Lecture 3

• An organization’s formal structure is defined by how tasks are formally divided, grouped, and coordinated

• Formal structures are designed to support the strategic direction of the firm by enhancing order, efficiency, effectiveness, and accountability. They serve as guides and controls on decision-making authority, coordinate and integrate operations, provide direction to internal governance, and attempt to promote desired behaviors and organizational outcomes. The organizational chart is the common document of organizational design

Formal systems include planned routines and processes such as strategic planning, accounting and control systems, performance management, pay and reward systems, and the information system. Collectively, these set out how things are supposed to be done, the rules and procedures to be followed, how information is collected and disseminated, how individuals are to be compensated, and all the other formalized systems and processes that are used for coordination, integration, and control purposes. They provide the formal infrastructure that operationalizes the organizational structure.

• Differentiation

• Chain of command

• Span of controlCentralization vs. decentralization

• Formal vs. informal

• The degree to which tasks are subdivided into separate jobs or tasks. This concept deals with who does what and asks about the degree to which jobs are specialized and distinctive from one another on both the horizontal and vertical organizational axes.

• The coordination of the various tasks or jobs into a department or group. This is the extent to which activities are combined into processes and systems, pulling together all the disparate pieces of tasks and jobs into a coherent whole.

The reporting architecture in a hierarchical organization. This concept defines how individuals and/or units within an organization report to one another up and down the organizational ladder

The number of individuals who report to a manager. This notion questions the optimal ratio of workers to managers in an organization. Since there is no one correct way to answer this question, part of the art of organizational design is to figure this out, given the culture, strategy, and what needs to be done.

How and where decision making is distributed in an organizational structure. The more centralized the approach, the more the decision making gravitates to the top of the organization. Conversely, the more decentralized it is, the more the decision making is delegated to lower levels of employees.

The degree to which organizational charts exist, are codified, and are followed. This is the extent to which structures and processes of the organization are set down in writing and expected to be followed

• Mechanistic organizations rely on formal hierarchies with centralized decision making and a clear division of labor. Rules and procedures are clearly defined and employees are expected to follow them. Work is specialized and routine. Mechanistic organizations tend to be concentrated in industries where the risk of getting it wrong is high. For example, nuclear power suppliers or pharmacy industries will be extremely mechanistic in order to manage the high risk and detailed logistics of their business.

• Organic organizations are more flexible. They have fewer rules and procedures, and there is less reliance on the hierarchy of authority for centralized decision making. The structure is flexible and not as well defined. Jobs are less specialized. Communication is more informal, and lateral communications are more accepted. Many start-up companies and companies in creative fields will be more organic, allowing increased communication and flexibility in day-to-day tasks. While it may appear that one structural form is more appealing than the other, both can be effective depending upon their fit with the environment. When efficiency is critical to success and ambiguity and uncertainty are low to moderate, a more mechanistic structure will fit best. However, when an organization’s ability to respond to its environment with flexibility and adaptiveness is critical to its success, a more organic structure will make more sense

• If the organization is to perform effectively, there needs to be a fit between the organization’s information processing requirements and its capacity to process information through its structural design choices

• As uncertainty increases, the amount of information that must be processed between decision makers during the transformation process increases.

• As uncertainty increases, the traditional vertical information strategies for uncertainty reduction will prove increasingly less effective, and the organization will require methods that either reduce the need for information processing or increase the capacity of the organization to process information

• Organizations can reduce their information-processing challenges by adding slack resources to act as buffers (e.g., extra people and inventory) and/or by creating self-contained tasks (e.g., divisions organized around product categories, geography, or customers).

  Similarly, separating an organization into divisions operating as profit centers means that the divisions may not need to coordinate their activities as much. This reduces the information-processing requirements.

• Organizations may attempt to increase their informationprocessing capacity by using the hierarchy (i.e., vertical communication). That is, if you are uncertain what to do, ask your boss. If the situation becomes repetitive, create a decision rule to guide the decision. A further vertical information strategy is when organizations increase their capacity to process information by investing in vertical information systems (e.g., computer generated performance reports, decision support systems).

• Organizations also can improve their information-processing ability by increasing their horizontal communication capacity. They can increase the capacity to process information horizontally by creating lateral relationships that vary in complexity from something as simple as direct, informal contact, to more formal networks and complex, formal structures such as a matrix that are intended to facilitate the hierarchical and horizontal flow of information.

The role of the information systems is to distribute needed information and get it to the individuals who most need it in a timely manner for decision making. Interdepartmental and interdivisional boundaries and jurisdictional disputes can impede the flow of information.

• there needs to be congruence between the outside world, the strategy, and how the inside world is formally organized. By understanding the nature of the external environment and the organization’s strategy, history, and resources, a change leader gains insight into the types of structures and systems that have the most to offer. By understanding the formal organizational arrangements, the leader gains insights on where and how decisions are made and how these can be leveraged to advance change.

• Change leaders also need to be aware that even in a fairly mechanistic organization, different departments and divisions may face very different information-processing needs and will therefore need to be structured and managed differently.

• Often differentiation and integration are overused

• An alternate strategy would be to decrease the need to differentiate, easing information-processing needs in Galbraith’s terms. This could be done by outsourcing the technical customer support function, by undertaking design changes that reduce the need for such customers support, or other such strategies

• Wetzel and Buch believe that it is useful to consider the benefits of a reduction in the amount of structural differentiation in the organization, through such mechanisms as flattened structures, multi-skilled workers, automated processes, and self-managed teams. By reducing their reliance on differentiating structures, organizations can reduce their need for integrating mechanisms.

• all organizational designs present structural dilemmas, or insolvable predicaments, that managers must deal with and reconcile

• If tasks are not clearly assigned, then they can easily fall through the organizational cracks. If, on the other hand, managers overlap assignments, then they may create “conflict, wasted effort, and unintended redundancies.”

• At the team or departmental level, change leaders have the option of creating several types of reporting structures, depending upon the need under different conditions.

• Mechanistic organizations may need to create structures or processes that allow them to either temporarily or permanently suspend hierarchical practices to advance innovation.

• Structural decisions should follow strategic decisions because the structure will then be there to support the strategy.

• All structures present leaders with dilemmas that they must manage. Today’s trade-off may seem too costly in the future and will suggest a reorganization to fit tomorrow’s external environment.

• Once structural choices are made, formal systems, and processes need to be aligned so that weaknesses are addressed and the internal alignment with the strategy is supported.

• Organizational structures shape and impact people’s behavior. A task force, for example, that formally brings people together to analyze and report on a particular issue forces its members to cross organizational boundaries and to learn about and collaborate with people beyond their silo

• Any significant change initiative will cost money. To maximize the chances of receiving resources for a change initiative, change leaders will need to understand the budget process and how to garner support for the proposed change through departments and individuals who approve the budget. Timing is important. The likelihood of approval, in the short term, is less if the organization is in the middle of the budget cycle and available funds have already been allocated. Efforts to build interest and support should begin well in advance of when significant funds are needed, building to coincide with key decision dates.

• Change projects that are incremental will normally require fewer resources and lower levels of organizational approval. As the change increases in magnitude and strategic importance, change leaders will need to pay attention to formal approval processes, eliciting the support of senior individuals prior to enacting the change. This is unless there is an immediate urgency

• Proposals are typically developed and brought forward for consideration, and they are reviewed for inclusion on the agenda. Once the proposal is presented and discussed, it is approved, rejected, or sent back for further study or rework

• As one proceeds through the approval stages, the assessment process becomes increasingly rigorous and the hurdles that must be met before proceeding to the next stage rise. When the process is working well, it should stimulate innovative thinking and initiatives, enhance the quality of assessment, reduce the cycle time from ideation to implementation, and reduce the likelihood of dysfunctional political behavior.

  The formal approval process does more than ensure that the decision making concerning change is thorough and reasoned. If the process used to make the decision is viewed as legitimate by others in the organization, this will lend legitimacy to what changes are pursued and enhance acceptance.

• Initiatives such as customer and employee surveys, benchmark data, pilot programs, and other incremental systembased approaches can be used to acclimate organizational members to the change ideas. Such initiatives can be used systematically to clarify the need for change, refine the initiative, address concerns, reduce resistance, show linkages to their agendas, and increase comfort levels. As well, they can create opportunities for direct involvement that will build interest and support for the change within key groups. This, in turn, should reduce pushback and increase the prospects for support if and when formal approval is sought

• Coalitions can be extremely valuable for building support prior to the formal approval process. Change leaders need to understand key players and behave authentically with them to develop influential coalitions that will support the changes

It grows out of the premise that it is often easier to gain forgiveness than permission to do something in organizations. This tactic can prove helpful in the early stages of product innovation, but Frost and Egri57 argue that securing permission is an important contributor to success when social innovations are involved. When using a renegade approach, one must be careful not to create enemies unnecessarily or engage in tactics that create long-term damage to your reputation and credibility or the reputation of the firm.

• If the case can be made that the change initiative adds value over other alternatives and fits within the context of the mission, vision, strategy, and significant downstream systems

• The likelihood of acceptance and adoption of the change is enhanced. If the resources required for the change seem relatively minor relative to the benefits, approval is also more likely.

• The likelihood of approval and acceptance is higher if the only required actions are an additional half day of training, the development of needed support materials, the modification of a couple of decision support screens, the presence of supervisory support, and the modification of performance metrics to reinforce the desired change. In effect, the change leader will have demonstrated that there is little to fear because the change is incremental, is not particularly disruptive in nature, is consistent with the vision and the strategy, and contains benefits that outweigh the costs.

• The perceived risk can be reduced by breaking the change down into a number of smaller, manageable stages that begin with exploratory research and evaluation, followed by a pilot project, assessment of learning and system alignment challenges, extension to a customer group that was particularly well suited to the approach, and so forth.

• When major changes are undertaken, there will be existing systems and structures that change agents have to work with in order to gain approval and proceed. In addition, subsequent alterations to those structures and systems will often be required in order to bring them into alignment with the proposed path forward.

• change agents need to understand the approval processes for their particular projects. They need to know the key players and how formal the process is

Structural and systemic factors in an organization can be used to ease the legitimization and acceptance of a change initiative and provide access to needed resources. They facilitate the assignment of authority and responsibility, provide needed training and bandwidth, publicly affirm commitment and needed resourcing at the senior and middle levels, and ensure that the output of the changes is put to use and not ignored, because they have not been part of past practices. However, they can also derail progress when not properly deployed. The inappropriate delegation of sponsorship, structures that fail to provide sufficient access to needed resources, and the misapplication of systems are three of the most commonly cited mistakes made by top management in change initiatives

Thinking first strategy works best when the issue is clear, data are reliable, context is structured, thoughts can be pinned down, and discipline can be established as in many routine production processes. The introduction of an initiative such as Six Sigma is an example where management needs to think first.

Seeing first strategy works best when many elements have to be combined into creative solutions, commitment to those solutions is key, and communication across boundaries is essential. New product development is an example of the need to see first.

Doing first strategy works best when the situation is novel and confusing, complicated specifications would get in the way, and a few simple relationship rules can help people move forward. For example, if a manager is testing a variety of approaches to customer service and wants feedback about what works best under what conditions, then doing first is appropriate. At the macro level, this approach often makes sense for organizations attempting to figure out how to deal with disruptions to their business models—something firms are experiencing with increasing frequency.

Complexity of the problem and the solution

Scope of the problem and framing of the solution

Diversity in views and (powerful) stakeholders

Culture

Desired performance change (speed, effectiveness)

Context (ambiguity, uncertainty)

It was the person and it was more than the person. Change agent effectiveness was a function of the situation, the vision the person had, and the actions he took. A robust model for change considers the interaction between personality, vision, and situation

• Commitment to Improvement

• Communication and Interpersonal Skills

• Determination

• Eyes on the Prize and Flexibility

• Experience and Networks

  • Networks don’t work for long if others don’t feel they are getting value from them. To ensure that members of the networks and others continue to communicate with them, change leaders are well advised to remember to never be seen as shooting the messenger

• Intelligence

  • In general, one has more confidence in a proposal developed by a bright individual than one brought forward by a dullard. However, traditionally defined intelligence is not enough. Interpersonal skills, empathy, self-regulation, a positive and yet realistic outlook, attention to detail, and the motivational drive to see things through are needed to frame proposals effectively and implement them. These factors make up what is called emotional intelligence and it is often highlighted in discussions of change agent characteristics

Caldwell argues that change leaders operate from a visionary, adaptable perspective while change managers are much more hands on and work with people

In order for reflection to add value, there can’t be a “wrong” understanding. Everyone must strive to fully understand people’s perceptions, assumptions, and visions through discussing and challenging one another’s views. In a global society with relationships developing and evolving at all levels, organizations operate in an ever-changing context, making the development of shared understanding and mutual respect all the more important

Roles:

• The Catalyst overcomes inertia and focuses the organization

• The Solution Giver knows how to solve the problem

• The Process Helper facilitates the "how to" of change playing the role of third party intervener

• The Resource Linker brings people and resources together to solve problems

• Is comfortable with ambiguity and risk; thinks tangentially and challenges accepted ways of doing things; has strong intuitive abilities; and relies on feelings and emotions to influence others.

• The Emotional Champion has a clear and powerful vision of what the organization needs and uses that vision to capture the hearts and motivations of the organization’s members. An organization often needs an emotional champion when there is a dramatic shift in the environment and the organization’s structures, systems, and sense of direction are inadequate. To be an emotional champion means that the change agent foresees a new future, understands the deep gap between the organization and its future, can articulate a powerful vision that gives hope that the gap can be overcome, and has a high order of persuasion skills

Engages in big-picture thinking about strategic change and the fit between the environment and the organization; sees organizations in terms of systems and structures fitting into logical, integrated components that fit (or don’t) with environmental demands; and is comfortable with assessing risk and taking significant chances based on a thorough assessment of the situation.

embraces moderate risks; engages in a limited search for solutions; is comfortable with the current direction that the vision offers; and relies on intuition and emotion to persuade others to propel the organization forward through incremental changes

thinks logically and carefully about detailed processes and how they can be improved; aims for possible gains and small wins rather than great leaps; and is systematic in his or her thinking while making careful gains.

Pull actions by change agents create goals that draw willing organizational members to change and are characterized by organizational visions of higher-order purposes and strategies. Push actions, on the other hand, are data based and factual and are communicated in ways that advance analytical thinking and reasoning and that push recipients’ thinking in new directions. Change agents who rely on push actions can also use legitimate, positional, and reward-and-punishment power in ways that change the dynamics of situations

strategic or episodic change followed by incremental or continuous change. Episodic change is change that is “infrequent, discontinuous, and intentional.” Continuous change is change that is “ongoing, evolving and cumulative.

The catalyst is needed to overcome inertia and focus the organization on the problems faced. The solution giver knows how to respond and can solve the problem. The key here, of course, is having your ideas accepted. The process helper facilitates the “how to” of change, playing the role of third-party intervener often. Finally, the resource linker brings people and resources together in ways that aid in the solution of issues.