Tools and techniques Archives - Organization (re)Design

Tools and techniques

In these posts, I describe tools and techniques that I use (or have developed myself). In most cases I have applied them in client projects, but I may also describe methods that I am in the process of developing and have yet not tested in a real project.

Should you adopt a mirror image structure?

January 17, 2022 By Nicolay Worren 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.

One more time: How do we simplify our organization?

July 2, 2021 By Nicolay Worren 4 Comments

Most organizations tend to get more complex over time.

New processes, roles and reporting lines are added. New steering groups and advisory boards are established. New cross-functional initiatives are launched.

All with the best of intentions. But the cumulative effect is increased complexity…

…which means that goals and KPIs start to conflict, we spend more time in internal meetings, and have trouble reaching agreement on key decisions.

This means that we, from time to time, need to make an effort to simplify. And ideally, we should also try to not to add too much complexity in the first place when we make changes.

However, I find that business gurus often come up with rather simplistic solutions to this problem (e.g., “get rid of low value added activities” [OK, what are those?]).

But it’s not simple to achieve simplicity.

We first have to understand the underlying sources of complexity, and idenfity the right intervention.

And there isn’t one, but multiple forms of complexity.

In a new working paper, I use three different systems theories and describe how they lead to three different views on organizational complexity, related to:

The goals and functions of the organization (or of the sub-units)
Work processes and interdependencies
The vertical structure (management layers; reporting relationships)

I summarize the key design principles in the framework shown in the table below (This table basically summarizes most of what I know about organization design!)

My hope is that you can use this framework to identify the causes of complexity and discover potential solutions.

Taking too long?

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This is still just a working paper, so it needs to be further developed before it can be published in a journal.

But I share this as “work in progress” in case you want to take a look and perhaps give me some feedback before I finalize the paper in the Autumn.

Feel free to leave a comment below!

Image: Simplification by YuguDesign from the Noun Project

William of Baskerville in the library

May 21, 2021 By Nicolay Worren 1 Comment

“The name of the rose” by Umberto Eco is one of the best-selling books ever published (50 million copies sold!).

During a break between Zoom meetings recently, I came across it (on my own bookshelf…).

I bought it many years ago, but must admit that I never got around to reading it (it happens…).

Until now, that is.

It did look interesting, so I started reading it.

I don’t regret it: It’s a complex but fascinating book.

To my surprise, there’s even a story in it that illustrates a couple of organization design principles.

In the book, we follow William of Baskerville, a friar who is called to help investigate a series of murders at an abbey in Northern Italy in 1327.

The voice in the book is that of Adso, his young assistant.

The abbey is well known for its extensive library. Scholars, illustrators and munks from near and far come to visit to read the many rare books that it has in its collection.

On the first day, William and Adso visit the library and talk to librarian, named Malachi.

Here’s an excerpt:

(…) we found titles of books we had never heard of, and others most famous, that the library possessed (…) “De pentagono Salominis, Ars loquendi et intelligendi in lingua hebraica, De rebus metallicis (…), Algebra by Al-Kuwarizmi, translated into Latin by Robertus Anglicus, the Punica by Silius Italicus…

But then Wiliams becomes curious about the cataloging system. He says:

Splendid works. But in what order are they listed? He quoted from a text I did not know but which was certainly familiar to Malachi: “The librarian must have a list of all books, carefully ordered by subjects and authors, and they must be classified on the shelves with numerical indications”. How do you know the collocation of each book?

Malachi, the librarian, then shows him some annotations beside each title, such as “iii; IV gradus, V in proma graecorum”. This number indicated the position of the book on the shelf and in which room it was.

William then asks in which order the books are recorded in this list, as it does not seem to be by subject. The narrator, Adso, remarks:

He did not suggest an order by author (…) for this is a system I have seen adopted only in recent years, and at that time it was rarely used.

The librarian explains that the books are registered in order of their “aquisition, donation or entrance into our walks.”

William then remaks:

They are difficult to find, then (…)

And here we arrive at two key organization design principles.

The first is that we, as Peter Senge once remarked, forget about the designer of the ship. Or, in this case, the designer of the cataloging system.

We take it for granted that books are ordered by author or subject (or both). But somebody designed this system, and before 1327, it was not a common way to do it.

Same with organizational designs. Our organization may be organized by function, geography, market segment, or product, or some combination of these criteria.

If the structure has been in place for some years, we take it for granted. But somebody made a decision at some point in the past to introduce this structure (and it can be re-designed if we decide to do so.)

The second insight is that such choices have consequences. Depending on how we sort books and how we place them on the shelves, it will be easier or more difficult to find a given book afterwards, depending, for example, on whether we search for a specific author or a subject.

This is essentially a rudimentary version of the concept of coordination costs. There are different ways of “sorting” the roles and units in an organization.

They are not equally effective: Depending on which criterion we use for the sorting, it will be more or less costly to coordinate to perform the work processes in the organization.

This is illustrated in the challenge that we posted on the Reconfig web site. Have you tried it out yet?

P.S. The image above shows the abbey of San Michele, which was the abbey that inspired Umberto Eco to write the book!

Can you organize 12 people?

May 10, 2021 By Nicolay Worren Leave a Comment

If you are a manager, you might be asked to organize 1,200 people – or 12,000.

But to illustrate a key principle: Let’s start with just 12 people.

Are you able to organize them?

We have created a challenge with 12 roles in a Research & Development unit in a pharmaceutical firm. The current organization is not ideal –so the task is to allocate the roles to teams in a better way.

In the document posted below, you will see descriptions of the roles and their interdependencies. The document gives you a bit of context (but you can complete the challenge without it):

Pharmaceutical firm roles from Nicolay Worren

If you solve the challenge on the Reconfig web site and submit your solution, you will see how your solution compares to the optimal solution calculated by Reconfig, and to solutions proposed by others.

The challenge is intended to illustrate the key principle behind Reconfig, namely that…:

…organization design is fundamentally about “clustering” – finding the best possible grouping of roles – or, at higher levels of the organization: Units, such as departments or business units.
…optimal clustering can only be done by taking into consideration interdependencies between roles…
…which means that it becomes a difficult task: Most people will need to think hard to produce a good solution, even with just 12 elements (so imagine doing this manually with 120, 1,200, or 12,000 roles). It requires focused attention, even when the tool (like here) hightlights for you what the interdependencies are…
…but it is now possible to map these problems using a Design Structure Matrix (DSM), use The Reconfig algorithm to automate the clustering, and also express the quality of the solution using a quantitative indicator (the “speedometer” in the Figure above).

If you have followed this blog for a while, you are probably familiar with these principles already. But with the example with 12 roles, you’ll see how it works in practice.

To give it a try, go to:

https://www.reconfig.no/challenge (Select “Start tutorial” first; if you directly to “Start challenge”, you get a more complex challenge with 42 roles!)

By the way, we will likely post new challenges in the future, so stay tuned.

Let me know what you think by adding a comment below!

If you want more information about Reconfig, you can download a white paper from the web site or get in touch with us by sending a message.

Report from the field: Applying Reconfig in client projects

February 27, 2020 By Nicolay Worren

Image: From project meeting with client – my colleagues Tore Christiansen and Bjørn Helge Gundersen (from Deloitte) on the right.

Last year was an important year for Reconfig – the new software tool we are developing.

The key purpose of Reconfig is to help leaders find more effective organizational models.

I wrote about the tool in an article on this blog in 2018.

Lots of things have happened since then, so let me give you an update.

Last year, we launched a full fledged, web based version of the tool (you can see a 5 minute demo of it on the reconfig web page).
A key journal in the field – Journal of Organization Design – accepted a paper where we describe the principles behind the tool and our experience from two early pilot projects.
But most importantly: Last year we got our first real clients, in three different countries: Norway (an oil company), Sweden (a Fast Moving Consumer Goods Firm), and Germany (an engineering firm).

It was very exciting to work with these firms and be able to use the tool in practice.

We didn’t just hand over the tool to the clients, but worked with them on the whole process, from planning the project to analyzing and interpreting the data.

The feedback we received was encouraging, and made it possible to further improve the tool.

As with any new tool, things are not perfect, but we are constantly updating and extending the functionality. For example, dozens of changes have been made to the user interface just in the last 3-4 weeks.

Here are some of my own observations from the three projects:

People agree that there is a need for a more data driven approach to organization design.

Our clients agree that Reconfig provides “situational visibility”: You get to see how the organization actually works, before you make decisions about changes.

The output from the tool that clients use the most is the map (or rather, matrix) that shows “who works with whom doing what” in the current organization.

Clients use it to test their own understanding of their organization.

For example, in one project, the firm had staff performing similar work in two locations. The assumption was that these were independent teams; but the data from Reconfig showed that there in fact was extensive communication across the two locations.

The client realized that the teams were missing certain skill sets in each location, which made them more dependent on each other.

Another client mentioned a key benefit from using Reconfig: She said it was easier to gain acceptance for the proposed, new organizational model because people could see that it was based on actual data, as opposed to speculation or hunches.

The data are collected from employees themselves – in a survey questionnaire – that’s where the input to the tool comes from.

What about the solutions produced by tool? Reconfig contains an algorithm that identifies a more optimal way of grouping teams and units.

This topic deserves a whole blog post in itself, but let me mention a couple of things.

We have found that Reconfig usually identifies solutions that reduce coordination costs significantly (by as much as 50%).

If you implement the suggested model, this can be translated into reduced costs: Less time and money will be spent on meetings and e-mails (and on negotiating with people in other units) and more time can be spent on core work tasks.

In short, by using Reconfig, you can increase productivity, because the organizational structure can be aligned with the work processes.

The solutions generated by the tool are different from the designs that people come up with intuitively.

It seems like many people are quite “categorical”, top-down thinkers when considering organizational structures: “Should we organize by product or geography”?; “Should we use a functional structure or cross-functional teams?”.

In contrast, the tool works bottom up, from work processes.

The solutions identified by the tool tend to be hybrids. For example, in the oil company we worked with, Reconfig indicated that the best option was to use a cross-functional structure for the asset teams, but fairly traditional, functional groupings for staff units like IT and Finance.

There are situations where you should re-design the work processes, before you re-design the organization.

In one of the firms, the algorithm struggled to find a solution, it run for 36 hours before terminating, and only achieved a reduction of coordination cost of 26%.

This is still an improvement, but less than we had been hoping for.

After considering the results, both we and the client (independently) arrived at the same conclusion, however: The first step should be process improvement, not organization re-design.

The data from Reconfig showed that was a very large amount of communication and coordination going on between people in different sub-units in this firm (which is “Client 3” in the chart below).

The chart above shows the “”coordination density”, that is, the average number of connections per person (multiplied by the importance of each connection).

Rather than re-organizing right away, the first step in this situation should be to document and standardize the core work processes.

By standardizing processes, one may reduce the number of connections to a more manageable level. Because one can then rely on standards, procedures and guidelines to handle routine issues, instead of direct communication.

Once the work processes are reasonably “mature”, you can consider the right grouping of roles and units.

So what’s next?

This year, our main priority is to extend our reach by working with more firms, and also by developing the tool further.

We are also planning to extend Reconfig with a second module, tentatively called LearnConfig. It will enable project teams to run “what/if” scenarios, manually adjust the solution generated by the tool, and view the effect in terms of reduction or increase in coordination cost.

We are also establishing relationships with partners – consulting firms in different countries. Our partners will use Reconfig with their clients – while we will focus mainly on delivering the software.

Take a look at our web site for more information. On the web site, you can also book at time for a demo.

Should you adopt a mirror image structure?

One more time: How do we simplify our organization?

William of Baskerville in the library

Can you organize 12 people?

Report from the field: Applying Reconfig in client projects

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