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Seven Steps to the Right R&D Organizational Structure

Many companies, including Merck and AstraZeneca, recently restructured their R&D departments to achieve growth goals or improve productivity in their organization.  In fact, 43% of respondents to a CEB R&D survey cited the need for more radical or breakthrough innovation as one of the top two drivers for organizational change (see chart below.)

8 27 RTEC Org

Before embarking on a restructuring initiative, you should acknowledge and prepare for the potential pitfalls of any reorganization. Organizational changes, for instance, can weaken ideation networks, as teams struggle to maintain formal and informal relationships in the company.

To make your restructuring successful and avoid disrupting your employees and your organization’s innovation activities, follow these seven steps:

1.    Identify design team stakeholders. Using a workshop, select the staff to create the core (includes representatives from HR and R&D) and non-core (functional/operational line leaders affected) organizational design teams.

2.    Determine the strategic objectives for the redesign. Use a voting-based exercise to decide

the strategic objectives of the redesign .

3.    Identify a model that aligns with strategic objectives. Weigh the strengths and weaknesses of each potential model to determine which one best aligns with your strategic objectives.

4.    Choose a structure that aligns with your governance model. Gather the design team to choose a structure that aligns with your governance model. Use the organizational structures of other companies as a basis for choosing a structure (but tweaking where necessary).

5.    Develop a funding mechanism for R&D. Choose between one of three funding models that will fit your new structure: corporate central funding, indirect business unit funding via chargebacks, or direct business unit funding via service fees.

6.    Structure the redesign rollout. Carefully manage redesign rollout risks, such as employee disengagement.

7.    Structure the roles and responsibilities of stakeholders. Outline all the roles and responsibilities for stakeholders in the organizational change.


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