Strategy is about deciding what to do, execution about getting it done. Both are essential skills for a modern leader.

Yet another and perhaps more important skill lies between the two, in the realm of organization: the design of structures, systems, and mechanisms to guide and motivate the actions of employees and the critical task of implementing new organizational systems.

It is size, global spread, and complexity that have made organization so important. The chief executive of even a midsize company can’t oversee every employee or assume that orders from the center will be faithfully executed. Authority and accountability must be distributed, systems of control and inspection implemented, incentives to encourage desired behavior constructed. Most of all, a CEO must infuse the corporation’s work with meaning not just for those in the boardroom but also for thousands of employees. These days, a CEO has to be more architect than general: the job is to design working environments where thousands of people can figure out what they must do, cooperate to get it done, and experience it as personally fulfilling.

The task of organization is particularly challenging because most large companies are active not in one line of business but in several, and even a company that makes a single product will probably wish to excel in a number of dimensions. A manufacturer, for example, might want to develop deep relationships with customers and to produce at low cost. If so, should it organize along customer or product lines or divide accountability by function—R&D, manufacturing, marketing, sales, finance? Or perhaps a geographic organization would be more appropriate.

Today’s answer might not lie in any of these traditional models but rather in novel hybrid designs now being pioneered in a range of sectors. An industrial company might, for example, have manufacturing units that are organized geographically by product, as well as customer-oriented business units dealing with sales and services that are organized by the industries they serve. These hybrids require complex coordination, promoted by advanced information technology and by corporate cultures that foster cooperation.

But structure is only one element of organizational design. To continue the architectural metaphor, it isn’t enough to plan a building’s rooms and corridors: the atmosphere is equally important if employees are to work in a productive and satisfying manner. This is where management processes, measurement systems, and incentives figure as important elements of the CEO’s work. Even more vital, perhaps, is helping employees to understand that a new direction for the company is essential for its success, achievable, and personally important to them. Organization thus shapes not only how well strategies are executed but also the way the company generates and renews them. This issue of The McKinsey Quarterly therefore focuses on the work of designing and managing organizations to realize their full potential and that of their people.

"When reorganization works" outlines the conditions that make organizational restructuring succeed or fail. While recognizing the importance of good technical design, the article goes on to argue that any reorganization will probably meet with debilitating resistance if its timing, the business concept behind it, or the social realities that influence its fortunes should somehow be wrong.

"The psychology of change management" probes the challenge of improving a company’s performance by motivating employees to change their behavior and mind-sets. Drawing on the work of psychologists, the authors explain four conditions that, if met, greatly improve the prospects of any change program. And "Refining Shell’s position in Europe," an interview with two executives of Shell Europe Oil Products, explores a large global company’s experience of a major reorganization.

Organizational challenges have always confronted top corporate leaders. Today, in a business world marked by rapid change, continuing but erratic globalization, and the complex objectives of shareholder value, social responsibility, and corporate stability, the task of getting organization right is more important than ever.