Sometimes, people seem to think about organization design principles as abstract, theoretical concepts with no immediate relevance to how they work.

This is unfortunate. The principles may be abstract, but they can have a big impact, if they are applied to improve the design of organizations, and thereby influence the way we work, who we collaborate with, as well as the the quality of the outputs that we produce.

But the way organization design is taught makes it difficult to see the relevance of the topic, and does little to increase practical skills in applying the principles.

How then, can we make these principles “come alive” so that it becomes easier to understand how they can be used to improve the design of organizations?

One powerful method is by running simulations and exercises. I created a new simulation earlier this Fall together with two other consultants, Tido Eger and Tore Christiansen.

Last week we were able to pilot test the simulation with 90 enthusiastic students at the Norwegian School of Economics who follow a course taught by associate professor Jarle Bastesen.

Later we plan to use the simulation with executives as part of our client projects.

Here’s how we did it. The key concept that we want to illustrate was the relationship between the formal structure and the work processes in a firm. We used a pharmaceutical company as an example.

After a brief introduction where I explained the purpose, the students were divided into groups and were each given an “employee badge”.

They were told that the company was currently organized by functions (R&D, Product Development, Manufacturing, and so on), but that management wanted to introduce a more process based structure.

On the badges we had printed all the information they needed to configure themselves according to a process based structure:

• Their current unit
• Their current role
• Who they would need information from in order to perform their role (in the new organization)

They were then given 30 minutes to decide who should be part of which team in the new organization. The key principle we intended to illustrate was grouping based on work process interdependencies.

During the de-briefing afterwards, none of the groups stated that they felt they had been able to come up with a very good solution, even though this was a highly simplified case, compared to a real world re-design process.

Unlike in a real situation, they had all the information necessary. However, we did include some dilemmas that would require negotiation between the teams and trade-offs.

The feedback from the students was very positive. One student sent an e-mail afterwards stating: “This was interesting and fun, and something completely new!”

Because of the positive feedback, my long  term vision is to develop a course that is based entirely on simulations with the only lecturing being the introduction and the de-briefing. But because it takes a lot of time to develop and test each simulation, this may take a few years to realize.

What we will do during the coming week is to analyze the results more carefully. We asked each team to record the team configuration, so this means we can compare the results across the groups and also with an “optimal” configuration that we develop by means of a mathematical algorithm that my colleagues will develop.

P.S. Lecturers who use the textbook I have written will have free access to the materials required to run this simulation. The materials will be posted to the book site.

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Wanted – and possibly found – a ladder to climb the fence separating theory and practice

On Friday I participated in a conference organized by the Organizational Design Community, a network of academics, consultants and executives.

The conference was hosted by Harvard Business School and several of its faculty members participated. It was led and facilitated by Borge Obel from the Aarhus Business School in Denmark.

A number of brief presentations were held with some time for discussion afterwards. All of the presentations were interesting and thought-provoking, but I’ll highlight three of them that I thought were particularly relevant for readers of this blog.

If you have followed this blog, you know that I have been interested in multidimensional organizations. In my book I write about alternative ways of structuring organizations with three dimensions. In his presentation, Jay Galbraith (author/consultant) went one step further in pointing out that some organizations (like Procter & Gamble) now have four dimensions (see picture above).

But he also noted the challenges that this implies in terms of coordinating an exponential increase in interdependencies. He mentioned that business process automation is a new coordination mechanism that may help address this challenge.

The goal for Ray Levitt – professor at the engineering school at Stanford University – is to enable managers to design organizations the way engineers build bridges. He and his team has built a simulation/modelling tool (Virtual Design Team, or VDT) that can be used to support the planning and execution of large engineering projects.

The starting point is an analysis of the individual project activities, their estimated time, and their interpendencies. Based on such data, the tool can be used to predict the probability of delays and breakdowns in the deliverables.

Initially they used this approach to model relatively routine activities in well defined projects but have now moved to more complex projects involving multiple stakeholders.

Moving to organizational change and implementation issues, Michael Beer (professor emeritus at Harvard) described an approach he calls the Strategic Fitness Process. The approach resembles many existing organization development and change interventions, but he combines them in a new way.

The key idea seemed to be to use mid-level managers as the “consultants”, in that mid-level managers would form a task force and diagnose organizational problems and opportunities.

The task force would present their findings in a “fishbowl” session where senior managers are only allowed to ask questions for clarification. The key idea is of course to ensure that senior managers get a good, unfiltered understanding of current situation inside the organization before making decisions about any changes.

These are all topics that I will return to in future articles on this blog. Stay tuned!

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Discussing the future of organization design

Naomi Stanford recently wrote a review of my book. You can find it on her blog. Naomi is a consultant, teacher and author (see this page for more about her background and the kind of work she does)

My son of 9 years took this photo during a family walk the other day, and I thought it might serve as a metaphor for the concept of Design Rules (or Design Propositions, as I call them in my book).

The organization design field – as most other management disciplines – is divided into two camps – the academic and the managerial, on each side of the fence.

Many of the books written for managers are of the “guru” type where a new and revolutionary solution is proposed, with little regard for evidence or data to support the claim.

Academics, on the other hand, mainly write articles for each other, often to resolve a theoretical problem instead of addressing a business challenge. How, then, are we to develop useful knowledge – knowledge that can help us improve organizations?

The concept of Design Rules was proposed by Dutch professor Georges Romme (building on the work of another professor in the Netherlands, Joan Ernst van Aken). Romme sees Design Rules as a device that can help bridge the division between theory and practice.

The key idea is to express research-based knowledge as practical action principles for addressing a given problem or challenge in an organization. Example: Imagine that academic research concludes that global firms that are decentralized are more profitable than those that are centralized. This can be turned into a design rule by stating that

“if you lead a global firm and is considering its structure, to maximize profitability, select a decentralized structure”.

A key element is that design rules should be both actionable and testable. “Actionable” means that a manager or employee in an organization should be able to implement it, and “Testable” means that it should be possible to find out whether the principle leads to the intended effects or not.

To be actionable, it has to be fairly specific. My example above is probably too vague – do we mean that all functions should be decentralized, or only some (e.g., marketing, sales)? Do we mean that this principles applies to all firms, or only firms in some industries (e.g., consumer goods)? Do we by “decentralization” mean to move people into regions, to transfer decision rights, or both?

Ideally a design principle should also be accompanied by a tool that a manager can use for assessment, in this case, for example, it could be a tool or framework to assess how centralized or decentralized a unit in the organization actually is, data comparing different firms in a given industry, or guidelines for implementing more decentralized structures.

To be testable, we have to have some system for following up the implementation. Design rules are a starting point for learning – if we manage to feed back information about the effects and then revise the design rule based on our experience.

In this manner, design rules are like the ladder in the picture above because they allow us to go from theory to action, and back to theory again.

In my book there are 72 design rules alltogether. I am considering how to make them available to more people. One possibility may be to create a wiki where the design rules could be described and where practitioners could suggest (or make themselves) edits and changes. Let me know if you have any thoughts about this.

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Developing a new applied science for organization design