Organizational development (OD) is of high importance for every company that strives to improve organizational effectiveness, maximize employee potential, and quickly adapt to industry changes. According to Anderson (2019), OD is “the process of increasing organizational effectiveness and facilitating personal and organizational change through the use of interventions driven by social and behavioral science knowledge” (p. 7).
In other words, OD is an evidence-based and structured process that aims to build the firm’s capacity to change structures, strategies, and processes. Modern economic, technological, workforce and organization trends provide challenges to classic OD. Manuti et al. (2017) state that human capital, a company’s intangible asset, remains the most valuable one even in the world of fast technology development and ongoing innovation. OD practitioners should address new working modalities with specific approaches and strategies to achieve competitive advantage. Although companies change how they operate and organize rapidly, OD remains an essential part of management theory and practice.
Benefits and Functions of OD
OD, which has a system approach and learns through experience, is associated with multiple benefits. It is essential because it can potentially improve a firm’s performance, profitability, and quality of its products by enhancing internal processes, systems, and employee capabilities (Bhasin, 2020). Moreover, OD drives market share, contributes to the better financial position of an enterprise, and helps to edge over competitors.
This management approach increases employee engagement that boosts innovation, and promotes change. As a result, it decreases costs associated with employee turnover and absenteeism (Bhasin, 2020). OD program starts with initial diagnosis and ends with interventions in the system, actions such as process consultation, education, or team development (Anderson, 2019). It is a long and ongoing process that requires close collaboration between managers and employees to be successful.
Typical organizational development initiatives are human process (teambuilding), techno-structural (work design, Agile), strategic (leadership or culture change) initiatives, and human resource management (employee development, performance management). Competency management, succession planning, performance management, and professional development are among its main functionalities (Anderson, 2019). Competency management helps to determine which skills and personal characteristics are needed at a particular position. Competency models are used to identify gaps between employees’ competency profiles and one of their jobs and establish screening or candidate tests.
Succession planning assists managers in assigning jobs to employees based on their skills, experience, competencies, and recent training (Bhasin, 2020). It helps to identify talents and leaders that meet organizational requirements and goals. Performance management, as the OD function, uses review software to assess employee performance and salary data. Managers can identify underperformance and address the issue by assigning professional development or use incentives.
Finally, professional development aims to enhance the knowledge and skills of employees by identifying competence gaps and providing specific training aligned to organizational goals. With the advent of technology, lifelong learning became a reality for the majority of professionals. For instance, Amazon, a famous retailer, invests considerable funds in its human workforce to keep its employers competent in a digital world (Cullen, 2019). This training improves workers’ technical knowledge and skills and contributes to lower recruiting costs, higher retention, and productivity.
Businesses operate in an ever-changing world that requires frequent realignment and restructuring. Modern management trends, technologies, and industry transformations result in new forms of organizing that undermine the classical OD effectiveness (Bach, 2019). It means that most past frameworks, formats, and theories do not apply to highly decentralized models. For instance, improving leadership within a structure with no single boss is more complicated. In such cases, OD practitioners will need to develop a new toolbox and make OD an integral part of the organization’s business functions (Bach, 2019). It would not be possible just to pass the initiatives along the chain of command.
It appears that OD and HR departments will continue to merge in the near future, blurring the difference between their functions. For example, OD interventions regarding talent management and leadership development will be more integrated with the general development strategy set by the organization’s HR. What is more, some organizations apply strategic HR that integrates the concepts and tools of OD. They do not have a separate department; nevertheless, they still incorporate OD-specific practices. This movement will likely expand soon and result in more OD solutions to the common issues (Anderson, 2019). In other words, traditional HR departments that deal only with hiring, retention, and contractual relationships will remain in the past.
To conclude, OD will be more cross-cultural, interdisciplinary, and more integrated with the organization’s operations in the future. The advent of technology and new ways to organize a company does not undermine the importance of OD. In the digital world, ongoing innovation is possible only if the company has a well-trained and dedicated human capital. OD interventions help management engage employees, align their goals with the organization’s ones, and enhance overall performance. OD functionality includes human process, techno-structural, strategic, and human resource management initiatives. It seems that the functions of OD will be almost fully integrated by HR shortly.
Anderson, D. L. (2019). Organization development: The process of leading organizational change (5th ed.). Los Angeles: Sage Publications.
Bach, O. (2019). What role will organization development departments play in the future? [Blog post]. Web.
Bhasin, H. (2020). Organization development – Definition, objectives, features, importance. Marketing91. Web.
Cullen, T. (2019). Amazon plans to spend $700 million to retrain a third of its US workforce in new skills. CNBC. Web.
Manuti, A., Impedovo, M.A. & De Palma, P.D. (2017). Managing social and human capital in organizations: Communities of practices as strategic tools for individual and organizational development. Journal of Workplace Learning, 29(3), 217-234. Web.