Organization Design

Author, Birge D. Reichard Ph.D.

Preface The terms organization design, organization structure and reorganization are used interchangeably here. All three have a

major impact on organization dynamics, and a useful frame for viewing an organization's needs may be a review of the behavioral dynamics as manifested in organization design.

Historical Perspective of Organization Structure It is useful to take a moment to recall the reasons why structure became an organizational concern, the various approaches that have been taken and what has been learned by the effort.

Division

of

labor

became

necessary

when

the

industrial

revolution converted cottage industry artisans who performed a whole task (such as making shoes) to production line workers who performed specific parts of the whole task (e.g. stamping out soles). This production line of workers could indeed increase

production, and, for managers whose over arching assumption was that organizations are essentially economic vehicles, the

production gains outweighed the loss of artisan pride in the "whole job".

As

production

increased

and

more

workers

joined

the

production line, coordination of the workers was needed.

Foremen

were inserted above the workers to manage the integration of the tasks. As factories grew, the increasing number of foremen were seen as needing to be coordinated by managers above them - and so the hierarchy grew. What is important about this early beginning

of organization structure was that it evolved from the interplay of values (e.g. organizations were seen as economic entities, people were viewed as needing to be controlled and as dependent upon the organization) and the nature of the work. One overriding

principle of organization design that is still very useful is the axiom "Form Follows Function". That is, the structure should Structure, including

facilitate the accomplishment of the work.

the management structure, evolved from the bottom level tasks.

An inevitable consequence of dividing up the whole task into pieces was loss of job satisfaction. The production line workers Since

became less "motivated" than the artisans of the past.

organizations were viewed as economic entities, the solution was to pay them more. needs. The Hawthorne studies in the 30's began to uncover some of the psychological needs derived from work and the workplace. However, this did not address workers' inner

During the 1940's through the 1960's the Human Relations school of organization design focused on working conditions, reinforcement or recognition and rebuilding whole jobs and work systems through

approaches such as job enrichment, QWL and Socio-Tech.

The values

espoused during this period revealed a view of organizations as being more than just economic entities - they were also the arena for human achievement, growth and development. Employees and

organizations were seen as being interdependent upon each other. The structure efforts focused on small self-regulating groups of workers who did not need a tall structure of managers to control or coordinate them. Again it was the interaction of values

(people were now seen as motivated by achievement, complex tasks, variety, etc.) and the nature of the work (small groups where decisions were made by those performing the tasks).

Students forms of

of

organization

design

identified

three

primary line and

organization

structure:

functional,

product

matrix.

Each has advantages and disadvantages.

For example,

functional organizations take longer to process information and make decisions; but they are good at developing specialized

expertise.

Product line organizations are more self contained,

more decentralized and are good for quick decision making in a rapidly changing market. However, they require a redundancy of Again, values, beliefs

expensive staff or specialist resources.

and personal preferences, as well as competencies, enter into choosing a structure. functional For example, control is increased in a conflict is prevalent in matrix

organization,

organizations and autonomy is essential for product line type

organizations. Current Perspectives Unlike the early "division of labor" thinkers like Frederick Taylor, who believed in one best way to design a job or an organization, most people now believe that there is seldom one best way to organize. This makes sense if one factors values and The only "one

beliefs into the "logic" of organization design.

best way" advocate I know of is Eliot Jacques, who is an admitted advocate of traditional tenets of bureaucracy such as one man one boss). The culture and norms of an organization and its

practiced (vs. espoused) values are a major factor in the success or failure of the structure. Every structure has advantages There is no perfect structure. and disadvantages and, when

contemplating organization design, one must consider the assets and liabilities each particular organization brings to a proposed form. For example, one may prefer a functional structure but be

short of functional specialists, or one may prefer a product line form but be short of general managers.

Another reason for a more flexible approach to organization design (as compared to the "one best way" approach) is the need to consider the contextual factors in which any organization exists. For example, some divisions of large organizations have adopted The Strategic Business Unit (SBU) concept, which was highly

advocated by consulting firms like the Boston Consulting Group.

It would only be possible to redesign a "non-SBU" structure if the larger organization in which the division is embedded agreed. The

reward systems - especially job grading and compensation need to be consonant with the structure. Using the SBU example, how

possible is it for an SBU to have a different compensation system from the larger organization? Again, using the SBU Does the culture fit the structure? does the SBU culture promote

example,

autonomy in the SBU while the larger organization is really a centrally controlled organization?

One of the most important guidelines in organization design is to avoid dealing with non-structure issues through structure. It is very debilitating to an organization to use structural solutions (e.g. levels, titles, segments, etc.) to manage

relationship problems.

However volatile the conflict, confronting

it is less costly than trying to "structure it away".

Summary To recap the issues discussed here, I will put them in point form for easier reference. They are as follows:

1.

Structure according to the work.

The whole point

of organization design is to facilitate work. "Form Follows Function."

2.

Organization culture and norms, prevailing beliefs about the purposes of an organization (besides making money) and assumptions about human behavior greatly affect structure decisions.

3.

There is no one best structure.

There are usually

several options, and the options are very related to the real culture, values and beliefs (not the espoused).

4.

Every structure has advantages and disadvantages. Assessing the organization's strengths and vulnerabilities is part of thinking through any structure change.

5.

The context in which an organization - or any sub part of it - is embedded must be considered in deciding upon a design. All of the support systems (e.g. rewards, system) must "fit" the

information systems, planning design.

6.

It is risky to use structure to solve non-structure problems like relationship problems.

Given

the

complexity

of

large

organizations

today,

organization design is very personal to each organization. The geographic spread, product mix, coordination and control dilemmas and management development needs must be accounted for in design. Organization design or redesign is a major intervention and

requires understanding and agreement to both the intentions of the design and to the problems that will need to be managed because of the design. Involvement of top management is essential.

Conclusions Organization design/redesign must involve all of the

appropriate people (the principals who must lead the people in the structure) in thinking through the design. It is not useful for

the staff to design a structure and to give it to the managers who must make it work. Forthright assessments of the existing

organization and clarity about what is wanted in the future are hallmarks of these "thinking through" discussions. Organization

design is not an engineering problem -the thinking through that is required will, by necessity, be messy. As with any significant

managerial activity it also requires courage!