Organizational Development

An objective-based methodology used to initiate a change of systems in an entity

What Is Organizational Development?

Organizational development can be defined as an objective-based methodology used to initiate a change of systems in an entity. Organizational development is achieved through a shift in communication processes or their supporting structure. Studying the behavior of employees enables professionals to examine and observe the work environment and anticipate change, which is then effected to accomplish sound organizational development.


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Benefits of Organizational Development

Increasing productivity and efficiency comes with many benefits. One of the best ways to encourage positive results in these metrics is by using a well-thought-out organizational development structure. Organizational development is used to equip an organization with the right tools so that it can adapt and respond positively (profitably!) to changes in the market. The benefits of organizational development include the following:


1. Continuous development

Entities that participate in organizational development continually develop their business models. Organizational development creates a constant pattern of improvement in which strategies are developed, evaluated, implemented, and assessed for results and quality.

In essence, the process builds a favorable environment in which a company can embrace change, both internally and externally. The change is leveraged to encourage periodic renewal.


2. Increased horizontal and vertical communication

Of considerable merit to organizational development is effective communication, interaction, and feedback in an organization. An efficient communication system aligns employees with the company’s goals, values, and objectives.

An open communication system enables employees to understand the importance of change in an organization. Active organizational development increases communication in an organization, with feedback shared continuously to encourage improvement.


3. Employee growth

Organizational development places significant emphasis on effective communication, which is used to encourage employees to effect necessary changes. Many industry changes require employee development programs. As a result, many organizations are working toward improving the skills of their employees to equip them with more market-relevant skills.


4. Enhancement of products and services

Innovation is one of the main benefits of organizational development and is a key contributing factor to the improvement of products and services. One approach to change is employee development – a critical focal point is a reward for motivation and success.

Successful engagement of employees leads to increased innovation and productivity. Through competitive analysis, consumer expectations, and market research, organizational development promotes change.


5. Increased profit margins

Organizational development influences the bottom line in many different ways. As a result of increased productivity and innovation, profits and efficiency increase. Costs come down because the organization can better manage employee turnover and absenteeism. After the alignment of an entity’s objectives, it can focus entirely on development and product and service quality, leading to improvements in customer satisfaction.


Organizational Development Process

A conventional approach in the organizational development process is the action research model. This model is used by many organizations to guide the OD process. It entails what its name describes – research and action.

However, there is much more to the OD process than just research and development. There are multiple loops used to transmit feedback, which makes an organization more responsive to change.


Components of the Action Research Model

The action research model comprises six key components:


1. Problem diagnosis

The organization development process begins by recognizing problems. The method of diagnosis usually takes the form of data gathering, assessment of cause, as well as an initial investigation to ascertain options.


2. Feedback and assessment

The feedback and assessment step often involves proper investigation of identified problems so that there is a deep understanding of the challenge at hand. This can include an appraisal of documents, focus groups, customer or employee surveys, hiring consultants, and interviewing current employees. Information gathered is used to re-evaluate the challenges in the first step.


3. Planning

Once an organization defines and understands its challenge, an action plan is put together. The plan lays down all the intervention measures that are considered appropriate for the problem at hand. Usually, the measures include such things as training seminars, workshops, team building, and changing the makeup or structure of teams. Additionally, measurable objectives, which define the expected results, form an integral part of the overall plan.


4. Intervention and implementation

Once a plan is in place, the intervention phase commences. Since the organizational development process is complicated, implementation processes are a key element of the model. As an example, if training classes are preferred over other methods, test results will form the basis upon which the training process is evaluated. The objective at this point is to ensure the required changes take place. If that is not the case, feedback is assessed and used to bring about the required change.


5. Evaluation

As soon as the intervention plan is complete, the outcome of the change in the organization is assessed. If the required change does not take place, the organization looks for the cause. Adjustments are made to ensure the obstacle is eliminated.


6. Success

Success denotes that the desired change took place. A proper plan and efficiency standards are put in place to ensure that the new switch is sustainable. Ongoing monitoring is needed to ensure that implemented changes last. Furthermore, as markets and organizations change, new problems can arise, leading to the push for further development. Great organizations evolve continuously.


Final Thoughts

Organizational development is essential, as it helps organizations transition into a more productive phase. Change helps to bring new ideas and ways of doing things, and it ensures that an entity is innovative and profitable.


More Resources

Thank you for reading CFI’s guide to Organizational Development. To keep learning and advancing your career, the following CFI resources will be helpful:

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