· 

The Importance of Organizational Design

 

Reading the article of Burton and Obel in the recent Journal of Organizational Design(2018), the question about the contradiction of science and design turned out to be very interesting to me. By science, we mean the understanding of the organization through the observation of “what is”. Following this academic approach, we often use experimentation to get more knowledge about “what might be”. In contrast, design is more of a practical discipline, focusing on imagination and creation of what might be to achieve “what should be”. How can we create knowledge about something that does not yet exist? From this perspective, we might come up with the opinion that science and design are polar opposites and that the two are not comparable. How can we then speak about a “science of organizational design”?

 

The authors remind us at the beginning that the design of an organization has a significant impact on the performance of the organization. Therefore, from a business perspective, we should be interested in how a particular organization should be designed. Based on my own practical experience, I have to admit that this is not always the case in change management projects. Top management is far more interested in the definition of the structure (rather than all other design components) as the structure is the determination of the power architecture of an organization. I always try to create the awareness with regards to change management processes that the structure itself should not be overrated. Without any doubt, the structure determines the relationship between the different activities and roles/responsibilities. It gives the members of an organization a framework of authority within which they carry out their tasks.

 

But organizational (hierarchical) structures are only controlling tools. Structural components of organizational design include goals, strategy, structure and tasks. Coordination includes control systems, decision-making systems and information systems. Only through coordination of the different tasks are we able to attain the collective goals. Burton and Obel remind us that coordination is “bringing the units together through communication, IT, leadership, culture, incentives, routines and procedures and generally what we call management”. Management should therefore focus much more on how to constantly improve the coordination within an organization rather than just hedging their power.

 

Structure and coordination are not independent of each other. In the article, it was clearly demonstrated that, once we have defined a structure, the coordination choices are limited in order to achieve a good fit. Therefore, in all my transformation processes, I have created design principles. With these design principles, I try to shift the focus of the top management to the coordination issues (away from the purely structural issues). We need to define the principles to which coordination mechanism we are supposed to use to design the structure. “The structural issue is a decision-making issue while coordination is a management issue”. In the end, it’s all about the information processing. Marschak and Radner explain this principle of modern organization as follows: “Who talks to whom about what, who makes which decisions based upon what information”. Uncertainty always arises when we perceive an incomplete description of the world around us. And uncertainty creates the need for information processing within an organization. It goes without saying that, in our business world which is marked with volatility and uncertainty, the need for information is dramatically increasing. According to Galbraith, we have in principle two different organizational design strategies: Either we reduce the need for information by creating semi-independent units or we increase the information capacity with more communication, either hierarchically or laterally (coordination). 

 

In fact, I agree with the argumentation of Burton and Obel–that the challenge for the science of organization design is to create predictive models of future organization design. The prediction of the organizational models will define usefulness for the business world. I strongly believe that science should never be an end in and of itself. The science of organizational design has a good chance to create real value for the business. Organizational design is a normative science to recommend what might be designs for increasing effectiveness and efficiency. 

 

However, the article is a very interesting scientific discussion of organizational design. Additionally, with regards to the structural issue and coordination component, with NeuroChange, we focus–besides on the structural components and coordination issues–much more on the human components (leadership, work processes and people). Organizations are made by their members and they influence the performance of an organizational structure much more than its design itself. Only when we understand the human side of an organization will we be able to design sustainable organizational frameworks.


Reference:

 

If you liked this article, then please comment on our Facebook page and I would be very pleased to receive a “Like”.