What Is Organizational Development? And How It Can Work With HR

By Indeed Editorial Team

Published July 21, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Organizational development can help strengthen a company's workforce to provide structure and value to the business and its employees. This may enable human resources to find solutions to workplace issues and develop employee interventions. Learning to combine organizational development strategies with HR practices may help you develop inclusive plans that foster engaged, collaborative employees. In this article, we define organizational development, explain why it's important and how it can benefit traditional HR practices.

What is organizational development?

Organizational development (OD) is a process that provides strategies and solutions to improve the employee experience while growing a company. It incorporates behavioral science such as psychology and sociology to refine methods of recruiting and retaining talent. The process involves consulting data and research to perform assessments to identify departmental and leadership strengths and weaknesses. Once identified, businesses can develop interventions that can elevate skills and reduce liabilities, such as implementing coaching, conflict management or leadership development. In addition, organizational development serves to:

  • Advise departments or company-wide management of employee management strategies

  • Suggest training programs to improve and diversify employee skills

  • Assign employees to the roles that match their skills

  • Develop strategies to improve recruitment, training and retention practices

Related: Careers in Organizational Development

Why is organizational development important?

Organizational development is important because it works to ensure both the employer and employee benefit from effective practices. When combined with HR practices such as policy compliance, OD helps provide the data that analyzes the policy's efficacy for a balanced assessment. As a result, HR fully represents the employee and functions as a consultant rather than an agent. Other reasons organizational development is important to human resources and the company include:

Improving organizational efficiency

Organizational development assists human resources in maximizing employee potential by placing employees in positions that encourage and support their contributions. OD assesses departmental and leadership performance to identify inconsistencies. It works to align employees with the goals of the organization and promotes company values through training and feedback.

Promoting loyalty and commitment

Placing employees in positions that make the best use of their skills can help boost employee morale and commitment to the company. Challenging employees through tasks and responsibilities encourages an engaged atmosphere so employees feel valued and useful. Providing regular training and education helps employees understand their job roles and how they can improve.

Improving talent acquisition

Companies can gain a competitive advantage when they focus on attracting talent to their business. Employee skills can add to product value or provide a unique service. For example, a clothing company may aim to hire talented designers that provide specific fabrics or designs. Organizational development can provide the guidance needed for hiring, training and keeping ideal designers.

Monitoring market response

Organizational development relies on data to guide its decisions, and job market conditions are no exception. Studying the industry helps OD understand the needs of the employer alongside market conditions to form responsive strategies. For example, OD might conduct a benefits package assessment and suggest preventative strategies like adding gym memberships to the company's healthcare plans.

Related: FAQ: Is a Career in Human Resources Right For You?

What does organizational development do?

Organizational development follows a process that supports HR goals through assessment and mitigation of issues to improve performance, production or results. Here are the primary ways organizational development benefits human resources:

Involves employees in decisions

Organizational development may encourage management to ask for employee feedback and to communicate clearly so employees understand job expectations. It works to understand employee needs and provide the resources to perform job functions. For example, OD may send an annual or quarterly survey to employees to gauge job satisfaction and professional goals.

Focuses change on an area

Organizational development identifies areas or departments that may require a change. It analyzes the area's process or procedure, identifies solutions and makes projections for the results. For example, an assessment may show accounting productivity diminishes after 2 p.m., following the last lunch break. OD intervention may move primary responsibilities to the morning and projects a 20% increase in productivity.

Focuses on collaboration

Organizational development involves all departments to foster collaboration and improve communication, results and growth. OD assessments may identify areas where change is beneficial and alert related departments so they can respond accordingly. For example, an industry report may indicate a competitor is entering the market. OD and HR may respond by developing a hiring strategy and informing marketing for promotion, accounting for budget approvals and stakeholders with evidence of why it's important to hire emerging talent.

Determines interventions

Interventions can help identify duplicate processes and combine them for efficiency, or provide training or education for employees or leadership. Interventions aim to help employees perform their jobs better, learn about the company's goals and mission or foster collaboration. Examples of interventions may include sensitivity training and team building.

Related: Human Resources: Definition and How It Works

What is the difference between organizational development and human resources?

The primary differences between organizational development and human resources include:

Human resources

Human resources departments primarily ensure hiring and firing practices comply with regulations and enforce company policies and procedures. In addition, HR:

  • Mitigates employment-related risks like turnover

  • Focuses on processes

  • Is compliance-oriented

  • Monitors employee diversity

  • Reduces labor costs

  • Promotes employee safety

Organizational development

The goals of OD are to improve systems through data analysis and mediation. It acts to design behavioral strategies that improve employee performance and company results. In addition, OD:

  • Improves HR systems and processes

  • Helps employees function better

  • Exacts meaningful change

  • Offers professional development

  • Educates leadership on best HR practices

  • Gains a competitive advantage

Related: What Is Human Resource Management?

Tips to integrate OD with HR

When organizational development integrates with human resources, it can create a strategic, comprehensive department to better serve its employees, which ultimately benefits the company. Here are a few tips to integrate OD strategies into HR practices:

Consider the entire business

The goals of the business form the foundation for a strategic HR plan. You can consider the company's aim or mission to align HR strategies with the business. For example, a company's primary objective may be to lower expenditures and HR can align its strategies to reduce labor costs by improving retention. Another company may focus on its hand-crafted product which may prompt HR to recruit talented artists.

Rely on data and analysis

To measure the impact of HR policies, data compilation and analysis play an important role. Learning to understand and analyze key performance indicators (KPI) alongside key performance drivers (KPD) can help HR evaluate the entire operation to understand how policies affect departments. For example, a retail store might determine that one-on-one interactions with store employees result in a sale 85% of the time. HR responds by moving qualified employees from other positions to the retail floor to better assist customers and increase sales.

Include all the stakeholders

Although HR serves employees, its practices can affect other areas of the business. Consider how policy changes might affect a company's stakeholders such as:

  • Leadership

  • Investors

  • Customers

  • Suppliers

  • Communities

Ask effective questions

Data supply quantitative evidence of necessary changes, but it doesn't explain the cause of the change. For example, data might prove employee retention is down by 10% but doesn't explain why. The analysis begins by asking questions that uncover the details in the underlying information to study its effects. Ask questions that provide answers to:

  • Why the data changed: Analyze hiring practices, benefits package or compensation strategies.

  • When the data changed: Analyze if the event is unique or corresponds to a company or competitor event.

  • How the data changed: Analyze job market, job trends or competitor strategies.

Continue assessments

Committing to regular assessments can help you stay current on HR policies and how they may affect the business. You can monitor for changes in the market or job trends to make predictions about employee needs for the future. Regular assessment and intervention may help improve employee retention and keep the company competitive.

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