Designing Dynamic Organizations: A Hands-on Guide for Leaders at All Levels / Edition 1

by Jay Galbraith, Diane Downey, Amy Kates

Overview

Which business structures are best suited to the unpredictable 21st century? How can a business reconfigure itself with minimum disruption and maximum impact?

Every executive grapples with problems of restructuring—and most need hands-on guidance to solve them. Based on Jay Galbraith’s world-renowned approach to organization design and featuring a broad selection of practical tips and tools developed by Diane Downey and Amy Kates, Designing Dynamic Organizations gives business leaders at all levels everything they need to implement positive, progressive change.

In this book, business executives will learn how to examine their choices by leading them systematically through these fundamental questions:

• Should we restructure to meet our strategic goals?
• What are the best structural options to achieve our success?
• What lateral processes are necessary to support the new structure?
• How do we staff the restructured organization to optimize results?

Designing Dynamic Organizations includes examples and worksheets that pilot you through the essential steps of organizational design.

Product Details

ISBN-13:	9780814471197
Publisher:	AMACOM
Publication date:	12/17/2001
Pages:	272
Sales rank:	382,751
Product dimensions:	8.50(w) x 11.00(h) x 0.88(d)
Age Range:	17 Years

About the Author

Jay Galbraith (Breckenridge, Co) is a professor at the University of Southern California and the International Institute for Management Development in Lausanne. His previous books, including Organizing for the Future and Designing Organizations, are classics in their field.

Diane Downey (New York, NY) is president of Downey Associates International (DAI), a management consulting firm, and author of Assimilating New Leaders. Amy Kates (New York, NY) is a senior consultant at DAI.

Amy Kates (New York, NY) is a senior consultant at DAI.

Read an Excerpt

Designing Dynamic Organizations

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By Jay Galbraith Diane Downey Amy Kates

AMACOM Books

Copyright © 2002 Jay Galbraith, Diane Downey, and Amy Kates
All right reserved.
ISBN: 0-8144-7119-6

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Preface

Case Study

Gardenville had never experienced anything like the night of November 27. At 7:00 p.m. the main water line burst under Duggal Street, and the basements of many of Gardenville's shops and homes quickly began to fill with freezing water. At 9:00 p.m. a fire broke out during the second shift at the factory, which was located just on the edge of town where many of the town's Mexican immigrants worked. Most of the volunteer fire department was downtown blocking off streets and helping the utility crews when the call came in about the fire. Half the firefighters were sent over to the factory, and a call for assistance was made to neighboring towns.

Dan Roskobev was one of the first to arrive at the factory. In his twelve years on the first aid squad, he had never seen such confusion. The fire was blazing out of the upper windows on the east side of the building. People were milling about in the 20-degree temperatures, many without coats. Some people looked hurt and were bent over, crying. Others were calling out in Spanish for someone to help the workers who might still be in the factory. Everyone seemed stunned.

The leader of Gardenville's emergency services crew was away for the Thanksgiving weekend. The firefighters were preoccupied with the blaze. Dan decided somebody had to take charge. He asked one of the firefighters to break into a small restaurant that was dark and locked for the night. At least it was a place to get people inside, somewhere warm where he could begin to triage those who were hurt and needed to get to the hospital. Over the next four hours, he tended to minor burns, directed people to find blankets and supplies, and organized car pools among the onlookers to get people to the hospital. He coordinated translators to interpret when the other first aid squads arrived, and when the owner of the restaurant showed up, he convinced him to make coffee for everyone.

That week, an editorial in the county newspaper lauded Dan as "a true hero." It also called for better emergency services resources, training, and coordination, noting, "Our county is not prepared for a major disaster. We can't always count on having a hero show up at the right time."

This is not an uncommon story. When disaster strikes, people step up to the job that needs to be done. They pull together resources that are in short supply, coordinate the actions of others, and make fast decisions. We hail them as heroes. Of course, what works in a crisis is an inefficient and ineffective way to operate all the time. On a day-to-day basis, we count on organizations, not heroes, to ensure that resources are in the right place when needed, and that people have the right skills, tools, and support to carry out their jobs.

Many managers in businesses today complain that they feel as though they are "fighting fires" all the time. They are continually focused on short-term problems without a chance to pull back and think through the consequences of options and decisions. Rather than analyzing strategic opportunities, planning for business growth, or developing their people, they are caught up in day-to-day "doing."

These pressures often come from external forces. As a manager, you may not face natural disasters with lives at stake in your everyday work, but you often must react quickly to challenges. If you're in a mature company, you probably need to respond to new competitors, consolidations, mergers and acquisitions, global expansion, and e-commerce. If you are a leader of a start-up, you may be struggling with building an infrastructure that will support rapid growth while trying to avoid unnecessary bureaucracy. On top of this, you may also be faced with higher than desired turnover and a shortage of talent to draw upon in the employment marketplace.

Too often, however, it is internal forces that keep managers from attending to long-term, strategic business challenges. Issues that should be resolved at lower levels and decisions that should be made at the front line float up to the leadership level. More time is spent on smoothing internal frictions than on customers, markets, and competitors. Yet, few managers feel confident in their own ability to shape their organizations to be more effective. A survey of the 441 fastest growing U.S. businesses conducted by PriceWaterhouseCoopers in the summer of 2000 found that 32 percent of CEOs believed that their inability to manage or reorganize their business could be "an impediment to growth" during the coming year. Only 10 percent of CEOs felt that way in a similar survey conducted in 1993.

As a leader, you have very few levers of change in your organization. Three key levers are setting the business strategy and vision, choosing the players on the executive team, and designing the organization. Your strategy provides the organization with direction and purpose. The quality of your executive team ensures leadership is evenly distributed and determines how well you sleep at night. The organization design defines the structure, processes, metrics and reward systems, and people practices that will ensure that individual and organizational energy is focused on those activities that support the achievement of the strategy. All levers are equally important, but organization design is frequently the lever given the least attention. If you're reading this book, you may already believe in the value of organization design. But you still may be wondering whether organization design is relevant in a world that is changing so rapidly.

The pace of change has been used as a reason for arguing, "If I hire the right people, they'll figure it out themselves." The story at the beginning of this chapter illustrates that while good people are important, they don't act in isolation. Organization design is the means for creating a community of collective effort that yields more than the sum of each individual's efforts and results. The organization's structures, processes, and practices channel and shape people's behavior and energy. The values and culture of the organization influence interpersonal interactions and determine which decisions get made. The form of the organization can enable or inhibit people's innate desire to do good work on a daily basis. As a leader, you have the opportunity, and the responsibility, to structure these relationships so that people find it easy to collaborate, innovate, and achieve.

Throughout the 1990s, there were numerous articles in the business and popular press on the emerging organizational forms that were destined to replace the traditional organization. A number of works came out that applied what had been learned about systems in the physical and biological world to organizational systems. The interest in the fields of complexity and chaos theory introduced concepts of organic growth and change into the study of organization design and structure. In this theory, chaos is defined as the inevitable state of a system as it moves away from order. Although there appears to be turbulence without any predictable form, chaos theory predicts that forces will come into play that will create a new order, what some have termed "order without predictability."

The idea of self-organizing, self-renewing, and adaptive organizations is appealing to managers trying to create organizations that are responsive to a rapidly changing external environment. Some managers have used these new ideas to create more open, flexible organizations that have broken down hierarchical barriers to speed and innovation. Others, however, have used these ideas as an excuse to abdicate their management responsibility for designing and managing their organizations. As a result, many of these managers experienced chaos firsthand!

It is also clear that good ideas and a strong brand are not enough to compensate for the lack of a strong design. Companies that focus on growth without building an organization and without the capabilities that can leverage those good ideas (and abandon them for even better ideas when necessary) tend to fall into cycles of rapid expansion followed by retrenchment, cost cutting, and sometimes demise. For example, Cambridge Technology Partners (CTP), a corporate technology consulting firm specializing in client/server applications, recorded 61 percent compounded growth for its first seven years. Growth goals pushed the firm to pursue projects too large and complex for its capabilities, caused it to abandon a profitable pricing model, diverted attention from building its own technology and human infrastructure, and resulted in its not recognizing the potential of the Internet in the mid-1990s. With its stock price down and staff turnover of 39 percent annually, CTP was forced to pull back in the marketplace to rebuild its internal capabilities.

This book makes the case that in the twenty-first century organization design is more, not less, important. A well-thought-out organization design empowers and enables employees to work in the highly interdependent, team-oriented environments that typify today's business landscape. Further, the clearer the rationale for the design, the more quickly design decisions can be reassessed and modified to respond to external forces.

A recurrent theme in this book is the need for dynamic, reconfigurable organizations that recognize and respond to rapid changes. Organizations exist to execute strategies. Yet few organizations are able to maintain their strategic advantage for long. Success formulas are quickly copied or even surpassed by high-speed competitors. Thomas Jefferson, speaking of the European laws and constitutions that had outlasted their usefulness in the changing world of the early nineteenth century, said, "We might as well require a man to wear still the coat which fitted him as a boy." The same is true of organizations. When strategic advantages don't last long, neither should the organization design. "Ill-fitting coats," as much as poor strategies or the wrong people, inhibit organizations from achieving their goals.

This doesn't mean that change renders the organization design disposable. Employees in many companies feel whiplashed by the constant reorganizations implemented without apparent rhyme or reason. The need for change does mean that the leaders of successful organizations will continually assess their capabilities and purposefully realign them to execute against the opportunities that arise. More important, they will design their organizations to anticipate and accommodate change with the fewest disruptions to customers and employees.

What Is An Organization

The word organization is used frequently throughout this book. An organization for our purposes can be a whole corporation or just one part of it. It can comprise tens of thousands of people or just a few dozen. Each reader will have a different definition depending upon where he or she sits within his or her business. If you are the CEO or equivalent, then the "organization" encompasses the entire business. If you are a division director or head of a function, then your "organization" is the part of the business you have authority to change and impact. Organizations are nested inside one another. A unit of ten people within a large company is an organization both distinct from and a part of the company itself. The smaller the organization, the fewer design choices and decisions there are to make and the more those decisions will be influenced by the surrounding organization. Regardless of size, there are still tremendous opportunities for the leader to shape the organization and improve its effectiveness.

We also use the term to apply to a variety of organizational types. Although the book assumes a business environment, all of the concepts apply equally to not-for-profits and public entities.

Who Should Read This Book

The need for this book emerged out of frequent requests to Jay Galbraith and to Downey Associates International, Inc. (DAI) to provide a hands-on guide to organization design. Midlevel and senior managers, in particular, asked for a design guide to translate the concepts that apply to a whole company to their own piece of the organization. This book will enable readers to:

* Make choices about which organizational forms will best support their business strategy.

* Understand the trade-offs and impact of each design decision.

* Introduce flexibility and continuous change without losing the clarity that employees need to function effectively.

This book draws upon Jay Galbraith's written work as well as his experience consulting to clients around the world. The book also reflects the extensive experience that Diane Downey and Amy Kates of DAI have had in assisting clients to assess their organizations, make decisions, and implement new designs. The book takes a consulting rather than a theoretical or academic approach. It is built around the questions we ask our own clients, and it provides the tools to allow managers to assess options and make their own decisions.

This book is written for those who lead an organization and want to be sure that it is aligned to achieve their business strategy, including heads of companies, divisions, or business lines, and midlevel managers responsible for a product, location, or functional area.

The book is also addressed to the human resources (HR) professionals and internal and external organization development consultants who support the organization design process. All of the tools and concepts will be of use to the HR professional assisting a business leader in redesigning the organization. Corporate trainers and other executive education providers will also find the book a straightforward reference to use in their programs.

Organization of the Book

You usually don't have a choice about whether to redesign your organization. The business changes, the strategy changes, and you are no longer positioned to deliver what needs to get done. Too often, however, redesigns are limited to reorganizing the vertical structure - i.e., what can be shown on an organization chart. This book addresses the topic of organization design holistically. The seven chapters are structured around the key decisions that will guide you through the thought process of creating a dynamic, reconfigurable organization.

Chapter One, "Getting Started," provides an overview of the design process and how to effectively involve people from the organization in that process. It answers the questions:

* What is organization design?

* What are the characteristics of dynamic, reconfigurable organizations?

* How do I know when I need to redesign?

* What are the steps in the design process?

* When and how should I involve others?

Chapter Two, "Determining the Design Framework," helps you identify the desired future state, assess the current organization, and determine priorities for change.

Continues...

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Excerpted from Designing Dynamic Organizations by Jay Galbraith Diane Downey Amy Kates Copyright © 2002 by Jay Galbraith, Diane Downey, and Amy Kates. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

"Preface

Introduction

What Is an Organization?

Who This Book Is For

Organization of the Book

Acknowledgements

1. Getting Started

Organization Design

The Reconfigurable Organization

Deciding When to Redesign

The Design Process

The Case for a Participative Process

Summary

2. Determining the Design Framework

Translating the Strategy into Design Criteria

Clarifying Limits and Assumptions

Assessing the Current State

Summary

3. Designing the Structure

Structural Concepts

Organizational Roles

Testing the Design

Mapping the Structure

Design and Implementation Governance

Summary

4. Processes and Lateral Capability

Lateral Capability

Networks

Lateral Processes

Integrative Roles

Matrix Relationships

Building Lateral Capability

5. Defining and Rewarding Success

Metrics

Values and Behaviors

Compensation

Reward and Recognition Programs

Summary

6. People Practices

Introduction

Staffing the New Organization

Assessing for Learning Aptitude

Performance Feedback

From Training to Learning

Summary

7. Implementation

Planning

Managing Skepticism

Conclusion: Assimilating into the Organization"

What People are Saying About This

From the Publisher

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"This book offers a comprehensive and easy-to-use approach for creating high-impact organizations in uncertain times. The authors have successfully taken the complexity out of designing complex organizations." — Dennis Shiel, Vice President, Human Resources, MetLife

"Most corporate strategy does not fail because it is poorly conceived; it fails because the organization is unable to execute. Designing Dynamic Organizations is a must read for leaders who want their business to thrive in the global corporate environment. Galbraith, Downey, and Kates have combined their expertise to create a marriage between theory and practice. The authors provide the reader with a clear pathway for action, one that tightly bolts strategy to implementation." — Les F. Martel, Ph.D., Vice President, Global Learning and Performance, Instinet Corporation

"With increasingly uncertain and volatile markets, businesses are under crushing pressure to extend the reach of their strategic imperatives, to quickly adapt their work processes and structures, and to effectively leverage their human capital. Designing Dynamic Organizations is a veritable survival guide for organizations coping with these demands. The authors translate rigorous theories and models into practical step-by-step approaches that can be quickly absorbed and utilized by teams at all levels of the organization." — Nancy Bologna, Ph.D., Senior Vice President, Best Buy Company, Inc.

"You will find Designing Dynamic Organizations an endless source of practical insights and ideas whether you are a line executive responsible for organizational performance or a human resources professional providing expert advice. Keep this book close at hand . . . it will prove to be invaluable!"— Dave Tierno, Retired Senior Partner, Ernst & Young Consulting Group

"Galbraith, Downey, and Kates have done something delightfully different from the typical treatise on organization design. This book is all about practical tools and instruments, options and how-to’s. A real find for today’s business practitioner." — Reinhart Helmke, Executive Director, UN Office for Project Services"