Transorganizational Organizational Development

Transorganizational change is the change in the arena of relationships between organizations that affect not only the
single organization but impacts the whole network of organizations. It is a planned change in the network of
relationships with a variety of stakeholders to accomplish something which is beyond the capability of a single
entity or organization.

Organization development OD is an ongoing, systematic process of implementing organizational change

effectively. Its main objective is to improve organizational performance by handling its internal and external
functioning of relationship.
They are developing highly complex network so as to gain competitive advantage in this rapidly changing
environment.

Most of the challenges facing in the field of OD is arising due to the growing network age where new
organizational forms by partnering or merging and redesign of work structure is of prime importance to facilitate
the new changes in technologies, market or new collaborative culture.

Cummings (1984) has proposed a four-stage OD model for improving collaboration in networks called
Transorganizational development (TOD), which is defined as:

“It is an intervention concerned with helping organizations to join into partnerships with other organizations to
perform tasks or to solve problems that are too complex for single organizations to resolve. It helps organizations to
recognize the need for partnerships and to develop appropriate structures for implementing them. (Cummings &
Worley, 1997, p. 151)”

Explain the rationale and logic behind organization collaboration. Describe and apply organization development
(OD) interventions that enable mergers and acquisitions. Discuss and apply the OD process to alliance formation
and development. Describe the process of network formation and transorganizational development as well as how
networks change.

Transorganizational Rationale Transorganizational strategies allow organizations to perform tasks that are too
costly and complicated for single organizations to perform Goods and services are exchanged between
organizations and transactions occur Transorganizational strategies work best when transactions occur frequently
and are well understood

Transorganizational Systems Members maintain their separate organizational identities and goals Tend to be
underorganized and member organizations are loosely coupled Different from mergers and acquisitions Network
interventions may be appropriate

Mergers and Acquisitions Merger -- the integration of two previously independent organizations into a
completely new organization Acquisition -- the purchase of one organization by another for integration into the
acquiring organization Distinct from transorganizational systems, such as alliances and networks, because at least
one of the organizations ceases to exist

Merger and Acquisition Rationale Diversification Vertical integration Gaining access to global markets,
technology, or other resources. Achieving operational efficiencies, improved innovation, or resource sharing.
Merger and Acquisition Application Stages Pre-combination Phase Search for and select candidate Create and
M&A team Establish the business case and perform a due diligence assessment Develop merger integration plans
Legal Combination Phase The two organizations settle on the terms of the deal, gain approval from regulatory
agencies and shareholders, and file appropriate legal documents Operational Combination Phase Implementing the
operational, technical and cultural integration activities

Strategic Alliance Interventions When two organizations formally agree to pursue a set of goals There is sharing
of resources, intellectual property, people, capital, technology, capabilities or physical assets Common alliances are
licensing agreements, franchises, long-term contracts, and joint ventures
Strategic Alliance Application Stages Alliance Strategy Formulation Clarify the business strategy and why an
alliance is needed Partner Selection Leverage similarities and differences to create competitive advantage Alliance
Structuring and Start-up Build and leverage trust in the relationship Alliance Operation and Adjustment

Network Interventions Involves three or more companies joined together for a common purpose Each
organization in the network has goals related to the network as well as those focused on self-interest Characterized
by two types of change: creating the initial network (transorganizational development) and managing change within
an established network

Application Stages for Transorganizational Development Identification Convention Organization Evaluation Who
should belong to the transorganizational System (TS)? Relevant skills, knowledge, and resources Key stakeholders
How to organize for task performance? Communication Leadership Policies and procedures Should a TS be
created? Costs and benefits Task perceptions How is the TS performing? Performance outcomes Quality of
interaction Member satisfaction

Managing Network Change Create instability in the network Manage the tipping point The Law of the Few:
Salespeople, Mavens, Connectors Stickiness The Power of Context Rely on self-organization.

Transorganizational Change

This chapter describes interventions that move beyond the single organization to include merging, allying, or
networking with other organizations. These multi-organization change programs are becoming more prevalent in
OD as organizations extend their boundaries to keep pace with highly complex and rapidly changing environments.
Under these conditions, organizations may merge with or acquire other firms to gain essential capabilities and
resources, to operate at a larger scale, and to enter new markets. They may form strategic alliances with other
organizations to share costs and expertise and to manage their exchanges more efficiently. They may join with other
firms to tackle complex problems and projects that single organizations cannot accomplish. Trans-organizational
change helps organizations create and sustain such multi-organization linkages. It helps organizations transcend the
perspective of a single organization and address the needs and concerns of all involved organizations.

This represents a fundamental shift in strategic orientation because the strategies, goals, structures, and processes of
two or more organizations become interdependent and must be coordinated and aligned. This raises the scope and
complexity of change processes; it increases the chances that conflicts and misunderstandings will occur.
Transorganizational change calls for OD practitioners to move to a higher level of diagnosis and intervention that
straddles the boundaries of different organizations, attends to their unique and often conflicting needs, and brings
structure to what is frequently an under-organized and highly uncertain process. Practitioners are having to develop
new concepts, skills, and expertise for implementing these change interventions. Because transorganizational
change is relatively new to OD, this chapter starts with an explanation of the rationale underlying multi-
organization arrangements. Then, three kinds of interventions are described: mergers and acquisitions, strategic
alliances, and networks.
Mergers and acquisitions leverage the strengths (or shore up the weaknesses) of one organization by combining
with another organization. This transorganizational change involves integrating many of the interventions
previously discussed in this text, including human process, technostructural, and human resources management
interventions. Research and practice in mergers and acquisitions strongly suggest that OD practices can contribute
to implementation success.

Alliance interventions, including joint ventures, franchising, and long-term contracts, helped to develop the
relationship between organizations that believe the benefits of cooperation outweigh the costs of lowered autonomy
and control. These increasingly common arrangements require each organization to understand its goals and
strategy in the relationship, build and leverage trust, and ensure that it is receiving the expected benefits.

Finally—and building on the knowledge of alliances—network interventions are concerned with helping a group or
system of organizations engage in relationships to perform tasks or to solve problems that are too complex and
multifaceted for a single organization to resolve. These multi-organization systems abound in today’s environment
and include research and development consortia, public–private partnerships, and constellations of profit-seeking
organizations. They tend to be loosely coupled and nonhierarchical, and consequently they

More and more, organizations are linking with other organizations to achieve their objectives. These
transorganizational strategies can provide additional resources for large-scale research and development; spread the
risks of innovation; apply diverse expertise to complex problems and tasks; make information or technology
available to learn and develop new capabilities; position the organization to achieve economies of scale or scope;
and gain access to new, especially international, marketplaces.

1 For example, pharmaceutical firms form strategic alliances to distribute noncompeting medications and to avoid
the high costs of establishing sales organizations; firms from different countries form joint ventures to overcome
restrictive trade barriers; and high-technology firms form research consortia to undertake significant and costly
research and development for their industries. More generally, however, transorganizational strategies allow
organizations to perform tasks that are too costly and complicated for single organizations to perform.

2 These tasks include the full range of organizational activities, including purchasing raw materials, hiring and
compensating organization members, manufacturing and service delivery, obtaining investment capital, marketing
and distribution, and strategic planning. The key to understanding transorganizational strategies is recognizing that
these individual tasks must be coordinated with each other. Whenever a good or service from one of these tasks is
exchanged between two units (individuals, departments, or organizations), a transaction occurs. Transactions can be
designed and managed internally within the organization’s structure, or externally between organizations. For
example, organizations can acquire a raw materials provider and operate these tasks as part of internal operations or
they can collaborate with a raw material supplier through long-term contracts in an alliance.
Economists and organization theorists have spent considerable effort investigat-ing when transorganizational
strategies work best. They have developed frameworks, primarily transaction cost theory and agency theory, that
are useful for understanding these interventions.

3 As a rule, transorganizational strategies work well when transactions occur frequently and are well understood.
Many organizations, for example, outsource their payroll tasks because the inputs, such as hours worked, pay rates,
and employment status; the throughputs, such as tax rates and withholdings; and the out-puts occur regularly and
are governed by well-known laws and regulations. Moreover, if transactions involve people, equipment, or other
assets that are unique to the task, then transorganizational linkage is the preferred approach. For example, Microsoft
works with a variety of value-added resellers, independent software vendors, and small and large consulting
businesses to bring their products to customers ranging in size from individual consumers to the largest business
enterprises in the world. An internal sales and service department to handle the unique demands of each customer
segment would be much more expensive to implement and would not deliver the same level of quality as the
partner organizations. In general, relationships between and among organizations become more formalized as the
frequency of interaction increases, the type of information and other resources that are exchanged become more
proprietary, and the number of different types of exchanges increases.