Unit 2 Individual Project Foundation of Organizational Design MGMT673

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 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 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 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 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 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 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 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. 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 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 flexibility and get feedback and help from others in a helping profession.