Designing Organizations

1. Designing Organizations Marilyn Pash Pash and Associates, Inc. 3362 Rodeo Drive NE Blaine, MN 55449 763-738-0423 mjpash@aol.com

2. Though this be madness, yet there is a method in it.– Hamlet William Shakespeare

3. Designing Organizations Method? Or Madness?

4. This Presentation will . . . • Discuss why organization design is important • Focus on the fundamental elements and principles of effective organization design. • Provide some recommendations for more resources and information.

5. Definitions Organization Structure The way work is divided up. How work and responsibilities are clustered . Lines of reporting and accountability. Organization Design Planning and fitting together the people, activities and technologies and other elements of the enterprise.

6. Why Does Organization Design Matter? • As business analysts, we often are: • Improving or even re-engineering processes • Introducing new technologies and associated systems into the organization • Introducing new jobs? Other ??

7. Why does Structure Matter? • Influences what employees pay attention to • Affects ease of coordination • Impacts the speed, cost, and quality of business activities • Drives relationships and interaction

8. Key Success Factors • Understanding business context is imperative.

9. Method Means Knowing the Context • What is the business and the organizational mission? • Its stage in the lifecycle? • Its value proposition? • Its core competencies? • Its desired goals and strategies? • Process strengths and weaknesses? … and only then applying design principles!

10. Key Success Factors • Understanding business context is imperative. • Always formulate goals for the design or redesign. • Designs can be prescriptive or contingent

11. How Good is the Fit?

12. Open/Flexible Technology Management System Culture Process Open/Flexible Closed Task Technical System People Formal Informal Alignment Examples

13. The Star Model © Jay R. Galbraith Strategy People Structure Rewards Processes • Different Strategies = Different Organizations • Organization is More than Structure • Alignment = Effectiveness Behavior Performance Culture

14. Key Success Factors • Understanding business context is imperative. • Always formulate goals for the design or redesign. • Designs can be prescriptive or contingent • Alignment is critical.

15. Organization Structure • 5 basic forms or configurations • 3 parts to management structure • Hierarchy (no. of levels) • Spans of control • Centralization vs. decentralization • Best arrangements for coordination and control

16. Organizational Forms ABC Printing ABC Printing President President Sales Graphic Design Print Shop Stationary Brochures Business Cards Functional Product/Service ABC Printing VP of Domestic Operations Corporate Accounts Consumer Accounts Governmt. Accounts Customers

17. Organizational Forms ABC Printing ABC Printing President President No. Am Brochures Team 1 Domestic Brochures (Includes: Sales Graphic Design Print Shop) Team 2 Corp. Accts Stationery VP ABC Printing Europe No. Am Stationery No. Business Cards Business Process Team Matrix Note: Most organizations of any size and complexity are hybrids of these forms

18. What are Pros and Cons? • Functional • Product/Service • Geographies and/or customers • Business Process Teams • Matrix

19. Parts of Management Structure • Hierarchy (No. of levels)

20. Parts of Management Structure • Hierarchy (No. of levels) • Spans of control

21. Parts of Management Structure • Hierarchy (No. of levels) • Spans of control • Centralization vs. Decentralization • Cost • Control • Responsiveness • Independence • Technology

22. Considerations Financial Decentralize Centralize External Decentralize Centralize

23. Considerations Operational Decentralize Centralize

24. Considerations Strategic Decentralize Centralize

25. Coordination & Control • Supervision • Standardization of • Work - Skills - Outputs • Formal & Ad Hoc Teams • Commitment and Employee Involvement

26. Four Phases of Organization Design I. Determining the Design Framework Current State Assessment Leader and Executive Team Strategy What organizational capabilities do we need to deliver on the strategy? What is the gap between where we are and where we want to go? Leadership Team II. Designing the Organization Processes and Lateral Capability Structure Reward Systems People How do we select and deploy people into new roles, manage their performance, and support their development? What structure and organizational role meet our strategic design criteria? How will work get coordinated and integrated across business units? How do we measure and reward performance at an individual, a team, and an organizational level? Steering Committee and Work Groups III. Developing the Details What are the details? How do the pieces all work together? Whole Organization IV. Implementing the New Design How are we going to make the transition? Source: Jay R. Galbraith, Designing Organizations: An Executive Briefing on Strategy, Structure, and Process (San Francisco: Jossey-Bass, 1995).

27. Mintzberg’s 5 Organizational Forms • Simple Structure • Machine Bureaucracy • Professional Bureaucracy • Divisionalized Form • Adhocracy

28. Organic vs. Mechanistic Organization Low UNCERTAINTY High Mechanistic Structure Organic Structure • Change Unlikely • High Formalization • Narrow Span of Control • Tall Structure • Centralized Authority in few top people • Rigid Rules • Many Specialists • Change Likely • Low Formalization • Wide Span of Control • Flat Structure • Decentralized and Diffused Authority throughout Organization • Considerable Flexibility • Many Generalists

29. Six Organization Shapers Buyer Power Variety & Solutions The Internet Speed Change Multiple Dimensions New competition shift power to buyers – design around customer! Increase customizable product and service variety in response to buyer power Customers expect fast delivery. Speed thru decentralized decision- making Design with staff to handle the Internet communication Organization Organize by functions, products, geography, customer segments, channels and processes Environment changes fast, requiring management to relearn and re-decide often. So need to design to cater to change

30. Method or Madness? • It just seems like a good idea to change the structure? • We’ll be able to tell if the new structure works once we try it. • We don’t need other’s input, it will just slow us down. • Let’s worry about staffing levels once we decide what to do.