Digital Transformation Organizational Structure: The Importance of a Self-Sufficient Organization. The seventh part of Acquiring and Organizing Talent to Drive Digital Transformation (DX) Success explores strategies for effectively organizing and managing a dedicated digital transformation (DX) team. Learn the importance of an end-to-end organizational structure and HR strategy, and discover how to support your organization for DX project success.
Basic considerations for building a digital transformation organizational structure
Now that you have an organization dedicated to digital transformation (DX and DT) and have someone working on it, the next question is how to organize it. If you have 8 people or less, you can organize them into a team without much thought. However, if you have more than eight people, or three or four people in different roles, you’ll need to think a bit more. How you organize your team has a lot to do with how fast you can get DX up and running.
Job-centric vs. project-centric: How digital transformation organizations should be structured
Even when a company has only 30 members, executives are often faced with the question of how to organize. Most companies have two main types of organizations. One is a functional organization. For example, a development team, a planning team, a design team, etc. In IT, this is especially preferred because people learn and grow by working with their peers. Functional organization gives employees a sense of security and helps them improve their skills.
Another form of organization is teaming up by project or business unit. Instead of being organized by job function, people with different roles are brought together to work on a project or business with a common goal. This type of organization has the advantage of being able to execute quickly because the common goal is clear. Instead, the leader of the team needs to have an understanding of all job functions. And because members aren’t working with people in similar roles to their own, they may not have a sense of belonging and may feel insecure about their personal development.
The right end-to-end organizational structure for your digital transformation organization
So what kind of organization is right for digital transformation? Unless you’re a large enterprise that can afford a large team to handle your digital transformation, I recommend a single, purpose-driven team, which means you’ll want to have an end-to-end organization where someone on the team is responsible for DX execution from start to finish. This may sound like a no-brainer, but you need to be aligned early on, with clear goals and a limited timeframe. This is why it’s good to have an organization that is accountable for the beginning and end of a task. That’s not to say you should create an IT-only organization.
If you’re planning DX for your existing core business, you’ll need to bring key people from that side of the business into the DX organization as well. For example, when Starbucks launched a new business offering mobile experiences like Siren Order, they had service planners, developers, and designers that were part of the IT staff, but they also had people from the retail organization that were transitioned into the new organization. This means that you need to have a true end-to-end organization, and you need to be able to pull in and out of the organization as you see fit.
This is similar to running a separate startup or internal venture. You might think that you can create a virtual organization in the form of a task or project team, but the reality is that running a DX is a series of decisions, just like running a successful startup. That’s why it’s important to have clearer organizational goals and approval lines. It is difficult to achieve the desired level of DX results by simply moving from one place to another like an enemy.
HR strategy for running a complete digital transformation organization
Once you’ve made the decision to create a complete, end-to-end organization, the next step is to establish the basic principles by which it will operate. It is fundamental to give the head of the organization maximum authority and responsibility, and to establish early on the attitudes and philosophies that individuals in the end-to-end organization should have as new team members.
To this end, I would like to suggest the following HR practices: For the first three years, I recommend that the organization’s evaluation method be absolute rather than relative. Relative evaluation has its advantages, but in a DX organization with a clear direction, it is important to create a sense of shared goals among employees. It sends the message that if you do your best work, you’ll get a good evaluation. Absolute appraisals help to focus all work towards the organization’s common goals, rather than individual competition.
When you have a cross-functional team in an organization, there are bound to be some roles that are more internally vocal than others. This can vary from company to company or depending on the person in charge of the organization. This can lead to developers giving various opinions on planning and business instead of focusing on development, designers ignoring developers’ opinions, and so on.
In order to avoid these mistakes, it is important to clearly declare the roles and responsibilities of each job from the beginning of the organization and make sure that they are recognized by each other. In other words, it is important to create a culture that recognizes and trusts the skills of the best professionals. There should be a consensus that each person should be expected to make the decisions necessary to execute their job.
Effective organizational management to support your digital transformation organization
Finally, we’re talking about the support organizations that will help your DX organization. For example, legal, finance, accounting, and so on. Leaving these support organizations to execute according to their existing processes can lead to frequent changes in personnel, or people with no IT understanding trying to dictate the DX project with their own internal management rules. To avoid this inefficiency, executives should also consider assigning a dedicated DX person in the support organization.
Some of the aforementioned directions can be quite uncomfortable from a traditional HR perspective. However, since DX is all about breaking the mold and creating new efficiencies, it’s important to explain this to existing employees and create a culture where both organizations understand each other.
