OB - Organization Design & Development


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Based in part on the Organizational Behavior text by Krietner & Kinicki (2009) with a lot of extra material, all cited.

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  • OD has existed since we were hunter gatherers
  • OD has evolved through agricultural, craftwork-feudal societies, and the industrial revolution.
  • An organization is a system of consciously coordinated activities of two or more people.The four factors that make up the organization’s structure are coordination of effort, which is achieved through formulation and enforcement of policies, rules, and regulations; division of labor, where the common goal is pursued by individuals performing separate but related tasks; and hierarchy of authority, which provides a control mechanism dedicated to making sure the right people do the right things at the right time.
  • False, there is no ideal span of control because it is so dependent on the situation.2. True, as employees become more empowered, less direct day to day supervision is required.3. False, narrower spans of control are more expensive4. True.
  • A closed system is a relatively self-sufficient entity. Management theorists used to view organizations as being closed systems, operating somewhat like a clock that only needs a battery to function efficiently. More recently, the view has shifted to one that recognizes that organizations are much more like an open system.An open system is an organism that must constantly interact with its environment to survive. For example, the human body is an open system because we need oxygen, food, and shelter for survival so we are very dependent on the environment.Organizations also have permeable boundaries. Let’s look on the next slide at an open system from an organizational perspective.
  • An extension of the open-system model is the adding of a “brain” to the “living body.” A learning organizationproactively creates, acquires, and transfers knowledge throughout the organizationSource: Garvin, D. A., Edmondson, A.C., & Gino, F. (2008). Is Yours a Learning Organization? Harvard Business Review.This articles discusses the need to diagnose organizations for their ability to truly learn and develop. The authors have developed an assessment tool to measure the key factors for improving knowledge sharing, idea development, and learning from mistakes.There are three major building blocks for creating a Learning Organization. However, they are fairly separate and distinct in that a company can do well on one of the building blocks but not the others. Therefore, building capacity in each one takes a separate set of activities.Building Blocks:A supportive learning environmentConcrete learning processes and practicesLeadership that reinforces learning
  • An extension of the open-system model is the adding of a “brain” to the “living body.” A learning organizationproactively creates, acquires, and transfers knowledge throughout the organizationThese organizations constantly seek new information from the external environment and seek to develop their employees. They also pursue experts to employ and stay up to date on practices that affect their business.Senge et al. (1994) describe organizational learning as “the continuous testing of experience, and the transformation of that experience into knowledge accessible to the whole organization and relevant to its core purpose” (p. 49).
  • Source: Garvin, D. A., Edmondson, A.C., & Gino, F. (2008). Is Yours a Learning Organization? Harvard Business Review.Supportive Learning EnvironmentPsychological safety – in order to learn, employees cannot fear being belittled or marginalized when they disagree or own uup to mistakes – they must be able to express their ideas and thoughtsAppreciation of differences – Ee’s need to recognize the value of competing ideas and different worldviewsOpenness to new ideas – crafting novel approachesTime for reflection – people who are busy or stressed by deadlines are not able to think as analytically and creatively as they might. A supportive environment allows time to pause and encourage thoughtful review of the organization’s processesConcrete Learning Processes and PracticesExperimentation – allowing the development and testing of new products and servicesInformation Collection – gathering intelligence regarding competitorsAnalysis – disciplined analysis and interpretation to identify and solve problemsEducation and Training – to both new and established employeesLeadership that Reinforces Learning Leaders who actively listen to their employees prompt dialogue and debate – leaders need to signal the importance of spending time solving problems, transferring knowledge, reflection, and appreciation of different points of view.
  • Some common organizational structures are depicted here.FunctionalOrganized according to business function (marketing, finance, etc.)Divisional StructureOrganized by activities related to outputs (e.g., product or service type)Matrix StructureHorizontal cooperation necessary as is functional knowledgeTypically organized by function vertically and product/service horizontally
  • Adam Smith, Ronald Coase, Jay Galbraith
  • Used as the basis for the majority of US Organizations today.
  • From Smith, and Coase we get our standard vertical org hierarchies, which over time for many organizations became more lateral, but in many cases that just increased bureaucracies, middle managers and still had some vertical tendencies.
  • In the 80’s we get the development of teams (highly successful in Europe and in companies like Toyota) and in the 90’s Communities of Practice became popular.
  • Networked organizations continue to grow, with contributors to the team working in the cloud from across the globe.
  • The only MS image available for global organizations, which I didn’t like.
  • So I chose this one which only represents the complexity because at least one of these employees looks confused. Unfortunately none of them appear to be women so it’s still not an accurate reflection.
  • Graphic Source: Cutter Consortium. Roberts, B. (2010). Holacracy: A complete system for agile organizational governance and steering. Agile Project Management. 7-7.
  • Economies of scale have mostly been achieved in a global manufacturing environment. Today organizations need Economies of scope to focus energy, intellect and assets quickly and effectively as margins continue to be squeezed.
  • But what if I don’t work or ever intend to work for a global organization?
  • More and more organizations are seeing the need for improved collaboration among their organizational members. One approach towards this end is to organize around processes rather than functional areas and create flexible cross-functional teams. Here are five principles for designing horizontal organizations.Organize around complete workflow processes rather than tasksFlatten hierarchy and use teams to manage everythingAppoint process team leaders to manage internal team processes.Let supplier and customer contact drive performance.Provide required expertise from outside the team as required.
  • In small or new organizations, this vertical view [the traditional organization chart] is not a major problem because everybody in the organization knows each other and needs to understand other functions.   However, as time passes and the organization becomes more complex, as the environment changes, and as technology becomes more complicated, this view of the organization becomes a liability.Defining the system and identifying , missing, unnecessary, confusing, or misdirected inputs or outputs that are causing the problem is managing the white space. Figuring out what happens during a process when the baton is passed, not the official transactional view of the organization, is how performance can be improved on all three levels.Rummler G. & Brache A. (1995) Improving Performance: How to Manage the White Space on the Organization Chart.
  • There are some organizations that seek to break down not only the internal boundaries but also the barriers between organizations in order to better pool their resources towards their own advantage. Examples of these types of structures are:HollowOutsourcing non-core processes to those more able – retain what you do well and outsource functions that others can do faster and cheaperModularOutsources parts of a product rather than processes – ensure quality meets standards from other companies but assemble parts internallyVirtualTemporary company created to respond to an exceptional market opportunity – creates partnerships that help serves customers they wouldn’t be able to without each other
  • Burns and Stalker drew a distinction between mechanistic and organic organizations.Mechanistic organizations are rigid, command-and-control bureaucracies. These are important when there is a need for uniform product quality, speedy service, and cleanliness, with McDonalds serving as an excellent example of this.Organic organizations are fluid and flexible networks of multitalented people. People in these organizations perform a variety of tasks. Gore is an example of an organic organization because people don’t have job titles, nor do they report to anybody. Gore uses a very team-based structure.
  • 1 – Centralized2 - Decentralized
  • In order to determine organizational effectiveness, you need to consider a variety of criteria. These four criteria are generic approaches that broadly apply to both for profit and non-profit organizations.Goal Accomplishment the organization achieves its goals—most widely used effectiveness criterionDoes the organizations achieve its publicly stated goals and objectives?Resource acquisition: Does the organization acquire the necessary resources to pursue it’s objectives?Internal Processes the organization functions smoothly with a minimum of internal strainIs the organization a “healthy system” in which information flows freely and employees are loyal, committed, satisfied and trusted.Strategic Constituencies Satisfaction the demands and expectations of key interest groups are at least minimally satisfiedAre people who have a stake in the organization's operation or success satisfied.
  • It is necessary to have both creativity and invention but need to have a way to transform that into a product or service for a customer in order to have innovation.Therefore you need integration which requires collaboration from multiple people, units, departments, and functions to work together.
  • Seeds of innovationHard work in a specific direction – most innovations come from dedicated people working hard to solve a well-defined problemHard work with direction change – innovations often occur when people change their approach to solving a problemCuriosity – curiosity spawns experimentation and inventivenessWealth and money – innovations frequently occur because economic viability depends on itNecessity – required to achieve a larger goalCombination of seeds – often innovation is a result of multiple factors
  • Source: Cohn, J. Katzenback, J. & Vlak, G. Finding and Grooming Breakthrough Innovators, Harvard Business Review, December 2008.This article discusses the strategies companies use to attract and retain true innovators. They discuss a study conducted by Spencer Stuart, an executive search firm, that states that over 2/3rds of directors at the leading global companies it advises cite innovation as critical for long-term success. Members of corporate boards are asking how can we sustain innovation and how do we develop future leaders who can facilitate this goal.Finding and effectively managing innovative talent is difficult. The article estimates that 5-10% of high potential managers have the skills and attributes necessary to become innovators.Then, if you do have them, many companies fail to capitalize on the creative energy and instead may squelch it. In many companies promotions come for people who emulate their superiors in terms of attributes and, therefore, are less likely to think and act differently regarding the business.
  • Source: Cohn, J. Katzenback, J. & Vlak, G. Finding and Grooming Breakthrough Innovators, Harvard Business Review, December 2008.What innovators look like:Innovators tend to have strong cognitive abilities and analytic skills and can focus on the most important points and ignore all the rest. This is important given the sheer volume of data that is easily accessible today. They have an underlying sense of insecurity and don’t tend to rely on past successes for future progress.They also have an ability to determine the motivations of a diverse audience and speak eloquently about their idea in a way that will resonate with each stakeholder (e.g., vendors, partners, customers, subordinates, bosses, etc.)
  • Source: Kao, J. Tapping the World’s Innovation Hot Spots, Harvard Business Review, March 2009.This article discusses the different strategies countries are taking with regard to innovation and suggests that new companies can take advantage of the innovative strategies across the globe in forming their own competitive product or service.For example, many countries are putting innovation at the top of their national agenda and investing in education, new research, etc.The authors offer four models of innovation companies are taking.Model 1: The Focused Factory – combines clear strategic intent with a concentration of infrastructure and high-octane talent in an effort to discover and deploy new solutions to big challenges. Countries such as Singapore and Denmark, focus their innovation investments on a handful of industries or research fields.For example Singapore has devoted more resources to life sciences than to any other field and created a world renowned “Biopolis” – biomedical research center that attracts top researchers from around the world. India provides talent management for some of the world’s most sophisticated technology development work and Finland is becoming a global center for innovative design.Model 2: Brute Force – uses the law of large numbers. By applying massive amounts of low-cost labor and capital to a portfolio of innovation opportunities, countries (e.g., China and India) hope that a huge quantity of ideas from a large number of talented people will eventually yield valuable discoveries. For example, Microsoft started a Beijing research center 10 years ago and has found that is allows it to tap expert and junior Chinese talent at a comparatively low price. They partner with academics and scientists and encourage them to publish their work. Microsoft, in return, builds is intellectual property and collaborative relationships.Model 3: Hollyworld – providing opportunities to build a “global creative class”. Using the “law of cool” countries are creating their own Silicon valleys (e.g., Bangalore, Toronto, Helsinki). This strategy involves creating a place where talented innovators want to come to share ideas and collaborate.Model 4: Large-Scale Ecosystems – end-to-end innovation systems combining stewardship mechanisms, funding bodies, research institutions, and structures for business and academic collaboration in support of an overall national strategy. For example, Finland has a well-run innovation system that is guided and funded by the government. The Science and Technology Policy Council is responsible for the country’s overall innovation efforts.
  • OB - Organization Design & Development

    1. 1. Organizational Design (OD),Development and Innovation BUSA 220 - Wallace Krietner/Kinicki, 2009
    2. 2. OD Background Krietner/Kinicki, 2009
    3. 3. OD Background Krietner/Kinicki, 2009
    4. 4. Common Characteristics Hierarchy Coordination of of effort authority Common Division of goal labor Krietner/Kinicki, 2009
    5. 5. Typical Org Chart Example of Hospitals Organization Chart Board of Directors Strategic Legal Counsel Chief Executive Planning Officer Officer Cost-Containment Staff President Executive Executive Administrative Medical Director DirectorDirector of Director of Director of Director of Director of Director of Director of Chief Human Admissions Accounting Nutrition X-Ray and Surgery Pharmacy PhysicianResources and Food Laboratory Services Services Director of Director of Patient and Outpatient Public Services Relations Krietner/Kinicki, 2009
    6. 6. Basic Terminology Span of control • The number of people reporting directly to a given manager Staff Personnel – (dotted lines) • Provide research, advice, and recommendations to line managers Line managers – (solid lines) • Have authority to make organizational decisions Krietner/Kinicki, 2009
    7. 7. What Do You Think? True or False? 1. The ideal span of control is 10. 2. Wider spans of control complement employee empowerment trends. 3. Narrower spans of control save costs and are administratively efficient. 4. With wider spans of control, inadequate supervision and less coordination may result Krietner/Kinicki, 2009
    8. 8. Closed vs. Open SystemsClosed Systems Open Systems Krietner/Kinicki, 2009
    9. 9. Open System Organization OutputsInputs Goals and Technical • Products Material Values Subsystem • Services Money Subsystem • Human Human effort satisfaction Managerial • Organization Information Subsystem survival and growth • Social Psychological Structural benefit Subsystem Subsystem Feedback Krietner/Kinicki, 2009
    10. 10. Learning Organizations?Organizations need to develop and become adaptableThe concept of a “learning organization” was made popular in the„90‟s but many organizations have yet to reach their potentialA new measure assesses the three building blocks: • A supportive learning environment • Concrete learning processes and practices • Leadership that reinforces learningCompanies can be strong in some areas and weak in others Krietner/Kinicki, 2009
    11. 11. Organizational LearningExperience Knowledge Purpose Krietner/Kinicki, 2009
    12. 12. Org Learning Building BlocksSupportive Learning Environment • Psychological safety • Appreciation of differences • Openness to new ideas • Time for reflectionConcrete Learning Processes and Practices • Experimentation • Information Collection • Analysis • Education and TrainingLeadership that Reinforces Learning Krietner/Kinicki, 2009
    13. 13. Common StructuresFunctional• Organized according to business function (marketing, finance, etc.)Divisional Structure• Organized by activities related to outputs (e.g., product or service type)Matrix Structure• Horizontal cooperation necessary as is functional knowledge• Typically organized by function vertically and product/service horizontally Krietner/Kinicki, 2009
    14. 14. OD BackgroundWealth of Nations, 1776 OD, 1974 The Nature of the Firm, 1937 Krietner/Kinicki, 2009
    15. 15. Galbraith, 1974 Krietner/Kinicki, 2009
    16. 16. Organization DesignsVertical Lateral (with Vertical tendencies) Krietner/Kinicki, 2009
    17. 17. Organization Designs80’s - Teams 90’s – Communities of Practice Krietner/Kinicki, 2009
    18. 18. Organization Designs 2000’s – Networked Organizations Krietner/Kinicki, 2009
    19. 19. Organization Designs 2000’s – Complex Global Structures Krietner/Kinicki, 2009
    20. 20. Organization Designs 2000’s – Complex Global Structures Krietner/Kinicki, 2009
    21. 21. Holacracy Krietner/Kinicki, 2009
    22. 22. Organization DesignsComplexity – Economies of Scope, NOT Scale Krietner/Kinicki, 2009
    23. 23. CollaborationSource: http://www.aiim.org/What-is-Collaboration Krietner/Kinicki, 2009
    24. 24. Collaborative Horizontal Designs Appoint Organize Provide Flatten process around required hierarchy team Let supplier complete expertise and use leaders to and customer workflow from teams to manage contact drive processes outside the manage internal performance.rather than team as everything team tasks required. processes. Krietner/Kinicki, 2009
    25. 25. The White Spaces (Rummler/Brache) CEO Assistant“A primary contribution of a VP VP VP manager at the second level or above is to manage Line Line Line interfaces. The boxes Manager Manager Manager already have managers; the Senior manager adds value Individual Individual Individual Contributor Contributor Contributorby managing the white space between the boxes.” Individual Individual Individual Contributor Contributor Contributor Individual Individual Individual Contributor Contributor Contributor Krietner/Kinicki, 2009
    26. 26. Open BoundariesHollow• Outsourcing non-core processes to those more ableModular• Outsources parts of a product rather than processesVirtual• Temporary company created to respond to an exceptional market opportunity Krietner/Kinicki, 2009
    27. 27. Mechanistic vs. Organic Characteristic Mechanistic Organic Task definition & knowledge Narrow: Technical Broad: General required Linkage between individual’s contribution & organization’s Vague or Indirect Clear or Direct purpose Task flexibility Rigid; Routine Flexible, Varied Specification of techniques, Specific General obligations, & rights Degree of hierarchal control High Low Primary communication pattern Top-Down Lateral Primary decision-making style Authoritative ParticipativeEmphasis on obedience and loyalty High Low Krietner/Kinicki, 2009
    28. 28. What Do You Think? 1. Which decision-making approach tends to be used in mechanistic organizations? a. Decentralized b. Centralized 2. Which decision-making approach tends to be used in unstable and uncertain environments? a. Decentralized b. Centralized Krietner/Kinicki, 2009
    29. 29. Assessing Org Effectiveness Goal AccomplishmentResource InternalAcquisition Processes Strategic Constituencies Satisfaction Krietner/Kinicki, 2009
    30. 30. Signs of Decline1. Excess personnel 8. Loss of effective2. Tolerance of incompetence communication3. Cumbersome administrative 9. Outdated organizational procedures structure4. Disproportionate staff power 10. Increased scapegoating by leaders5. Replacement of substance with form 11. Resistance to change6. Scarcity of clear goals and 12. Low morale decision benchmarks 13. Special interest groups are7. Fear of embarrassment and more vocal conflict 14. Decreased innovation Krietner/Kinicki, 2009
    31. 31. InnovationCreativityInvention InnovationIntegration Krietner/Kinicki, 2009
    32. 32. Seeds of Innovation 1. Hard work in a specific direction 2. Hard work with direction change 3. Curiosity 4. Wealth and money 5. Necessity 6. Combination of seeds 7. Collaboration Krietner/Kinicki, 2009
    33. 33. Breakthrough InnovatorsMore than 2/3rds of directors at leading globalcompanies cite innovation as critical for long-termsuccessHow can we Innovative talent is rare sustaininnovation? Be aware of organizational 5-10% of processes and practices that high How do we potential squelch innovationdevelop future leaders who managers Don‟t base promotions on ability to can facilitate mimic incumbents this goal? Krietner/Kinicki, 2009
    34. 34. Breakthrough InnovatorsWhat innovators look like Strong cognitive abilities Strong analytic skills, can focus on most important points Don‟t rely on past successes Keenly aware of others‟ motivations and interests when “selling” their idea Krietner/Kinicki, 2009
    35. 35. Innovative HotspotsThe Focused Brute Force Hollyworld Large-ScaleFactory • Apply massive • “Global Ecosystems• Invest in a amounts of creative class” • End-to-end handful of low-cost labor • Silicon Valley innovation industries or to different systems with research fields innovative government as• Singapore, projects steward Denmark • Microsoft in • Finland Beijing Krietner/Kinicki, 2009
    36. 36. The Design of Business (Martin) Krietner/Kinicki, 2009
    37. 37. The Design of Business (Martin) Krietner/Kinicki, 2009
    38. 38. What‟s Your Objective? Krietner/Kinicki, 2009