Pyramid of Organizational Development™


Developed by Dr. Eric Flamholtz, Management Systems’ founder and President, the Pyramid of Organizational Development™ consists of six factors that research has shown to be the key drivers of financial performance and long-term organizational success: 

  • Identification and definition of a viable market to serve (i.e., set of customers). 
  • Development of products and/or services appropriate to the organization’s chosen market.  
  • Acquisition and/or development of resources required for current and anticipated future operations (including people, equipment, facilities, and financial resources). 
  • Development of the operational systems necessary for the organization to function on a day-to-day basis. 
  • Development of management systems required for the overall functioning of the organization on a long-term basis.  The four key management systems are strategic planning, organizational structure, management/leadership development, and performance management systems. 
  • Development and effective management of the organization’s culture – that is, the organization’s values, beliefs, and norms that influence the behavior of people in the company. 

As shown below, these six factors are “built” upon a foundation that consists of the organization’s Business Definition, Strategic Mission, and Core Strategy.
 

Pyramid of Organizational Development™


To maximize organizational effectiveness and success, there needs to be a focus on all six key tasks that make up the Pyramid.  However, depending upon the organization’s Stage of Growth, certain levels should receive greater emphasis than others.

The Pyramid of Organizational Development™ is a powerful tool which has many important uses:  

  • It can be used to systematically identify an organization’s strengths and opportunities to improve. The Pyramid framework is used by Management Systems as the basis for our Organizational Assessments.
  • It is used to assess the “level of strategic organizational development” of an enterprise and, in turn, its likelihood of sustainable success.
  • Because the factors in the Pyramid have been shown to promote long-term success, we use it as the underlying framework upon which Management Systems’ Strategic Planning method and tools are based. 

Empirical research has shown that the Pyramid has a statistically significant relationship to financial results:including Gross Margin, EBIT (Earnings Before Interest and Taxes), and ROI (Return on Investment).  Specifically, our published research shows that the variables contained in the Pyramid account for or explain as much as 70% of Gross Margin, 56% of EBIT, and 22% of ROI.     

The Pyramid framework is further explained in several of our books and articles including Dr. Flamholtz’s and Dr. Yvonne Randle’s book, Growing Pains.