Strategy Formation and Organization Design




A Brief Overview of Organization Design
Roy H. Autry, MBA, Ph.D.

Organization Design is a formal, guided process for integrating the people, information and technology of an organization.  It is used to match the form of the organization as closely as possible to the purpose(s) the organization seeks to achieve.  Through the design process, organizations act to improve the probability that the collective efforts of members will be successful.

Organization Design derives the optimum form for an organization directly from the purpose(s) to be achieved.  It is a process for improving the probability that an organization will be successful.

Typically, design is approached as an internal change under the guidance of an external facilitator.  Managers and members work together to define the needs of the organization then create systems to meet those needs most effectively.  The facilitator  assures that a systematic process is followed and encourages creative thinking.

Hierarchical Systems

 Western organizations have been heavily influenced by the command and control structure of ancient military organizations, and by the turn of the century introduction of Scientific Management.  Most organizations today are designed as a bureaucracy in which authority and responsibility are arranged in a hierarchy.  Within the hierarchy, rules, policies, and procedures are applied uniformly and impersonally to exert control over member behaviors.  Activity is organized within sub-units (bureaus, or departments) in which people perform specialized functions such as manufacturing, sales, or accounting.  People who perform similar tasks are clustered together.

This basic organizational form is assumed to be appropriate for any organization, be it a government, school, business, church, or fraternity. It is familiar, predictable, and rational.  It is what comes immediately to mind when we discover that ...we really have to get organized!

As familiar and rational as the functional hierarchy may be, there are distinct disadvantages to blindly applying the same form of organization to all purposeful groups.  To understand the problem, begin by observing that different groups wish to achieve different outcomes.  Second, observe that different groups have  different members, and that each group possesses a different culture.  These differences in desired outcomes, and in people, should alert us to the danger of assuming there is  any single best way of organizing.  To be complete, however, also observe that different groups will likely choose different methods through which they will achieve their purpose.  Service groups will choose different methods than manufacturing groups, and  both will choose different methods than groups whose purpose is primarily social.  One size cannot possibly fit all.

Organizing on Purpose

 The purpose for which a group exists should be the foundation for everything its members do ó including the choice of  an appropriate way to organize.  The idea is to create a way of organizing that best suits the purpose to be accomplished, regardless of the way in which other, dissimilar groups are organized.

Only when there are close similarities in desired outcomes, culture, and methods should the basic form of one organization be applied to another.  And even then, only with careful fine tuning.  The danger is that the patterns of activity that help one group to be successful may be dysfunctional for another group, and actually inhibit group effectiveness.  To optimize effectiveness, the form of organization must be matched to the purpose it seeks to achieve.

The Design Process

 Organization design begins with the creation of a strategy ó a set of decision guidelines by which members will choose appropriate actions. The strategy is derived from  clear, concise statements of purpose, and vision, and from the organizationís basic philosophy.  Strategy unifies the intent of the organization and focuses members toward actions designed to accomplish desired outcomes.  The strategy encourages actions that support the purpose and discourages those that do not.

Creating a strategy is planning, not organizing.  To organize we must connect people with each other  in meaningful and purposeful ways.  Further, we must connect people with the information and technology necessary for them to be successful.  Organization  structure  defines the formal relationships among people and specifies both their roles and their responsibilities. Administrative  systems govern the organization through guidelines, procedures and policies.  Information and technology define the process(es) through which members achieve outcomes.  Each element must support each of the others and together they must support the organizationís purpose.

Exercising  Choice

Organizations are an  invention of man.  They are  contrived social systems through which groups seek to exert influence or achieve a stated purpose. People choose to organize when they recognize that by acting alone they are limited in their ability to achieve.  We sense that by acting in concert we may overcome our individual limitations.

When we organize we seek to direct, or pattern, the activities of a group of people toward a common outcome. How this pattern is designed and implemented greatly influences effectiveness.   Patterns of activity that are complementary and interdependent are more likely to result in the achievement of intended outcomes.  In contrast, activity patterns that are unrelated and independent are more likely to produce unpredictable, and often unintended results.

The process of organization design matches people, information, and technology to the purpose, vision, and  strategy of the organization.  Structure is designed to enhance communication and information flow among people.  Systems are designed to encourage individual responsibility and decision making.  Technology is used to enhance human capabilities to accomplish meaningful work.  The end product is an integrated system of people and resources, tailored to the specific direction of the organization.



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Last modified: October 19, 2000