7 - Organization Design - Part II - Structure and Process
issue is the second of a three-part series on Organization Design.
covers two of the five important elements that must be taken into
account when doing organization design work, Structure and Processes.
the next issue, we will discuss People and Rewards, the two remaining
variables. You may wish to review the first issue that gave
an overview of the topic and Strategy before continuing with this
one. You can access it here.
issue also contains:
2. A Review of Designing Organizations:
An Executive Briefing on Strategy, Structure, and Process by Jay
3. Pointers to additional information
on this topic.
STRUCTURE AND PROCESSES: THE RECIPROCALS OF ORGANIZATION DESIGN
of the fundamental concepts underlying Organization Design is Differentiation
and Integration (D/I). Differentiation refers to determining
what the basic units of the organization will be--what needs to
be separate and distinct, based on the required functions or focuses
of the organization. Integration refers to how to get the differentiated
parts to "play" together, i.e. how to ensure that the parts of the
organization can interact to provide the necessary coordinated outputs.
large, complex, highly interdependent organizations, it is especially
important to pay attention to the balance between the two in order
to enable the required collaboration. Therefore, when designing
an organization, each time a differentiation step is taken, consideration
must be given to a corresponding integration step: it is the Structure
of the organization that creates differentiation, and the Processes
that enable integration.
defines how the organization's resources are to be grouped and held.
It also specifies reporting relationships; layers or levels of management;
the placement of power and authority; work design; and the relationship
of functions, groups, operations, and tasks to each other and to
various stakeholders. The dimensions around which organizations
are most typically differentiated or structured are: products, markets
and/or customers, functions, and geography.
of the multiple demands and market conditions that organizations
face, structures are often created that address more than one dimension.
For example, matrixed organizations combine elements of product/customer
and functional dimensions are employees work simultaneously for
two bosses. Business Units focus attention on a particular market
or line of business, giving it the resources that are required for
it to operate essentially as a separate entity (though it may share
the services of some centralized or common functions, e.g. finance,
human resources, facilities, legal, etc.)
are also said to be hierarchical or flat. This refers to the
number of layers or levels of managers and their respective groups
and the distribution of power and authority within the organization.
Thus, a steep hierarchy would have many layers with the power and
authority concentrated at the top. A flat organization would have
fewer layers of management, each with a larger span of control.
Because a single manager can't direct all the activities or make
all the decisions, more authority and power is given to work groups,
teams, and individuals. This form of organization requires more
enable organizations to perform well on the dimensions of speed,
cost, quality, and innovation. They include both business processes
(e.g., quality systems, order fulfillment, and financial reporting)
and processes that enable human interaction or manage the interface
between employees and the business, such as performance appraisal,
problem solving and decision making, and information and communication.
These processes enable the knowledge, skills, and abilities of many
"people, groups, functions, organization" to be brought to bear
on problems, opportunities, and outcomes that are complex and/or
require the expertise of multiple specialties for resolution.
are also either vertical or lateral. Vertical processes manage
the allocation of scarce resources. Lateral or horizontal processes
manage coordination across the steps in a continuous or interdependent
work process that spans departments, functions, and/or organizations.
order to design an organization that functions effectively, the
Structure and the Processes must be considered and developed concurrently
and interactively. A common error in organization design is
thinking that the Structure is all there is, so the "lines and boxes"
are redrawn, but little or no attention is paid to the processes
that define, focus, and enable the required integration, coordination,
and collaboration among the differentiated entities.
just as the Structure won't work without corresponding integrative
processes to support it, there are Structural design alternatives
that will increase the likelihood that people will be able to work
together more collaboratively and interdependently. When undertaking
a design effort, we encourage our clients to do a thorough and detailed
analysis of interdependencies before finalizing a structure. The
Structure and the Processes can then be designed in relationship
with each other against a set of overall design criteria.
Designing Organizations: An Executive Briefing on Strategy, Structure,
and Process by Jay R. Galbraith. (Jossey-Bass Publishers, 1995)
of modern organizations are becoming increasingly involved in organization
design: first, to create knowledge-based organizations, and
second, to create effective, rapid responses to powerful customers.
Designing Organizations is a leader's concise guide to the creating
and managing of an organization. It focuses primarily on the structure
and process sections of the Star Model (discussed previously).
examines the forces that are shaping today's organizations "buyer
power, variety, speed, and change" and how they affect organization
design. As a result of buyer power, more organizational structures
are being designed around market segments or specific customers.
Variety forces management to bring more people into the decision
processes, primarily through decentralization. Change requires that
companies make more decisions more frequently, and thus to expand
their decision-making capacity. Speed requires that decisions be
moved to points of direct contact with the work, to meet shorter
the section Choosing an Effective Design, Galbraith introduces the
concepts of Structure and Process. The structure of the organization
determines the placement of power and authority. Structure policies
fall into four areas:
SPECIALIZATION: the type and number of job specialties used
in performing the work;
SHAPE: the number of people constituting the departments;
DISTRIBUTION OF POWER: the classic issues of centralization
and decentralization, and the more modern concept of movement
of power to the departments;
DEPARTMENTALIZATION: the basis for forming departments at
each level of the structure. The standard dimensions on which
departments are formed are functions, products, workflow processes,
markets, and geography.
and decision processes cut across the organization's structure.
Management processes are both vertical and horizontal:
PROCESSES allocate the resources of funds and talent. They are
usually business planning and budgeting processes. The needs of
different departments are centrally collected, and priorities are
decided for the budgeting and allocation of the resources to capital,
research and development, training, etc.
PROCESSES (also known as Lateral Processes) are designed around
the workflow (e.g., new product development or customer order
fulfillment). These processes are becoming the primary vehicle for
managing in today's organizations. Lateral processes can be carried
out in a range of ways, from voluntary contacts between employees
to complex and formally chartered teams.
Organizations offers us both time-tested knowledge and current innovative
trends. It is intended to provide a contrast to the oversell
that often accompanies popular ideas. Sometimes the hype diminishes
the usefulness of new ideas by turning them into fads. This book
portrays new ideas as useful tools that should be understood by
every leader and consultant to be kept in every their toolboxes
and taken out only when appropriate.
the book falls short, however, is in the implementation of the tools
introduced. Over and over again, I found myself wishing that
Galbraith would say more about how to use the concepts and how to
integrate them into an already existing organization and culture.
Websites and Other Resources we've found about this topic include:
* The Association for
the Management of Organization Design
is the website of a nonprofit organization that promotes the knowledge
and practice of organization design.
S.A., Cohen, S.G., and Mohrman, A.M. Designing team-based
organizations: New forms for knowledge work. (1995). San Francisco:
is a research-based, how-to book on designing an organization in
which teams are the fundamental units of performance. It presents
a systemic rather than an occasional approach to teams as an alternative
to hierarchies as a form of organization structure.
available as companions to this book are :
and leading team-based organizations: A workbook for organizational
and leading tram-based organizations: A leaders/facilitator's guide
E.E. The ultimate advantage: Creating the high-involvement
organization. (1992). San Francisco: Jossey-Bass Publishers.
book, particularly Part Two, looks at designing a structure for
employee involvement in organizations, which Lawler views as a source
of competitive advantage for organizations.
S. and Lawrence, P. Matrix. (1977). Reading, Massachusetts:
book is the classic on matrixed structures. It provides guidelines
and tools for the development of matrix organizations which Davis
and Lawrence believe is the viable answer to the age-old centralization
vs. decentralization question.
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