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Published: 22 November 2023

Contributors: Matthew Finio, Amanda Downie

What is organizational development?

Organizational development (OD) is the planned, systematic process of changing the strategies, procedures and culture of an organization to improve its performance, effectiveness and growth.

OD is an effort within an organization to improve its capabilities and overall effectiveness. Not a simple process or quick fix, OD is a structured, organized and often lengthy endeavor to bring transformational change to specific areas of an organization or all of its parts—its values, strategy, structure, people and processes—with the goal of creating a sustainable, resilient organizational culture that can adapt to change and achieve targeted goals for success, growth and profitability. 

Data and evidence are used extensively in OD. It is a research-driven process and focuses on modifying human behavior for the betterment of employees and the organization overall. Unlike HR management, which includes hiring, employee retention and performance management as well as helping with policies and procedures, OD assesses what is happening within an organization and performs an intervention, attempting to produce positive change and align employees’ behavior with the organization’s strategy, business processes and goals.

In a rapidly changing business environment, OD is crucial for maintaining the competitiveness and sustainability of companies. It helps them to improve organizational effectiveness, adapt to new challenges and support a positive and engaging work culture.

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History of organizational development

OD is rooted in various fields, including psychology, sociology and management theory. The history of OD can be traced back to the early 20th century when the field of industrial and organizational psychology emerged as an attempt to understand human behavior in the workplace.

In the 1920s and 1930s, the Hawthorne studies conducted at the Western Electric Company near Chicago explored behavioral science and highlighted the important role social dynamics play in influencing productivity. In the 1940s, psychologist Kurt Lewin introduced the concepts of applied research, action research and group communication for driving organizational change. In the UK the Tavistock Institute of Human Relations worked studied business management, workplace demographics and the adoption of new technologies.

The term “organizational development” gained exposure from various scholars and social sciences practitioners in the 1960s and 1970s. Its principles and processes became more well known after the National Training Laboratories in the US conducted experiential learning and sensitivity training workshops. OD developed further in the 1980s and 1990s in response to advances in technology and globalization, putting greater emphasis on change management, leadership development and cross-cultural collaboration. The digital age that evolved from then until the present brought the need to address the rapid changes and increasing pace of the global business environment. Technology, data analytics and agile methodologies are now essential for driving organizational change, and OD practitioners continue to help organizations adapt to disruption and create a culture of continuous learning and improvement.

Goals of organizational development

The OD process is centered on improving the overall effectiveness, resilience and success of an organization. Businesses might undergo OD for various reasons, as it can help them address internal challenges, improve problem-solving and performance and adapt to changes in the economy or their industry. Specific goals of OD interventions often include:

Adaptation to change: Encouraging a culture of adaptability and resilience to effectively navigate changes in the business environment such as advancements in technology, increased competition and market shifts.

Better communication: Improving organization-wide communication, collaboration and feedback to create a more transparent work environment where employees feel valued.

Better performance and efficiency: Implementing interventions that identify and address operational inefficiencies, streamline processes and enhance overall performance. By optimizing workflows and reducing waste, organizations can meet goals and achieve higher productivity and profitability.

Conflict resolution: Addressing challenges related to communication and collaboration to support better teamwork, more trusting relationships and a positive and productive work environment.

Effective talent management:  Implementing strategies for recruiting, developing and retaining top talent, confirming that the organization has the skills and expertise needed for current and future challenges.

Employee development. Introducing training, learning and process improvements that support increased productivity and help team members keep up with new and shifting demands. 

Employee engagementCreating a positive work culture that values communication, collaboration, employee satisfaction and professional growth.

Improved culture: Supporting morale and satisfaction within the organization by creating a positive, engaging and inclusive culture that aligns with the organization's values and goals. 

Increased customer satisfaction: Improving processes, products and services with the goal of meeting or exceeding customer expectations, fostering loyal, long-term customer relationships.

Increased innovation: Cultivating a culture of continuous improvement by promoting an environment of creativity and experimentation, enabling employees to contribute ideas and try new approaches in order to improve processes, products and services.

Increased profits: Boosting the bottom line by optimizing communication and employee processes and improving products or services.

Leadership development: Investing in coaching and employee development to cultivate effective leaders who can make strategic decisions, guide and inspire teams and lead the organization to its wanted goals.

Restructuring: Facilitating a smooth restructuring process when required as a result of mergers, acquisitions or the internal reorganization of a business.

Sustainable growth: Creating a dynamic and resilient organization that can seize opportunities, adapt to change and thrive in the face of new challenges.

Key stakeholders for organizational development

OD involves a diverse range of stakeholders, each having unique perspectives and interests in shaping the success of initiatives. Key stakeholders in this process include:

Community: Communities want successful organizations that practice social responsibility and implement initiatives that don’t negatively affect the area.

Customers: The satisfaction of clients and customers relies on the ability of the organization to deliver high-quality products and services.

Employees: All team members have a stake in OD, and its success relies on their participation, feedback and openness to change.

Government agencies: Organizations that operate within a regulated industry need their OD initiatives to reflect laws and regulations.

Human resources: In addition to hiring, training and developing employees, the HR department is often directly involved with the planning and implementing of OD initiatives.

Investors and shareholders: Their financial interest in the organization gives them a stake in initiatives that affect its growth and success.

Leadership: Executives and senior staff are essential for the planning, implementation and institutionalization of OD initiatives and their commitment and support of the process is critical.

Suppliers and business partners: Their direct relationship with the organization gives them a vested interest in its success. 

Unions and employee associations: Organizations affiliated with these groups need their collaboration and support to successfully make changes to policies and practices.

The organizational development process

Systematic and evidence-based, the OD process is rooted in the action research model, which was introduced in the 1930s to help organizations bring about positive and sustainable change. The basic steps are the same—identifying the problem, gathering and interpreting relevant data, acting on evidence and evaluating the results. While specific steps can vary depending on the unique needs and context of the organization, here are more detailed descriptions of steps now commonly used in OD:

1. Problem diagnosis: Assess the organization—its structure, processes, performance and culture. While some organizations are aware of their issues, a data-driven approach can bring more clarity and understanding. Use tools such as employee and leadership interviews, surveys and metrics, and then evaluate the data to determine areas of strength, weakness and problems that offer opportunities for improvement.

2. Assessment and feedback: Investigate the identified problems to gain a deep understanding of why they exist, why they haven’t been successfully addressed and what, if any, solutions have been attempted in the past. This step also includes data gathering: surveys, focus groups, interviews and outside consultants can be used to thoroughly evaluate the challenges.

3. Planning: Develop a strategic action plan for addressing the issues and implementing intervention measures. Such measures often include training, workshops, team building exercises, leadership development and changes to team structures. Choose the delivery methods best-suited to teach needed skills or change behavior. Allocate resources, outline employee roles and define clear, measurable goals that align with the organization’s vision. Include a timeline, decide how necessary changes will be introduced to staff and clarify how communication and feedback will be addressed. Leaders need to be enthusiastic role models and convey the plan’s big-picture goals.

4. Implementation: Start the chosen interventions to address the wanted goals. Encourage participation and collaboration, foster open communication and support employees with coaching and mentoring. Ongoing engagement and feedback make the change process progress more smoothly.

5. Evaluation: Assess the outcome of the interventions through data collection. Key performance indicators should be used to measure progress. Feedback from leaders and employees should be collected and analyzed to measure the impact of the changes to determine whether they have been successful or need adjusting. The change management process should also be evaluated to see whether it was sufficiently effective. If the wanted change does not take place, the organization needs to identify obstacles and make adjustments to remove them.

6. Institutionalization and adjustments: If the evaluation of initial results shows that the wanted change took place, embed the changes and interventions into the organizational structure. Establish ongoing monitoring and support to ensure they are sustainable. If the process is unsuccessful or not fully successful, make adjustments to the interventions and OD plan. Evaluating and monitoring the plan provides opportunities to learn and make changes that enable all OD components to be successfully sustained and helps ensure they align with the evolving goals of the organization.

Great organizations continuously evolve. By encouraging ongoing learning and adaptability, a culture that supports a continuous process of improvement can be created. Conduct regular training programs, performance evaluations and feedback sessions with employees. Continuously monitor and evaluate implemented changes so that the organization can remain competitive and meet new challenges.

Challenges to organizational development

Organizations often face various hurdles and problems during the OD process. Some common challenges include:

Culture issues: Deep-rooted conflicts within the organization, such as lack of trust or resistance to teamwork, can block the progress and success of OD.

Fear and resistance to change: Team members may resist changes to existing structures, processes or culture, believing the status quo is fine the way it is. They may have fear of the unknown, concerns about job security, fear of failure or be cynical about change if initiatives have failed in the past.

Inadequate communication: Poor communication about the reasons for change, steps of the process and desired outcomes can lead to employee confusion and resistance. Providing a timetable and clearly articulating the process and potential problems can help avoid these issues.

Inadequate training: OD can be disrupted if employees are not provided with the proper training to learn and adapt to new processes or technologies introduced during the process.

Insufficient resources: Inadequate time, budget or personnel allocated to the OD process can limit the ability to implement changes and sustain change over time.

Lack of leadership support: Strong commitment from leadership is required for successful OD. If leaders are not enthusiastic and fully invested in the process it can hinder the adoption of new practices.

Poorly defined objectives: Lack of clarity in defining the goals of the OD process or the existence of conflicting goals can result in an aimless initiative with no clear path for achieving positive results.

Addressing these challenges requires the facilitation of a thoughtful and strategic plan. Organizations and OD professionals should prioritize communication, involve key stakeholders, secure leadership commitment, allocate sufficient resources and actively manage change to increase the likelihood of successful OD results.

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