Foundation of Organization Design
(MGMT673)
Reading Material
Professional Ethics
Humanistic Values
Organizational development (OD) practitioners traditionally encouraged having valued human beings, open communications, employment involvement, and personal growth. These values emerged at the end of World War II on both sides of the Atlantic. They were strengthened by early experiments in British coal mines and studies carried out in a plant in Illinois. These studies demonstrated that paying attention to workers improved productivity. Numerous studies that followed have demonstrated again and again that people do matter and are quite capable. When redesigning organizations, it is wise to use these early lessons as well as research performed by behavioral economists.
Helping Relationships
Helping can take on numerous forms and carries personal responsibility. The responsibilities for an OD consultant working on team building may be different from those of one working on organizational redesign, but they have many of the same issues with which to contend. Both can have a major impact not only on productivity and efficiency but on people’s lives as well.
As previously mentioned, organizational development practitioners are members of the helping profession and like the other helping professions, they have a professional code of ethics because their work has direct ethical implications on individuals, organizations, and society.
Ethical Dilemmas
Though having and following an ethical code can prevent problems, OD practitioners do encounter ethical dilemmas in their work. As with most ethical problems that emerge, individuals and organizations do not start out wanting to be unethical; they generally just slide into unethical behavior because they do not stop and reflect, or are in a big hurry to accomplish something or get specific results.
Value Conflict and Misplaced Interest
Not taking the time to adequately address value differences, taking shortcuts, misusing data, using coercion to save time or money, and misrepresenting skills or knowledge are major causes of ethical misdeeds and corporate failures. Taking the time to be ethical is good business not only for the OD practitioner but for the entire organization
Organizational Diagnosis
Before taking action, it is necessary to understand the situation. Organizational diagnosis is the process the consultant goes through to understand the current situation and includes the following:
· Determining an appropriate diagnostic strategy
· Gathering data through review of important organizational documents
· Developing an interview and research protocol
· Data gathering including conducting interviews
· Analysis of qualitative and quantitative data
· Assessment of information
· Discussing potential options with key organizational leaders and stakeholders to determine what is to be done and how to implement an intervention
An organizational diagnosis needs to be done before beginning.
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Foundation of Organization Design (MGMT673)Reading Materia.docx
1. Foundation of Organization Design
(MGMT673)
Reading Material
Professional Ethics
Humanistic Values
Organizational development (OD) practitioners traditionally
encouraged having valued human beings, open communications,
employment involvement, and personal growth. These values
emerged at the end of World War II on both sides of the
Atlantic. They were strengthened by early experiments in
British coal mines and studies carried out in a plant in
Illinois. These studies demonstrated that paying attention to
workers improved productivity. Numerous studies that followed
have demonstrated again and again that people do matter and
are quite capable. When redesigning organizations, it is wise to
use these early lessons as well as research performed by
behavioral economists.
Helping Relationships
Helping can take on numerous forms and carries personal
responsibility. The responsibilities for an OD consultant
working on team building may be different from those of one
working on organizational redesign, but they have many of the
same issues with which to contend. Both can have a major
impact not only on productivity and efficiency but on people’s
lives as well.
As previously mentioned, organizational development
practitioners are members of the helping profession and like the
other helping professions, they have a professional code of
2. ethics because their work has direct ethical implications on
individuals, organizations, and society.
Ethical Dilemmas
Though having and following an ethical code can prevent
problems, OD practitioners do encounter ethical dilemmas in
their work. As with most ethical problems that emerge,
individuals and organizations do not start out wanting to be
unethical; they generally just slide into unethical behavior
because they do not stop and reflect, or are in a big hurry to
accomplish something or get specific results.
Value Conflict and Misplaced Interest
Not taking the time to adequately address value differences,
taking shortcuts, misusing data, using coercion to save time or
money, and misrepresenting skills or knowledge are major
causes of ethical misdeeds and corporate failures. Taking the
time to be ethical is good business not only for the OD
practitioner but for the entire organization
Organizational Diagnosis
Before taking action, it is necessary to understand the situation.
Organizational diagnosis is the process the consultant goes
through to understand the current situation and includes the
following:
· Determining an appropriate diagnostic strategy
· Gathering data through review of important organizational
documents
· Developing an interview and research protocol
· Data gathering including conducting interviews
3. · Analysis of qualitative and quantitative data
· Assessment of information
· Discussing potential options with key organizational leaders
and stakeholders to determine what is to be done and how to
implement an intervention
An organizational diagnosis needs to be done before beginning
any OD intervention but is especially critical when
contemplating an organizational redesign because modifying an
organizational design has far-ranging implications for everyone
involved. For all practical purposes, organizational diagnosis is
an ongoing activity because in the current world, change is
constant. It is also important to do a thorough organizational
assessment at the beginning because this will be referred to as
new data and information emerges.
Diagnostic Models
The most important model for all OD practitioners to
understand is the open systems model and the theory that
explains what an open system is and how it functions.
Organizations, departments, groups, and individuals are all
systems and interact with other systems. Systems are seen as a
whole composed of various parts or subsystems with a
component that integrates or coordinates the functioning of the
different parts.
Open Systems Analysis
Open Systems Revisited
An open system exists within a larger environment, which
affects how it performs. The model proposes that an
organization take specific input from the environment and
transform it using technical and social processes, then return the
output to the environment. The organization then gets feedback
4. from the environment. The environment is everything outside of
the boundaries of the organization. Open systems cannot
completely control their own behavior because they are
dependent on the environment for their existence.
Diagnosing Systems
If everything is working well and all of the stakeholders are
content with the functioning of the organization, there is
probably not a need for a thorough diagnosis. In today’s world,
this is seldom the case.
In a closed system, direct cause-and-effect links exist. An
example would be a watch that runs effortlessly as long as it has
a constant power source. Once powered up, the watch runs
automatically.
Biological and human systems operate very differently. In an
organization, a manager can transform various resources in
different ways to achieve the desired results. For instance, a
large chicken farm must feed the chickens on a regular basis,
but they can use different combinations of feed to get the same
result. Modern poultry operations have sophisticated computer
systems that monitor how the chickens are converting feed into
weight and are also constantly monitoring the local and national
markets to determine costs of different grain to provide the
same conversion. They also monitor the selling price for
processed chickens in various parts of the country. A manager
or management team then processes the information turned out
by the computer, and makes decisions and adjustments to turn a
profit. They are also using the computer or hiring outside
specialists to determine what their cost will be in a year or two.
Appropriate Level of Analysis
A chicken farm is a relatively simple organization to diagnose.
Most large organizations are extremely complicated, and the
forces that can turn a "perfectly sensible" organizational design
5. into a nightmare are legendary. For example, the simple shift
from a functional to a divisional design has driven more than
one company into bankruptcy.
Quite often, a complete diagnosis and a little forethought would
have led to a more workable design for the organization or
postponed the implementation until the organization was
capable of managing it. Organizational redesign nearly always
has far-reaching consequences. An appropriate analysis will
generally be far more time consuming and costly than selecting
a departmental supervisor or changing the pay structure. The
size and type of the organization will also play a major role in
determining the level of analysis.
Design Components
Number of Design Components
There are an infinite number of design components for some
complex organizations, such as major international producers of
airplanes, automobiles, and supercomputers, or a worldwide oil
and chemical conglomerate. In all instances, it is important to
understand the organization’s strategic direction, the business it
is in, and its reason or purpose for being in business. The only
organization where pure profit is the organization’s mission is a
holding company. Even for a holding company, the goal is
generally more complex than simple profit maximization.
Profit should be the result of a good organizational design and
not the reason for the design. Strategy should drive design,
rather than the opposite.
Environment
Understanding an organization’s environment is one of the most
difficult elements in determining an organization’s strategy and
design. Some companies spend thousands of dollars on
researching their environments. As an organization development
6. consultant working on a redesign project, you probably will not
have the resources or time to do such an elaborate
environmental analysis. However, it is critical to ask about any
such studies the organization has conducted or hired others to
conduct. If possible, read those studies and do at least an
elementary environmental scan on your own. You do not want
to redesign an organization just to see it collapse because it was
unresponsive to environmental factors.
Strategy
Strategy is how an organization positions itself in its market or
environment and arranges its various resources (finances,
technology, information, human resources, and so on) to
accomplish its purpose, mission, goals, and objectives. Other
factors also go into an organization’s strategic intent, such as
market niche, institutional identity, product or service mix,
brand recognition, and pricing. Organizational redesign is
increasingly being considered strategic by a number of
organizations. For example, an oil firm that completely
redesigns its organization to increase its market share is an
example of strategy-driving design.
Organization Alignment
Does the organization’s strategy fit with its various design
components, mission, resources, market niche, and capabilities?
An organization’s effectiveness depends on the alignment of all
of these components and its ability to deliver products and
services to its customers or clientele.
Choosing a Design
Fits Mission, Strategy, and Goals
How well does the existing organizational design fit the
organization's current mission, strategy, and opportunities?
What problems have been reported that stakeholders believe to
be caused by the current organizational design? How will
alternative designs fit the organization’s mission, strategy, and
7. goals?
It is important to ask these questions to see if any problems that
need to be addressed are ones that any organizational design can
solve. In some cases, there may not be a design problem, but
rather difficulty with communications, marketing, or leadership.
Appropriate for the Organization’s Situation
Nearly any organizational design has its advocates. There are
fads that run through the business community every few years.
How many times has an organization switched from a functional
to a divisional or matrix design, only to switch back again
because the chief executive officer (CEO) has read one more
book on how to best structure the organization? How many
times has a new structure been put into place, only to have the
organization discover that the computer system would not
support the new design, or employees did not have the
prerequisite skills to make it work?
Considers the Informal Organization
The informal organization is the one that actually gets things
done. Talk to people in any organization about "how things
really get done around here,” and you will hear things like: “It
depends on who you know,” or “the administrative assistants
really run the place; managers just come and go,” or “you need
to talk with the president. She even decides on the color of the
floor tile.” The point being made is that micromanagement of
the absurd does not fit with a matrix design or one that demands
teams and delegation.
Workable and Desirable
Before a design is decided upon and finalized, it is essential to
question the desirability of the proposed designs. Even after
gathering and analyzing enormous amounts of data, critical for
determining an appropriate design, other success factors may
have been overlooked. Though the big concerns have been
8. discussed, such as whether the new design will work within the
organization's culture or if the budget is adequate for the
project, it is the unasked questions and covert behaviors of low-
level employees, customers, or suppliers that can sink an
otherwise flawless design process.
The OD Consultant
The Organization Consultant
Organizational development (OD) consultants offer professional
services to managers and organizations. They utilize social
science knowledge and humanistic values to help individuals,
managers, and organizations improve organizational and human
performance. Given the nature of contemporary organizational
issues, it should not be surprising that the OD practitioner needs
a wide range of skills and attributes to perform ethically and
effectively. In fact, there are few, if any, OD consultants who
can do it all. Most develop one or several areas of expertise and
often work with other practitioners in and outside of the field to
achieve positive results. Organization development is a
collaborative endeavor.
Because organizational design has organization-wide
implications for the firm and its employees as well as
customers, suppliers, government regulators, and the larger
community of which the organization is a member, redesigning
an organization is serious business. Other organizational
development efforts such as role clarification, climate surveys,
and team building are important but do not have as much
potential for harm. All organizational development activities
need to be initiated with respect for the various clients and the
organization, but some interventions do have the potential for
having deleterious effects. Both the consultants and their clients
must be aware of the downside, as well as the upside, to an
intervention, especially when it calls for an organizational
9. redesign.
Essential Knowledge
Organizational development practitioners need a wide range of
skills. First, they need excellent interpersonal and
communication skills and experience in social process and
group dynamics. Those involved in organizational redesign also
need an understanding of systems theory; cultural anthropology;
psychology; sociology; change management; and knowledge of
the organization’s history, mission, strategy, and goals.
Necessary Competencies
A thorough knowledge of organizational design and the decision
process associated with it is a must. Organizational
development practitioners must be well grounded in
organizational diagnosis and have a thorough understanding of
the strengths and weaknesses of various organizational designs.
They must be aware of system and environmental dynamics and
be consciously attuned to organizational politics and ethical
issues. Most of all, they must be comfortable with ambiguity
and be clear about who the client is and how the client can
change in the middle of the design process, to ensure positive
results from the design effort.
Internal or External Consultants
Internal consultants are part of the system. Because of this, they
often know much about the organization that an external
consultant does not. Oftentimes, they are aware of internal
politics and goal conflicts, but because of their dependence on
the organization, they may not ask the tough questions or
confront management.
External consultants contract with a client organization to help
it achieve some organizational goal. They are generally
contacted by the host organization because they have been
successful with other clients in the same or a similar industry.
10. Some consultants or consulting firms will specialize in a
particular area, such as organizational design, compensation
systems, or quality management. Others are known for their
generalist skills and ability to do quality diagnostic work,
turning the actual intervention over to those who have chosen to
specialize.
It is not always possible, but it is best when both internal and
external consultants can work together on a project. The
internals bring their understanding of the organization to the
project, and the externals bring a higher level of knowledge and
expertise because of their exposure to numerous clients.
Characteristics of OD Consultants
Change Agents
Both internal and external organization development (OD)
consultants are change agents. Their role and purpose is to help
individuals and organizations deal with and manage complex
change. Because change has become a permanent reality in our
modern world, a number of professions have developed to meet
the increasing need for living with and managing change.
Psychologists, social workers, engineers, and lawyers are all in
the change business, but few of them are equipped to manage
the complexity of organizational change in the modern world.
Organization development practitioners specialize in
organizational change and deal with it constantly. Indeed, they
must be lifelong learners of the change process.
Live on Organizational Boundaries
Organization development practitioners live on the internal and
external boundaries of organizations. Often they straddle two or
more cultures and speak several languages. They must either
already have, or quickly develop, the ability to be comfortable
in various settings and with a wide range of people. They need
to be at ease with hourly workers, as well as middle and top
11. management, and respect all people for their individual
contributions.
Handle Ambiguity Well
All managers and leaders need to be comfortable with
ambiguity, but organization development practitioners must
embrace it. Being change agents, living on organizational and
cultural borders, and helping others live with change and
ambiguity, they often become critical role models and even the
glue for keeping the organization together as it transforms
itself. Others often look to them to be calm and collected in the
midst of chaos.
Manage Stress and Emotional Demands
The emotional demands and stress levels of the job are very
high. Before entering the field, it is important to be aware of
this and to develop adequate stress reduction techniques and
procedures into one’s lifestyle. To work in the midst of change,
the best practitioners take the necessary time to stay physically
and psychologically healthy. Eating healthy, keeping an
exercise regimen, adequate sleep, and building downtime for
reflection into one’s schedule are all critical.
Organization development consultants' careers have a very short
life span. This is because of at least two reasons: They are
recruited to take on permanent management positions and they
burn out from job stress.
Flexible
Because of the need for having numerous skills and much
knowledge, and working with diverse individuals,
organizations, and cultures, flexibility is a core requirement.
Though flexibility is a learned behavior, it is not easily taught.
Like a good athlete, it helps to have natural ability and talent,
but even then it must be continually practiced and developed.
Top-quality OD consultants take the time to develop their
12. flexibility and get feedback and help from others in a helping
profession.
Foundation of Organization Design
(MGMT673)
Reading Material Organizational Structures
Types of Structures
There are many types of organizational structures. Each
structure functions in different ways, demands different skills
from employees, and is influenced by corporate size, strategy,
culture, and the resources the organization has for managing the
structure.
Organizations have been known to change their structure to
meet market demands, only to discover that they overlooked
something major, which is now derailing their work. For
example, the computer system an organization had in place
could not support the demands of the new structure, or other
stakeholders (such as suppliers, government regulators, or
employees) refused to work with the new structure. In many
cases, an organization has been forced to return to its old
structure at an enormous cost of both time and money. Though
structural change should not be feared, all critical stakeholders
must be in on the early stages of planning. This allows the
consultants and management to understand both the intended, as
well as the potential unintended, consequences of the new
design.
The following are some basic organizational structures'
strengths, weaknesses, and limitations.
Functional Organization
The functional organization is a widely used design and has
existed since Roman times. Such an organization is generally
13. broken into departments or divisions, such as manufacturing,
sales, accounting, and human resources. The importance of the
different structural units has emerged over time and can be
determined by looking at the organization’s history. As
functional organizations grew, they often added on new units or
subunits. Like all organizational designs, the functional
organization has strengths and weaknesses. The strength of the
functional organization is that when the environments these
organizations grow up in are stable, and the workforce is
homogenous, these organizations work very well.
There is a challenge in functional organization design. Through
the years, as organizational environments became more
turbulent, as the work force became increasingly diversified,
and as technology became more demanding and complicated, it
also became more costly to keep the functional organizations
performing well.
Divisional Organization
The divisional organization is built around products, services,
geography, or customers, rather than functions. It came into
being about the same time as the growth of the large American
corporations and the early development of the mass markets.
Some of the strengths of divisional organizations are that they
make accountability of managers easier, promote delegation,
focus interest on the customer, and build departmental cohesion.
Weaknesses of this structure are inefficiency and multiple
demands on people, which increase stress and cause goal
conflict. The latter is due to focusing on department objectives
at the expense of the overall organization’s needs and
objectives.
Matrix Organization
The matrix organization was developed as an attempt to take the
best from the functional and divisional structures, while
14. minimizing their weaknesses. It was first developed in the
aerospace industry where changing technological and customer
needs necessitated managing lateral demands. Its combination
of both lateral and vertical structures increases flexibility, and
it is more adaptable to change than either the functional or
divisional structure.
However, its dual chains of command, in which each employee
has at least two bosses, makes working relationships more
complex and increases interpersonal conflict within the
organization and also with clients. Matrix organizations are now
widely used in nearly all sectors but have not proven to be the
solution that everyone had hoped they would be. Working in
teams may increase complexity and other demands of decision-
making.
Process Organization
The process organization depends on multidisciplinary teams
organized around core processes. It emphasizes lateral over
vertical relationships with the need for fewer managers.
However, the team members often must develop traditional
management skills. Though the process organizations eliminate
many of the procedural and hierarchal boundaries by reducing
management costs, they do require a new mindset. They are
often resisted by middle management because it puts their jobs
into question. This type of organizational structure, however, is
growing rapidly in both manufacturing and service industries.
Customer-Centric Organization
The customer-centric organization focuses on satisfying
customer needs and demands. It is similar to the process
organization. The increasing power of the customer to demand
solutions to problems and the rise of globalization and e-
commerce is often given as the rationale for the development of
this type of organization. Advantages include providing “one
face” to the customer and having tailor-made solutions. A
15. disadvantage is that managing relationships between the front
and back offices and clarifying marketing’s role may become
nearly impossible.
Network Organization
The network organization gained its name from computer
networks. The basic idea is to link different organizations
together to provide a market or product. This type of structure
links very independent organizations together to produce and
deliver a product to customers. Design, manufacturing,
marketing, distribution, sales, and so forth, are all handled by
different organizations. The company’s task is to manage its
brand, while conveniently delivering a product that customers
want and where they can easily purchase it. Though it is an
ideal way to focus resources on customers and market needs,
managing relationships across multiple and divergent
organizations can be a major challenge.Preparing for Change
Simply designing the perfect organization is not enough, though
it can make for a good beginning. Management, along with help
from any outside consultants utilized, needs to develop a plan
for communicating the redesign. It must address why the new
design is necessary, what it is expected to accomplish, and how
it will affect employees and other stakeholders. Everything must
be communicated effectively if it is to result in high
performance that can be maintained.
Consider How Different Stakeholders Will React
It is highly likely that not all stakeholders will respond in the
same way, or that their responses will all be positive. Design
changes will not just impact management and employees, but
may force other stakeholders, such as suppliers and customers,
to change how they interact with the organization. It may even
force design changes upon them. Being aware of the new
design's impact on all stakeholders is vital for profitable
performance.
16. Have a Strategy for Communicating the Changes
Good organizational communication is critical for all
constituents. Bankers, suppliers, customers, clients, and the
governing board don’t always have to know every detail, but
they must receive clear and timely communications about the
stages of the process that will impact them. No one likes
surprises; when they can be avoided, they should be.
Consider Employee's and Other Stakeholders’ Needs
If the needs of the various stakeholders have been considered
during the design process, then this should not be a major
problem when rolling out the new design and communicating it
to the organization's various stakeholders. However, it is still
necessary to keep all vested parties informed that the
organization has considered their needs and is continually
monitoring the new design's impact on all stakeholders.
Consequences of Change
Structural change always has consequences and outcomes—
generally, both good and bad. The good results are welcomed,
and are often tied to the reasons for making the changes.
Oftentimes though, the changes that will challenge the
organization are not thoroughly thought out. Too often, both
management and consultants establish unrealistic expectations
for themselves and others.
Changes the Organization’s Culture
Structural change often impacts the current organizational
culture in unplanned and unexpected ways. Though some
assume culture is easy to change, that is simply not the case.
New cultures often demand a new language and new skills, and
these cannot be learned or transferred as quickly as one may
think.
17. Because of structural changes, a culture’s informal reward
system may suddenly no longer function. The customs that
formally allowed the business to function with a minimum
number of policies and procedures can be lost, because no one
thought to consider how critical functions would be
communicated after the change.
Leads to Confusion
Organizational restructuring often changes the ground rules that
people have become dependent on to do their jobs and to
function within the organization, with customers, and with other
important stakeholders. Who does what and who reports to
whom? Often such questions are not adequately addressed or, if
addressed, not communicated effectively throughout the
organization. Confusion can quickly lead to chaos and the
abortion of a completely appropriate design. The elimination of
confusion is essential if positive and productive results are to be
achieved.
Reduces Financial Performance
The added costs incurred because of new technologies,
additional training, managing complexity, and a host of other
hidden costs, can sometimes turn a profitable organization into
an unprofitable one. Obviously, this is not a desired
consequence. Consultants and management must attempt to
determine the cost of any particular organizational design.
Careful examination of such matters in the beginning can lead
to an effective and profitable redesign effort.
Planned Change
Not all change is planned. Changes are often forced on an
organization because of market adjustments, technological
innovations, and social and political movements, as well as
many other events occurring outside of the organization.
18. Nearly all organizational redesigns are initiated by management
and are examples of planned change. Management may hire an
outside firm to help with redesigning the organization, but that
is an example of management delegating its responsibilities to a
consultant who specializes in organizational design.
Many of the consequences of poor organizational design are
caused by a mismatch between the new design and what the
organization can actually accomplish. When using outside
consultants, the working relationship between management and
the consultants is essential—management must engage.
Successful redesign depends on mutual understanding of the
issues confronting the organization. Assessing the situation and
then deciding on a design that will help the organization
accomplish its objectives is a collaborative undertaking. Taking
on the redesign of an organization is so critical to an
organization’s success that it must be deliberate and well
thought through.
When managers and consultants are attentive and meticulous
and give constant attention to the redesign process, positive and
productive changes are achieved.
Deliberate Approach to Change
Organizational development, as a discipline and a practice,
concerns itself with planning change and helping manage it.
Organizational design is one of many strategies used by
organizational development consultants to manage planned
change.
Consider Organizational Contingencies
There is not one best way to design an organization. Those
accustomed to thinking that there is can easily get frustrated
with the design process. Many contingencies or forces, both
inside and outside of the organization, can lead to surprising
results. Because contingencies are critical to the design process,
19. organizational diagnosis is an essential and crucial step in
selecting and implementing an effective organizational design.
Often, it is because of a hurried or incomplete diagnosis that the
consultants and the management team select a dysfunctional or
inadequate design.
Assess the Organization and Its Environment
Organizational diagnosis is a procedure, or process, for
determining how an organization is currently performing. It
helps both the consultant and client determine where to focus
their efforts. Generally, organizational diagnosis is a continuous
process with deeper and deeper levels of data collection and
analysis. An organization may realize that it is not achieving its
objectives and goals or may discover things are not working as
it expected. Leadership looks for a reason and then takes action.
If the actions do not correct the issues, leadership may bring in
an external consultant or firm to help determine what is wrong
and to provide suggestions on how to manage the organization
or the problem area. Good consultants and business
organizations also build in an evaluation process to see how the
intervention is working. This often becomes the starting point
for another diagnosis. The process is circular, as it must be to
make a difference. Too often, things improve and management
goes back to its old way of doing things or just ignores what is
happening, and another crisis emerges.
A good organizational design may last for years. However,
because of growth, environmental change, or new technology,
the once-excellent design becomes dysfunctional, and the
organization must redesign. In the turbulent world in which we
currently live, redesign is increasing. In some organizations, it
is nearly continuous.
Open Systems Approach
Modern organizational development consultants use an open-
systems approach. That is, they see an organization as an open,
20. rather than a closed, self-contained system. In the real world,
there is no such thing as a closed system. An open-system view
takes into account the external environment as well as the
internal workings of the organization. It also uses internal and
external feedback to monitor the organization's processes,
markets, and response to feedback. Increasingly, the
environment influences organizations in numerous ways.
Why Restructure Organizations?
Why Restructure Organizations?
There is no one reason for restructuring an organization.
Changes in the organization's environment, technology, process,
and business strategy can all be factors. The simple fact that an
organization's competition, suppliers, or customers have made
structural changes in their own organizations has at one time or
another forced organizations to change their own designs. These
changes are often not planned, except by the most forward-
looking organizations that have proactive leadership.
Change in the Environment
Increasingly, leaders and managers are recognizing the
importance of seeing their organizations as open systems. A
major advantage to the utilization of open systems when
considering organizational restructuring, is the awareness of the
importance of the environment on both the current organization
and any future designs the management and consultants may
decide upon. Nearly everyone is aware of the impact of
globalization and e-commerce on organizations, but energy
sources, international debt, cultural and age diversity, and
natural and man-made disasters can all have an impact on
organizations as well, and need to be considered in the redesign
process.
Change in Technology or Process
Today’s world seems to be at the top when it comes to process
and technological change. The amount of technological change
21. today is unprecedented in human history, and the new
technologies and media continually modify both processes and
human relationships. Continuous adaptation is becoming the
norm and must increasingly be taken into consideration when
contemplating redesign. Given how long the functional
organization served organizational purposes and how many new
organizational structures have emerged in the last 100 years, it
is probably safe to say that new organizational structures will
keep emerging in the future. Anyone could create a yet
unthought-of organizational design, responding to ever-
changing technology.
Change of Strategy
Changing strategy to meet market demands, cut costs, or simply
to reposition an organization, often leads to considering
organizational redesign. Organizations have been known to
change their organizational strategy to differentiate their
product mix, change their market focus, change their client
base, or reduce cost, and then realize the new strategy would
necessitate a different type of organizational structure than their
current one. Sometimes an organization will be aware of the
organizational design issues before it changes its strategy, but
in many cases the redesign is the result of a strategic change
made without forethought of how the new strategy will impact
the organization
Changes Made by Customers, Suppliers, or Competition
Because modern organizations are open systems, changes in
customers’ wants, suppliers’ redesigned organizations, and
competition’s changing strategies often force structural changes
upon a client organization. These are not necessarily wanted
changes and often lead to resistance from top management as
well as employees. Encroaching unwanted outside demands
have forced organizations to redesign far more often than is
recognized. Because managers want to believe they are in
control, there is often a reluctance to recognize the obvious.