Designing your organization kates and galbraith pdf

RESOURCES

D esigning fo r Change M a r y A n n e M . G o b b le

As the articles in this special issue illus­ trate, successful culture change can re­ make a company's fortunes. It's often easy to determine that cultural change is needed. A platform is burning, a m arket is shrinking, customers are disappearing, the R&D pipeline is withering—clearly, something needs to change if the organization is to survive. Sometimes, there's a more positive driver: a radical innovation demands a new business model, a different market, an entirely original approach.

Occasionally, a portfolio analysis like the one described by Smith and Sonnenblick in a 2013 RTM article sug­ gests that, while the company is fine at the moment, a new outlook is needed to meet coming challenges. Or a futures exercise helps the company see that it needs to prepare for a very different fu­ ture from the one it has assumed is coming. Indeed, as Carleton, Cockayne, and Tahvanainen argue in their Play- book for Strategic Foresight and Innovation, developing such a program can help an organization to maintain a future orien­ tation and avoid becoming mired in what Christian Crews calls, in his inaugural column in this issue, an

In this space, we offer a series o f summaries on key topics, with pointers to im portant resources, to keep you informed o f new developments and help you expand your repertoire of tools and ideas. We welcome your contributions, in the form o f suggestions fo r topics and of column submissions.

DOI: 10.5437/08956308X5803005

"official future" that blinds the organi­ zation to unexpected shifts in the envi­ ronment. Shell's longstanding scenarios program, described by Wilkinson and Kupers in their HBR article "Living in the Futures," is an example of how an ongoing futures effort can help a com­ pany envision, and prepare for, chal­ lenges just over the horizon.

What's hard is asking the second set of questions. You know you need to be more agile, more innovative, more forward-looking—but what does that look like? How do you design the orga­ nization you need to support the change you need? Plenty of books and articles provide high-level models for the kinds of organizations that excel. Tushman and O'Reilly's thinking about the of am­ bidextrous organizations to balance breakthrough innovation with sustain­ ing work; Reis's ideas about how his lean management model, adapted from the startup world, can help big compa­ nies be more agile; and Kim and Mauborgne's focus on creating new markets through increased differentia­ tion and value innovation all offer keen insight, and solid foundations for driv­ ing organizational change.

But those high-level views need to be supported by concrete, street-level structures that integrate the various components of the organization and harness the energy for change in a way that matches outputs to strategy—and creates value. Creating those structures and determining how they relate to

each other is the role of organizational design.

Unfortunately, for many managers, organizational design begins and ends with the "org chart"—that construction of boxes and lines that defines who re­ ports to whom, and about what. The org chart is a useful map of the lines of authority and responsibility in a con­ ventional hierarchical organization; it emanates from the same source as the assembly line and is designed to ac­ complish much the same thing—to modularize and systematize work for maximum efficiency. Of course, much like the assembly line, it assumes that little changes; the line produces the same product over and over again, the organization follows the same processes to manufacture its products, respond to its customers, and sustain itself.

Designing to support change, or even just to survive in an increasingly dy­ namic and complex competitive envi­ ronment, means more than moving around the boxes on the org chart. In­ deed, some of the flatter, more collab­ orative models that have emerged render the traditional org chart largely meaningless. Rather, the manager faced with designing for change must rethink all of the elements of the organizational structure and how they interact. A structure that is misaligned to strategy, or aligned to an old strategy, will fail. A structure that doesn't balance auton­ omy and control in a way that aligns with the company's strategy and values

64 | Research-Technology Management • May— June 2015

will produce frustration and unhappi­ ness, and likely fail.

One way to avoid such mismatches is to involve every stakeholder—from the front-line clerk to the C-suite—in the design process. Participatory design, also known as cooperative design, offers one method for allowing the members of an organization to structure their work and their workspace. Marvin Weisbord's Productive Workplaces de­ scribes how "getting everybody improv­ ing the whole system" can produce more open, agile organizations that, not coincidentally, respect the autonomy and dignity of workers.

Nadler and Tushman argue in in Competing by Design that organizational design can itself be a source of competi­ tive advantage, if it works to maximize a company's capabilities and exploit its strengths. Given its power, the authors argue, organizational design should be an integral, and ongoing, process in ev­ ery forward-looking organization.

There are a number of frameworks available for thinking about organi­ zational structure and design. Jay Galbraith, a leader in the field of orga­ nizational design, proposes a Star Model that maps the interactions among five factors: • Strategy, which provides direction

for the other elements. • Structure policies, which determine

where power and authority lie as well as the degree of specialization and centralization.

• Process definitions, which map how information and decisions flow.

• Reward systems, which are designed to motivate people to act in ways that further the strategic direction.

• People policies, which govern re­ cruitment, training and other HR functions.

The Bridgespan Group, which provides management advice to nonprofits, of­ fers a slightly different framework, adapted from a Bain & Company tool­ kit, that breaks organizational design into four elements—leadership, deci­ sion making and structure, people, and work processes and systems—interacting around culture in a wheel. The wheel­ shaped presentation emphasizes the de­ gree to which all of the elements must

IN PRINT Richard M. Burton, Borge Obel, and Gerardine DeSanctis. 2011. Organizational Design: A Step-by-Step Approach. Cambridge, UK: Cambridge University Press.

Christian Crews. 2015. Killing the official future. Future Praxis. Research-Technology Management 58(3): 59-60.

Jay Galbraith. 2014. Designing Organizations: Strategy, Structure, and Process at the Business Unit and Enterprise Levels. New York: Jossey-Bass.

Gregory Kesler and Amy Kates. 2010. Leading Organization Design: How to Make Organization Design Decisions to Drive the Results You Want. New York: Josse-Bass.

W. Chan Kim and Renee Mauborgne. 2015. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Expanded Edi­ tion. Boston, MA: Harvard Business Review Press.

David Nadler and Michael Tushman. 1997. Competing by Design: The Power o f Organizational Architecture. New York: Oxford University Press.

Eric Ries. 2011. The Lean Startup: How Today's Entrepreneurs Use C ontinu­ ous Innovation to Create Radically Successful Businesses. New York: Crown Business.

Dan Smith and Richard Sonnenblick. 2013. From budget-based to strategy-based portfolio management: A six-year case study. Research-Technology Management 56(5): 45-51.

Naomi Stanford. 2007. Guide to Organisation Design: Creating High-Performing and Adaptable Enterprises. An Economist Guide. London, UK: Profile Books.

Michael Tushman and Charles O'Reilly III. 2002. Winning through Innovation: A Practical Guide to Leading Organizational Change and Renewal. Revised Edition. Boston, MA: Harvard Business Review Press.

Marvin Weisbord. 2012. Productive Workplaces: Dignity, Meaning, and Commu­ nity in the 21st Century. 3rd ed. San Francisco, CA: Jossey-Bass.

ONLINE John Beeson. 2014. Five questions every leader should ask about organiza­ tional design. Harvard Business Review, January 23. https://hbr.org/2014/01/ five-questions-every-leader-should-ask-about-organizational-design

Bridgespan Group. 2009. Designing an Effective Organization Structure. Pre­ sentation, January, http://w ww .bridgespan.org/getm edia/b1139597-adfe-4dd7- bbb2-ac8c67883020/effective-organizations„-structural-design.pdf.aspx

Tamara Carleton, William Cockayne, and Antti-Jussi Tahvanainen. 2013. Playbook for Strategic Foresight and Innovation: A Hands-On Guide for Modeling, De­ signing, and Leading Your Company's Next Radical Innovation. Helsinki, Finland: Tekes. https://www.box.eom/s/59y1940p88y0srvroiid

Jay R. Galbraith, n.d. The Star Model, http://www.jaygalbraith.com/im ages/pdfs/ StarModel.pdf

M ind Tools. 2015. Organization design: Aligning organizational structure with business goals. http://www.mindtools.com/pages/article/newPPM_95.htm

Charles A. O'Reilly and Michael L. Tushman. 2004. The ambidextrous organiza­ tion. Harvard Business Review 82(4). https://hbr.org/2004/04/the-ambidextrous- organization

Lex Sisney. 2012. The 5 classic mistakes in organizational structure: Or, how to design your organization the right way. Organizational Physics, January 9. h ttp :// organizationalphysics.com/2012/01/09/the-5-classic-mistakes-in-organizational- structure-or-how-to-design-your-organization-the-right-way/

Angela Wilkinson and Roland Kupers. 2013. Living in the futures. Harvard Busi­ ness Review 91 (5). https://hbr.org/2013/05/living-in-the-futures

Resources May— June 2015 | 65

https://hbr.org/2014/01/
http://www.bridgespan.org/getmedia/b1139597-adfe-4dd7-bbb2-ac8c67883020/effective-organizations%e2%80%9e-structural-design.pdf.aspx
http://www.bridgespan.org/getmedia/b1139597-adfe-4dd7-bbb2-ac8c67883020/effective-organizations%e2%80%9e-structural-design.pdf.aspx
https://www.box.eom/s/59y1940p88y0srvroiid
http://www.jaygalbraith.com/images/pdfs/
http://www.mindtools.com/pages/article/newPPM_95.htm
https://hbr.org/2004/04/the-ambidextrous-organization
https://hbr.org/2004/04/the-ambidextrous-organization
https://hbr.org/2013/05/living-in-the-futures
fit together to keep the organization running.

Lex Sisney, author of Organizational Physics, lays out three highly abbreviated steps for building an organization design:

• Identify the core functions needed to support the strategy.

• Define w hat each function is account­ able for and how it will be measured.

• Place the functions in a structure.

The result is a structural diagram that may look like a traditional org chart, but has a different intent. Where the org chart maps reporting lines betw een people, the structural diagram maps w hat functions need to be performed and w here responsibility for those func­ tions lie. The org chart emerges from the structural diagram. There's a lot implied in that high-level process, but Sisney's very comprehensive blog post offers a well-explained before-and-after example illustrating his points.

As John Beeson notes in a 2014 HBR article, organizational design is fre­ quently the province of consultants, and every consultant has his or her own model or framework. But, Beeson ar­ gues, organizational design has evolved from a "big bang event," most often as­ sociated with significant downsizing, to an ongoing process of continual adjust­ ments to improve efficiency and spur growth. That m eans every m anager has to deal with, and every m anager should have a model for approaching it. For Beeson, it doesn't much m atter what model, as long as it helps you to address five key questions:

• W hat is the business's value propo­ sition and sources of competitive advantage?

• Which activities directly deliver on th at value proposition?

• Which structure should we choose and how do we overcome its in h er­ ent downsides?

• W hat type of leadership and culture are required to deliver the value proposition?

• W hat organizational practices are required to reinforce the organiza­ tional intent?

There are, of course, some more-or-less standard structures used by many

organizations, including traditional h i­ erarchical structures, as well as more organic variations such as matrix and netw ork structures; each varies in terms of the level of complexity, formality, and inclusiveness it allows and in how communication occurs. A Mind Tools survey article on organization design of­ fers a useful sum m ary and comparison of each of these models (as well as a good introduction to the basic principles of organizational design).

For those seeking a m ore systematic introduction to the discipline of organi­ zational design, along with frameworks, tools, and processes for u n d erta k in g a stru ctu ra l redesign process, th ere are several options. Burton, Obel, and DeSandis offer a primer on the basics of organizational design and a step-by-step process for structural design. Stanford offers an overview of the field and an approach structured around five core principles in the Economist's Guide to Or­ ganisation Design. Kesler and Kates offer their own "scalable, five-step process" for organization design, directed specifi­ cally at business leaders. Any of these will provide a solid overview of the field along with some tools for engaging with it.

Organizational design may seem m undane, but it is every bit as critical as the big work of culture change. As Lex Sisney, author of Organizational Physics, put it in a blog post, "how your organi­ zation is designed determines how it performs." How an organization is structured will determ ine how it re ­ sponds to changes in its environm ent. An organization's structure m ay n u r­ ture or inhibit innovation. W here the structure runs counter to the strategy, people will become frustrated and aban­ don change in favor of the path of least resistance.

Reviews The Big Data-Driven Business: How to Use Big Data to Win Customers, Beat Competitors, and Boost Profits Russell Glass and Sean Callahan (Hoboken, NJ: John Wiley & Sons, 2014)

Although big data has become a perva­ sive buzzword, few businesses fully u n ­ derstand w hat exactly big data is or how

it can be leveraged to support growth and innovation. Russell Glass and Sean Callahan attem pt to address these issues and deconstruct the dauntingly com­ plex notion of harnessing big data for business applications. Glass and Callahan are pioneers in this field, having de­ ployed big data strategies to grow Bizo, a business-to-business marketing com ­ pany, until its acquisition by Linkedln for $175 million. Both are now at Linkedln; Glass is the head of marketing products and Callahan is a senior m a n ­ ager of content marketing. The authors give readers an insider's look at how big data can be used by laying out the avail­ able technologies and their im plem en­ tation and showing how a new com er can deploy big data tools for business goals.

Beginning with a simple idea—that "the companies that most effectively use big data to gain insight into their customers and act on that data will win"—the authors conclude that m od­ ern businesses should "be data-driven and customer focused." The notion that a business should be customer focused is hardly novel, but historically it has been difficult and expensive merely to collect and store the data needed to glean transformative insights—let alone perform the analyses that lead to these insights. The advent of inexpensive large-scale data storage and advanced analytics capabilities is quickly eroding this barrier, making it possible for busi­ nesses to im plement a data-driven ap­ proach across the organization. Big data analytics can provide new insights in the form of m ore focused information about w hat customers like and what m akes them buy—leading to m ore- informed decisions about, for instance, w hat could be optimized in the pipeline. Coupled with existing data and re ­ sources, big data can be used to gener­ ate and score new leads for sales, inform product development, and provide a hyper-focus on customers—potentially all in real time.

These benefits are not restricted to business-to-consumer companies; the authors provide several examples of business-to-business applications. For instance, they describe how DocuSign, which provides solutions to manage

6 6 | Research-Technology Management Resources

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