Strategic Organizational Diagnosis and Design - 01 Lecture

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Introductory course on strategic organizational diagnosis and design delivered at the Tallinn University of Technology, School of Economics and Business Administration by Marko Rillo

The slides include - introduction of the course and house rules. Thereafter aim to develop introductory understanding on theoretical framework of multiple contingency organization design (Burton & Obel). The multiple contingencies under review in the theoretical framework cover the contingencies of size, technology, environment, and strategy, as well as leadership style and organizational climate and culture. These contingencies aree mapped into design parameters such as organizational configuration, specialization, decision authority, information processing, coordination and control, and incentives. Introduction to the underlying components of organization design (based on Pugh, Hickson, Hinings, Turner (1968) Dimensions of Organization Structure): specialization, standardization, formalization, centralization and configuration.

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Strategic Organizational Diagnosis and Design - 01 Lecture

  1. 1. www.rillo.ee TMO1180 - Strategic Organizational Diagnosis and Design 1st lecture Marko Rillo Tallinn University of Technology Tallinn School of Economics and Business Administration
  2. 2. www.rillo.ee Marko Rillo - www.rillo.ee 2002-… 5MPC owner, trainer and consultant: Estonia (Estonian Telecom, Estonian Postal Services, MoF, Enterprise Estonia, Swedbank, Tele2 etc.), Work Finland, Bulgaria, Croatia, Denmark, Kosovo, Latvia, Netherlands, Romania 2001-02 AS Andmevara, CEO, member of board 1997-01 CFCU Estonia director Finalising PhD in Management, University of St. Gallen, Switzerland - strategy process Study Earlier: M.Sc Economics in Tallinn Univ. of Technology, IntBBA in EBS. Visiting research in: INSEAD, IESE, Aarhus Business School, Lappeenranta Uni. of Tech., Uni. of Helsinki, Uni. of Tartu Other fun Swimming, photography, hiking, music composition, Lecturing on management and strategic management - students in TUT, research on managerial issues
  3. 3. www.rillo.ee Other Team Members • Janno Veskimäe, former • Hannes Veskimäe, member of board of Saku Swedbank - handles Brewery, currently runs projects with increased businesses in Ukraine business risk
  4. 4. www.rillo.ee Your motivation and objective? • Your experience so far: • Why have you taken this – With practical experience? course ...? • Practicing manager? – Looks cool • Analyst? • Other? – More knowledge on org. diagnostics – Full time student? – Provides wider perspective • When you "grow up"? – Build up company – Manager? (strategy) structure, – Specialist? processes – Consultant? – $$$ £££ €€€ – Researcher? – Better English language
  5. 5. www.rillo.ee Welcome! • Organization - we focus on profit-making business organizations • Organizational design - specification of the organizational form • Organizational diagnosis - determine gaps between current and desired performance • Strategic - important because of long-term performance of the organization
  6. 6. www.rillo.ee This course is not a traditional course! It is a collaborative project! We only give you a framework, a book, a couple of research papers and software. And then it is up to your teams! (we will only be asking questions)
  7. 7. www.rillo.ee Course outline • Lectures: • Seminars – Org. configuration theory – Discussion on theories – Contingency theory – Analysis of case studies – Information processing view – Preparation of the report – Novel organizational – Support of OrgCon configurations and software to produce your advanced design view analyses – Organizational change after • Course project design choices – Criticism of the theories above
  8. 8. Oticon Case Study www.rillo.ee www.oticon.com www.demant.com
  9. 9. www.rillo.ee Two types of course project Executive style Research style • 2 real life business cases from • 1 research-style business case your own practice analysis of a publicly listed international firm, preferably not a company from Estonian origin Images from: http://oil.otago.ac.nz/oil/centraltafe
  10. 10. www.rillo.ee The Contents of the Course Project Executive style 2 x 12(+-2) pages Research style 24 (+-2) pages • Executive Summary • Executive Summary • Background and description • Introduction of the Case • Summary of the Analysis Organization • Recommendation for Action • Detailed analysis and • Plan for Implementation assessment of company environment • Analysis and assessment of the design factors • Explanation of past strategic choices • Conclusions
  11. 11. Course Project Roles - Teams of 3-4 www.rillo.ee Students • Divide the tasks among yourselves, but do not try to over-specialize: – Informant / Company specialist – Data collection specialist / Research specialist – OrgCon specialist – Planner
  12. 12. www.rillo.ee Assessment of the Report • Elaborate background information – Try to dig both in academic as well as good quality press sources • Thorough analysis, but short and consise findings • Nice, professional layout • Max points - if board members of the global firm would buy your suggestion
  13. 13. www.rillo.ee When you choose your cases - don't be boring - Microsoft, Apple, Google, Nokia, Toyota ... are OUT!  There are 500 companies in Fortune 500! Read business magazines or finance portals and come up with a case company that is off the beaten track, but still interesting!
  14. 14. www.rillo.ee EcoMerc OrgCon software for analysis • Seminars will be held at computer classes • Download your software from http://ecomerc.com/orgcon9/setup.exe • Each group will get a single 1-year license for your groupwork - send me your name and e-mail address: tudeng(at)rillo.ee
  15. 15. www.rillo.ee Presenting to the Class • Use attractive visual aids! • 15-20 minute executive-style presentation of your findings. • Imagine yourself in boardroom where your presentation will serve as basis for making significant organizational changes. • Be well prepared for rapid interruptions or (not as) rude (as in real life) comments! 
  16. 16. www.rillo.ee Familiarize yourself with ... • Study program - has the most important background information • Using EBSCO etc sources for data collection • Course textbook available at the TUT Library - 8 copies can be borrowed, 2 can be used on location: share them, scan and copy the most important parts - you will need it already for the next week seminar!
  17. 17. www.rillo.ee What else is important? • Collaboration - try to establish diverse groups and co-operate • At the end of the course - we'll do 360! • Any questions?
  18. 18. www.rillo.ee Timetable and groups Friday at 18:00-20:15 Saturday at 14:30-16:45 Group1 - practical: Group4 - ?: Group3 - theory: • Maigi Lasn • Janno Rillo • Madis Talmar • Ervin-Erik Kaasik • Silver Priks • Joonas Pärenson • Erik Mällo • Maris Jõgisoo • Ahto Orumets • Maris Nettan Group5 - Audi Group7 - practical: Group2 - practical: • Rivo Saarna • Tõnis Viiroja • Liisa Eichler • Kristi Tamm • Alvar Veersalu • Raul Siimut • Mariliis Topp • Raiko Kaasiku • Kärt Klein • Mari Kurig
  19. 19. Click "Like" on the Course Page in www.rillo.ee Facebook
  20. 20. www.rillo.ee TRADITIONAL CONTINGENCY THEORY
  21. 21. Traditional - Two types of variables www.rillo.ee Contingency variables Organizational design variables Size (number of employees) Functional specialization, Role specialization, Standardization, Documentation, Centralization, Vertical span Change in size (number of employees) Number of divisions, Division of labour, Extent of regulations, Delegation to personnel, Delegation of budget, Decentralization, Number of hierarchical levels Complexity of operations technology, Structure: Role specialization, Standardization of procedures, Formalization, automaticity, workflow rigidity, specificity Number of hierarchical levels of evaluation and continuity of throughput) Complexity of production Technology, Relationship of wage costs to other costs, Management system Complexity of operations technology Structure, Role specialization, Standardization of procedures, Formalization (automaticity, workflow rigidity, specificity of evaluation and continuity of throughput) Task uncertainty (largest impact), Co-ordination mechanisms (impersonal, personal or impersonal) task interdependence and units Dynamism of environment Stability of organization structure, Elaborateness of organizational design, Ratio of vertical communication to horizontal/diagonal, Prestige attached to possession of networks, knowledge and experience Uncertainty of the environment (Measured Differentiation: Goal orientation, Time orientation, Interpersonal orientation as clarity of information, uncertainty Integration: Influence of integrators, Reward system for integrators, Modes of causal relationships and the time span of of conflict resolution definitive feedback) Based on: Lawrence & Lorch (1967) and Bill McKelvey (1982) Organizational Systems. Taxonomy, Evolution, Classification
  22. 22. www.rillo.ee Key Terms in Org. Design • Formalization - the degree to which the organization has official rules, regulations, and procedures • Centralization - the degree to which decisions are made at the top of the organization • Specialization - the degree to which jobs are narrowly defined and depend on unique expertise • Standardization - the degree to which work activities are accomplished in a routine fashion • Complexity - the degree to which many different types of activities occur in the organization • Hierarchy of Authority - the degree of vertical differentiation across levels of management Pugh, Hickson, Hinings, Turner (1968) Dimensions of Organization Structure
  23. 23. www.rillo.ee Key Traditional Design Choices • Simple Structure - a centralized form of organization that emphasizes the upper echelon & direct supervision • Machine Bureaucracy - a moderately decentralized form of organization that emphasizes the technical staff & standardization of work processes • Professional Bureaucracy - a decentralized form of organization that emphasizes the operating level & standardization of skills • Adhocracy - a selectively decentralized form of organization that emphasizes the support staff & mutual adjustment among people • Divisional Form - a moderately decentralized form of organization that emphasizes the middle level & standardization of outputs
  24. 24. Five Traditional Structural www.rillo.ee Configurations of Organization Structural Prime Key Part of Type of Configuration Coordinating Organization Decentralization Mechanism Simple structure Direct supervision Upper echelon Centralization Machine Standardization of Technical staff Limited horizontal bureaucracy Work Processes decentralization Professional Standardization Operating level Vertical & horizontal bureaucracy of skills decentralization Adhocracy Standardization Middle level Limited vertical of outputs decentralization Divisional form Mutual adjustment Support staff Selective decentralization
  25. 25. And You Meed to Manage 4 Basic www.rillo.ee Contextual Variables • Size • Technology • Strategy & Goals • Environment
  26. 26. www.rillo.ee Example: Size Contingencies ... Basic Design Small Large Dimensions Organizations Organizations Formalization Less More Centralization High Low Specialization Low High Standardization Low High Complexity Low High Hierarchy of authority Flat Tall
  27. 27. Example of Relationships www.rillo.ee Few Exceptions Many Exceptions Ill-defined & Unanalyzable Craft Nonroutine Problem Analyzability 1. Moderate 1. Low 2. Moderate 2. Low 3. Moderate 3. Low 4. Low-moderate 4. Low 5. High 5. High 6. Low 6. Low Well-defined & Analyzable Routine Engineering 1. High 1. Moderate 2. High 2. Moderate 3. Moderate 3. High Key 4. High 4. Moderate 1 Formalization 4 Standardization 5. Low 5. Moderate 2 Centralization 5 Complexity 6. High 6. Moderate 3 Specialization 6 Hierarchy of Authority Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967, 194-208
  28. 28. www.rillo.ee Context of the organization Correct size The Relationship among Key Current technology Organizational Design Elements Perceived environment Current strategy & goals Influences how manager perceive structural needs Which influence how well the structure meets its Structural dimensions Level of formalization Purposes Level of centralization Designate formal lines Level of specialization of authority Level of standardization Designate formal Level of complexity information- Hierarchy of authority processing patterns Which characterize the organizational processes Which influence how well the structure fits the Differentiation & Integration Context of the organization
  29. 29. www.rillo.ee INTRODUCTION TO MULTIPLE CONTINGENGY THEORY
  30. 30. Principles of Conventional Organizational www.rillo.ee Configurational Approach • Broad strategy-structure-environment fit or congruence • Organization is conceptualized as a system of configuration whose major components include 1) strategy, 2) people, 3) structure, and 4) management processes • Overall organizational performance is heavily dependent on the quality of alignment of the organization's components as well as the external fit between the organization and its environment • The process of achieving fit is dynamic, and both organization's internal as well as external fit should be continually monitored and adjusted • All of the basic organizational configurations from the older hierarchical forms to modern multi-firm networks have particular strengths and limitations - there is no all purpose organizational design Snow, C.C., Miles, R.E., & Miles, G. (2006) “The Configurational Approach to Organization Design: Four Recommended Research Initiatives” in Information and Organization Design Series, Volume 6, Part 1:, 3-18.
  31. 31. Compatibility of Structure and www.rillo.ee Environment - Large Firms • Lex Donaldson: longitudinal study of UK, US, FR, GE and JP large MNCs over the period 1950-80: – 3/4 of companies cannot understand pressure of environment that creates a need to change their structure within 10 years – Those who did it in time gained 1/3 higher performance!!! Donaldson (1987, 2001)
  32. 32. www.rillo.ee Asset Losses from Misfits - 224 Danish SMEs (limitation of the study: 1 informant / firm) • Situational, contingency, and the combination of proposed misfits do diminish performance • Any misfit significantly diminishes performance in a nonlinear fashion i.e. lack of any misfits leads to significantly better performance Richard M. Burton and Jørgen Lauridsen and Børge Obel, Return on Assets Loss from Situational and Contingency Misfits, Management Science, Vol. 48, No 11, November 2002, pp.1461 – 1485
  33. 33. www.rillo.ee Configuration Approach to Organizational Design (Burton-DeSanctis-Obel) - 14 variables 1. Goal 2 types of variables: 2. Strategy • Contingency variables - given 3. Environment variables 4. Configuration • Design variables - subject to 5. Complexity managerial decision 6. Geographic Distribution 7. Knowledge Exchange Underlying logic: environment, complexity, geographic distribution 8. Task Design etc  have impact on the way how 9. People you establish your organisation 10. Leadership Style structure, processes and systems 11. Climate 12. Co-ordination / Control 13. Information Systems 14. Incentives
  34. 34. www.rillo.ee 1. Efficiency 1. Efficiency & Effectiveness 2. Defender 2. Analyzer 3. Varied 3. Turbulent 4. Functional 4. Matrix 5. Tall 5. Symmetric or complex hybrid 6. International 6. Transnational 7. Informated 7. Network 8. Complicated 8. Knotty 1. Goal 9. Factory 9. Office 2. Strategy 10. Manager 10. Producer 3. Environment 11. Internal process 11. Rational Goal 4. Configuration 12. Machine 12. Mosaic or Clan 5. Complexity 6. Geographic Distribution 13. Data-driven 13. Relationship-driven 7. Knowledge Exchange 14. Skill Pay 14. Profit Sharing 8. Task Design 9. People 1. No dominant goal 1. Effectiveness 10. Leadership Style 2. Reactor 2. Prospector 11. Climate 12. Co-ordination / Control 3. Calm 3. Locally Stormy 13. Information Systems 4. Simple 4. Divisional 14. Incentives 5. Blob 5. Flat 6. Local 6. Multi-Domestic 7. Ad hoc communications 7. Cellular 8. Orderly 8. Fragmented 9. Shop 9. Laboratory 10. Maestro 10. Leader 11. Group 11. Developmental 12. Family 12. Market 13. Event-driven 13. People-driven 14. Personal Pay 14. Bonus-based
  35. 35. www.rillo.ee 1. Goal - Which is the dominant priority? • All organizations value both efficiency and effectiveness to some degree Efficiency & • Efficiency is a primary focus on Efficiency Effectiveness inputs, use of resources, and costs, i.e. focusing on minimizing the costs of producing goods or services. • Effectiveness is a focus on outputs, products or services, and No dominant revenues, i.e. focusing on Effectiveness generating revenues or seizing goal leading-edge innovation in the marketplace • Ambidextrous - both efficient and effective
  36. 36. www.rillo.ee 2. Strategy - Strategic behavior of the organization based on a modified Miles & Snow classification • Reactor - organization whose top management frequently perceives change but seldom makes adjustments of any sort until Defender Analyzer forced to do so by environmental pressures • Defender - managers are experts in their organization's limited area of operation but do not search outside their domains for new opportunities. Resulting from Reactor Prospector narrow focus they seldom need to make major adjustments in their technology, structure, or methods of operation • ...
  37. 37. www.rillo.ee 2. Strategy - Strategic behavior of the organization based on a modified Miles & Snow classification • Prospector - organization that Organization that continually searches for opportunities combines the strategies and experiments with potential of the defender and the responses to emerging environmental prospector. moves into trends. Organization is often the Defender Analyzer the production of a new creator of change and uncertainty to product or enters a new which its competitors must respond market after viability has been studied • Analyzer with innovation - has innovations that take place concurrently with regular production. It has a dual technology core. • Analyzer without innovation - Reactor Prospector maintains an emphasis on its ongoing products, has limited innovation related to the production process but generally not the product
  38. 38. www.rillo.ee 3. Environment ... is everything that is outside Measures for the external the organization  environment are • The industry, its size and competitiors • Complexity - number of variables in • Actual customers the environment and their • Suppliers: raw materials, services, and the interdependency. It refers to factors labor market that can influence the operations and • Financial resources, including the stock outcome of the organization market, banks, and private investors • Uncertainty - lack of knowledge about • The evolution of the techniques of the value of a given variable or of the production • Regulation, taxes, services, and the political magnitude of the short term risk system in general • Equivocality - generic confusion and • Economic factors, such as inflation rates, lack of understanding, i.e. when you exchange rates do not know what kind and type • Sociological factors: values, beliefs, impact an external event may have education, religion, work ethic, and special • Hostility - measure of how benign or current trends, ex. environmental movements and women's rights malevolent the environment is
  39. 39. www.rillo.ee 3. Environment • Calm - not much changes • Varied - lots of complex external effects impact organization, however - these are mostly Varied Turbulent manageable • Locally stormy - lots of external effects impact organization, but the actual impact is mostly unknown • Turbulent - usually prone to Locally hypercompetition (dynamics, rapid Calm change and adaptation, short Stormy product life cycles, creative destruction (D'Aveni, 1994, p. 154))
  40. 40. www.rillo.ee 4. Configuration • Simple - flat hierarchy and a singular head for coordination, control and decision-making • Divisional - composed of sub-units centered on groupings of products, Functional Matrix markets, and/or customers • Functional - well-defined departmental structure with employees organized into departments, each with a specific function (administration, human resources, finances, production, Simple Divisional manufacturing, marketing, sales...) • Matrix - dual hierarchy; it incorporates the essential functional and divisional configurations in an organization simultaneously
  41. 41. www.rillo.ee 5. Complexity • Degree of horizontal, • Horizontal differentiation vertical, and spatial relates to the specialization differentiation within an organization • As organizational • Vertical differentiation relates complexity increases, so to the number of hierarchical levels in an organization does the difficulty of coordinating activities and • Spatial differentiation relates the requirement for to the geographic dispersion of activities within the information processing organization
  42. 42. www.rillo.ee 5. Complexity Hierarchy • Blob - low hierarcy, few job titles • Tall - high vertical Symmetric differentiation, low horizontal Tall or complex differentiation (hierarchy is hybrid high, but people deal with the same issue) No.of titles • Flat - low vertical differentiation, high horizontal differentiation (hierarchy is low, Blob Flat but people deal with may different things) • Complex hybrid - high hierarchy, lots of job titles
  43. 43. www.rillo.ee 6. Geographic Distribution Pressure to low costs • Local - thats obvious  • Global - centralized and controlled largely by corporate office. High pressure to lower costs, low International / pressure for local adaptation Transnational Global • Multi-domestic - emphasis is differentiating products and services to adapt to local markets. Pressure to Adaptation pressure high, cost adapt lowering pressure low, authority is decentralized Multi- • Transnational - both high costs for Local Domestic adaptation and force to keep costs down - optimization of efficiency, adaptation, and learning. Assets and capabilities are dispersed to the most beneficial location for a specific activity
  44. 44. www.rillo.ee 7. Knowledge Exchange Amount of information - volume of data that an organization collects, processes, and stores Tacit / explicit information • To some extent, this dimension is a • Tacit knowledge is characterized by function of firm size; larger causal ambiguity and difficulty of organizations tend to have greater codification (Choo, 1998; Polyani, information processing demands. 1966). • If tasks are repetitive and executed • Tacit information is not readily hundreds or thousands of times articulated as a set of facts or rules throughout the day (such as in a large and so is difficult to transfer retail chain or a bank), then amount of (Sorenson et al., 2004). information that must be processed is • This is in contrast to explicit high. knowledge, which can be expressed • If tasks are one-time tasks, relatively formally as a system of symbols and few and may be general, fragmented facts, and therefore more readily or knotty then the amount of communicated (Nonaka & Takeuchi, information to be processed is lower. 1995).
  45. 45. 7. Knowledge Exchange - Measures www.rillo.ee in OrgCon • To what extent is the vital knowledge of the firm codifiable (1) or non codifiable (5), in the sense that it does not lend itself to being explicitly captured, processed and stored? ___ • Could most of the important information that is exchanged within the firm be readily recorded on paper or in a computer system (1= yes, 5= no)?___ • Does the information exchanged within the organization require interpretation in order to be meaningful (1= not much interpretation required, 5= highinterpretation required)? ___ • Is information relatively easy to understand and explain (1), or are there subtleties to understanding the information, requiring specialized experience or expertise to fully “make sense” of the information (5)? ___
  46. 46. www.rillo.ee 7. Knowledge Exchange Amount of info • Ad hoc - information exchange takes place on the basis of need • Informated - lots of information - strict systems of formal reporting Informated Network are in place, mostly explicit information • Cellular - information exchange is Tacitness grouped by the teams, mostly tacit information • Network - lots of information that Ad hoc is both explicit and tacit, high Cellular communications requirements for all individuals to process information ROY B. 1998. Using Agents to Make and Manage Markets Across a Supply Web. Complexity, 3:31-35.
  47. 47. www.rillo.ee 8. Task Design Repetitive • Orderly - highly dividible and highly repetitive tasks • Complicated - not very dividible, but highly repetitive Complicated Knotty tasks • Fragmented - highly divisible, Divisible but not very repetitive • Knotty - not divisible, not repetitive tasks - most difficult to coordinate as adjustments to Orderly Fragmented both connectedness and non- repetitiveness are required simultaneously
  48. 48. www.rillo.ee 9. People Number of people • Shop - low number of people, no need for Factory Office professionalization • Factory - lots of people, Prof. need low need for professionalization • Laboratory - low number of Shop Laboratory people, high need for professionalization • Office - high both
  49. 49. www.rillo.ee 10. Leadership Style Uncertainty avoidance • Maestro - little delegation of decision making, accepts uncertainty Manager Producer • Manager - little delegation of decision making, avoids Delegation uncertainty • Leader - accepts uncertainty, delegates decision making Maestro Leader • Producer - avoids uncertainty, delegates decision making.
  50. 50. www.rillo.ee 11. Climate • ... characterizes the beliefs and attitudes held by individuals about their organization. • ... is a relatively enduring quality of an organization that is experienced by employees and influences their behavior. • ... is organizational characteristic, not a characteristic of individual. However, individuals are the source of information on climate
  51. 51. www.rillo.ee 11. Climate Direct measures of the internal Internal climate indicators can climate are be indirectly inferred from • Level of trust • Employee turnover • Level of conflict • Absenteeism • Presence of discussion groups, • Employee morale brainstorming groups, and other • Rewards reflective and/or information mechanisms • Resistance to change • Presence of mediating committees • Leadership credibility and consensus building activities • Level of scapegoating • Number of complaints filed to various mediating committees, and unions
  52. 52. www.rillo.ee 11. Climate • Group - friendly place to work where people share a lot of themselves. It is like an extended family. organization is held together by loyalty or tradition. • Internal process climate - formalized and Internal structured place to work. Procedures Rational Goal process govern what people do. Maintaining a smooth running organization is important. • Developmental - dynamic, entrepreneurial and creative place to work. People "stick their necks out" and take risks. emphasis is "being on the leading edge" • Rational goal - results oriented Group Developmental organization. The leaders are hard drivers, producers, and competitors. They are tough and demanding. The glue that holds the organization together is the emphasis on winning.
  53. 53. www.rillo.ee 12. Co-ordination / Control Formalization • Family - informal, ad hoc coordination mechanisms • Machine - formal, highly Clan / centralized coordination Machine • Market - decentralized control, Mosaic mainly determined on "what Decentraliz. sells on market and what not" • Clan - highly decentralized and formalized, but more homogenous approach than Family Market mosaic • Mosaic - heterogenous decentralized and formalized coordination mechanisms
  54. 54. www.rillo.ee 13. Information Systems • Event-driven - when something happens, then we do something Relationship- • Data-driven - we look at Data-driven driven advanced datasets and derive our actions based on elaborate background information in hand • People-driven - individuals People- Event-driven driven choose which information is delivered • Relationship-driven -
  55. 55. www.rillo.ee 14. Incentives • Personal pay - every employee has individual salary • Skill pay - salary system is Profit Skill Pay build up on the basis of Sharing competencies • Bonus-based - salary system is determined by the extent of achievement of immediate Personal Bonus- objectives Pay based • Profit sharing - salary system is determined by achievement of long-term objectives
  56. 56. Strategic Organizational Diagnosis and www.rillo.ee Design Fit 4 types of fit: • contingency fit, • strategic fit, • design fit • total design fit
  57. 57. www.rillo.ee Strategic Fit • Requires that organization's situation is internally consistent • Strategic facts that give answers to the "if" questions must make sense together • Ex. dynamic and uncertain environment and routine technology do not fit together, routine technology is not viable in the long run  something must be changed  change routine technology into less routine technology, because you cannot change the environment
  58. 58. www.rillo.ee Design Fit • For each design property and form "if-then" propositions must fit and be in balance • Ex. "organization must be decentralized" can be driven by a number of contingencies: – Leadership style, Climate, Size, Environment, Technology and Strategy  all can ideally suggest decentralization – However, some of them can provide conflicting suggestions, ex. leadership style suggests centralization, but organizational size - decentralization – The idea is to weigh certainty factors of individual elements to decide upon design fit • Equifinality (Doty et.al. 1993) suggests that multiple acceptable properties of the organizational structure are ok, but not all combinations are acceptable: – Ex. centralization may be high or low as well as formalization may be high or low, but only 2 of the 4 suggested configurations provide acceptable design fit
  59. 59. www.rillo.ee Overall Fit • Contingency fit - strategic fit and design fit must fit together • Total fit - the entire model must be consistent, especially with the actual strategic situation – This is the most complex, because strategic situation of an organization is dynamic ("You cannot step twice into the same river" - Heraclitus)  you need to constantly modify your design choices
  60. 60. www.rillo.ee Groupwork - Choose a Company and Assess if its Design Components are Properly Set up! • Goal • Knowledge Exchange • Co-ordination / Control – No common goal – Ad hoc communications – Family – Efficiency – Informated – Machine – Effectiveness – Cellular – Market – Both – Network – Mosaic or clan • Strategy • People • Information Systems – Reactor – Shop – Event-driven – Defender – Factory – Data-driven – Prospector – Laboratory – People-driven – Analyzer – Office – Relationship-driven • Environment • Leadership Style • Incentives – Calm – Maestro – Personal pay – Varied – Manager – Skill pay – Locally Stormy – Leader – Bonus-based – Turbulent – Producer – Profit sharing • Configuration • Climate – Simple – Group – Functional – Internal process – Divisional – Developmemtal – Matrix – Rational Goal
  61. 61. www.rillo.ee Homework • Register in Facebook • Read through course program (incl requirements) • Download and install OrgCon software • Borrow textbook from the library and make copies Any questions: tudeng@rillo.ee!

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