Organizational Strategy

& Design

Two issues have dominated

discourse in the nineties
Global Competition
Innovation

To survive in todays
marketplace
Companies must not only be globally
aware, but they must also be globally
competent

Being globally competent

means
Competing with global companies in
your home markets
Competing with local companies in
their home markets
Competing in multiple national
markets with global companies

To Survive ...
Companies must also play 2 different
games simultaneously

The efficiency game

Companies need to continually get
better at competing in the short term
by
increasing the alignment among
strategy, design, people, culture and
processes

The innovation game

For sustainable success, they also
need to innovate...
Externally (new products & services)
Internally (new processes, procedures,
structures, etc.)

Thus, we will focus on

Managing ambidextrously the
simultaneous management of
innovation and stability
Managing global innovation
Managing the creation and transfer of
knowledge globally
Organization Culture
Societal Culture
Leadership

Strategies drive design

That is, an organizations strategy

determines which design will be most
appropriate for an organization

Some Strategic options include

Product & process innovation

Speed to market
Quality
Cost
Local sensitivity

Which design is most

appropriate for which
strategy?
It depends

Different designs can be

equally effective
if matched with the right strategy.

Lets talk about some key

elements of organization design

An Organizations Design is
composed of
Structure
Systems
Control
Information
Reward

People
Tasks

Organization Structure refers

to...

the clustering of people into groups

or departments and the coordination
patterns that align them with one
another.

Key elements include:

Work Specialization/Division of Labor
The subdivision of tasks into separate
tasks

Centralization/Decentralization
Concentration of decision-making at the
top vs. pushing decision discretion down

Formalization
Written rules, procedures, & instructions

Two organization designs that

have dominated the field are
Mechanistic
High formalization
High centralization
Autocratic
leadership style
Top down
communication
Limited
participation in
decision-making

Organic
Low formalization
High
decentralization
Democratic
leadership style
All-channel
communication
Greater
participation in
decision-making

Mechanistic Versus Organic

Models

Its also important to note that

different departments within
the same organization use
different designs

Adhocracy
Org structure that emphasizes
shared, decentralized decision
making, extreme horizontal
specialization, few levels of
management and virtually no formal
controls.( few rules, policies &
procedures)
Microsoft creates new autonomous
team to develop new software
programs

The Bureaucracy
Strengths
Functional
economies of scale
Minimum
duplication of
personnel and
equipment
Enhanced
communication
Centralized
decision making

Weaknesses
Subunit conflicts
with
organizational
goals
Obsessive concern
with rules and
regulations
Lack of employee
discretion to deal
with problems

It has been hypothesized

that

higher performance will be

associated with a fit between an
organizations design and contingent
factors such as its environment, size,
technology, and strategy.

These contingencies create

the need for
- Information processing
- Coordination

Information is essential to an
organizations survival
Acquisition and dissemination of it,
both internally and externally,
enables the organization to function,
learn, control, and innovate.
But, it also creates uncertainty, and
so requires the use of mechanisms to
handle that uncertainty.

Information processing
Requirements facing the
organization

Information processing
Capacities of Design

Need to Fit

The Need For Coordination

Depends On...
The uncertainty of the tasks to be
done
Differences between departments
The degree of interdependence
between departments

Task Uncertainty
Routine Tasks

Standardization
is possible

Non- Routine Tasks

More information is
needed & more people
need the information

Departmental Differences
Time Orientation
Goal Orientation

3 types of interdependence
Pooled
relatively independent departments that
combine their outputs

A
B

Interdependence
Sequential
one department depends on another, but
the dependency is one way

Interdependence
Reciprocal
Departments exchange inputs & outputs

Managing Coordination
High

Teams - permanent teams for recurring

problems & projects
Task Forces - solves temporary problems

Cost &
Complexity

Liaison Roles - a.k.a. Superman

Planning - set specific goals
Hierarchy - refer problems to common boss

Low

Rules & Procedures - good for routine tasks