Enhancing Organizational Performance (1997) / Chapter Skim
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1 Organizational Change and Redesign
1 Organizational Change and Redesign
Pages 11-38
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PART I Organizational Responses to Environmental Change
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We then examine several bases for organizational design and redesign: the work of organizational theorists, the practical experience of managers, and the precepts of doctrine. Finally, we consider new organizational forms as a response to environmental change.
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, the idea that organizations vary in their choice of responses, the timing of their responses, and the means and effectiveness of executing their responses, and that these phenomena are managerially determined to a great extent. Some of the most powerful forces identified by the business press and organizational literature that are motivating managers to redesign their organizations are the increase in scientific knowledge, changes in professional roles, the technology explosion, and the changing demographics of the American workforce.
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One reason to expect continued growth in scientific knowledge is that increased capability and application of advanced communications technologies will greatly increase the availability of whatever knowledge is produced. Even now, a weekday edition of The New York Times contains more information than the average person was likely to come across in a lifetime during the seventeenth century, and it is estimated that today the amount of information available to the average person doubles every five years (Wurman, 1989)
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Environmental competitiveness arises from a number of factors, including new products competing with old ones, the removal of distance barriers that provided buffers from competition, and improved information technologies that enable producers of goods and services from far away to compete with local establishments for customers and clients. Organizations adapt to these changes by making decisions more frequently, more rapidly, and in more complex ways; by implementing decisions more rapidly; by requiring information acquisition to be continuous and more comprehensive; by reinforcing more selective information distribution; and by promoting more effective organizational learning (Huber, 1984; Huber et al., 1993)
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As a result, members of the same profession now find themselves variously located in the societal structure of work -- some in traditional solo practice; some in small groups or not-so-small professional organizations of their own construction, in which the professional service is the main organizational product; and some as staff specialists in organizations whose primary products or services are not those of its professionals. The first of these categories is familiar; the second is exemplified by the multilawyer legal firm and the medical group practice or health maintenance organization.
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affect organizational design and organizational decision processes, such as facilitating the elimination of layers of management and enabling the effective functioning of network organizations composed of other organizations. There is still considerable question, however, as to whether they create positive
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The organizational learning required to know how to use the technology or to redesign work and managerial structures to take advantage of the technology is substantial. The third area in which technology has had a strong impact on organizational change is that of the so-called high-risk technologies.
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How those challenges will be met and with what consequences for the performance of organizations, the competitiveness of industries, and the quality of life in the United States remains to be seen. To say that the effects on organizational design of demographic diversity in organizations are well documented or synthesized would be a gross overstatement; there are some bodies of evidence concerning the effects on organizational processes, however.
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This is because many combinations of organizational characteristics or features are not workable or result in inferior performance and are selected out of the population. It is also because, once organizational forms are established and appear to be effective, many will tend to quickly copy them.
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These studies have resulted in descriptive theories about the organizational-level factors and features that determine organizational performance. The best-known of these is called contingency theory; with its extension, configuration theory, it is the basis for most recommendations for organizational design made today by organizational scientists and many management consultants (Burke and Litwin, 1992; Lawrence, 1993; Burton and Obel, 1995; Galbraith, 1977)
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TABLE 1-1 Four Most Common Organizational Designs Simple Functional Form/ Professional Adhocracy/ Characteristic Structure Machine Bureaucracy Bureaucracy Team-Based Primary control mechanism Direct supervision Formalization of standards Professional standards Mutual adjustment Specialization of jobs Little specialization Much vertical and Much horizontal Much horizontal horizontal specialization specialization specialization ORGANIZATIONAL CHANGE AND REDESIGN Flexibility to adapt to High Moderately high if top Low High environmental change management is sensitized to need for change, low otherwise Most favorable environment Simple, fast-changing Simple or complex Simple or complex, stable Simple, fast-changing Examples Start-up firm, small unit Large hotel, military University, military Performing arts patrols in enemy-held procurement organization research organization theater, product terrain design team 21
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22 TABLE 1-2 Three Most Common Supraorganizational Designs Prime Contractor/ Network or Virtual Characteristics Multidivisional Subcontractor Organization Component organizations Headquarters and Prime contractor and Broker and partner subordinate divisions independent subcontractors Primary control Comparison of divisional Adherence to contractual Adherence to contractual mechanism performance, allocation of agreements, parties have options agreements, need to maintain budgeted resources not to continue relationship reputation for cooperative after each contract cycle behavior Horizontal interunit High High within specialties, low Low competitiveness otherwise Most favorable Stable Stable Fast-changing environment Examples Automobile company, Army Aerospace firm military base Multifirm alliance for major corps construction project, military joint-service operation/exercise ORGANIZATIONAL RESPONSES TO ENVIRONMENTAL CHANGE
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, which emphasize why change is so difficult to accomplish -- we examine here two theories about organizational redesign that more clearly depend on managerial action. One of these we term the evolution and revolution theory of organizational change.
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It seems plausible that combining two ideas -- that there are phases within an organization's life cycle and that there should be congruence among the organization's features within each phase -- can lead to prescriptive organizational redesign guidelines for improving performance. We close this section on theories of organizational change by mentioning two related bodies of literature.
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, such as inadvertent distortions at multiple nodes in a communication network and deliberate distortions by those who seek to gain from such distortions. A manager who observed a large number of design changes might be less prone to learning incorrectly by making comparisons or averaging across instances, but few managers experience a large number of organizational changes that are comparable.
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They worked within a schema, the McKinsey 7-S framework, which is more a listing of classes of factors to take into account than a theory of organization. The framework consists of seven factors that in combination are assumed to determine organizational effectiveness.
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These requirements are translated into tables of organization and equipment. The Army reviews and revises its current unit designs in response to changes in its doctrine, concepts, and new technology, as well as global trends and threats.
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Internal conditions include new or revised missions, changing funding, technology advances, lessons learned from training and combat, and new or revised doctrine. The product of this step is a requirement to change a unit design in order to bring it up to date and tailor it to internal and external conditions.
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and training exercises provide feedback for the unit design process and for the revision of tables of organization. The modeling and simulation tools used in Step 3 are also applicable to this step.3 Assessment of the Bases for Organizational Design The major sources of guidance for organizational design are research and theory, experience, and doctrine.
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. A second reason that organizational theory has had only modest impact on organizational designs is that the large body of empirical studies on which it draws includes many studies carried out under conditions that no longer exist.
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Without the products of systematic empirical studies, many executives would have little basis for making informed choices. The value of organizational theory as a basis for organizational design is understood best in relation to the alternatives.
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NEW ORGANIZATIONAL FORMS As organizational environments undergo accelerating change, it is no surprise to discover distinctively new forms of organizations emerging as managers attempt to create organizations better suited to these changes. In this section we examine several "new" organizational forms: the adhocracy or the team-based organization, the network or virtual organization, the horizontal organization, and the matrix organization (the oldest of the new forms)
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Network or Virtual Organizations The increases in knowledge specialization that lead to an adhocracy's intraorganizational specialization also lead to interorganizational specialization, as organizations seek to exploit niches with their own distinctive products and services. The network form has developed in order to deal simultaneously with higher levels of interorganizational specialization and the
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. Network organizations are an increasingly common supraorganizational form.
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. Increasing pressures for both shorter project completion times and less proprietary resource allocations from departments led to project managers acquiring more authority and attaining more influence.
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, "inverted" organizations when all nonboundary-spanning units serve the units that interface with the customers and clients, and other new and not yet common organizational designs. As organizational environments become more differentiated, we can expect more new organizational forms, but as these environments continue to change, we can expect a sizable proportion of the new forms to pass away, as the niches for which they are well matched disappear.
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