How Organizational Design influence the Corporate Strategy>>>Fundamental Formula : profit per employee per capita rather ROIHierarchies & Collaborations…20thvs 21st century…
Manner in which a managementachieves the rightcombination of differentiation and integration of the organization'soperations, in response to the level of uncertainty in its external environment. Differentiation refers to the sub-division of functional or departmental units, each concentrating on a particular aspect of the organization's operations. Integration refers to the linking of differentiated units to achieve unity of effort in working toward organization's goals. In times of high uncertainty, greater organizationaleffectiveness is achieved through high differentiation coupled with high integration. In times of low uncertainty, through low differentiation and low integration.
What its is & Need?Organization design may involve strategic decisions, but is properly viewed as a path to effective strategy execution. The design process nearly always entails making trade-offs of one set of structural benefits against another. Many companies fall into the trap of making repeated changes in organization structure, with little benefit to the business. This often occurs because changes in structure are relatively easy to execute while creating the impression that something substantial is happening. This often leads to cynicism and confusion within the organization. More powerful change happens when there are clear design objectives driven by a new business strategy or forces in the market that require a different approach to organizing resources.Product – Formal Arrangement – Look (object based)Service – Touchpoint Arrangement – Experience (time based)Organization – Social Arrangement – Relationship (interaction based)
The classic options for strategic grouping are to organize by:BehaviorFunctionProduct or category or serviceCustomer or marketGeographyMatrixEach of the basic building block options for strategic grouping brings a set of benefits and drawbacks. Such generic pros and cons, however, are not the basis for choosing the best strategic grouping. An analysis must be done completed relative to a specific business strategy.
Elements determine the formulation of Questionnaire, Surveys, team charter or assessment for any tyoe of organization
Method:The organization design process is often defined in phases. Phase one is the definition of a business case, including a clear picture of strategy and design objectives. This step is typically followed by "strategic grouping" decisions, which will define the fundamental architecture of the organization - essentially deciding which major roles will report at the top of the organization. Subsequent phases of organization design include operational design of processes, roles, measures and reward systems, followed by staffing and other implementation tasks.The Principles of Organization Design have been known for 30 years in the academic and consulting community. Knowing the principles and implementing them are clearly two different things. First, I will detail the principles and following that I will highlight what has made the implementation so difficult.1. Complementarities:How we go about restructuring needs to be compatible with what we are trying to achieve by the restructuring. The process of design must be complementary with the objectives. This means the design and implementation process is critical. If you want flexibility and participation within the work group as an output of the design, then how you go about designing the organization has to be flexible, interactive and participatory.If the completed work system will depend upon high levels of meaningful flexibility in accomplishing the work, then it is through a process of meaningful flexibility that the system needs to be built. The “means” have to be complimentary with the “ends”. In other words, if you want a system where people assume responsibility, then people have to be responsibly involved in creating the work system or you won’t get it. We do not get participative highly effective organizations by fiat.2. Minimal Critical Specification:New technologies require people to learn and change. These abilities have to be developed through the work itself. Therefore, specify as little as possible concerning how tasks combine into jobs and how people are to interact within jobs. The creation of a well-designed work team must involve dialogue and decisions being made by the people involved. Most teams struggle from over-structure, which is based in job descriptions and compensation schemes, which result in “that’s not my job”. The trick in building a team that works is to specify no more than is absolutely necessary about the task or how jobs relate to the task, or how people relate to individual jobs. To build a high performance team the rule is to FIX as little as possible. This means to identify and specify no more than what is absolutely critical. Generally the critical information is about output expected. The vision of results is very important and has to be co-constructed with the group but more than anything you want to build an organic ability to learn and change into the team.3. Variance Control:Support and reward groups that deal with errors at the point of origin. Effective teams need the legitimacy to find out where things go wrong and deal with variance where it occurs. The goal is to minimize exporting problems to others. The assumption that is safe to make is that people know what good work looks like. Exporting problems and unsatisfied customer needs is the mark of a team that lacks options.4. Clear Goals and Flexible Strategies:Define what is expected in terms of performance early and clearly and then support adaptations toward appropriate means by which the group can achieve ends. (Do not over-specify.) This is an adaptability principle, which recognizes that we are designing living systems rather than machines. With living systems, the same ends can be reached by different means. There are a lot of ways to solve problems and meet a customers needs. What is critical here is the definition and understanding of the end goal. The “What” is to be highly specified. The “How” is open to local decision and initiative. This enables learning and an increased sense of “efficacy” on the part of team members. Efficacy is the sense that we are effective as a team that we can make a difference and do the job well. Efficacy is fragile and needs to be supported by continuous learning and improvement. High performance teams constantly “tinker” with the means by which they accomplish their results. They seldom settle on “one best way”.To review- The first 4 principles are: the design process is important, how you do it needs to be complementary with what you are trying to accomplish. Don’t over-structure it, allow room for influence and change. Look for where it goes wrong and promote self-directed learning at the source of errors. Define the strategy and design a process to enable people to self-manage. To continue-5. Boundary Location and Control:Supervisors and managers have to grow to become more comfortable performing a role as a group resource, a beacon of coming changes and a coordinator across task group boundaries.Traditional organizations group by: time, technology or territory. The weakness of this is that boundaries interfere with the desirable sharing of knowledge and experience and so learning suffers. The consistent social-technical message is if there are supervisors, they manage the boundaries as a group resource, insuring the group has adequate resources, coordinating activities with other groups and foreseeing coming changes. More and more these resource positions are disappearing as groups become more self-regulating. Often the presence of supervisors is an indication of a lack of success in a groups design, or unwillingness at higher levels to trust based upon a poor job of building the structure. When it is done right supervisors are superfluous at best and harmful at worse.6. Information Flow:Teams have to be deeply involved to determine what and where information is needed for self-direction. There needs to be a management commitment to provide information for task performance and learning. Information has to be provided where it is needed for self-direction, learning, and task improvement. Control has to be subordinated to achievement.7. Support Congruence:Goals, reward and support systems that integrate required behaviors have to be consistent. The reward and support systems have to be consistent with goals. Incentives have to be realigned to support team-based work structures. Individual based compensation systems are being modified continually to support many different team structures. Skill-based schemes and gain sharing are foundations for high performance.8. Design and Human Values:Task and organization design has to be oriented toward improving both the technical and the human components of the organization. The process of design must address the need for variation and meaning in work. It has to take into account the needs for continuous learning, involvement in decision-making, help and support between colleagues, and meaningful relationship between work and outside society, a desirable future. A re-design enterprise will be successful only if it unites a process of organization development, which includes work restructuring combined with a planning process that is both interactive and participatory.9. Incompletion:Design is a continuous commitment, a reiterative process. A design is a solution, which inevitably has to be changed, therefore it is critical to build learning and change ability into the team. Management has to appreciate that organization design toward high performance is a continuous process. What has to be learned is the process of design because it is a never-ending necessity. Deep in our organizations, people have to learn how to periodically re-fashion their organizational arrangements. Everything falls out of balance and has to be reviewed with an eye toward deciding upon changes necessary. In the early stages learning how to redesign is often more important than the design itself. The design will change over time and learning how to do it is a team life skill.The basic message is that if you want people to assume responsibility for the work process you have to involve them in the work redesign process itself. Responsibility is the essence of self-management. To accept responsibility people have to define and make decisions. The tendency is for management to hand the operational people an output of redesign thinking done by others, and expect them to work it. Expecting also, the supervisors to supervise the implementation of a design which management has completed. The trick of organizing for real teamwork is getting everyone involved in the total systems improvement.
Product – Formal Arrangement – Look (object based)Service – Touchpoint Arrangement – Experience (time based)Organization – Social Arrangement – Relationship (interaction based)Other designs:Boundaryless organizationLearning OrganizationEnvironmental And Technical factors::Pooles Sequential ReciprocalSlide 14.9Organizational Uses ofFunctional DesignPermits clear identification and assignment of responsibilitiesEmployees easily understand the designPeople doing similar tasks and facing similar problems work together, thus increasing the opportunities for interaction and mutual supportEmployees tend to lose sight of the organization as a wholeCoordination across functional departments often becomes difficultWith the exception of marketing, most employees have no direct contact with customers and may lose sight of the need to meet or exceed customer expectationsMay be effective when the organization:Has a narrow product lineCompetes in a uniform environmentPursues a low-cost or focused business strategyDoes not have to respond to the pressures of serving different types of customersSlide 14.10 Organizational Uses of Place DesignEach department or division is in direct contact with customers in its locale and can adapt more readily to their demandsLower costs for materials, freight, and perhaps labor may resultMarketing strategies and tactics can be tailored to geographic regionsControl and coordination problems increaseEmployees may begin to emphasize their own unit’s goals and needs rather than those of the entire organizationSlide 14.12 Organizational Uses ofProduct DesignReduces the information overload that managers face in a purely functional designMore effective handling of the business is possibleAddition of product lines, diverse customers, and technological advances increases the complexity and uncertainty of an organization’s business environmentProduct design may incorporate features of functional and place designs into the organization of each product divisionSlide 14.13 Organizational Uses ofMultidivisional DesignEases problems of coordination by focusing functional expertise and knowledge on specific goods or servicesA firm must have a large number of managerial personnel to oversee all the product linesHigher costs result from the duplication of various functions Often reduces the environmental complexity facing any one team, department, or divisionHorizontal mechanisms help in dealing with complex environmentsSlide 14.15Organizational Uses ofMultinational DesignWorldwide product-line divisions will be more dominant than geographically based divisions under certain conditionsA worldwide product-line division may not be as effective at opening up new territories as a geographically organized divisionA division operating under a place design often:Can establish relations with host governmentsInvest in distribution channelsDevelop brand recognitionBuild competencies that no single product-line division could afford Slide 14.16Key Elements of Network DesignDistinctive competenceResponsibilityGoal settingCommunicationInformation technologyOrganization designBalanced viewSlide 14.17Organizational Uses ofNetwork DesignEffective in creating alliances of flexible partnershipsCan create successful external relationships through:ImportanceInvestmentInterdependenceIntegrationInformationInstitutionalizationSlide 14.19Organizational Uses of Virtual DesignStructure can be changed quickly to meet changing conditions and situationsBoundaries between an organization and its customers and suppliers are blurredEmployees continually master new manufacturing and information technologies, speeding the production process and the flow of information through the organizationEmployees respond quickly to changing customer demands with customized products and services available at any time and placeEmployees are reciprocally interdependentManagers delegate authority and responsibility to employees while providing a clear vision of the organization’s purpose and goals
Mechanistic ModelA structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization.Organic ModelA structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.Why Do Structures Differ? – StrategyInnovation StrategyA strategy that emphasizes the introduction of major new products and services.Cost-minimization StrategyA strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.Imitation StrategyA strategy that seeks to move into new products or new markets only after their viability has already been proven.Strategy Structural OptionInnovation Organic: A loose structure; low specialization, low formalization, decentralizedCost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralizationImitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakingsStructure differ due to size technology environment strategy bureaucracyThe organization operates according to a set of rules that are intended to tightly control employees’ behaviorAll employees must carefully follow extensive impersonal rules and procedures in making decisionsEach employee’s job involves a specified area of expertise, with strictly defined obligations, authority, and powers to compel obedienceEach lower-level position is under the tight control and direction of a higher oneCandidates for jobs are selected on the basis of “technical” qualificationsThe organization has a career ladder; promotion is by seniority or achievement and depends on the judgment of superiors
The primary determinant > strategy size technology environment >> the design///Then the motivation by leadership enhances the performance and job satisfaction…
Definition: Complex one but is vital entity that determines the design feature of an organization…Research Findings:Work specialization contributes to higher employee productivity, but it reduces job satisfaction.The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.Participative decision making in decentralized organizations is positively related to job satisfaction.
The three levels refer to the layers of corporate culture.Artifacts include any tangible or verbally identifiable elements in an organization. Architecture, furniture, dress code, office jokes, and history all exemplify organizational artifacts.Values are the organization's stated or desired cultural elements. This is most often[a written or stated tone that the CEO or President hope to exude throughout the office environment. Examples of this would be employee professionalism, or a "family first" mantra.Assumptions are the actual values that the culture represents, not necessarily correlated to the values. These assumptions are typically so well integrated in the office dynamic that they are hard to recognize from within.
• multi-layered : structured in irreducible layers (not reducible to basic rolesand their interrelations);• designed : created by means of a decisional process and with speciﬁcobjec-tives in mind;• agentive: coordinating agents in order to obtain its objectives;• realized : ultimately built by autonomous agents playing speciﬁc roles;• situated : immersed in the environment• dynamic: its structure and its realization may change through time;• regulated : governed and structured by norms.
Employee Motivation Workers in any organization need something to keep them working. Most times the salary of the employee is enough to keep him or her working for an organization. However, sometimes just working for salary is not enough for employees to stay at an organization. An employee must be motivated to work for a company or organization. If no motivation is present in an employee, then that employee’s quality of work or all work in general will deteriorate.Work specialization contributes to higher employee productivity, but it reduces job satisfaction.The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.Participative decision making in decentralized organizations is positively related to job satisfaction.Gore is one of the most innovative and successful companies around and still reflects the thinking of its founder, Bill Gore. Terry says:First, we don’t want to operate in a hierarchy, where decisions have to make their way up to the top and then back down. We’re a lattice or a network, not a hierarchy, and associates can go directly to anyone in the organization to get what they need to be successful.Second, we try to resist titles. We have a lot of people in responsible positions in the organization, but the whole notion of a title puts you in a box, and worse, it puts you in a position where you can assume you have authority to command others in the organization. So we resist this.Third, our associates, who are all owners in the company, self-commit to what they want to work on. We believe that rather than having a boss or leader tell people what to do, it’s more powerful to have each person decide what they want to work on and where they can make the greatest contribution. But once you’ve made your commitment as an associate, there’s an expectation that you’ll deliver. So there are two sides to the coin: freedom to decide and a commitment to deliver on your promises.And fourth: Our leaders have positions of authority because they have followers. Rather than relying on a top-down appointment process, where you often get promoted because you have seniority, or are the best friend of a senior executive, we allow the voice of the organization to determine who’s really qualified to be a leader, based on the willingness of others to follow.
Purpose and strategy assets (purpose, vision, values, mission, strategy)Discovery and innovation assets (including intellectual capital/intellectual property creation and new product and service development)Organizational processes and structure assets (including roles, responsibilities, reporting relationships, organization design process, business processes)People assets (including human capital, talent management – acquisition, development, retention, and the learning organization)Information technology assets (including hardware, software, connecting-ware and people-ware)Branding assets (including product brands, service brands, leadership brand, and people brand)Marketing and selling assets (including marketing strategy, market research, and the sales approach)Culture assets (including values, traditions, norms, symbols, rituals, and stories)Measurement & Accountability Systems (how you track and learn from performance, contribution, and outcomes)Vision & Execution Architecture (a visual depiction of the intangible assets)When crafting a new strategy, these are the categories of design assets that one needs to consider when deciding whether a particular strategic bundle (set of strategic choices) is practical to select and implement.
Motivation Practice of Strategy Design in Design Management Psychology Lessons [HSS] Management of Organizational Behaviour Entrepreneurial Drive Management Education
Content What is Organization Design? n /.. (def_, structures etc) Organizational Architecture /.. (Design Models) Elements of Organizational Structure /.. (Foundation) Organization Design Process /.. (Design Phases) Organizational Culture /.. (Planning-Implementation) Organizational Assessment /.. (Team management, roles) Strategies for Designing Aesthetic organizations Organizational Learning : Case Study[Study on factors of Motivation of employees at HDFC Life Insurance]
What is an Organization design?Organization design can bedefined as the• process of (re)shapingorganization structure androles of teams/members.• alignment ofstructure, process, rewards, metrics and talent with thestrategy of the business whichare necessary to create newcapabilities to compete in agiven market.
Organizational ArchitectureReview Possible Organizational Structures There are five basic choices (plus hybrids) for design alternatives: – 1. Functional: Units are formed according to major technical or professional function performed – 2. Product Based: Units are formed around each of the major products (or services) – 3. Customer or Geographical Area-Based: Units are formed around the characteristics or location of customers or markets – 4. Business Process Teams: cross-functional teams structured around the major work processes – 5. Matrix: Units are formed where individuals have accountability to two managers: one functional and one project/product – 6. Hybrid: Units are formed which mix and match the above structures to create the best fit to their environment
Elements of Organizational Structure Work Specialization [Explicit Roles and Responsibilities] Chain of Command [Lines of Authority/Reporting Relationships] Departmentalization [Communication and Information Flow (Knowledge Sharing)] Centralization and Decentralization [Actual Performance Measures] Span of Control Formalization
Organization Design Process Confirm Develop and Create and Organization Prioritize Evaluate Org Mission- Design Structure Value, Strategy Principles Alternatives , Goals & Objectives Identify Stakeholders Identify Stakeholder Develop Alternatives Needs/Expectations Evaluate Using Create Design Design Principles Principles Develop Prioritize Design Advantages/ Principles Disadvantages for each alternative
Organizational Culture Characteristics of Healthy Organizational Cultures• Acceptance and appreciation for diversity• Employee Empowerment [opportunities/pride of work]• Strong communication with all employees regarding policies and company issues• Strong company leaders with a strong sense of direction and purpose• Ability to compete in industry innovation and customer service, as well as price• Guidance learning, training, and employee knowledge• Better aligning the company towards achieving its vision, mission, and goals [lateral management]• High employee motivation and loyalty [reward and incentive]• Increased team cohesiveness across various departments and divisions• Promoting consistency and encouraging coordination and control• Shaping employee behavior at work, enabling the organization to be more efficient
Levels of Organizational Culture Scheins model of organizational culture originated in the 1980s. Schein (2004) identifies three distinct levels in organizational cultures:• artifacts and behaviors• exposed values• assumptions
Team AssessmentFormulation of Team Charter was Team roles Identified through theprepared on following Team role charter:characteristics: Chairperson Individual Contribution Shaper Personal Shortcomings Ideas Person Individual Performance Monitor- Evaluator Characteristic Approach Company Worker Job Satisfaction Team worker Challenging Situations Resource Investigator Problematic Circumstances Job Finisher
Organizational Learning : Case Study• Motivation [intrinsic | extrinsic] is the driving force which help causes us toachieve goals.• Objective was to study the factors of intrinsic motivation of an employee in anorganization. The study was primarily done to identify and assess these factors onthe scale of their importance for the employee motivation.• Method used in study is a simple research method of formulating hypothesisand testing their validation against the scores collected from the data set ofemployees.• 12 positive statements were made based on the following 6 factors ofmotivation and their correlation on BIG5 personality traits(a)Choice (b)Competence (c)Managerial Support(d)Meaningfulness (e)Progress (f)Hygiene Factors• e.g. Competent employees are progressive at work [0.65]:I feel I can succeed on tasks given by my boss. Were answered as positively asQuestions like: I have achieved the promotion/increment atleast once in last 2 yrs.
Strategies for Designing Organizations• Demarking the Intangible Assets which are the building blocks of thestrategic organizational design process & contribute 70 and 90% of the valueof organizations.• Strategic alignment: an organization is designed to achieve certainobjectives therefore each of its components (units, teams, roles, processes)must align to these objectives.• Engagement of key stakeholders: those stakeholders who will operate in thenew organization must be part of the design process – providing options andweighing in on key decisions.• Data-based decision making: the process makes it clear for the participantswhat the trade-offs are between different designs and it leverages data tohelp the design team make informed decisions.• For the aesthetic appeal of organizational design principles may be based onthe beliefs and values that are inherent to a given organizational culture.
Opportunity to changePreceding HygienefactorsAccelerated workpaceRisk analysisNew Businesspropositions
Conclusion• The study of organization design is a structured process itentails the study of organizational elements, existingarchitecture and the design process.• The organizational culture is an important field to interpret theinternal arrangement of entities in organization and adapt tochanges of external environment.• Organizational learning is vital to assess any organization andthe design process primarily revolves around this assessment.• Strategies for designing organizations are formulated based onorganizational learning and overall organization working process.• Vital studies for HR development, organization design andinnovation that big corporate outside are venturing currently.
References• Mckinsey Quaterly 2007 Lowell Bryan• Gibson, Ivancevich, Donnelly, & Konopaske. (2003). Organizations: Behavior, Structure, Processes• Kates, A., and Galbraith, J. R. (2007), Designing Your Organization: Using the Star Model to Solve Five Critical Design Challenges• Melcher, A.J. (1976). Structure and Process of Organizations: A Systems Approach• HSS 401 Mgmt of Organizational Behaviour [Robins, Luthans, Sekran]• Cross Cultural Assessment of OB in design oriented companies• Study of the process of organizational learning in software firms in INDIA• Exploring talent management in India: The neglected role of intrinsic rewards• Richard Daft : Organizational Theory and Design• How can organizations embrace Design Thinking? <Copernicus Consulting>