to assess effectiveness, an organizational development professional uses assessments and interventions. Both serve a purpose in an organization but while HR is more risk managing OD is more data-driven.

Benefits of organizational development

Now that you understand what organizational development is, why use it? There are several benefits organizational development can offer.

1. Constant improvement

Processes and company structures can always be improved. By using organizational development, you’ll recognize where there are areas of weakness. And once these are identified, you can improve and strengthen these. Not only can OD be applied internally, but this same philosophy can be applied externally. For example, how can you better serve your customer base, or what products could use tweaking?

2. Better communication

Bad communication is the cause of inefficiency. Using organizational development, identify areas of communication breakdowns to correct these. Then by creating a corporate communication plan based on your findings, you can plan, implement, evaluate, improve, and monitor communication going forward. Again, this can be applied both internally and externally to manage customer satisfaction.

3. Robust employee training

Often employees leave companies due to a lack of skill development. And projects often fail because team members lack the necessary employee training to complete the tasks at hand. So using organizational development, you can study industry and market trends so that your employees receive the necessary skills to stay competitive. And in return, this will create more productive and happier employees.

4. Motivated employees

Another area of organizational development that can help is employee motivation. The analysis from OD can be used to create a program or system to recognize and reward employees for their hard work. And the more invested employees are the more productive and engaged they will become. This leads to better products, positive experiences with customers, and better company outcomes.

5. Increased bottom line

Overall, what every company wants is to meet company goals and to be as profitable as possible. Organizational development helps increase profits. This is accomplished through increased productivity which will raise company earnings. Internal costs will also go down with less employee turnover and increased employee satisfaction. And overall the company will gain a reputation as a market leader both for employees and customers.

How to implement organizational development

Every organization no matter how large or small can benefit from organizational changes. We’ve talked about how it can help so now let’s discuss how you can start using it within your company. Here are a few simple steps to deploy organizational development. This process can be used to assess both internal and external business components. Using this process will help develop techniques and strategies to fix any issues the process discovers.

1. Signs

Entry signs or signals are warning signs that something is not right either within the organization or outside of it. For example, you may notice high employee turnover or more than usual customer complaints.  Basically, these are red flags that the company is not running as optimally as it should be.

2. Cause

Once issues have been raised, the next step is purpose. Take a look at the issues and decide what is the root cause of these. For example, high employee turnover may be due to a lack of training. Or you may have more customer complaints due to a faulty new product launch.

You’ll need an organizational development point person to help identify these. If you don’t have one, you may want to look for a consultant who can help with this process. Not only will this person identify the root issue, but they will need to create an effective L&D strategy to correct it.

3. Analysis

Next, the information gathered during the root cause phase is compiled in a report. The purpose is to summarize the information and feedback in order to create a solution. It needs to be detailed and organized so that any stakeholders or management can understand the issues, what needs to be done to resolve the problem, what budget needs to be allocated, and how any resolutions align with overall company goals.

4. Plan

After management and stakeholders review the analysis, a plan must be completed. This plan should take into account which team members will be involved in solving the issue. And if there needs to be outside vendors or consultants called in to help, a budget and a timeline for hiring these individuals will also need to be in the plan.

Going back to our examples, one plan may be to overhaul the training program for employees. The other plan may be to re-roll out the new product launch with increased customer support,

5. Discussion

The next phase is discussion. Every team member who will be involved in solving the issue needs to understand what the problem is, why it is occurring, and what the proposed solution is. This is a good opportunity to make sure an employee understands their role in solving the problem.  And if there are questions or concerns, this is the time to discuss these as a group.

For example, in a new training roll-out, you may hold a roundtable discussion with a select group of employees about what’s not working currently. Or for customers, you talk to customer service to understand what customers' feedback has been on this new product.

6. Adoption

After the analysis is complete, stakeholders and managers need to decide if this organizational development plan should take the place of the current plan. So take for example our new training rollout program. Did this solve the issue of high turnover? If so, this what the correct course of action. If not, maybe there is something else that is affecting employees leaving the company that should be explored instead.

If outside consultants or vendors were brought on for this organizational development project, it’s time to end those contracts. Reports should be documented and discussions had on what the roles of the individuals and companies were. That way, any outstanding duties can be absorbed by the internal employees and nothing falls through the cracks. And, if a future organizational development shift needs to be made, you have reliable resources to call on again.

7. Assess

Once the plan has been put into action, it’s time to evaluate the results. Metrics should be pulled and studied. Was the organizational development change successful? Did it solve the problem completely? How did affected audiences react to the plan? Did it meet the plan goal?

Best practices for organizational development

As you can see several industry leaders are already using organizational development. Now that you know the process, it’s important to keep a few organizational development best practices in mind to make your outcomes successful.

1. Establish readiness

As much as you want to implement change within your organization, your audience needs to be ready to accept it. If they aren’t, and organizational development shift will never work. But if there is some resistance, determine what the cause of it is.

For example, the change would better be delivered through an organizational development consultant than consider hiring one. Or if your audience is unmotivated for a new direction or responds slowly to change you’ll need to work through these issues.

2. Senior-level buy-in

No matter how large or small your company is, organizational development change needs to happen from the top down. If senior-level management or key stakeholders don’t believe in the new plan, then employees and even customers won’t either. Meetings should be held to discuss why the change needs to happen, why the change budget is accurate and what is needed of upper management to make sure the OD shift is successful.

3. Examine goals

Every organization has goals. But when it comes to organizational development, these goals need to be reexamined. The entire point of OD is to affect change. So look closely at the outlined goals. Do any of these need to be tweaked based on your proposed change? If so, realign the goals to the projected OD outcomes. That way it will be easier to measure if the organizational development change was successful or not.

4. Foster Culture

Change is hard for anyone. This goes for organizational development change as well. Even if you have your audience's buy-in, it’s hard for employees or customers to shift their thinking. To create a culture of open and honest feedback. For example, if your OD shift is to take your training program from in-classroom development to e-learning, hold lunchtime meetings. Check in with select employees to get their opinion on how this OD shift is going. Then take any constructive feedback and tweak your process.

5. Reasonable shift

Processes and methods should be relied on for getting the job done day to day. When you implement an OD change, this disrupts the flow whether internal or external. Recognize that a new way of thinking will take time and plan accordingly. For example, to re-roll out a product launch, recognize that training materials will need to be created, and disseminated to your customers, and then change will start to happen. It’s not an overnight process so any OD goal should be attainable otherwise it will fall flat.

Case studies on organizational development

We’ve given you a couple of scenarios for organizational development, but it may be helpful to look at a few case studies on the development of organizations. Here are some examples of how businesses have used the organizational development process to better their audiences.

Amazon

Much like our example above, Amazon used organizational development and spent $700 million to retrain its workforce using continual learning. They felt this money was well spent to keep their employees up-to-date on needed skills and to keep their business as an industry leader.

Starbucks

This coffee giant used OD to revamp its impact on the environment by introducing increased recycling, paper cup reduction, and energy consumption. Not only do these steps create less of a global footprint, but they also help public perception of Starbucks as an environmentally-friendly company. And this in turn impacts their bottom line.

Walmart

The landscape of the retail store is struggling with the continued movement of buying online. Walmart doesn’t want to become the next casualty. Even though they are an industry-leading big box store, they needed to make adjustments. Walmart used organizational development to digitize its efforts. This included things like a new customer service rollout, a partnership with Microsoft, and an increased effort on technology.

How will you incorporate organizational development?

Now that you know more about organizational development, think through your current processes and what can become more streamlined. Ask yourself some key questions like are my employees happy? Are customers satisfied? Are our company goals on target? This will help restructure your goals, foster internal and external partnerships, and create better collaboration within your business. When applied successfully, organizational development will achieve better and more calculated results.