Designing an Organisation for AI-Readiness

Generally speaking, the organisational structures of mature organisations – those that have been in existence for more than 25 years – have their origins in classical organisation theory, which is characterised by the principles of scientific management.

Organisations were until very recently designed to reflect economies of scale and job standardisation based on these concepts. Corporate headquarters exerted operational control over divisions, business units, and departments because financial capital was viewed as a limited resource. Entrenched legacy structures have proven difficult to update and refresh for big organisations and, as a result, several of them are suffering today. Depending on the desired results, structural considerations might play a larger or smaller part in organisation design initiatives. Leaders typically give structural considerations more weight than other organisational design decisions. But focusing an organisation’s design on structural changes is a mistake (and frequently an expensive one at that).

Structure is only one of the factors to take into account. Instead of being thought of as mechanistic, linear processes, organisations should be seen as complex, adaptable organisms.

To produce future outcomes in a way that is consistent with the other parts of the organisation, the existing structure must at the very least be evaluated for all design work. To help with the evaluation, it is helpful to know whether the present structure:

• focuses enough management attention to the sources of competitive advantage in each addressable market;
• assists in the corporate centre’s organisational value adding;
• reflects the people’s strengths, motivations, and shortcomings;
• safeguards groups that require diverse cultures;
• coordinates the unit-to-unit linkages that are most likely to have issues;
• has excessive layers and divisions of management;
• backs efficient controls;
• encourages the creation of fresh approaches;
• offers the adaptability necessary to deal with change;
• Reflects industry linkages and market complexity while being simple enough for stakeholders to deal with.

But as executives explore methods to speed up, adapt, integrate, and inject innovative life into an organisation without losing control of it, they often start by looking at its structure, possibly because it seems like a simple thing to accomplish (compared with, say, looking at the culture, or the way people learn and apply things in the organisation). In essence, executives want to know what alternatives are available and what structure would work best for the organisation. In order to answer this question, they generally ask the following questions:

• How frequently and how much restructuring is required to stay one step ahead of the competition?
• What organizational structures facilitate quick decision-making and service or product delivery?
• What organizational structures will make it possible to adapt quickly to changing consumer and market demands?
• What designs minimize bottlenecks without running the risk of harm?

• What organisational structure will maximise the flow of knowledge and information throughout the organisation?
• What impact do specific organisational structures have on the connections between business units, divisions, corporate offices, clients, and suppliers?
• Does the organisational structure of a department, business unit, or company hinder productive and efficient workflows?
• Which levels of centralisation and decentralization strikes the optimum balance?
• Does the structure encourage widespread engagement (high participation) while promoting centralisation (facilitating decision-making by more senior managers)?

• How will job descriptions and pay scales be organised to maximise employee flexibility?
• What degrees of freedom, responsibility, and involvement come with each possible structure?
• What job designs are appropriate for each type of structure?
• How well-functioning are the connections between the various departments?

• Which organisational model would best foster and support the desired culture?
• Which organisational structure will best serve the organisation’s values?
• Does the organisational structure assists best in the retention of the finest and brightest employees?
• Will reorganising the organisational structure improve its competitiveness and market position?
• What organisational structure would maximise the flow of information and expertise?

• How will a balance be struck between business unit / individual autonomy and central control?
• How many management tiers are necessary for effective and efficient control?
• In a certain set of circumstances, what is the ideal span of control (the maximum number of individuals that one person can manage)?
• How could structures be utilised to influence the desired or necessary behaviours?
• How should command and decision-making be organised?
• Who will provide reports, and why?

AI and prospects of its adoption have deep-seated implications on organisational design and how it goes about creating high-performing and adaptable enterprises.

Organisational design should be driven by the business strategy and the operating context. The organisation’s purpose, structure and process should also be aligned with the business strategy, and AI strategy, in turn, should be an integral part of the business strategy of any modern organisation. When trying to conceive an organisational design for an AI-ready organisation, designing for the future is always a much better bet than designing for now, even though the design-for-now doctrine has worked well in the past. Since organisation design involves several of the elements that make up an organisation, it is invariably a resource-intensive endeavour. Running the day-to-day operations while simultaneously trying to design for a new computer system, re-engineering divisions, or moving from a process to a market structure is not only difficult but heavily taxing.

When designing an organisation for AI-readiness, the organisation needs to be looked at from both a structural and a functional perspective. The functional perspective helps identify what functions need to be performed and how they can be grouped together. The structural perspective helps determine who reports to whom, where the power lies, and how the organisation is organised into divisions or business units.

Organisational design for AI should start with a clear understanding of the organisation’s strategy and what it wants to achieve with AI. Once the strategy is in place, the organisation needs to decide on the right structure and processes to support it. The organisational design should also take into account the organisational culture and values, as well as the existing skillsets of employees.

When designing an organisation for AI-readiness, there are a few key things to keep in mind. Firstly, organisations need to have a clear understanding of their strategies and what they want to achieve with AI. Secondly, after deciding on their strategies, organisations need to decide on structures that will best support those strategies. These decisions must take into account an organisation’s culture, values and employees’ existing skillsets. Thirdly, it is important for organisations undergoing this process not try and do too much at once. Rather, they should focus on one thing at a time so that each change can be properly executed and assimilated before moving onto the next area.

Planning organisation design work entails determining when it is appropriate to design by evaluating the problem or issue the organisation is facing, being clear about the design objectives to develop a detailed plan, obtaining support for implementation to ensure a smooth transition to the new design, and monitoring the new design with appropriate performance measures to enable corrective action to be taken if there are signs of inability.

AI-ready organisations are those that have the right mix of structure, culture and capabilities to take advantage of AI. They are also able to anticipate and manage the disruptive impact of AI.

To be AI-ready, as a bare minimum, organisations need to have the following:

• A clear understanding of what AI is and its potential implications for the organisation;
• A strong commitment from senior leaders to invest in and implement AI initiatives over a well-defined but not overly-ambitious period of time;
• The right mix of organisational structure, culture and capabilities to take advantage of AI;
• The ability to anticipate and manage the disruptive impact of AI; and
• A detailed plan for how AI will be integrated into the organisation in its entirety.