This document discusses the debate around separation versus integration in organization design. It provides three arguments for separation: 1) to avoid conflict of interest, 2) to minimize coordination costs, and 3) to avoid goal conflicts. The document uses examples from Nestle to illustrate how establishing separate units can pursue innovation goals independently from existing business units. Overall, the document analyzes the tradeoffs between separation and integration and presents arguments for why separation of responsibilities may be preferable in some cases.

1. Separation versus
integration in
organization design
Nicolay Worren
European Organisation Design Forum conference, Vevey,
Switzerland, May 10-11, 2012

2. The dilemma
Vs.
Separation Integration

3. Three arguments
for separation
1.
2.
3.

4. The governance perspective
Nestlé
Corporate
Governance
Report
Separation of responsibilities

5. Underlying principle

6. Universal?
“Let the wolf take care of the sheep”
“Let the fox guard the hen house”
“Let the dingo take care of the kids”
“Letting the ram take care of the bag of
oats”.
“Giving the keys to the thief”

7. Three arguments
for separation
1. Avoid conflict of interest 
2.
3.

8. Three arguments
for separation
1. Avoid conflict of interest
2.
3.

9. Integration leads to coordination...
which leads to coordination costs.
Time in meetings
Corporate e-mail traffic
(billions of messages per year)
35
30
25
20
15
1960
10
5
0
2003 2004 2005 2006
1982

10. When there’s no role separation,
everybody needs to coordinate with
everybody
1 2 3 4 5 6 7 8 9 10
Advisor 1 (responsible for employee survey and x x x x x x x x
division 1) 1
Advisor 2 (responsible for performance mngt x x x x x x x
and division 2) 2
Advisor 3 (responsible for leadership x x x x x x x
development and division 3) 3
Advisor 4 (responsible for competence x x x x x x x x
management and division 4) 4
Advisor 5 (responsible for succession planning x x x x x x x
and division 5) 5
Advisor 6 (works on performance mngt, x x x x x x x
responsible for division 6) 6
Advisor7 (works on leadership development, x x x x x x x
responsible for division 7) 7
Advisor 8 (works on employee survey, x x x x x x
responsible for division 8) 8
x
Advisor 9 (works on employee survey) 9
Advisor 10 (works on competence x
management) 10
Source: Worren (2012)

11. Three arguments
for separation
1. Avoid conflict of interest
2. Minimize coordination cost 
3.

12. Three arguments
for separation
1. Avoid conflict of interest
2. Minimize coordination cost
3.

13. Three arguments
for separation
1. Avoid conflict of interest
2. Minimize coordination cost
3.

14. Pursuing different goals
in same vs different unit
Q: What's the best way to organize for innovation?
Option 1 Option 2 Option 3
Functional structure Cross-functional team Structurally independent
Manager Manager
Manager
Mfg Sales R&D Mfg Sales R&D
Existing New
New business business business
25% succeeded 90% succeeded
Source: O’Reilly, C. A. & Tushman, M. L. (2004)

15. Nestlé does it
“The corporate team set up a
separate unit, fully owned by
Nestlé, but completely independent
from the main organization”
Informant in case study of innovation in Nestlé by Raisch & Tushman (2011)

16. Three arguments
for separation
1. Avoid conflict of interest
2. Minimize coordination cost
3. Avoid goal conflicts 

17. Resources
Blog:
Article Book www.organizationdesign.net
http://www.amazon.co.uk