Summary Introduction to Organization
Design
Lecture 2
- Organization design:
o Challenge to organizations.
o Globalization, competition, deregulation, etc. influence the design.
o Need for adaption of an organization to environmental demands .
o 30% of variation in organizational performance can be attributed to aspects of
organizational design (Volberda et al., 2012).
o Organizational design is a general sense.
o There are different forms of organizations (functional bureaucracy, matrix organization,
cellular, network, etc.). These forms are based on theoretical frameworks, like Mintzberg.
- Organization design (Burton et al.): Involves the challenge how to:
o Partition a big task into more smaller tasks.
o How to coordinate these smaller tasks in such way that they fit together in an efficient way
to realize the organization’s goals.
- According to Burton et al. Organizational design consists of a number of
components that should be considered in a coherent way.
- According to Burton et al., design involves 5 interrelated aspects:
1. Goals and scope
2. Strategy
3. Structure
4. Coordination and control
5. Processes and people
All five aspects of organizational design should fit with each other and with contingencies of the
environment.
- How to realise a fit:
o Choices for the inside of the five categories should relate to characteristics of the
environment. Stable environments have different design demands that turbulent ones.
o Choices in one aspect of the model have consequences for the other aspects. So structural
changes cannot go without attention to people. Misfit has consequences for the firm’s
performance.
- The five aspects of organizational design influence information processing within the
organization. Organizations should balance between information processing demands and
abilities.
- Information processing perspective:
o An organization uses information to coordinate and control its activities.
o By processing information, the organization sees what is ‘happening’, analyses problems
and makes choices on what to do.
o Paradox: The more uncertain the organizational environment, the more information needs
to be processed within the organization, but the quicker a response has to be.
Example:
When organizations operate in a predictable environment, in which the product demanded by
customers does not vary a lot, and tasks are characterized by routine work.
1
, o Not much information sharing needed, no quick response needed.
o Tasks can be standardized and control can be hierarchical (acc. to book).
o When problems arise, they can be “bumped up” in the hierarchal line because no quick
response is needed.
When organizations operate in a dynamic environment, such as the military on mission, the
police, and crisis response.
o Much information needs to be processed to come up with solution for operating.
o Tasks cannot be standardized and hierarchical control will always be too late to respond.
o Less standardization, more autonomy at the operational level, different structure and
coordination.
- Organizational diagnosis and (re-) design in the information processing approach:
Getting started:
1. Assessing the scope and goals of the organization
Assessing the strategy:
2. Strategy
3. Environment
Analysing the structure
4. Traditional configurations of the fir
5. New organizational forms
Assessing process and people
6. Work, task design, and agents
7. Leadership and organizational climate
Analysing coordination, control, and incentives
8. Coordination and control
9. Incentives
10.Designing the structure and coordination
Designing the architecture
11.Designing the architecture and the sequence of change
Implementing the architecture
12.Implementing the change: who should do what when??
1. Assessing the scope and goals of the organization
- Scope: What is the domain in which the organization aims to derive its ‘existence’ from? It
influences the degree to which it encounters uncertainties to a great extent, and hence also what
demands for information processing the organization may have.
- Goals: According to Burton to be defined along efficiency and effectivity dimensions.
- Efficiency: Related to inputs, use of resources in the primary process and costs. First order
learning, learn to produce the same product as cheap as possible, low information
processing.
- Effectivity: Related to outputs, products or services and revenues (and hence relates to
environmental demands). Change products according to demands, second order learning,
high information processing needed.
2
, - Ambidexterity: Aimed at both exploration and exploitation. Aimed at integrating efficiency
(internal) and effectiveness (external) goals.
Chapter 1: Assessing the scope and goals of the organization
- Organizational design: An everyday, ongoing activity and a challenge for every executive, whether
managing a global enterprise or a small work team.
- Organization: Social unit of people with a relatively identifiable boundary that is structured and
managed to meet a collective goal.
- Organizational design involves two complementary problems:
o How to partition a big task of the whole organization into smaller tasks of the sub-units.
o How to coordinate these smaller sub-unit tasks so that they fit together to efficiently realize
the bigger task or organizational goals.
- Multi-contingency model: This model consists of nine components that are inspected following a
step-by-step process. Components:
o Goals/scope o Climate
o Strategy o Task design and agents
o Environment o Coordination an control
o Configuration o Incentives
o Leadership
- Organizational design is multifaceted, with complex and interrelated components with significant
performance effects. Thus, to design an organization, you need a comprehensive model based on
tested theory and you need an approach to use the model.
- Work of an organization can be seen as information processing: observing, transmitting,
analysing, understanding, deciding, storing, and taking action for implementation.
- Information processing view:
Goal Creates the Provides the Configuration
need for ability to
Strategy Formalization
information process
Environment processing FIT information Decentralization
Leadership style Incentives
IT systems
- Fit: ToClimate
balance the information-processing demand and capacity.
- Two different organizational design strategies: Agents
Tasks
o Reduce the need for information by
creating semi-independent units.
o Increase the information capacity with greater communications, either hierarchical or
lateral (coordination).
- Unit of analysis: The organization chosen is the unit of analysis for the entire seven-step design
process.
- Scope of the organization: What the organization is doing. E.g. If the organization is a consulting
firm, it is important to define within which areas you are doing consulting.
- Assessing the relative importance of two fundamental (competing) goal dimensions:
o Efficiency: A primary focus on inputs, use of resources, and costs.
o Effectiveness: Focus on outputs, products or services, and revenues.
3
Design
Lecture 2
- Organization design:
o Challenge to organizations.
o Globalization, competition, deregulation, etc. influence the design.
o Need for adaption of an organization to environmental demands .
o 30% of variation in organizational performance can be attributed to aspects of
organizational design (Volberda et al., 2012).
o Organizational design is a general sense.
o There are different forms of organizations (functional bureaucracy, matrix organization,
cellular, network, etc.). These forms are based on theoretical frameworks, like Mintzberg.
- Organization design (Burton et al.): Involves the challenge how to:
o Partition a big task into more smaller tasks.
o How to coordinate these smaller tasks in such way that they fit together in an efficient way
to realize the organization’s goals.
- According to Burton et al. Organizational design consists of a number of
components that should be considered in a coherent way.
- According to Burton et al., design involves 5 interrelated aspects:
1. Goals and scope
2. Strategy
3. Structure
4. Coordination and control
5. Processes and people
All five aspects of organizational design should fit with each other and with contingencies of the
environment.
- How to realise a fit:
o Choices for the inside of the five categories should relate to characteristics of the
environment. Stable environments have different design demands that turbulent ones.
o Choices in one aspect of the model have consequences for the other aspects. So structural
changes cannot go without attention to people. Misfit has consequences for the firm’s
performance.
- The five aspects of organizational design influence information processing within the
organization. Organizations should balance between information processing demands and
abilities.
- Information processing perspective:
o An organization uses information to coordinate and control its activities.
o By processing information, the organization sees what is ‘happening’, analyses problems
and makes choices on what to do.
o Paradox: The more uncertain the organizational environment, the more information needs
to be processed within the organization, but the quicker a response has to be.
Example:
When organizations operate in a predictable environment, in which the product demanded by
customers does not vary a lot, and tasks are characterized by routine work.
1
, o Not much information sharing needed, no quick response needed.
o Tasks can be standardized and control can be hierarchical (acc. to book).
o When problems arise, they can be “bumped up” in the hierarchal line because no quick
response is needed.
When organizations operate in a dynamic environment, such as the military on mission, the
police, and crisis response.
o Much information needs to be processed to come up with solution for operating.
o Tasks cannot be standardized and hierarchical control will always be too late to respond.
o Less standardization, more autonomy at the operational level, different structure and
coordination.
- Organizational diagnosis and (re-) design in the information processing approach:
Getting started:
1. Assessing the scope and goals of the organization
Assessing the strategy:
2. Strategy
3. Environment
Analysing the structure
4. Traditional configurations of the fir
5. New organizational forms
Assessing process and people
6. Work, task design, and agents
7. Leadership and organizational climate
Analysing coordination, control, and incentives
8. Coordination and control
9. Incentives
10.Designing the structure and coordination
Designing the architecture
11.Designing the architecture and the sequence of change
Implementing the architecture
12.Implementing the change: who should do what when??
1. Assessing the scope and goals of the organization
- Scope: What is the domain in which the organization aims to derive its ‘existence’ from? It
influences the degree to which it encounters uncertainties to a great extent, and hence also what
demands for information processing the organization may have.
- Goals: According to Burton to be defined along efficiency and effectivity dimensions.
- Efficiency: Related to inputs, use of resources in the primary process and costs. First order
learning, learn to produce the same product as cheap as possible, low information
processing.
- Effectivity: Related to outputs, products or services and revenues (and hence relates to
environmental demands). Change products according to demands, second order learning,
high information processing needed.
2
, - Ambidexterity: Aimed at both exploration and exploitation. Aimed at integrating efficiency
(internal) and effectiveness (external) goals.
Chapter 1: Assessing the scope and goals of the organization
- Organizational design: An everyday, ongoing activity and a challenge for every executive, whether
managing a global enterprise or a small work team.
- Organization: Social unit of people with a relatively identifiable boundary that is structured and
managed to meet a collective goal.
- Organizational design involves two complementary problems:
o How to partition a big task of the whole organization into smaller tasks of the sub-units.
o How to coordinate these smaller sub-unit tasks so that they fit together to efficiently realize
the bigger task or organizational goals.
- Multi-contingency model: This model consists of nine components that are inspected following a
step-by-step process. Components:
o Goals/scope o Climate
o Strategy o Task design and agents
o Environment o Coordination an control
o Configuration o Incentives
o Leadership
- Organizational design is multifaceted, with complex and interrelated components with significant
performance effects. Thus, to design an organization, you need a comprehensive model based on
tested theory and you need an approach to use the model.
- Work of an organization can be seen as information processing: observing, transmitting,
analysing, understanding, deciding, storing, and taking action for implementation.
- Information processing view:
Goal Creates the Provides the Configuration
need for ability to
Strategy Formalization
information process
Environment processing FIT information Decentralization
Leadership style Incentives
IT systems
- Fit: ToClimate
balance the information-processing demand and capacity.
- Two different organizational design strategies: Agents
Tasks
o Reduce the need for information by
creating semi-independent units.
o Increase the information capacity with greater communications, either hierarchical or
lateral (coordination).
- Unit of analysis: The organization chosen is the unit of analysis for the entire seven-step design
process.
- Scope of the organization: What the organization is doing. E.g. If the organization is a consulting
firm, it is important to define within which areas you are doing consulting.
- Assessing the relative importance of two fundamental (competing) goal dimensions:
o Efficiency: A primary focus on inputs, use of resources, and costs.
o Effectiveness: Focus on outputs, products or services, and revenues.
3
