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(Simulated) Organization in Action

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(Simulated) Organization in Action

  1. 1. (Simulated) Organizations in Action Pilot testing an Organization Design simulation Nicolay Worren Simulation developed in collaboration with Tido Eger
  2. 2. The plan 10:35 Introduction 11:00 Simulation 12:00 Break 12:15 Debriefing
  3. 3. Background
  4. 4. Traditionally, one has distinguished between ”top down” and ”bottom up” design perspectives Strategic design Operational design
  5. 5. The theoretical ideal is to perform the operational design in a manner that minimizes coordination cost Within the same unit A B Across different A B units “Under norms of rationality, organizations group positions to minimize coordination costs” “Organizations seek to place reciprocally interdependent positions tangent to one another, in a common group, which is (a) local and (b) conditionally autonomous” (Thompson ,1967, p. 57)
  6. 6. We should distinguish between two phases of Operational Design 1. Identifying A B C E F interdependencies D ”Unit A” ”Unit B” 2. Grouping of roles/units A B C E F based on the D interdependencies
  7. 7. Today, we skip the first stage by using colors to indicate who is interdependent and thus should be grouped together 1. Identifying A B C E F interdependencies D ”Unit A” ”Unit B” 2. Grouping of roles/units A B C E F based on the D interdependencies
  8. 8. The simulation task is analogous to a company that decides to move from one grouping criterion to another (a) = Geography A 1 Initial: Geographical organization = Geography B Unit A Unit B 2 The firm identifies roles according to new criterion = Product 1 = Product 2
  9. 9. The simulation task is analogous to a company that decides to move from one grouping criterion to another (b) 3 The firm restructures according to new grouping criterion = Product 1 = Product 2 Unit A Unit B
  10. 10. We will monitor the performance of each unit (table) and the total group in real time by using an Excel tool* Changes in total system cost with number of switches 450 414 400 398 386 366 350 350 338 330 300 306 278 262 250 250 Cost 200 150 100 50 36 40 28 32 20 24 12 16 4 8 0 0 0 1 2 3 4 5 6 7 8 9 10 Number of switches Total Coord Cost Switching Cost *The tool was developed by Tido Eger
  11. 11. Simulation Briefing
  12. 12. The plan 10:35 Introduction 11:00 Simulation 12:00 Break 12:15 Debriefing in
  13. 13. Starting configuration (with N = 36) 1 1 1 1 1 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 5 5 5 5 5 6 6 6 6 6 7 7 7 7 7 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 1 6 11 1 2 12 3 2 7 3 4 5 8 9 10 13 14 15 16 21 26 17 4 22 5 6 27 18 19 20 23 24 25 28 29 30 31 32 7 36 33 34 35 Note: Players are shown in consecutive order but may be seated in any order around the designated table
  14. 14. What’s the analogy? • Colors – People that you are dependent upon (e.g., that work on the same process as you do) • Tables – The formally defined units (e.g., departments) • Coordination cost – The cost associated with collaborating, communicating, exchanging information etc within and across units • Switching costs – The costs that arise as a result of transferring people to another unit (e.g., training in new role, temporarily reduced productivity, etc.)
  15. 15. There is a small set of simple rules that we need to follow The goal : To minimize table and total group coordination cost by grouping same color around table 1. You should agree around the table about which person to move 2. All moves are reciprocal (i.e., between two tables) – you must receive a person from the table you are moving a person to 3. Each table can make 5 moves (within the timeframe of the simulation) 4. Each move must be documented on the attached sheet, which should be handed to the facilitator when a move is executed – The two tables involved in swap hand in one paper sheet
  16. 16. How to calculate your coordination cost 3+3=6 1+3=4 Individual coordination 6 4 4 4 4 6 cost Table coordination 14 14 cost 6 + 4 + 4 = 14 4 + 4 + 6 = 14
  17. 17. De-briefing
  18. 18. A gradual reduction in coordination cost was achieved Changes in total system cost with number of switches Only the last move 600 stands out as suboptimal 0 500 4 8 12 16 20 24 28 32 36 40 400 Cost 300 518 502 486 470 454 442 430 418 200 402 402 402 100 0 0 1 2 3 4 5 6 7 8 9 10 Number of switches Switching Cost Total Coord Cost
  19. 19. Minimal coordination costs were achieved at Table 2 Table 2 after 4 swaps Number of switches 0 6 7 8 9 10 1 6 7 8 9 10 2 6 7 8 9 33 3 6 7 8 28 33 4 6 20 8 28 33 Table 7 after 2 swaps Number of switches 0 31 32 33 34 35 36 1 31 32 33 34 35 36 2 31 32 10 34 35 36 3 31 32 10 34 35 36 4 31 32 10 34 35 36
  20. 20. What’s analogous to what we experience in real life? 1. Organizations sometimes change the ”grouping criterion” – E.g., they move from a functional to process based structure, or from geographical to product based structure) 2. One must try to increase both individual, team and overall performance 3. Reconfiguring an organization in such situations depends on the capacity to handle a complex set of direct and indirect interdependencies – That capacity is limited and the decision process may ”satisfice” rather than ”optimize” 3. At some point, ”switching” (i.e., reconfiguration) costs will exceed the benefits (reduction in coordination costs)
  21. 21. What simplifying assumptions were made? 1. In real life there are more options. One can: – Move people – Move tasks – Merge two or more sub-units – Establish integrator roles – Remove the interdependency that creates need for coordination 2. More time is available too 3. People who are interdependent cannot be identified by means of the color of their clothing!
  22. 22. In sum: What’s new? • The simulation creates an experiential setting for learning about key organization design principles • It shows how alternative designs may be quantified • It allows a comparison between ”optimal” and ”actual” decisions in a design process  Continuing this line of work may contribute to making organization design a more analytical discipline
  23. 23. Thanks • To you – for participating • To Thorvald Hærem – for allowing us to use you as test pigeons • To Tido Eger for developing the Excel tool • To the following companies, for providing t-shirts: – Accenture – Petroleum Geo-Services (PGS) – Posten – Expert – Ringnes (Solo) – Kiwi
  24. 24. Bio • Independent consultant – 12 years of experience with organization re-design, process improvement, strategic HR, and strategy facilitation • Previously with Accenture, PA Consulting Group, and Aker • PhD (2003) from Said Business School, Oxford University • MA (1994) from McGill University • Currently writing textbook with Pearson Education, UK • Blog: www.nicolayworren.com • Contact: nicolay@worren.com

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