Organizational change

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Implementing Organizational Change: Theory into Practice

Bert Spector

Chapter 4

Organizational Redesign

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Learning Objectives

 Define organizational design and differentiate between formal and informal design elements.

 Explore the main challenges posed by organizational redesign.

 Appreciate the special design challenges faced by multinational companies.

 Analyze the requirements for building coordination and teamwork in an organization.

 Discuss the dynamics of changing the design of an organization in order to impact patterns of behavior.

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Building a Vocabulary

Organization design: the arrangements, both formal and informal, that an organization calls upon in order to shape employee behavior Organizational redesign: the process of changing an organization’s design in response to shifting dynamics in the organization’s environment

Design Elements Formal

Arrangements  Compensation and measurement  Reporting structures

Informal Arrangements

 Defining roles and responsibilities of employees

 Defining relationships within the organization and between the organization and external stakeholders

“Effective change implementation starts with informal redesign rather than formal design changes.”

Organizational Redesign Sequencing

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 The most effective way to change organizational design is to be systemic and strategic rather than piecemeal and haphazard.

 Effective change implementation starts with informal redesign in order to shape new behaviors; formal design changes can follow as a way of reinforcing new patterns of behavior.

 When implementing change, seek early wins through pilot projects.

Piloting Redesign

 Change pilots—small units or specific processes which can be targeted at the early stage of change implementation to experiment and learn

“When implementing change, seek early ‘wins’ through pilot projects.”

“In selecting change pilots, select units where the change is most likely to be successful.”

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Building a Vocabulary Differentiation: the degree to which different functions, departments, and units in an organization are allowed to develop their own approaches in response to their particular goals and unique competitive environments Integration: the required level of coordination across differentiated functions, units, and division

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“Use high differentiation to enable different functions, departments, and units in an organization to develop their own responses to their particular goals and

unique competitive environments.”

“Use high integration to enable the organization to achieve efficient operations among different functions, departments, and units.”

“Levels of differentiation need to be matched by appropriate levels of integration.”

The Challenge of Differentiation and Integration

Integration

High

Low

Low High

Differentiation

Low differentiation hampers an

organization’s responsiveness to

a complex environment

In highly complex, dynamic

environments, effective firms operate here

SAP America’s consulting service

was operating here

Dimensions of Differentiation Dimension Examples

Goals A sales function may have the goal of increasing revenues, whereas a manufacturing function may have the goal of

reducing costs

Time orientation A research department will likely have a long-term

orientation toward research and development, whereas a sales function will want new products that it can sell by the

end of the quarter

Interpersonal style

Research scientists might believe that they can maximize creativity and contribution by focusing all their individual attention on their task, whereas manufacturing managers

might desire to create rich interpersonal relationships among key individuals to maximize quality

Formality An assembly operation is more likely to be governed by tight

rules and strict procedures, whereas a research and development laboratory would find such rules stifling of

creativity

Building a Vocabulary  Control: design choices called upon to shape employee

behavior in alignment with the requirements of outstanding performance

 Organic controls: an approach to shaping employee behavior that emphasizes shared values, a common understanding of strategy, loosely defined roles and responsibilities, and overall organizational performance

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“Traditional mechanistic control tools can create predictability and standardization but can undermine

creativity, flexibility, and collaboration” “Organic controls, which are intended to increase employee

flexibility and creativity, rely on shared values and clarity about overall strategy and performance expectations.”

Building a Vocabulary

Decision-making rights: the determination of who should make what decisions in organizations.

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“Allowing front-line employees to make autonomous decisions is intended to unleash

motivation and creativity among those organizational members with the ‘best

information’ to make decisions.”

Challenge of Multinational Organizations

 Multinational organizations face special challenges regarding the allocation of decision‐making rights.

“The challenge for multinational organizations is to allocate a high level of autonomy to national

units as a way of achieving marketplace responsiveness while simultaneously making

corporate‐level decisions that allow the exploitation of synergies across the divisions.”

Building a Vocabulary  Synergies: the advantages of efficiency and effectiveness conferred by

the combined effect of interaction and collaboration among multiple units

 Employee commitment: the internalized desire of employees to expend energy and discretionary effort on behalf of the goals of the organization

 Collaboration: involves willing cooperation among individuals and groups with a common goal

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“The challenge for multidivisional organizations is to allocate a high level of autonomy to separate divisions as a way of achieving marketplace

responsiveness while simultaneously making corporate-level decisions that allow the exploitation of synergies across the divisions.”

“High employee commitment can improve organizational performance by enhancing productivity, creativity, collaboration, and the willingness to change.”

“Collaboration will require effective teamwork across units and functions of an organization.”

Informal Design Elements for Building High Commitment

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Element What Happens Clarity of

organizational goals

Employees at all levels and in all units are provided with an understanding of the goals and values of the

organization as well as its strategic choices

Influence mechanisms A variety of formal (elected board of representatives) and informal (open doors and accessible managers)

mechanisms enable wide participation in the dialogue and decision making of the organization

Teamwork Teams designated to perform interdependent tasks

Shared information Employees kept informed about how the organization is performing, including the dissemination of data such as financial performance, costs, profitability, information

on competitors, and feedback from customers

Organic controls Control exerted through peer pressure, organizational culture, and expectations of outstanding performance

reinforced through performance feedback

Individual development opportunities

Control exerted through peer pressure, organizational culture, and expectations of outstanding performance

Building a Vocabulary

 Job design: organizational expectations for how tasks will be performed in order to meet both individual task requirements the overall performance requirements of the organization

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“By enriching jobs along any or all of five characteristics, organizations can increase the

motivation and commitment of employees performing those tasks.”

Using Job Enrichment to Increase Commitment

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Job Dimension Description Enrichment Action

Skill variety The degree to which a job requires a variety of

different activities in carrying out the work, involving the use of a number of different skills and talents

Enlarging task requirements to involve multiple and varied

skills

Task identity The degree to which the job requires

completion of a “whole” and identifiable piece of work; that is, doing a job from beginning to a

tangible outcome

Combining individuals into a team with shared responsibility

for the final product

Task significance

The degree to which the performance of the task has a substantial impact on outcomes that are deemed to

be important to employees, to the organization, and/or to society as a whole

Communicating regularly and clearly how individual and group effort contributes to

overall performance of company

Autonomy The degree to which the job provides substantial discretion to the individual in scheduling work and

determining procedures for carrying it out

Allowing individuals or groups to schedule work and assign specific tasks consistent with achieving performance goal

Feedback The degree to which carrying out work activities

required by the job results in the individual acquiring direct and clear information about the

effectiveness of his or her performance

Communicating frequently concerning progress toward

work goals

Building a Vocabulary  Teams: interdependent groups with shared responsibility for an

outcome

 Cross-functional teams: teams made up from representatives of multiple organization functions typically intended to achieve required coordination along a chain of interrelated activities and processes

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“Don’t just place employees on teams and expect the performance benefits of teamwork; organizations will need to create the context required of teamwork.”

“When members of a team feel equally responsible for the outcome of their efforts, teamwork will be enhanced.”

“At least in the early stages of change, organizations will need to make sure teams are buffered from traditional hierarchical power and are allowed to work across functions.”

“In order to encourage teamwork, organizations can take care to ensure that team members have the appropriate skills to perform the task effectively.”

“Teams succeed or fail in organizations based not just on the efforts of team members but on the overall design and context of the organization, which must support and reinforce joint effort.”

Team Types Team Type How they contribute

Work team By sharing responsibilities, developing multiple skills, and performing varied tasks, motivation

and quality are enhanced

Product development team Through concurrent rather than sequential

development activities, speed to market and innovation are enhanced while costs associated

with rework are diminished

Problem-solving team By bringing together individuals from multiple

functions, problems associated with handoffs and cross-functional interactions can be creatively

addressed

Project management team The multiple functions and tasks of the value chain are linked in order to enhance quality, coordination, and customer responsiveness

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