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What is Organizational Alignment Risk?

Posted by Protiviti KnowledgeLeader on Thu, Feb 22, 2018 @ 11:33 AM

Working Hard-2.jpgWhat is Organizational Alignment Risk?

Organizational alignment is defined as a conscious and systematic coordination and alignment of three powerful and interrelated driving forces: organizational strategy, organizational culture and organizational infrastructure. Organizational alignment is to be mutually supportive and contribute as efficiently and effectively as possible to meet organizational goals and objectives.

Organizational strategy represents the organization's intent in the marketplace and indicates where it wants to be in order to achieve the results that it needs to survive and prosper.

Organizational culture is “the way we do things around here,” and represents the actual values, principles and belief systems held by the organization's people. It drives how people in the organization treat one another, as well as their customers, suppliers and partners, while conducting day-to-day business.

Organizational infrastructure is best described through its architecture, consisting of its structure, policies, systems, procedures and processes. Weak organizational alignment may impact any of the following areas within the company:

  • Allocation
  • Deployment and Development of Resources
  • Tax Efficiency
  • Business Process Reengineering and Business Process Improvement Efforts
  • Management of Financial Flows
  • Enterprise Risk Management (ERM)
  • Identification
  • Sourcing
  • Effective and Efficient Use of Available Resources
  • Measurement and Control of Business Risks
  • Measurement and Monitoring of Performance

If the company's organizational structure does not support change or the company's business strategies, then its organizational alignment becomes endangered. Organizational alignment also involves the degree to which the company’s products, services and organizational structure are aligned with the needs of its customers, the changes in the marketplace and competitive environment.

If a company is not aligned appropriately with its customers and markets, many human and financial resources may be wasted. As such, the company may not be able to react quickly to market changes, especially while operating in the fast changing world of business. Similarly, when management lacks the information needed to assess the effectiveness of the company's organizational structure, the capacity to change or achieve its long-term strategies is threatened.

Getting to Organizational Alignment

Given the speed of current technological developments, the continuing revolution in technology that is drawing industries closer together, the progressive opening of markets to new competition, and the increasing importance of understanding end-to-end business processes, the need for strategic change has become perpetual. Strategic change helps a company maximize its market value within the context of its industry in which it operates.

Progressive companies proactively re-evaluate their positions within shifting boundaries in order to retain their competitive positions. To understand which boundaries are moving and which strategic changes are needed, it is best to analyze organizational change in manageable, related areas. Companies must design their organizational alignment in such a way that their culture, people, processes and IT are aligned to create maximum efficiency within the contexts of their markets and societies.

Companies have to make sure that their strategic business units are effectively aligned to their overall business strategy by proactively undertaking the following action steps:

organizational alignment action steps.jpg

 

More on organizational alignment can be found in the Organizational Alignment Risk Key Performance Indicators (KPIs) tool on KnowledgeLeader, including:

  • 16 business risks related to organizational alignment
  • Management practices and performance measures
    • Organize to Perform: The best way for companies to organize and perform to their ultimate potential and creative models to employ as the company embarks on reorganization
    • Meet Multiple Demands: Leveraging competitive advantages for success
    • Create Information Flow: In the new organizational structure, information flows in channels other than reporting relationships.
    • Make Change an Ongoing Process: A comprehensive mehtodology for successful companies in the new economy who continually retool in response to customer needs and market forces.
    • And more

Questions to Consider

  • To what extent do you and others inside the organization understand who your customers are? Additionally, how does the organization know what the customers think about its products or services?
  • Does the organization know the standards used by its external customers to judge the values and services of its product/service?
  • How do you know your customers are satisfied? What are the key measures?
  • To what extent do you think the organization is making progress for better performance? Additionally, how does your organization compare with its competition in the industry or marketplace online arena?
  • How does the organization know what its competitors are up to? What are the unique differentiators (distinctive competencies) from the competition?

More resources like this on KnowledgeLeader:

Topics: enterprise risk management, risk assessment, audit committee & board, strategic risk, performance management/measurement, KL Tools

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