For what seems like all the right reasons, the company is not acting in the external market, but is piling up more internal initiatives. Our pricing decision-making is a mess. Expose the vampires. It is difficult to measure the internal cost of energy lost to process because no one measures the energy of organizations.
No one can really quantify the costs energy-sucking people and tasks exact from your people. Many clever people are energy vampires, finding lots of ways to slow down action in your companies. You just need a way to ask. In fast-growing companies, the opposite is almost always true: The people who are valued are the ones who get out of the office and execute. It is up to leadership to right this balance.
Thinkers obviously play a critical function in any organization, but it must be clear that their role is to support those who are translating strategy into action.
One tactic: Make sure the next 10 hero stories you tell are about doers, about the front line, about those who execute. Celebrate them, elevate them.
And be prepared to shut down conversations among your team that imply the doers are somehow less important than the thinkers. Make people more accountable for the outcome than the process. As complexity grows in an organization, process often steals focus from outcome.
My favorite example is a story one CEO told us about his innovation pipeline. Instead, what I heard were lots of comments about the process.
About how rigorous it was. How inclusive. Large corporations often consist of a few dominant businesses, each with its own orthodoxy about strategy, customers, and technology. These tightly integrated entities and their monocultures make a company vulnerable to unconventional competitors and blind it to new kinds of opportunities. To avoid that risk, Haier has divided itself into more than 4, microenterprises, or MEs, most of which have 10 to 15 employees.
To be sure, some MEs, particularly in manufacturing, have larger payrolls, but even in them decisions are made by small autonomous teams. Microenterprises come in three varieties. Zhisheng, which makes refrigerators for young urban customers, is a typical example. That entails more than developing web-enabled products. The web is incredibly diverse and yet still coherent.
MEs are free to form and evolve with little central direction, but they all share the same approach to target setting, internal contracting, and cross-unit coordination. Old assumptions get challenged only once the business has hit a wall.
Not so at Haier. Market-facing MEs are expected to grow revenue and profit four to 10 times faster than the industry average. In areas where Haier leads, the target is more modest but still a multiple of the market baseline. While ambitious, the targets do get adjusted when circumstances change.
Every market-facing ME is also expected to make a transformative leap from selling products and services to building an ecosystem. A good example is Community Laundry. Today the Community Laundry platform hosts dozens of other businesses and takes a share of the revenue they generate. Every market-facing ME is expected to eventually build a business ecosystem. Like their market-focused siblings, node MEs have leading targets that are pegged to external benchmarks.
A manufacturing node, for example, may be responsible for lowering costs, cutting delivery time, improving quality, and further automating its production facilities. In most organizations, a significant percentage of employees are insulated from market forces. They work in functions that are, in essence, internal monopolies, such as human resources, research and development, manufacturing, finance, information technology, and legal affairs. A typical user ME will have agreements with dozens of nodes.
If an ME believes that an external provider would better meet its needs, it can go outside for services. Senior executives virtually never interfere with internal negotiations. Usually, two or three nodes will respond with proposals. The ensuing discussions provide an opportunity for all parties to challenge existing practices and brainstorm new approaches. Nodes that are unable to provide competitive service can and do go out of business. When a customer unit fails to meet its leading targets, the node takes a hit.
Instead, they are paid by customers. This compensation model has three benefits. First, it discourages mediocrity. Second, it unites everyone around the goal of creating great customer experiences. When a user ME seems in danger of missing its targets, representatives of all its supplier nodes quickly come together to resolve the problem. Third, it maximizes flexibility: Market-facing MEs are free to reconfigure their network of service providers as new opportunities emerge.
How does a company with more than 4, independent operating units synchronize major investments in technology and facilities? How does it build cross-business capabilities such as manufacturing automation? In a start-up, coordination happens spontaneously.
As a company grows and operating units become more siloed, coordination becomes increasingly difficult. The typical solution involves more layers, mandates, and corporate-level functions. Haier has a different approach: organizing all MEs into platforms. Some platforms bring together MEs operating in a similar category, like washing or audiovisual products, while others focus on building new capabilities, such as digital marketing and mass customization.
A typical industry platform encompasses more than 50 MEs. Haier is made up of thousands of microenterprises MEs , which are grouped into platforms. Below is a map of the refrigeration platform.
Any user ME is free to hire and fire nodes as it sees fit—or to go outside for services if it believes an external provider can better meet its needs. Critically, no one reports to the platform owner, nor does the platform owner have a staff. Platform owners have leading targets and are expected to grow their platforms by developing new MEs. Platform owners are as much entrepreneurs as facilitators. Like platform owners, integration nodes encourage collaboration rather than exert control.
MEs also rely on the expertise of competence-focused platforms. Two of the most important are smart manufacturing and marketing, each of which employs fewer than individuals. The largest node within the manufacturing platform provides technical support for mass customization. Another node, smart engineering, deploys advanced production tools for the company.
The primary role of the marketing platform is supplying customer information. The idea is to unearth cross-business insights and build predictive models that help MEs respond to emerging customer needs. One example: alerting MEs in the washing platform that a customer has bought a refrigerator and an oven and may be in the midst of a remodel that will call for new laundry equipment as well.
While the marketing and manufacturing platforms do set standards—for brand visuals and factory automation software, for example—they issue few commands. And like other units at Haier, they have a financial stake in the success of their internal clients. The shared ecosystem, XCook, now encompasses million end users and partners.
In most companies, coordination means sacrificing speed and responsiveness for greater efficiency. Zhang believes that such trade-offs are best made by those closest to the customer, by MEs that are free to choose when to collaborate and when to go it alone.
The coupling of MEs is decidedly loose but still strong enough to ensure that Haier exploits its size and scope. Turns out it really is possible to achieve coordination without centralization.
Bureaucracies are insular. Although scientists often identify subtleties that executives may not have had the opportunity to grasp, such subtleties are often so situation-specific that they do not apply to the circumstances in which executives find themselves. In spite of these concerns, there are important conditions under which prescriptive organizational theory can be of considerable use to organizational designers see Donaldson, , One of these is when trial-and-error learning is prohibitively expensive and applicable personal experience is unlikely to be available.
For example, research shows that organizations tend to remain relatively unchanged, even as their environments shift, leading eventually to the need for radical and swift redesign Hannan and Freeman, Unfortunately, swift redesign leaves no time for experiential learning, so redesign decisions need to be right the first time.
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. As we noted, in a fast-changing world, personal experience applicable to any current choice situation is unlikely to be available.
Also, because the feedback from executive action is both slow and subject to cognitive and motivational biases, it is very difficult for accurate learning to occur.
Thus, although the aggregate personal interpretations of experience by a team of executives are likely to be superior to any single executive's interpretation, they are unlikely to be superior to the systematically evolved theory that comes from the careful integration of the results of scores of scientific studies. Doctrine consists of design principles derived from the experiences, beliefs, values, and ideologies of an organization's key leaders.
Because doctrine follows from the careful review and integration, by many experts, of many experiences, idiosyncratic confounding variables and noise are reduced in their impact, and contingencies are often recognized and accounted for. Thus, with respect to experience, doctrine does not suffer from some of the problems involved in using the experience of individual managers.
It is also true that beliefs, values, and ideologies are generally extremely slow to change and often very resistant to revision in light of new data. As a consequence, the use of doctrine can lead to periods of poor organizational performance when conditions are changing rapidly. Doctrine as a basis for organizational design has an advantage over the more general organizational theory, in that it is specific to a particular type of organization. It does not suffer from the low levels of accuracy that sometimes occur when highly generalized, cross-industry theories are used to predict the relationship between design and performance in specific situations.
In this respect, it avoids the criticism that Starbuck would direct at prescriptive organization theory—that it does not account for the properties that make organizations distinctive.
Experience, organization theory, and doctrine each serve as a basis for the design of organizations. Because they draw on past events, they tend to perpetuate previous designs albeit designs that led to satisfactory performance ; they tend not to lead to new organizational forms. New forms or designs are appearing, however, and we turn now to a discussion of them.
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.
The first three of these new forms have so far received little empirical examination. Indeed, a reason to mention them here is to make them more conspicuous as objects and opportunities for study by organizational scientists.
A second reason to note them is that, individually and collectively, they may portend the future set of organizational forms from which managers choose and which organizational scientists study for their survivability. As such, these forms can be regarded as archetypes or as new general models or templates for constructing organizations Hinings and Greenwood, In today's fast-changing organizational environments, competitive pressures and stakeholder demands have compelled many organizations to redesign large portions of their operations as team-based structures.
In such structures, specialists from different domains work together to complete projects. Although sometimes a team is self-managed, generally a team leader is appointed by higher-level management.
When a team's task consists of projects rather than ongoing activities, the team typically disbands after a project is completed and its members move on to other projects.
The adhocracy form of organization has developed in order to deal simultaneously with the coordination problems associated with intraorganizational specialization and the requirement for quick responses associated with fast-changing environments see Figure Not all team-based organizations are adhocracies. The term refers specifically to organizations in which the teams are temporary structures, as in the production of theatrical performances in which producers, directors, technicians, and actors come together to form a temporary company that produces a play.
The teams then disband when the production has been completed and the members join other teams to produce a different play. In contrast are permanent multispecialist teams, such as professional sports teams and surgical teams in hospitals. Adhocracies and other project-based team structures are currently in fashion and seem to be appropriate design solutions in certain situations see Katzenbach and Smith, ; Mohrman et al.
Widely accepted solutions have not yet been developed to the problems of team rewards, including compensation, and the maintenance of technical expertise for experts whose team assignments do not provide opportunities for technical learning. 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. When organizations specialize, they often are forced to limit the range of their competencies and team with other organizations with different specializations to satisfy customer needs.
Such interorganizational teaming results in what is called a network organization 4 or a virtual organization see Powell, , for an overview of research on networks. Network organizations are generally formed by a "broker" who selects the member organizations and coordinates their network-related strategic activities.
In some instances, only strategic planning and financial accounting are performed by the broker; all other functions, such as design, manufacturing, and advertising, are carried out by other organizations in the network.
In essence, a network organization is an integrated set of alliances. In network organizations, membership is not permanent, although if the network has a continuing market, good performance by member organizations usually leads to continuing membership. Member organizations are generally members of other network organizations.
The instability of organizational environments can cause one network member to become mismatched, either as the network changes focus or as the member organization finds new opportunities outside the particular network. For an example of creating and managing network structures, see the Eccles and Crane, , study of investment bankers. The network organization is an extension of the concept of a vertically integrated organization that contains all necessary functional units within itself.
As other organizations specialize in certain functions and become more practiced, capable, and efficient in performing them, vertically integrated organizations can eliminate their corresponding functional units and instead subcontract these functions to the external specialist organizations to form a network organization; they can then focus on their functional "core competence" Quinn, Theories of transaction costs are a basis for prescriptions about the types of activities that organizations should conduct within their firms and those they should contract out—the "make or buy" decision Williamson and Masters, This sequence of events can certainly occur, although a more common scenario is that of an entrepreneur or an entrepreneurial organization that sees an opportunity to engage in a large endeavor without creating a large vertically integrated or multifunctional organization, creating instead alliances with other organizations Harrison, Network organizations are an increasingly common supraorganizational form.
As noted by Kanter , they pose problems of interorganizational coordination and the development of trust; these problems and others are examined in Miles and Snow and Kanter One of the most common and important tasks of the middle manager is coordination, yet, during the past decade or two, layers of middle management have been eliminated.
One substitution for the deletion of the middle manager coordination function is to require and authorize first-line managers and operations-level personnel to coordinate work and work flow across functions.
The term horizontal organization refers to the organizational form in which coordination is done by direct and prescribed interaction between persons of different units. This form of organization is employed in hospitals, when a patient is processed through a series of departments without the use of coordination by superordinate authority.
The horizontal form was created in response to a demand for faster decision making and decision implementation and greater efficiencies. It goes beyond the capabilities of what has been called the "informal organization" in that it increases reliability by formalizing accountability and procedures. A matrix organization exists whenever there are overlapping sources of formal authority.
This organizational form originated in the electronics and space industries shortly after World War II. Its adoption was fashionable for several decades, and it is still popular today. Early in the evolution of the matrix form, problems in coordinating functional specialists caused organizations to create coordinating roles on behalf of the functional department managers. At this early stage, functional managers generally delegated no authority to the coordinator.
That form has been termed a functional matrix Larson and Gobeli, 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. This organizational form is called a project matrix. The extension to a team-based organization, in which functional departments have no authority over team members during a project's life, followed.
The matrix form is a stable form in some organizations, such as the hospital industry, in which a unit manager has coordination responsibility as well as a high level of responsibility for the performance of medical wards, but functional specialists also have some level of responsibility to their function supervisor, as does a nurse to the head nurse. In other organizations, it seems to be serving as a transition form between the functional form and the team-based form.
For an interesting analysis of the adoption and abandonment of matrix management in the hospital industry, see Burns and Wholey Several additional organizational forms, not yet included in any generally accepted taxonomy and without widely accepted names, have emerged over the years in response to particular situations. Toffler describes several of them, including the following:. Quinn discusses decentralized organizations as ''intimately flat" organizations , extremely dispersed organizations as "spider's web" organizations , "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.
Army and other forces during the cold war are adjusting to new realities and their requirements. Although the United States will be prepared, as it was in the Persian Gulf War, to respond to conventional military threats, it is still struggling with new and unfamiliar missions such as peace-keeping and humanitarian relief. Our examination focused on the redesign of force structures and unit organizations for responding to traditional hostile threats.
Although we have considered peacekeeping issues elsewhere in this report, our focus is on the process rather than the design of peacekeeping units. Army force structuring and force development are accomplished in response to a National Military Strategy Document, which is updated every two years. Information on the process may be found in U. Army However, the electronic network is not a requirement for networking to occur.
Total quality management TQM , reengineering, the workplace of the twenty-first century—the s have brought a sense of urgency to organizations to change or face stagnation and decline, according to Enhancing Organizational Performance.
Organizations are adopting popular management techniques, some scientific, some faddish, often without introducing them properly or adequately measuring the outcome. Enhancing Organizational Performance reviews the most popular current approaches to organizational change—total quality management, reengineering, and downsizing—in terms of how they affect organizations and people, how performance improvements can be measured, and what questions remain to be answered by researchers.
The committee explores how theory, doctrine, accepted wisdom, and personal experience have all served as sources for organization design. Alternative organization structures such as teams, specialist networks, associations, and virtual organizations are examined. Enhancing Organizational Performance looks at the influence of the organization's norms, values, and beliefs—its culture—on people and their performance, identifying cultural "levers" available to organization leaders.
And what is leadership? The committee sorts through a wealth of research to identify behaviors and skills related to leadership effectiveness. The volume examines techniques for developing these skills and suggests new competencies that will become required with globalization and other trends. Mergers, networks, alliances, coalitions—organizations are increasingly turning to new intra- and inter-organizational structures. Enhancing Organizational Performance discusses how organizations cooperate to maximize outcomes.
The committee explores the changing missions of the U. Army as a case study that has relevance to any organization. Noting that a musical greeting card contains more computing power than existed in the entire world before , the committee addresses the impact of new technologies on performance. With examples, insights, and practical criteria, Enhancing Organizational Performance clarifies the nature of organizations and the prospects for performance improvement.
This book will be important to corporate leaders, executives, and managers; faculty and students in organizational performance and the social sciences; business journalists; researchers; and interested individuals.
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Sign up for email notifications and we'll let you know about new publications in your areas of interest when they're released. Get This Book. Visit NAP. Looking for other ways to read this? No thanks. Suggested Citation: "1 Organizational Change and Redesign. Enhancing Organizational Performance. Environmental Conditions Driving Organizational Change.
Page 12 Share Cite. Page 13 Share Cite. Increase in Scientific Knowledge. Page 14 Share Cite. Trends in Professional Roles. Page 15 Share Cite. Page 16 Share Cite. Emerging Technologies. Page 17 Share Cite. Page 18 Share Cite. The Changing U. Page 19 Share Cite. Organizational Design And Redesign. Page 20 Share Cite. Organization Theory as a Basis for Design and Redesign. Contingency Theory and Configuration Theory.
Page 21 Share Cite. Examples Start-up firm, small unit patrols in enemy-held terrain Large hotel, military procurement organization University, military research organization Performing arts theater, product design team.
Page 22 Share Cite. Page 23 Share Cite. Theories of Organizational Change. Page 24 Share Cite. Experience as a Basis for Organizational Design.
Page 25 Share Cite. This combination is well exemplified by the best-seller on organizational. Page 26 Share Cite. Doctrine as a Basis for Design. Page 27 Share Cite. Clarifying the Meaning of Doctrine. Army Doctrine in the Unit Design Process 1. Page 28 Share Cite. Page 29 Share Cite. Page 30 Share Cite. Prescriptive Organizational Theory.
Page 31 Share Cite. Page 32 Share Cite. New Organizational Forms. Team-Based Organizations. Page 33 Share Cite. Network or Virtual Organizations. Page 34 Share Cite. Page 35 Share Cite.
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