Organizational Development Guide: Definition, Benefits, and Phases

The term “Organizational Development” sounds like one of those phrases that exist to codify something as ill-defined as the growth of a business. Thus, many business owners dismiss it as a buzzword without looking deeper. That is, unfortunately, a detrimental behavior.

First, let’s start with the definition. 

What is Organizational Development? 

Organizational development is a detailed process using data to guide the growth and efficacy of a business.

Every business reaches a critical point wherein it must make changes, sometimes significant foundational changes, to progress and grow. A family-owned business might need to explore franchising, or a historical company may need to establish an online presence to service its customers. A small business may need to make the jump into multiple locations.

These developmental changes are often large and complex, requiring integration and buy-in from every department within the company, converting business processes, and often dramatic change. Unlike many forms of business growth, this development must be planned, implemented, and optimized using data and formalized structures to succeed.

To quote Maryville University:

“Organizational development is a planned, systematic change in the values or operations of employees to create overall growth in a company or organization. It differs from everyday operations and workflow improvements in that it follows a specific protocol that management communicates clearly to all employees.”

There are a few critical aspects of the organizational development process that stand out from other business processes.

✅ Science-Based

Organizational development is a science-based and evidence-based process. The “try it and see what works” process is ineffective for organization-wide changes, which typically require massive shifts in operations, values, and procedures. This requires evidence as input to develop new business processes, which can be tested and measured, and the outcomes used to determine the next steps.

✅ Lofty Goals

Organizational development codifies goals that affect the entire organization, often in dramatic ways.

These goals often include, but are not limited to, improved financial performance, customer satisfaction, employee engagement, and organization renewal. Different plans and outcomes have additional benefits and procedures to reach them.

✅ Systemic Reach

Organizational development encompasses the whole of the organization. These are not business process changes within individual departments or segments of a business; they are system-wide changes in structure, process, or business strategy. As such, they can achieve significant results but require major buy-in to implement.

The modern world of commerce is uncertain and ambiguous, and it’s often difficult to predict what will and what won’t work. Testing and adapting, not just to the pressures of industry and location, but to overall perspective and opinion, becomes a complex yet necessary task.

Remember that the modern state of commerce is unlike any that has come before. The internet easily facilitates global reach for businesses that could never have dreamed of more than local exposure even a decade ago.

Modern analytics open up a wealth of data formerly unheard-of. The very model of a modern business is unlike anything that has come before.

The Benefits of Organizational Development

The overall process brings with it many benefits, some direct, some indirect. I have listed these benefits below: 

✅ Increased Productivity. Organizational development allows you to implement policies and procedures that take “work smarter, not harder” to heart. Increasing the efficacy of individuals and processes within the organization cuts out the fat, streamlines processes, and serves as a force multiplier for the effort put in by employees.

✅ Continuous Development. To quote Corporate Finance Institute: “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.”

✅ Effective Communication. Every modern business needs effective communication as a foundational value. Horizontal transmission between members of a team and between teams allows for efficient work. Vertical communication upwards gives management and executives the feedback necessary to improve the company in broad strokes. In contrast, vertical contact downwards keeps middle management and workers appraised of the direction and goals of the business for fully-aligned operations.

✅ Employee Growth. A business is only as strong as its employees. Therefore, continual employee development is a foundational to grow a business. This process allows a company to grow institutional knowledge and value while retaining valuable employees and encouraging growth. It also reduces expenses by reducing employee turnover.

✅ Enhanced Goods and Services. A product or service needs to be unique in some way to be successful in commerce. It may focus on providing services otherwise unavailable, synthesizing services from various sources to promote convenience, or providing higher quality or lower cost than the competition. Discovering the ideal route to a unique selling proposition is a crucial focus. Innovation is required for modern commerce.

✅ Bolstered Profits. Through many of the above benefits, productivity is improved, expenses are reduced, and sales rise, resulting in increased profit margins, which can then be reinvested in the business to further fuel the cycle of organizational development.

By synthesizing these benefits, a business can grow organically in whatever direction the pressures of the market, the industry, the employees, the management team, and the values of all of these guide it. The implementation of continual, effective, evidence-based change is crucial to growth and is the foundation of organizational development.

As a science and evidence-based process, organizational development takes place in a series of phases.

There are, however, several different models for organizational development, each with its unique process. Here are some of the more popular versions.

The Action Research Model

The Action Research Model is a six-phase approach, I list out each step below.

1st: Problems are diagnosed and identified.

Quoting CFI again:

“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.”

2nd: Feedback and assessment of the problems. 

Each problem identified in the first phase is investigated here. Data is gathered using various sources, including focus groups, customer feedback, employee surveys, document reviews, external consultants, and any other relevant data sources. This information is then used to evaluate and codify the problem in actionable terms.

3rd: Planning is a two-part phase that involves setting SMART (Specific, Measurable, Actionable, Realistic, and Time-Bound) objectives with defined target results. 

Once those goals are set, plans are developed to address the problem with potential solutions. These plans can involve many changes to a business, from training and process streamlining to restructuring teams.

4th: The plans are implemented. 

Solutions developed in the planning phase are implemented, and the results of those solutions are measured and compared to the goals set by the second and third phases. The focus here is on determining if the proposed solutions achieve the desired effects or if they need to be reevaluated. Feedback is then assessed, and plans are either implemented on a broader scale or re-engineered for alignment with overall objectives.

5th: Intervention is evaluated. 

Assuming all went well in the fourth phase, the plan can be implemented organization-wide. Once this is completed, comprehensive data is measured, and the success or failure of the overall implementation is evaluated. If the desired change occurs, the organization can proceed back to phase one to identify further problems to address. If not, the organization can return to phase three to re-assess and develop new potential solutions. “Back to the drawing board.”

6th: Measuring success. 

When all goes well, the final phase of one cycle is the successful implementation of a plan, with measured and sustained change that produces effective results.

Monitoring is required to ensure that results are sustained and to watch for potential other problems that arise from the changes. Those results can then feed those back into phase one, and the process started again.

Kurt Lewin’s Three-Step Model

Kurt Lewin developed an alternative model in the 1940s as a simple and generalized three-phase process for organizational development.

✅ Phase one: Unfreeze. The first step of the process is “warming up” the organization to prepare it for change. This process shakes up established norms and procedures. The goal is to shake up the status quo to instill in the organization the fact that change is both possible and necessary. From MindTools:

“[The] key to this is developing a compelling message showing why the existing way of doing things cannot continue. This is easiest to frame when you can point to declining sales figures, poor financial results, worrying customer satisfaction surveys, or suchlike. These show that things have to change in a way that everyone can understand.”

This process may require challenging the business’s core values, the beliefs it is founded upon, or the behaviors that define it. This creates a “controlled crisis” that can then be leveraged by presenting the desired change as an effective solution.

✅ Phase two: Transition. The second phase takes advantage of the natural human desire to find a solution to an existing problem. A crisis has been developed in the first phase, and once the initial panic has worn off, those involved will begin to look for a solution. Presenting the desired change as a solution to the problem allows the more forward-thinking among the business to embrace it and begin to implement it.

This phase is often resisted by variable human nature. Some individuals will resist change, either out of fear of the unknown or out of sheer uncertainty. Others, primarily those who benefit from the previous status quo, may need to be forcibly converted, or removed from the organization, to avoid hampering organizational development. Overall, this process requires both time and communication throughout the organization to propagate the change successfully.

✅ Phase three: Refreeze. The third phase of the process is to freeze the organization in its new state.

Change is good, but only when it produces results; change for the sake of change creates an uncertain and ineffective business. In particular, this phase boosts productivity to new heights, as employees recognize that stability has returned and they no longer need to worry about the uncertainty.

Examples of Organizational Development Interventions

A specific intervention can be as narrow as adjusting the behaviors of a handful of employees to as broad as adjusting the overall management style of the business as a whole.

Here are some examples of potential organizational development interventions that can be seen in the real world.

1. Coaching an employee on adjusting maladaptive behaviors that inhibit their function as part of a team.

2. Restructuring a team for efficient handling of issues the team is meant to resolve through a hierarchal revision with established escalation protocols.

3. Bringing in a third-party consultant to bring a fresh perspective to a problem and resolve it most effectively.

4. A confrontational meeting is established to use as a starting point to identify structural or management problems through feedback in a confidential or privileged environment.

5. Review and interventions are implemented to diagnose and repair relationships between disparate teams that need to work together but where communications have broken down.

6. A review and revision are implemented for an entire organization’s structure to reduce bloat in certain areas of an organization chart, prune off vestigial departments that are no longer necessary, and identify areas where more staff is required.

7. A high-level review is conducted to reorient teams and departments to align with the goals that matter and to reduce drift that may have occurred over time.

8. Overviews are conducted to identify employees, roles, or teams not fulfilling positions and giving those roles more fulfillment to increase job satisfaction and reduce overall turnover.

9. Reviews identify gaps in diversity in teams and hiring practices, and processes are implemented to encourage further diversity in hiring and employee development.

These are just some of the changes, from a personal level to an organizational or structural level, that can be made through the overall process.

Every business implements its own procedures to enact this process, or it will stagnate and fall through the ongoing churn of industry.

Conclusion

Organizational development is far more than a mere buzzword; it’s a critical, science-based process that guides a business through necessary changes for growth and efficiency. 

Utilizing data and structured approaches, it aims to enhance productivity, communication, employee development, and overall profitability. As businesses face the complexities of modern commerce, understanding and implementing organizational development is not just beneficial but essential. 

Whether through the Action Research Model or Kurt Lewin’s Three-Step Model, the systematic and evidence-based nature of this process ensures that changes are not just made but are made for the better. 

Don’t let your organization fall behind; start your journey towards employing an effective team today. Contact our team today to learn about how we can help you.