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Organizational Design
Today’s Agenda
• Organizational Structure & Design
– Three goals of structure
– Understand relationships between environment,
strategy and structure
• SMA MEPD
2
Open Systems Model
Transformation
Processes
Inputs
Interactions of:
Environment
• Formal Org
Strategy
• Informal Org
• Tasks
Resources
• Individuals
History
Outputs
Individual
behavior
Group
behavior
Organizational
functioning
Feedback
3
The Three Goals of Structure
• Efficiency
– minimize costs, time, effort
• Coordination
– coordinate diverse organizational tasks
– ease information flow
• Adaptability/Flexibility
– scan environment
– change to meet environmental needs
4
Structural Design Dimensions of
Organizations
• (Structural) Differentiation: How are activities divided?
– Vertical differentiation (hierarchy of authority)
– Horizontal differentiation (specialization, e.g. product, process,
function, geography)
– Complexity (number of activities or subsystems)
• Integration: How are activities coordinated/linked?
–
–
–
–
Centralization (hierarchical level of decision making)
Span of control (# of products, processes, functions supervised)
Formalization (amount of written documentation)
Standardization (degree similar work is done in uniform
manner)
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Issues in Differentiation of Subsystems
•
•
•
•
Differences in time orientation
Differences in objectives
Differences in interpersonal orientation
Differences formal structure
Divisional (Product or Market, etc.) Structure
President
Product
Group 1
R&D
Mfg
Acct
Product
Group 2
Mkt
R&D
Mfg
Acct
Product
Group 3
Mkt
R&D
Mfg
Acct
Mkt
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Structural Integrating Mechanisms
Integration
Mechanism
Formalization
Description
Rationale
Rules, policies
and procedures.
Example
More formalization
coordinates by specifying
roles and responsibilities, or
how different subunits will
interact
Centralization Level at which
Centralized decisiondecisions are
making coordinates by
made.
concentrating decisions
under one person
Spans of
Number of
Larger spans of control are
control
subordinates or
more integrating because
activities
responsibility is grouped
supervised.
under one person
Standardization Standardized
Increases predictability,
inputs, outputs or reducing the need for
processes
coordination
Job
descriptions,
operations
manuals
Co-location
Marketing and
R&D in same
building
Different units
located in the
same physical
place
Physical co-location
increases the likelihood of
informal interaction
CEO has to
sign for
expenses over
$1000
Sales and
marketing in
same sub-unit
TQM
7
Non-structural Integrating Mechanisms
Integration
Mechanism
Liaison Roles
Description
Assign responsibility for
inter-unit communication
and coordination to
specific people
Groups made up of
people from multiple
business units
Rationale
Making someone directly
accountable for coordination
will ensure boundary-spanning
interaction
Teams
Regular meetings between
people from different business
units increases communication
and coordination
Culture
Cultural propensity for
Unified culture can facilitate
sharing information,
coordination across different
balanced power between business units
subunits
Info Systems
Who has access to
Increased access to
information
information increases
coordination through
awareness of situations
Cross-training, Employees have
Experience in multiple jobs
Internal job
experience in multiple
enables coordination through
mobility
business units
better understanding of other
sub-units’ issues, and personal
contacts
Example
Cross-functional
product development
team
Southwest Airlines
gate turns
Intranet knowledge
bases
Management
development
programs
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Vertical Linkages
Vertical information
systems
High
Add positions to hierarchy
Rules and plans
Hierarchical referral
Low
Low
High
Information Capacity of Linkage Mechanism
9
Horizontal Linkages
High
Teams
Full-time integrators
Task forces
Liaison roles
Direct contact
Information Systems
Low
Low
High
Costs of Coordination
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 Designing Organizations is the
process of purposefully configuring
the elements of the organization to
foster the achievement of valued
business, customer, and employee,
community and environmental
outcomes.
SM14J(11)
Design at All System Levels
Inter-Organizational
Corporate/
System Wide
Business
Unit
Inter-Unit
Team, Work Unit,
or Work Process
SM22I(12)
Why is organization design important?







Resources are aligned or misaligned with strategy and
priorities.
Coordination is efficient or inefficient—resource use is
optimized or resources are wasted.
Performance capabilities are enabled or disabled—quality,
speed, innovation, growth
Work is hard or easy to do—people are frustrated or feel
well utilized.
Customer interfaces are effective or ineffective—high
value is delivered or not.
Human capital is developed, motivated, and retained or
stagnates, becomes cynical and “departs”.
Societies, communities, and ecologies are strengthened
or depleted
SM194P(13)
Learning Two:
Organizations are designed to
fit a context, not a recipe
(14)
Strategy
Star Model
Work
Processes/
Capabilities
People
Structure
Management
Processes
Rewards
Behavior
Performance
Culture
Adapted from: J. Galbraith
SM107T(15)
Self-Design and the Star
Strategy
Laying the
Foundation
Valuing
Acquiring
Knowledge
Diagnosing
W
P
S
R
C
R
I
T
E
R
I
A
Designing
W
P
S
R
Implementation
&
Assessment
M
M
SM106T (16)
Learning Three:
Hierarchical structure is
necessary but insufficient
in a dynamic and complex
environment.
(17)
Hierarchical, Functional Organization
General Manager
Director of
Engineering
Manager
Software
Engineer
etc.
Manager
Hardware
Engineer
Director of
Marketing
Manager
Tech
Support
etc.
etc.
QA
Manager
QA
Specialist
QA
Specialist
Manager
Product
Marketing
QA
Specialist
Director of
Manufacturing
Manager
Marketing
Support
Manager
Mfg
Engineer
Administrative
Director
Manager
Operations
etc.
Manager
HR
etc.
Testing
Manager
Mfg
QA
Manager
Training
Specialist
etc.
Manager
Info
Systems
etc.
etc.
Comp &
Benefits
Manager
Mfg
Testing
Manager
etc.
Finance
Manager
Comp
Manager
Comp.
Specialist
Benefits
Specialist
Comp.
Analyst
SM34I(18)
Team-Based Organization
Executive Team
Process
Teams
Councils
Shared Services
Team
Team
Leadership Team
Business Unit 1
Process Team
Team
Team Team
Team
Leadership Team
Business Unit 2
Cross Unit
Opportunity
Teams
Process Team
Team
Team Team
Team
SM50T(19)
Networks
Executive Team
Integrating Councils
Shared Services
Management Team
Unit 1
Integrating Teams
Team
SM33M
Team
Team
Management Team
Unit 2
Opportunity
Team
Knowledge
Network
(20)
Integrating Teams
Team Team Team
Common Aims of Internal
Restructuring
• Enhance flow of information and expertise
across organizational boundaries to increase:
– Learning
– Catching Mistakes
– Innovation
– Efficiency
– Shared Understanding
– Coordination
Implement the Internal Restructuring
• Over communicate honestly
• Align goals with the restructuring Efforts
• Avoid the creation of bottle-necks that require
certain people to be brokers
• Involve employees in the process and take
their input into account
• Create a climate that supports speaking up in
order to enhance the flow of information
resources across organizational boundaries.
Managing Internal Change: Downsizing
• Downsizing= Layoffs + Restructuring
• Given economic weakness, majority of CEOs
report the need to reduce staff amid
continued economic weakness and tight profit
margins
• More than 3 M people are laid off every year
• Downsizing can happen even during good
economic times.
Effect on Work
• Try to figure out which departments and
people matter and protect them.
• Be ready to adjust work processes now that
there are fewer people to accomplish the
work.
• Be mindful of how it will affect customers and
their expectations.
Announcing a Downsizing
• Use as a last resort
• Be clear about long and short term goals.
• Communicate rationale and allow for
questions and answers
• Involve senior management
• Let everyone know at the same time
• Provide counseling at the location
• Try not to make an announcement before the
holidays or before the weekend
Implement the Downsizing
• Over communicate honestly
• Be fair (Procedural Justice, Trevor & Nyberg, 2008)
– Help victims find other jobs
– Senior management should share this burden
– Reduces likelihood of voluntary turnover
• Explain the selection process
– Focus on merit or future skill needs
– Fit this criterion with the vision for the future
Implementing the Downsizing
(Cont’d)
• Involve employees
• Don’t just take people out
– Work out procedures and processes
• If you can’t offer job security, provide ways to
enhance employability
– Training and Development
– Link incentives to performance in order to
motivate skill development
Surviving Organizational Downsizing
• Depends a great deal on the way that
survivors respond:
– If they support the change initiative, downsizing is
perceived to meet its objectives
– If they feel that the downsizing has violated them
and their work environment, workers will tend to
work against the objectives of downsizing.
From a Worker’s Perspective:
Survivor’s experience
Recommended text:
-Healing the Wounds (Noer, 2009)
SMA MEPD: Performance?
• How is SMA MEPD performing?
– Profitability
– Product development
– Morale?
– Anything else?
SMA MEPD: Diagnostic Question
• What are the sources of the intergroup and
inter-functional challenges in MEPD?
– Management and Org problems & practices
– External Environment
– Organizational Design
– Leadership
– People
SMA MEPD: Action Question
• What should Spichty do about these problems
or what should a consultant recommend to
Spichty?
Recommendations for Change
• Increase integration by development product
organization, communication, and decisionmaking systems
• Communicate new project organization to
division and R&D group
• Develop interpersonal competence
• Improve group relations through inter-group
problem-solving meetings
• More personal leadership
SMA Lessons
• Structure should follow strategy
– MEPD’s structure has become misaligned with its strategy
and market conditions
• Structure shapes interactions and accountability
inside the organization
– Structure influences communication patterns and quality
– Split accountability and control leads to conflict
• Linking mechanisms can compensate for
mismatches, but only so far!
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Midterm Results
2016