Organization (re)Design

Research based advice for designing more effective organizations

When should you separate rather than integrate roles in the same team?

By Leave a Comment

A key challenge in organization design is grouping – finding out which roles to organize in the same team or department. 

Or, at higher levels of the organization, deciding which teams or departments to group together in the same business unit or division.

On what basis should we do this?

A general principle was formulated by James Thompson in 1967. It says that you should group interdependent roles in order to minimize coordination costs.

That is, you should take those roles that depend on each other in the work processes (e.g., with regards to information, resources, and so on) and therefore need to collaborate or exchange information, and ensure that they are placed in the same team or department.

This design principle is the basis for the Reconfig software that we have built. We chose it as the main design principle because it’s so fundamental and generic – it is relevant in nearly every organization and re-design project.

Nonetheless, there are important exceptions that we need to consider.

One key exception is when there are conflicts between roles. When this is the case, you should not necessarily integrate roles, even if they are interdependent, but separate them (i.e., place them in different teams or departments).

With my colleague Shawn Pope, I have been working on an academic article where we analyze this issue in depth. The article was recently published in Academy of Management Review.  

One thing we discuss in the article is how to deal with problematical cases where a set of roles are both highly interdependent and conflicted.

We propose the framework that you can see in the slide below. It says that potential conflict should “override” or take precedence, because a failure to separate is more serious than a failure to integrate.

A typical example would be roles that are responsible for monitoring or auditing a process unit, which normally should not report to the same manager that is being monitored or audited.

If you know Reconfig, you may wonder how you can take this into consideration.

First of all, it is, as I mentioned, an exception. In perhaps 80% of the cases, you can group by interdependency and produce a good solution. So this should be the starting point.

But in the design module of Reconfig (see this GIF), you can make manual adjustments to the solution and re-group the elements so that conflicting roles are separated in different teams.

The key implication is that it should be a routine part of any organization re-design effort to consider not only integration but separation. And hopefully, the framework that Shawn and I have developed will remind people of this and suggest design solutions.

 

A country without checks and balances

By Leave a Comment

This blog is primarily about the organization of business firms, but let me start at another “level of analysis” this time: The organization of societies.

As all of you, I have been watching with horror the brutal and senseless war in Ukraine.

I have also been reading the discussions about Putin’s intentions and speculation about his mental health.

Up until recently, you could argue, as did the renowned political scientist John Maersheimer, that Putin was a rational person and that he was “playing the winning hand”. But right now it is harder to defend that viewpoint; this war will only have losers.

But in addition to focusing on Russia’s leader, we also need to recognize how a system of government can allow a despot like this to emerge and completely control not only political decision making, but also the media, the courts, and the military.

And unfortunately, Russia is only one of many totalitarian states, which not only repress their own citizens, but also pose security risks for the rest of the world.

A few years ago, I visited the building where Norway’s constitution was drawn up and signed in 1814. Next to this building, there is a museum, with various displays that describe the principles that our constitution was built on. 

The first thing I saw in the museum was the description of Rousseau and his book “The Social Contract”. But the next one I found even more interesting: The principle of separation of powers, proposed by Montesquieu in 1748.

To learn more, I ordered Gwyn’s book from 1965. 

As he explains, the principle proposed by Montesquieu also formed the basis for the U.S. constitution. One of the founders, James Madison, wrote the following (the Federalist papers, 1788):

“The accumulation of all power, legislative, executive and judiciary in the same hands, whether of one, or few, or many, and whether hereditary, self-appointed or elective, may justly be pronounced the very definition of tyranny.”

To avoid tyranny, Madison explained that each branch of the government needs to have a “will of its own”. As explained by Carpenter (1932, cited in Kemp, 2010); this is:

“a mechanism for the distribution of power between discrete components that [are] locked into constant tension by an arrangement of checks and balances so as to achieve and sustain a dynamic equilibrium”

I am simply in awe of the people who, more than 200 years ago, were able to not only propose but implement this principle. Today, it forms the basis for every democratic country, and its absence characterizes the failure of every totalitarian state.

This principle is also more broadly relevant to the design of organizations, because even within each branch of government, and within each individual organization, we need to separate incompatible roles if we are to minimize conflicts of interest (more about that in a later blog post).

Still, we are probably overstating it if we say that failures to adhere to the principle is the root cause of dysfunctional government.

The problem is that in addition to laws, democratic governance also relies on norms. So if leaders don’t adhere to democratic norms, it may not be possible to establish or maintain separation of powers.

So it is a fragile system.

If something good can possibly come out of the current crisis, it must be that we develop a stronger commitment toward the norms and values that underpin democracy, while doing what we can to manage the risk posed by authoritarian regimes. 

What is happening now should never happen again.

Should you adopt a mirror image structure?

By 1 Comment

Jay Galbraith (1939 – 2014) was a leading scholar and consultant in the field of organization design.

In several of his books, he mentioned the possibility of implementing a “mirror image organizational structure.”

He argued that a mirror image structure would facilitate effective coordination across units. But he also cautioned that it could be inefficient in some situations.

In a research project with my two eminent colleagues, Ali Yassine and Tore Christiansen, we delve deeper into this topic.

In this blog post, I will summarize what we are doing.

But let’s first clarify what the term means:

A mirror-image structure is established when a unit (e.g., department) organizes its sub-units (e.g., teams) in such a way as to correspond to the structure of another unit that it needs to collaborate with.

For example, consider an IT department with several teams responsible for developing and deploying new IT system components.*

Traditionally, it has been organized in a functional manner, as indicated below.

But after considering the need for coordination with its internal clients, the IT director decides to create a team structure that mirrors the business units that the IT department serves:

In our research project, we use a more complex case, but it’s basically this problem that we look at. 

We have a built a data set that represents an international firm with three subsidiaries. The question we ask is how the three subsidiaries should be organized.

One alternative is to let the subsidiaries select the appropriate structure, given their particular local requirements (their work processes, products, customers, culture, etc.). This may result in three different organizing principles being used, as indicated below.

Alternatively, the firm may adopt a consistent (i.e., mirror image) structure, where the three subsidiaries are organized in the same manner:

So how can we determine which alternative is the best one?

We wanted to develop an analytical method to find the answer.

We used a coordination cost approach, similar to that used in Reconfig, the organization design software tool.

So we built an Excel model that represents the two alternatives described above (mirror image versus hybrid) in different scenarios.

Our decision rule is: Choose the alternative that minimizes coordination costs. This is likely to be the alternative with the lowest number of interfaces between units (but we also take into account the size of the units).

For simplicity, let’s use the Sales & Marketing unit as an example.

Let us assume that the three divisions manufacture different types of components, but sometimes combine their efforts to deliver integrated solutions. Hence the Sales & Marketing departments need to collaborate to create client proposals, agree on pricing and delivery schedules, and so on.

With a consistent, mirror image structure, there will be three interfaces between them:

This increases to 10 (!) if the divisions choose different organizing principles. The reason is that ii implies that the Sales & Marketing department is split in Division 2 and 3 when they choose to depart from the functional structure in Division 1.

However, we also have to take into consideration the benefits that Division 2 and 3 obtain by selecting a model that reflects their particular requirements.

If these benefits are significant, it could make it worthwhile to adopt a model that is unique for each division, resulting in a hybrid and inconsistent structure for the organization as a whole.

For example, for Division 2, it may be the case that adopting a geographical (instead of a functional) model will reduce internal coordination costs. This will be the case if the geographical model is better aligned with the work processes in this division, as indicated below (for simplicity, the figure only shows two departments, with four employees each):

In other words, this problem is actually a particular instance of a more general conundrum: A decision to adopt a mirror image structure implies a trade-off between organization-wide versus local (unit-specific) performance.

We have calculated the results for various scenarios for a test data set that we created. 

The scenarios differ in terms of the degree of collaboration that is required across the three divisions and how much local adaptation that is required by each division.

What we find is that the mirror image structure is superior in most situations.

However, the hybrid model – where divisions select a unique structure – is better in situations where there is a strong need for local adaptation, combined with little need for collaboration across divisions.

If the results are confirmed by others, one implication is the following:  Leaders should think twice before they delegate organization design decisions in firms that rely on a lot of cross-unit collaboration. Such firms need a fairly consistent structure across sub-units.

Feel free to leave a comment below if you have questions or comments. 

*This example is inspired by: Vlietland, J. & van Vliet, H. (2015). Towards a governance framework for chains of Scrum teams, Journal of Information and Software Technology, 57, 52-65.

Fighting complexity with subtractive change

By Leave a Comment

golf course subtractive or additive change

Internal complexity seems to increase gradually over time in most organizations.

Earlier this year, a study was published in the prestiguous journal Nature that looks at the underlying causes of this tendency.

The authors conclude that there is a cognitive bias, which they call subtraction neglect.

As the name suggests, it leads people to add things and to ignore the possibility of subtracting things in order to solve a problem.

The authors mention some initial observations that led them to examine this issue.

For example, they analyzed improvement ideas that were submitted to a new university president. Of the 651 proposals, only 70 (11%) were subtractive, that is, involved removing something or stopping an activity.

To study this tendency more systematically, they set up a series of experiments.

In one of the experiments, they showed the participants drawings of a minigolf course and asked them for ideas about how to improve it. The experimenters coded whether the ideas were additive (e.g., “add a windmill”) or subtractive (e.g., “remove the sand trap”).

It turned out that only about 20% of the ideas were subtractive.

So with regards to organizational design, this may explain why we tend to add new roles, units, processes and reporting lines on top of the old ones, instead of removing and simplifying the organization.

Or, in our personal and professional lives, why we commit to too many goals and activities and end up with overburdened schedules (I am guilty of that myself.)

However, all hope is not lost.

In the minigolf experiment, they did another variation, where they offered cues, for example, reminding participants that they could “add or substract”. Offering a cue increased the likelihood that participants would submit a list with at least one subtractive idea.

This suggests that by raising awareness of the issue, we may be able to counteract subtraction neglect, at least to some extent.

In another recent article, Denise Rousseau suggests that this should be a key concern for everyone interested in organization development and change:

Learning how to subtract things is critical to overextended people and organizations—and a new frontier for change scholars and practitioners. (…) I suggest that change scholarship and practice incorporate subtractive change into the suite of change processes they recognize, study or deploy.

She adds that not all subtraction is good.

We need to distinguish between subtraction that adds value, by removing unecessary elements, and subtraction that removes elements that we actually need for the organization to function.

What are the appropriate organization design methods that we can use?

I think many of the methods and principles that I have discussed on this blog in the past are relevant.

For example, the proposal by Prof. Nam Suh to periodically start from scratch and re-set the system. Or, in the words of organization development expert Paul Tolchinsky – do a yearly “Spring cleaning” of the organization instead of just assuming that everything should continue the way it is.

If we you have ideas for how “constructive subtraction” can be accomplished, I would like to hear from you – feel free to add a comment below.”

Can companies be too people-focused?

By Leave a Comment

husna-miskandar-FC4z3l4sUYc-unsplash

People focus is the key.

Who would want to work for a company that is focused on structure and systems, rather than people?

Probably few, but maybe they should reconsider.

Let me explain.

In an earlier career, I worked as an internal consultant in a large engineering firm.

During this period, the HR director once invited Stephen Drotter, author of the book “The leadership pipeline” to give a talk to our group (I believe it was in 2002 or 2003.)

I still remember his presentation, because it was rather provocative.

He argued that we should focus less on the people, and more on the work that needs to be done.

This was rather counter-intuitive to most of us: Here was a well-known HR guru, talking to a group of HR advisors, arguing that we should focus less on people!

It didn’t make any sense.

But Drotter explained that paradoxically, if HR starts to focus more on the work and less on the people, people will actually be treated better!

I was reminded about this line of thinking recently, when I came across a German podcaster, Christina Grubendorfer, discussing a similar topic.

So how can this be?

Drotter did not go into details in his talk, but here’s my take.

I think that he addressed a common misunderstanding: That structure and systems constrain us; that they are “mechanistic” things that are opposed to more “organic” and humane ways of organizing.

But an organization without a structure isn’t very humane. It is either a chaotic anarchy or a clan that is dominated by those with the most power and political influence.

As Paul du Gay, professor at the Copenhagen Business School, puts it: The question is not whether you want to have structure or not, but whether you want to have formal or informal structure.

So the risk is that by focusing too much on people, you ignore the systems and procedures that may seem bureacratic, but that actually create consistency, efficiency, and the perception of “fair process”.

As one example, consider how teams operate.

Some teams may allow people to work however they want. “The road is made while walking.” “Let’s just trust each other and things will work out.”

So the they don’t take the time to define the roles, accontabilities, and priorities. The structure is emerging and informal.

This very issue was examined in a rigorous study of 44 production teams in a Fortune 500 company.

It found that the well structured teams were not only the most productive – but also had fewer conflicts between the members.

These teams were also rated by outside observers as more likely to “improve work practices” and more likely to “help team members develop their skills and competencies”.

Sounds quite humane to me.

As the authors of this study concluded:

(…) structure and bureaucracy have become scapegoats for a wide variety of organizational problems which, ironically, would likely disappear if organizations and teams simply utilized structure appropriately (Bundersen & Boumgarden, 2010, p. 621).

P.S. If you are interested in data-driven approaches to organization design, I will hold a free webinar on September 29 12.00-1:30 EDT (18:00-19:30 CET) in collaboration with ODF. Use this link to sign up.

0
0
0

  • Sign up to get updates via e-mail

  • **I guarantee 100% privacy. Your information will not be shared.

About

The purpose of this blog is to provide research based advice for managers who want to design a more effective organization. I am an associate professor at the Norwegian University of Life Sciences. See the "About" page for more details.

Recent Posts