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.