What is organizational development, and why should your business care?

August 26, 2021 - 15 min read

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What is organizational development?

What is the difference between organization development and human resources?

Why is organizational development important to businesses?

What does organizational development look like in different businesses?

Understanding the organizational development process

How do organizational development and human resources impact each other?

What is an organizational development practitioner?

Why should companies care about organizational development?

The future of organizational development

As the culture and norms of the workforce transform, organizational development is front and center. But what is organizational development, and why is it so critical to company success?

What is organizational development?

Organizational development is an interdisciplinary field of behavioral science research that exists to improve where people work. Organizational development, often abbreviated as OD, improves existing processes and creates new ones. The idea is to understand how to maximize the effectiveness, potential, and capacity of both people and organizations. The science of OD combines industrial/organizational and adult developmental psychology.

Some areas where companies benefit from organizational development are: 

What is the difference between organization development and human resources? 

Organizational development has often been attributed incorrectly, as a function of human resources. However, the focus of human resources is people. On the other hand, organizational development focuses on the whole organization. In other words, human resources is individualized and organizational development is holistic. The goal of OD is to systematically move people toward change for better results. 

Why is organizational development important to businesses?  

The answer is, change. The only thing that stays constant in a business is change.  Organizations must change as often as technology, consumer tastes, and cultural needs demand. 

The main goal of organizational development is improvement. However, improvement can mean different things to different organizations. These interventions are examples of the many different ways organizational development affect the life cycle of an organization. Such processes aren't often recognized as organizational development — but they are.

  • For employees
    • Individuals, group, third party, and internal team relations
    • Team building
    • Large or small group interventions
    • Mentoring and leadership development

  • Technical structure
    • Organizational structure
    • Quality management systems
    • Design of work
    • Role enrichment

  • Human resources, people management, human capital
  • Strategic change management
    • Changes in process
    • Transformational change or restructurings (such as mergers) that involve more than one organization

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What does organizational development look like in different businesses? 

Organizational development is never “one size fits all.” For example, a nonprofit organization may find it easier to focus on mission, since people who work at their organization are passionate about a cause. However, they may not necessarily be as excited about operations and processes.  This is where organizational development diagnoses problems and creates a strategic plan. Their strategy may be to address issues and bottlenecks to stabilize the environment so the mission continues.  

A startup might use OD strategy to create a compelling company culture to retain employees. This is especially critical when capital may be limited and employees trade sweat equity for real equity. Many competitive startups are vying for top talent. 

In a sales based company with a fast-paced promotion ladder for achievers, sales managers may be weak on management and strong on sales. Organizational development can partner with sales enablement to identify gaps and provide training.

Understanding the organizational development process

The process of organizational development has several moving parts. There are 5 initiatives to the organizational development process.

  • Diagnosis

Where is improvement needed? Depending on the organization, this can be focused on one department or entire organizational entity. Diagnosis requires data. 

  • Collection of data and analysis

The collection of data requires a holistic approach. One process can have far reaching tentacles to multiple other processes and departments. Once data is collected the analysis and method requires a scientific objective approach. Organizational development allows the data to tell its own story. 

  • Strategy creation

This is the design and development of a set of solutions or one specific solution to address the diagnosed problem. 

  • Strategy implementation

The implementation of the strategy requires alignment of workforce, stakeholders, and internal procedures. Above all, it requires communication of the goals and motivation behind the strategy. 

  • Evaluation

This second round of data collection is continually assessed. It ensures that the implementation is actually addressing (and improving) the target area. This requires hard data, reporting, and employee and stakeholder input on the value of the changes.

Dr. Kurt Lewin, thought of as the father of organizational development, simply called the change process unfreezing, change, and refreezing

Unfreezing

Determine what needs to change.  Create an environment that supports the changes that will take place. 

Change

Implement actions, involve people in the plans for change while communicating often about the actions taking place and the plan. 

Refreezing

Anchor and support the changes that have been made. 

The OD process seems fairly simple at a first glance, but to enact any change requires clarity. Additionally, there are four guiding principles, or pillars, to keep in mind in the organizational development process. Those pillars are mission, vision, strategy, and goals

Mission

Who are we as an organization? What do we value? Why do we do what we do?

Vision

Where do we want to go? Who do we want to be as an organization?

Strategy

How will we get to where we want to go? What needs to change to become our vision?

Goals

What is the desired result of our plan? How do we measure our success as an organization? 

Again this seems fairly simple — but not so quick.  For successful deployment of an OD initiative, there must be a culture of trust and employee engagement. For this to take place, the organization needs to be clear on its mission and vision. 

Are mission statements and vision statements really still relevant? Yes. Often confused with one another, they have two entirely different jobs. Both, however, are critical to the organizational development process. 

The mission statement is set in the present tense. It clearly and powerfully defines the purpose of organization to its employees and the public. 

The vision statement is set in the future tense. It also defines the purpose of the organization. But unlike a mission statement, a vision is timeless, aspirational, and inspirational about the goals it wants to achieve.  

How do organizational development and human resources impact each other?

As mentioned earlier, there is a lot of confusion between organizational development and human resources. It’s true that these two functions complement each other. However, you need trust from not only stakeholders, but all employees, to implement change. 

The HR department plays a critical role in selecting, training and engaging stakeholders and communicating the mission to employees. They steward the relationship between the changes that OD seeks to create and the employees. The intermediary between the two is the organizational development practitioner. They’re the ones who actually design and implement the organizational initiatives and oversee the whole strategic process.

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What is an organizational development practitioner?

An organizational development practitioner is someone who helps create organizational change. Whether an in-house professional or consultant, they create organization-wide or department-wide strategies to implement change.  

Many universities offer undergraduate and graduate programs specifically geared for a career in organization development. However, in addition to being trained in OD, these professionals need to have excellent interpersonal and project management skills. Here’s a list of 8 competencies that an organizational development practitioner should develop to be successful.

  • Diagnosis and assessment skills

Once an area is identified for development, organizational development practitioners must know how to pinpoint the source and the metrics to be collected. 

  • Analytic skills

Once the data is collected, the organizational development practitioner must synthesize it and allow it to tell a story that identifies the actual pain points and their repercussions. 

  • Organizational knowledge

The organizational development practitioner must know an organization's past and present, successes and failures, competitors and partners. This helps them understand the values, mission and vision of the company and ensure the planned OD interventions are appropriate for the organizational culture.

  • Process skills

A good understanding of the processes that are being evaluated is necessary to envision, create, and implement the redesign of an organization's business processes. This will support the goals and timeline of the planned change.

  • Flexibility

Things change, and a skilled OD professional is nimble enough to pivot when the results show that a change in process isn’t yielding the desired outcome. This may not require a full redesign of a change plan, but could mean reevaluating a step in the process.  Sometimes a pivot or pause in a process step is necessary to stay on track with the vision. 

  • People skills

Change can’t happen without the support and trust of the people both directly and indirectly affected by the change. The organizational development practitioner is part manager, part cheerleader, and part organizational psychologist. As they embark on the long process of change, trust is critical for alignment to the organizational development process.

  • Communication skills

The organizational development practitioner must be able to explain the results of their assessments and recommendations to clients. Sometimes, these clients may be strongly resistant to perceived criticism, so a skillful approach is needed.

  • Inner strength

Organizational development practitioners are often met with resistance, in spite of the fact they were chosen to be the agents of change. They must have confidence in their knowledge and skills to persist on the path to change for the better of the organization. 

Why should companies care about organizational development?

Organizational development has a ripple effect across all facets of a company, from the employees to operations and sales. To stay competitive, organizations must always be changing and improving. This agility empowers them to fulfill their mission and stay on track with their vision. Here is a list of all the ways organizations can benefit. 

  • Increased productivity
  • Cost savings in efficiency
  • Employee development and growth
  • Employee retention
  • Enhanced products and services
  • Better communication across the organization
  • Better client communication
  • More competitive in the marketplace
  • Understanding of mission and vision
  • Increased profits

The future of organizational development

Organizational development has existed as long as organizations have been around. But it was only given the identity of the “process for change” when scientists, organizational psychologists and business-minded scholars began to research and formalize it.  As the work world continues to evolve so will the process for change. Continuing to invest in development interventions — as well as OD practitioners — will ensure that your company always has the right skills and vision to be able to thrive.

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Published August 26, 2021

Marie Stevenson, PCC, MSODL

BetterUp Fellow Coach, MSOD

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