SHRM-CP / SHRM-SCP Certification Exam: Organization - Organizational Effectiveness & Development

Functional Area 7—Organizational Effectiveness & Development
Here is SHRM’s BoCK definition: Organizational Effectiveness & Development concerns the overall structure and functionality of the organization, and involves measurement of long- and short-term effectiveness and growth of people and processes, and implementation of necessary organizational change initiatives.

Organizational effectiveness and development (OED) is a complex effort whose objectives are to change the beliefs, attitudes, values, culture, and structure of organizations so that they can be in a better position to adapt to new technologies, markets, and challenges. These changes occur through planned interventions designed to accomplish better results. In simple terms, OD is a systematic approach that enables the company to implement improvements in a consistent way.

Key Concepts
- Application of behavioral assessments (e.g., personality assessments)
- Intergroup dynamics (e.g., intergroup conflict)
- Intragroup dynamics (e.g., group formation, identity, cohesion, structure, influence on behavior)
- Organizational design structures and approaches (e.g., customer, functional, geographic, matrix, program)
- Organizational performance theories, structures, and approaches
The following are the proficiency indicators that SHRM has identified as key concepts:

Overview of Organizational Effectiveness and Development (OED)
A major HR responsibility and function is to regularly monitor and analyze an organization’s metrics to identify and analyze major operating, workforce, and cultural health information to plan and implement organizational effectiveness and development efforts in a way that adds value to the organization. To do this, the HR professional must do the following:
- Recognize and support the alignment of key strategic and tactical business plans and program objectives. Each unit’s tactical plans should be designed to support one or more strategic business objectives for the organization. Each unit’s operational tactics need to be coordinated with other plans and objectives. In much the same manner, all HR and OED objectives must be aligned with the organization’s overall strategy, with each other’s activities, and with country-specific requirements.
- Focus on the organization’s skills and capabilities; for example, all of the organization’s business units, including HR, need to identify, focus, and improve the organization’s talent acquisition capabilities.

OED Process
The OED process is based on an action research model that begins with an identified problem or need for change and proceeds with assessing, planning an intervention, implementing the intervention, gathering data to evaluate the intervention, and determining whether satisfactory progress has been made or whether there is need for further intervention. The process is cyclical and ends when the desired developmental result is obtained.
The OED process begins when an organization recognizes that a problem exists that impacts the mission or culture of the organization and change is desired. It can also begin when leadership has a vision of a better way and wants to improve the organization. An organization does not always have to be in trouble to implement organization development activities.
Once the decision is made to change the situation, the next step is to assess the situation to fully understand it. This assessment can be conducted in many ways including documentation review, organizational sensing, focus groups, interviewing, or surveying. The assessment could be conducted by outside experts or by members of the organization.
After the situation is assessed, defined, and understood, the next step is to plan an intervention. The type of change desired determines the type of intervention needed. Interventions can include training and development, team interventions, structural interventions, or individual interventions. Examples are team building for management or employees and establishing change teams. Once the intervention is planned, it is implemented.
During and after the implementation of the intervention, relevant data is gathered. The data to be gathered is determined by the change goals. For example, if the intervention is training and development for individual employees, the data would measure changes in knowledge and competencies.
This data is used to determine the effectiveness of the intervention. It is reported to the organization’s decision-makers. The decision-makers determine whether the intervention met its goals. If the intervention met its goals, the process can end, which is reflected by raising the development bar. If it did not, the decision is made whether to continue the cycle and to plan and carry out another intervention or to end it.

OED Strategies
One approach depicts three basic strategies to achieving successful organizational change. The three strategies are not mutually exclusive, and all three could be used concurrently to bring about systemic change. One or the other, however, may be more conducive to the type of change needed in a particular organization. For this purpose, they are shown as being three different strategies.10
The Behavioral Strategy: Talent Development
Talent development takes an employee training and development approach. It is based on the premise that employee learning would bring about the organizational change needed. Learning consists of gaining knowledge, skills, and new attitudes that lead to new behaviors. These new behaviors then lead to improved quality and performance.
The Technical Strategy: Performance Improvement
Performance improvement takes a continuous improvement approach. Its premise is that processes in the areas of customer focus, product and service delivery, support, and supplier and partnering can be improved. This strategy also maintains that technology be continuously updated and aligned with the processes of production and service to make work more efficient and effective.

Continuous process improvement with aligned technology leads to improved quality and performance.

 

The Structural Strategy: Organizational Design
The organizational design premise is that organization structure and design should be aligned (or realigned) consistent with the vision, direction, mission, or goals of the organization. Structural strategy will incorporate changes in the organization chart. Employees, units, divisions, and departments can be realigned to optimize resources. For example, hierarchies can be flattened, and decision-making can be placed closer to the point of action. Significant work can be done in chartered, self-directed teams. Such realigned relationships lead to improved quality and performance.
 

OED Benefits
OED is the practice of planned, systemic change in the beliefs, attitudes, and values of employees for individual and company growth. The purpose of OED is to enable an organization to better respond and adapt to industry/market changes and technological advances. The following are five benefits of OED that range from continuous improvement to increased profits:12
- Continuous improvement Companies that engage in organizational effectiveness and development commit to continually improving their business and offerings. The OED process creates a continuous cycle of improvement whereby strategies are planned, implemented, evaluated, improved, and monitored. Organizational effectiveness development is a proactive approach that embraces change (internal and external) and leverages it for renewal.
- Increased communication One of the key advantages to OED is increased communication, feedback, and interaction within the organization. The goal of improving communication is to align all employees to shared company goals and values. Candid communication also leads to increased understanding of the need for change within the organization. Communication is open across all levels of the organization, and relevant feedback is recurrently shared for improvement.
- Employee development Organizational effectiveness/development focuses on increased communication to influence employees to bring about desired changes. The need for employee development stems from constant industry and market changes. This requires an organization to regularly enhance employee skills to meet evolving market requirements, which is achieved through a program of learning, training, skills/competency enhancement, and work process improvements.
- Product and service enhancement A major benefit of OED is innovation, which leads to product and service enhancement. Innovation is achieved through employee development, which focuses on rewarding successes and boosting motivation and morale. In this scenario, employee engagement is high, leading to increased creativity and innovation. Organizational effectiveness and development also increases product innovation by using competitive analysis, market research, and consumer expectations and preferences.
- Increased profits Organizational effectiveness/development affects the bottom line in a variety of ways. Through raised innovation and productivity, efficiency and profits are increased. Costs are also reduced by minimizing employee turnover and absenteeism. As OED aligns objectives and focuses on development, product/service quality and employee satisfaction are increased. The culture shift to one of continuous improvement gives the company a distinct advantage in the competitive marketplace.
In its publication “Traits of Truly Agile Businesses,” Accenture reported the results of a survey it conducted in 2013 that investigated business agility in strategy, organization, marketing, operations, and finance. Because of this research, five critical enablers of company agility emerged. Agile companies had leaders who did the following:
- Actively build seasoned, diverse leaders and management teams Leaders ensure that managers up and down the organization are fully accountable and have the right competencies to handle a diverse set of circumstances.
- Speed up decision-making They establish a culture of making critical decisions quickly, always ensuring that those decisions are tuned to market conditions.
- Prioritize strategic decisions They distinguish between the decisions that affect everyday operations and the bigger decisions that concern the company’s strategic direction.
- Prepare their ecosystems to act quickly They arm their business ecosystems—suppliers, customers, and a range of third-party partners—with their sources, information, and tools to take decisive, well-orchestrated action and to quickly measure the results and correct their course when needed.
- Invest in and make more use of data and analytics to run the business Leaders understand the competitive value of deeper insights and know how to mine many sources of data—not just their own—to obtain those insights.13
 

Opportunities for OED
In recent years many companies became good at delivering their core products and services with limited resources by adopting a “do more with less” operating style. Many companies reaped some short-term benefits because of certain cost savings. However, some of these short-term benefits have the potential to inflict long-term problems on the organization’s overall capabilities, organizational structure, business processes, and levels of workforce engagement. The unintended result of attempting to get along with less over the long term can, in many cases, become very problematic. These same problems can become opportunities for alert HR professionals. Examples include the following:
- Diminished capacity, capability, and agility Not being properly staffed can directly influence a company’s cost structure, cash flow, and ability to deliver goods or services. Ultimately, diminished capacity and lagging response times will affect an organization’s ability to remain competitive.
- Misaligned organizational structure Many of these reorganizations produced structural gaps in roles, work processes, accountabilities, and critical information flows. Structural gaps can occur when companies eliminate jobs without eliminating the work, forcing employees to take on additional responsibilities. This can create problems because lower-level employees who step in may be ill-equipped to perform the required duties, and higher-level executives, who must take on more-tactical responsibilities, may feel that their leadership skills are being minimized.
- Broken business processes Many organizations will admit that, even prior to the economic downturn, many core business processes were not documented, were not supported by technology, and relied too heavily on the “tribal knowledge” of long-term employees. Many businesses have not analyzed the impact from their cuts and the corresponding critical gaps that have developed. By failing to address these issues in a timely manner, companies risk losing core efficiencies, thus damaging the customer experience—a primary driver of revenue sustainability.
- Declining workforce engagement While doing more with less can improve productivity, it can also damage employee morale. More workers (managers and individual contributors alike) are juggling additional responsibilities, working longer hours, missing family time, and performing jobs that are one or two levels above or below their pay grade.
To ensure long-term viability, organizations need to realign their critical elements to fit the new economic realities without diminishing their core capabilities and competitive differentiation.
 

HR’s Role in OED
HR should be involved in major organizational changes from the beginning. HR’s early involvement can facilitate the improvement of employee understanding of change and communication between management and nonmanagement employees. Positive outcomes of communication efforts can include the following:
- Identification and mitigation of potential risks
- Increased employee buy-in and satisfaction
- Increased trust between management and non-managerial employees
- Identification of needed change-related training initiatives to improve employee skills and proficiency throughout the change process
- Increased leadership cohesiveness

In its 2014 publication “Future Insights,” SHRM outlined the top OED trends according to an HR subject-matter expert panel. The panel identified several trends.
HR professionals must do the following:
- Increase their focus on the development and engagement of highly professional talent and high-potential employees who possess deep expertise, drive innovation, and uniquely contribute to the organization’s value proposition.
- Take responsibility to educate line management and help them acquire skills to become more proactive in managing and coaching talent.
- Become skilled in organizational design and change management required to effectively implement enhanced organizational structures.
- Develop superior communication and situational leadership skills, motivation, energy, and learning agility. Leaders must have the ability to recognize and respect cultural differences and to reconcile the issues cultural diversity creates.
- Integrate the workforce planning process with career planning and employee engagement to provide information and support for employees to help them identify and choose from available career paths and job opportunities.
- Interact with technology specialists to produce accurate models to use in planning and managing the workforce, including decision support tools and predictive analytics.
- Use creative development tools such as mobile technologies for just-in-time learning via “pulled” rather than “pushed” instruction.14

Organizational Gap Development
Organizational effectiveness and development involves more than just specialized interventions; its practice should be integrated into the organization’s daily operations. When a “gap” begins to develop between what is going on in your organization compared to a standard or benchmark in your industry or other comparator, you may be seeing a problem in the making.

Assessments and Targets
The means to identify an organizational gap is to first isolate the area of interest. That may be customer service, employee skills, leadership skills, employee training, and countless others. Pick one. If your concern is employee skills, first identify the specific skill (running scientific machinery, answering employee benefit questions, or management communication skills). Next, identify the benchmark or industry standard for the skill (number of hours managers spend working directly with employees each month, number of research grants obtained each quarter, successful merger or acquisition for employee policies).
Change Readiness
Developing and implementing change programs should follow the articulation of specific needs. If efficiencies can be improved through implementing new technologies (for example, use of robots on the automobile assembly line to perform routine repetitive actions), plans can be made to implement that change.

Normally, implementation plans should involve these steps:
1. Documenting goals and specific actions required to achieve them
2. Meeting with employees to discuss the changes and vision that requires those changes
3. Soliciting employee support and participating in the change process
4. Measuring the results
Organizational changes should always be consistent with the employer’s strategic plan. Changes should represent the means to achieve missions or goals. There should always be a link between the change and the organizational strategy.
 

Cultural Assessment
Perhaps the greatest need for cultural assessment comes in the wake of mergers and acquisitions (M&A). When organizations try to combine their operations, there will inevitably be conflicts in policy, management style, and “the way we do things around here.” One consulting firm, the Turknett Leadership Group, uses a written survey to gather input from employees on both sides of the corporate mix. Then, it conducts in-depth one-on-one interviews with a sampling of employees from each group.15 In those interviews, they ask questions such as the following:
- “Give me ten words you would use to describe the organization.”
- “Who really gets ahead in this organization?”
- “What and who is really rewarded around here?”
- “What are some of the war stories or legendary events in the organization’s history?”
- “What does the CEO or leader pay the most attention to? Where does the CEO’s energy get expended, and what do they reward?”

With the answers to those and other similar questions, it will soon become apparent where work should be focused for cultural improvement.

Implementing OED Initiatives
According to SHRM, “Unfortunately, many OED interventions are incorrectly implemented in response to symptoms of the dysfunction rather than by following a thorough diagnostic analysis, or organizational assessment, to reveal core problems. To avoid this, employers must use caution and make certain a comprehensive data collection process is followed.”16 When correctly assessed, plans for intervention can be built and then implemented.

OED Initiatives
Organizational development involves more than just specialized interventions; its practice should be integrated into the organization’s daily operations. One of the simplest tools OED practitioners use is the ADDIE model.17 ADDIE is an instructional systems design framework that many instructional designers and training developers use to develop courses. It can be used when dealing with other problems and issues, too. It involves the following:
- Analysis
- Design
- Development
- Implementation
- Evaluation

OED initiatives often involve transformational change including efficiency and effectiveness initiatives, organizational restructurings, organizational capabilities development, rebuilding trust initiative, and culture change. Nearly any aspect of the organization is fair game.

Workforce Support of OED Initiatives
To a large extent, whether employees support your OED initiatives will depend upon the quality of leadership that shepherds the effort. But it is a sure thing that unless employees do support your OED initiatives, there is little hope for success in that effort. Getting employee buy-in is critical.

OED Tools
Here are some tools and techniques that can help you in your OED initiatives.
 

Team Building
Achieving the state where individual team members actually trust one another to do their work and support others in the group is the objective of any team building program. Some groups work better together as teams than others. How the supervisor or manager treats each employee will influence how likely there will be a cohesiveness to the group. People want to work where they like the people they work with. They don’t like to work with people who steal the credit for accomplishments of others, tattle to the supervisor about each small infraction of rules, or actively work to discredit others. Team building can overcome some of those behaviors, but not all. Progressive discipline is sometimes needed to eliminate really bad behavior before the group is willing to be a team. The question in the minds of employees who see the bad behavior all the time is, “Will the boss actually do something about it?”
 

Group Decision-Making
Group decision-making is a type of participatory process in which multiple individuals acting collectively analyze problems or situations, consider and evaluate alternative courses of action, and select from among the alternatives a solution or solutions.18 In organizations many decisions of consequence are made after some form of group decision-making process is undertaken. However, groups are not the only form of collective work arrangement. Group decision-making should be distinguished from the concepts of teams, teamwork, and self-managed teams. Although the words teams and groups are often used interchangeably, scholars increasingly differentiate between the two.

The basis for the distinction seems to be that teams act more collectively and achieve greater synergy of effort.
- The group has a definite leader, but the team has shared leadership roles.
- Members of a group have individual accountability; the team has both individual and collective accountability.
- The group measures effectiveness indirectly, but the team measures performance directly through their collective work product.
- The group discusses, decides, and delegates, but the team discusses, decides, and does real work.

There are several types of group decision-making methods.
- Brainstorming This is freewheeling idea generation.
- Dialectical inquiry Opposing groups debate the pros and cons of selected solutions or decisions.
- Nominal group technique This is a structured decision-making process in which group members are required to compose a comprehensive list of their ideas or proposed alternatives in writing.
- Delphi technique Group members are in different remote locations, and the group develops successive rounds of ideas, evaluation, refinement, and choices.
 

Diversity Programs
Changing workforce demographics and new organizational forms are increasing the diversity of work teams in general and decision-making teams in particular. Given these environmental changes, work teams that are diverse in terms of sex, race, ethnicity, national origin, area of expertise, organizational affiliation, and many other personal characteristics are increasingly common.19
Striving to increase workplace diversity is not an empty slogan; it is a good business decision. A 2015 McKinsey report on 366 public companies found that those in the top quartile for ethnic and racial diversity in management were 35 percent more likely to have financial returns above their industry mean, and those in the top quartile for gender diversity were 15 percent more likely to have returns above the industry mean.20
In a global analysis of 2,400 companies conducted by Credit Suisse,21 organizations with at least one female board member yielded higher return on equity and higher net income growth than those that did not have any women on the board.
In recent years, a body of research has revealed another, more nuanced benefit of workplace diversity: nonhomogenous teams are simply smarter. Working with people who are different from you may challenge your brain to overcome its stale ways of thinking and sharpen its performance.
 

Quality Initiatives
Focusing on quality issues can happen in any workgroup within an organization. Of course, quality is important on the production line, but it is also important in the accounting department and in HR. What would be the consequence of HR publishing incorrect information about company benefit programs just before open enrollment? There are a few different ways to address quality.
 

Systems Theory
Systems theory is less of a management methodology as it is a way of analyzing and thinking about organizations. It puts forth the premise that organizations, like living organisms, are made up of numerous component subsystems that must work together in harmony for the larger system to succeed. Systems theory states that organizational success relies on synergy, interrelations, and interdependence between different subsystems. As arguably the most valuable component of a company, employees make up various vital subsystems within an organization. Departments, work groups, business units, facilities, and individual employees can all be considered component systems of the organizations.22
Systems theory is an alternative approach to understanding, managing, and planning organizations. Employee relations is a human resource discipline concerned with strengthening ties between employers and employees. Systems theory can provide a fresh perspective for approaching employee-relations initiatives, allowing managers to understand their employees’ importance and position as a vital system in the organization, rather than viewing employees as an expense through the lens of accounting.
 

Quality Standards
The International Organization for Standardization (ISO) has now published four standards for human resource management. These are considered the benchmark against which all employers should measure themselves in these specific areas of HR.
The standards are as follows:23
- ISO 30400, Human resource management – Terminology This standard provides a common understanding of the fundamental terms used in human resource management standards.
- ISO 30405, Human resource management – Guidelines on recruitment This standard provides guidance on effective recruitment processes and procedures. It is designed for use by anyone involved in recruiting.
- ISO 30408, Human resource management – Guidelines on human governance This standard provides the guidelines to create an effective human governance system that can both respond effectively to organizational and operational needs but also foster greater collaboration across all stakeholders, anticipate and manage risks in human resources, and develop a company culture that is aligned with its values.
- ISO 30409, Human resource management – Workforce planning This standard helps organizations respond more effectively to their current and projected requirements for staffing.
You can expect that there will be more standards developed related to human resource management as time goes on.
 

Quality Control Tools
The following are the seven tools of quality:
- Cause-and-effect diagram Also known as the fishbone or Ishikawa diagram.
- Check sheet Chart of event/occurrence by date or time with stroke tally of times the event happened.
- Control chart Plot of quality conformance at times throughout the day.
- Histogram Column chart showing frequency/intervals on the y-axis and the event being measured along the x-axis.
- Pareto chart Column chart showing types of quality problems on the x-axis and frequency of occurrence on the y-axis.
- Scatter diagram Graph showing plot of individual quality results using any two variables. Plot points can be used to determine the slope of a trend.
- Stratification Flow chart or run chart.
 

Theory of Constraints
The Theory of Constraints (TOC) says in essence that “a chain is no stronger than its weakest link.” That means quality depends on the weakest point in the process, whether it is a machine or a person. Quality failures can most often be traced back to that single point that constrains the quality results. It may also come to pass that there is more than one constraint interfering with the quality results.
 

Six Sigma
Six Sigma methodologies can be rolled out in a matter of months or over the course of years. From large international companies to midsize firms, many high-profile companies have implemented Six Sigma strategies as a way of saving corporate dollars, increasing quality, and leveraging the competitive edge.

One of the guiding principles behind Six Sigma is that variation in a process creates waste and errors. Eliminating variation, then, will make that process more efficient, cost-effective, and error-free. This may sound like a relatively straightforward concept, but its application in a complex and highly integrated business environment can be far from simple. The term Sigma refers to a scale of measurement of quality in processes such as manufacturing. When using this particular scale, Six Sigma equates to just under 3.4 defects per million opportunities (DPMO).

HR’s Role in Implementation
HR can be called on to support OED changes in other portions of the enterprise, or it can take on an OED change program within its own department. HR can help by training managers and employees how the process will work, what the changes will be, and what expectations they should have for the results. They can provide tracking systems if necessary to document the program implementation.
 

Communicating OED Changes
Communication is basically relating the objectives of the organizational redesign to the organization’s strategies and tactical plans. Employees need to understand how they will fit into the new organization, the new process, or the new work assignment. They will need to know that there is training, team building, or individual coaching on the horizon. Communication is more than an e-mail blast to everyone in the organization. It is conversation with groups and individuals. The more employees are included in the OED development process, the more communication they will be receiving along the way.

Measuring Organizational Effectiveness and Development
First comes the goal or objective. Then comes the measurement. There are two types of measurements you can use to determine whether you have reached your goal.
- Lagging indicators These confirm performance or lack of performance. They measure the results of past actions.
- Leading indicators These predict performance. They measure actions that will affect future organizational effectiveness.

Demonstrating Value
It is rather easy to demonstrate value. Simply gather the results you have measured and show how your performance has met or exceeded the goals you set. Goals are established to create value for the organization. If you reach them, or better yet, exceed them, there is clearly value for the organization.
 

Cultural Assessment
There are tools that companies can use to identify both their current and desired culture. One of the most well-known of these tools is the Organizational Culture Assessment Instrument (OCAI)25 developed by Kim Cameron and Robert Quinn at the University of Michigan. Cameron and Quinn analyzed 39 organizational effectiveness indicators and identified two key dimensions, as listed here:26
- Internal focus and integration versus external focus and differentiation
- Stability and control versus flexibility and discretion
Four organizational culture types emerged from these studies.
- Clan culture Similar to a large family. People have a lot in common. The organization is held together by loyalty and tradition. There is great involvement.
- Adhocracy culture A creative working environment where employees take risks. Experiments and innovation are the bonding agents within the organization.
- Market culture Results-oriented culture emphasizing finishing work and getting things done. The emphasis on winning keeps the organization together.
- Hierarchy culture A formal, structured environment. Procedures decide what people do. Formal rules and policy keep the organization together.