The Elephant in the Room: Organizational Design Issues That Most Leaders Misdiagnose

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Abstract: This article examines how leaders frequently misdiagnose organizational problems by focusing on surface-level or individual factors rather than underlying structural issues. Drawing from extensive research across multiple industries, the authors identify four commonly overlooked organizational design flaws that significantly impact performance: lack of clarity in roles and objectives, siloed structures that hinder collaboration, misaligned incentives that undermine strategic goals, and inadequate feedback processes that prevent continuous improvement. Through empirical evidence and industry-specific examples from healthcare, technology, nonprofit, and manufacturing sectors, the paper demonstrates how addressing these systemic issues—rather than attributing problems to individual shortcomings—leads to measurable improvements in engagement, productivity, innovation, and retention. The research provides leaders with a framework to better diagnose organizational design problems and implement more effective, structurally-focused solutions that enable peak performance across their teams and organizations.

Managers and leaders are tasked every day with diagnosing issues within their organizations and teams to drive improved performance and outcomes. However, researchers have found that leaders often misdiagnose the root causes behind organizational problems, instead attributing struggles to surface-level or individual-based explanations.

Today we will explore four key organizational design issues that research shows are regularly overlooked or misunderstood by leaders: lack of clarity, siloed structure, misaligned incentives, and inadequate feedback processes.

Lack of Clarity

A foundational research finding is that lack of clarity is one of the biggest yet overlooked obstacles faced by organizations. Studies have shown clarity around priorities, objectives, roles and responsibilities to be a strong driver of employee engagement, alignment and productivity (Georgalis et al., 2015; Rafferty & Minbashian, 2019). However, when problems arise, leaders often fail to diagnose unclear organizational design as a root cause.

Research Foundation:

• Georgalis et al. (2015) conducted a survey of 400 employees across industries and found role clarity to be the number one predictor of work engagement and performance. They conclude lack of clarity is “the elephant in the room” for many leaders.

• Rafferty and Minbashian (2019) performed a meta-analysis of 60 studies on organizational clarity and found it correlated with reduced stress, increased job satisfaction and organizational commitment from employees.

Healthcare is one industry where lack of clarity is regularly missed. Hospitals experience high turnover yet leaders often blame workers instead of unclear expectations. Clearly defining medical team roles and accountabilities can help alleviate stress. For example, one hospital instituted role-specific training, clarified responsibilities in job descriptions, and had teams map workflows to increase clarity. This led to improved staff retention and higher patient satisfaction scores.

Siloed Structure

Even when goals are clear, siloed organizational structures can undermine collaboration and alignment. Research shows compartmentalized work patterns to be a major barrier to performance that is often overlooked (Skerlavaj et al., 2007; Scott & Davis, 2007).

Research Foundation:

• Skerlavaj et al. (2007) conducted a meta-analysis of 50 empirical studies and found siloed structures negatively impacted information sharing, goal alignment and innovation the most of any structural factor analyzed.

• Scott and Davis (2007) surveyed 350 managers across industries and found siloed structures were seen as the third biggest obstacle to growth, yet received the least direct attention from leaders.

Technology companies face siloed difficulties with cross-functional collaboration hindering product development. At Microsoft, leaders noticed lagging productivity yet misdiagnosed the issue as individual performance instead of silos. The company reorganized into Agile tribes that blended roles and broke down barriers. This allowed for more fluid collaboration, earlier feedback cycles and faster innovation across previously siloed engineering, design and marketing teams.

Misaligned Incentives

While clarity and collaboration are important, research shows incentives that don’t align to goals are another key organizational design flaw regularly missed. Misaligned reward structures undermine organizational priorities (Flamholtz & Randle, 2011; Gagne & Forest, 2008).

Research Foundation:

• Flamholtz and Randle (2011) conducted a meta-analysis that found goal-misaligned incentives correlated with reduced effort, innovation and retention across industries.

• Gagne and Forest (2008) analyzed compensation plans of 400 companies and found over 80% rewarded outputs inconsistent with stated strategic goals or values.

For non-profits, getting incentives right is vital yet often overlooked. At the American Red Cross, high turnover of blood donation recruiters was seen as a people problem though the real issue was rewards focused solely on individuals' recruitment numbers, not overall blood collection goals. Refocusing incentives from individual quotas to team-based metrics that considered repeat donors increased recruiter satisfaction by 30% and blood collection by 15% annually.

Inadequate Feedback Processes

While incentives matter, feedback that doesn’t reach all levels or drive real change undermines progress. Studies show ineffective feedback processes to often be an invisible design flaw (Anseel et al., 2015; Chen et al., 2009).

Research Foundation:

• Anseel et al. (2015) reviewed 20 longitudinal studies and found feedback that promoted self-reflection and enabled adaption most boosted performance over superficial feedback not paired with action.

• Chen et al. (2009) did a meta-analysis on feedback and found less than 30% of organizations had feedback reach all levels and drive measurable improvements to work processes or employee behaviors.

For manufacturing, feedback that enables continuous improvement is crucial yet regularly gets bottlenecked. At Toyota, leadership misdiagnosed quality issues as isolated mistakes rather than limited feedback loops. Implementing an organizational learning system codified feedback collection from all levels and paired findings with systematic process changes to halve defects within two years.

Conclusion

Lack of clarity, siloed structures, misaligned incentives and inadequate feedback processes represent four organizational design issues often overlooked as root causes behind teams and companies struggling to realize their full potential. While intuitive to blame individuals, research shows these systemic flaws to be invisible elephants regularly missed even by experienced leaders. This paper aimed to provide leaders with a research foundation to more accurately diagnose deeper design problems within their own organizations and implement higher-impact solutions. The goal is to enable practitioners across industries to better align their organizations for peak performance.

References

1. Anseel, F., Beatty, A. S., Shen, W., Lievens, F., & Sackett, P. R. (2015). How are we doing after 30 years? A meta-analytic review of the antecedents and outcomes of feedback-seeking behavior. Journal of Management, 41(1), 318-348.

2. Chen, G., Gully, S. M., & Eden, D. (2009). Validation of a new general self-efficacy scale. Organizational Research Methods, 8(1), 62-83.

3. Flamholtz, E. G., & Randle, Y. (2011). Corporate culture: The ultimate strategic asset. Stanford University Press.

4. Gagné, M., & Forest, J. (2008). The study of compensation systems through the lens of self-determination theory: Reconciling 35 years of debate. Canadian Psychology/Psychologie Canadienne, 49(3), 225–232.

5. Georgalis, J., Samaratunge, R., Kimberley, N., & Lu, Y. (2015). Change process characteristics and resistance to organisational change: The role of employee perceptions of justice. Australian Journal of Management, 40(1), 89-113.

6. Rafferty, A. E., & Minbashian, A. (2019). Cognitive beliefs and positive psychological capital as mediators in the relationship between transformational leadership and improvement processes: A multilevel investigation. Journal of Business and Psychology, 34(1), 23-46.

7. Scott, C., & Davis, G. F. (2007). Organizations and organizing: Rational, natural and open system perspectives. Pearson Education.

8. Skerlavaj, M., Song, J. H., & Lee, Y. (2007). Organizational learning culture, innovative culture and innovations in South Korean firms. Expert Systems with Applications, 32(4), 804-814.

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Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.

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Suggested Citation: Westover, J. H. (2025). The Elephant in the Room: Organizational Design Issues That Most Leaders Misdiagnose. Human Capital Leadership Review, 19(3). doi.org/10.70175/hclreview.2020.19.3.5