# 7 - Organization Design - Part 2
this issue, you will find
A discussion of Structure and Process as elements in organization
A review of Designing Organizations: An Executive Briefing on
Strategy, Structure, and Process by Jay R. Galbraith.
Pointers to additional information on this topic
STRUCTURE AND PROCESSES: THE RECIPROCALS OF ORGANIZATION DESIGN
of the fundamental concepts underlying Organization Design is
Differentiation and Integration (D/I). Differentiation refers
to determining what the basic units of the organization will be--what
needs to be separate and distinct, based on the required functions
or focuses of the organization. Integration refers to how to get
the differentiated parts to "play" together, i.e. how
to ensure that the parts of the organization can interact to provide
the necessary coordinated outputs. In large, complex, highly interdependent
organizations, it is especially important to pay attention to
the balance between the two in order to enable the required collaboration.
Therefore, when designing an organization, each time a differentiation
step is taken, consideration must be given to a corresponding
integration step: it is the Structure of the organization that
creates differentiation, and the Processes that enable integration.
defines how the organization's resources are to be grouped and
held. It also specifies reporting relationships; layers or levels
of management; the placement of power and authority; work design;
and the relationship of functions, groups, operations, and tasks
to each other and to various stakeholders. The dimensions around
which organizations are most typically differentiated or structured
are: products, markets and/or customers, functions, and geography.
Because of the multiple demands and market conditions that organizations
face, structures are often created that address more than one
dimension. For example, matrixed organizations combine elements
of product/customer and functional dimensions are employees work
simultaneously for two bosses. Business Units focus attention
on a particular market or line of business, giving it the resources
that are required for it to operate essentially as a separate
entity (though it may share the services of some centralized or
common functions, e.g. finance, human resources, facilities, legal,
are also said to be hierarchical or flat. This refers to the number
of layers or levels of managers and their respective groups and
the distribution of power and authority within the organization.
Thus, a steep hierarchy would have many layers with the power
and authority concentrated at the top. A flat organization would
have fewer layers of management, each with a larger span of control.
Because a single manager can't direct all the activities or make
all the decisions, more authority and power is given to work groups,
teams, and individuals. This form of organization requires more
enable organizations to perform well on the dimensions of speed,
cost, quality, and innovation. They include both business processes
(e.g., quality systems, order fulfillment, and financial reporting)
and processes that enable human interaction or manage the interface
between employees and the business, such as performance appraisal,
problem solving and decision making, and information and communication.
These processes enable the knowledge, skills, and abilities of
many-people, groups, functions, organization-to be brought to
bear on problems, opportunities, and outcomes that are complex
and/or require the expertise of multiple specialties for resolution.
are also either vertical or lateral. Vertical processes manage
the allocation of scarce resources. Lateral or horizontal processes
manage coordination across the steps in a continuous or interdependent
work process that spans departments, functions, and/or organizations.
order to design an organization that functions effectively, the
Structure and the Processes must be considered and developed concurrently
and interactively. A common error in organization design is thinking
that the Structure is all there is, so the "lines and boxes"
are redrawn, but little or no attention is paid to the processes
that define, focus, and enable the required integration, coordination,
and collaboration among the differentiated entities. But just
as the Structure won't work without corresponding integrative
processes to support it, there are Structural design alternatives
that will increase the likelihood that people will be able to
work together more collaboratively and interdependently. When
undertaking a design effort, we encourage our clients to do a
thorough and detailed analysis of interdependencies before finalizing
a structure. The Structure and the Processes can then be designed
in relationship with each other against a set of overall design
Designing Organizations: An Executive Briefing on Strategy, Structure,
and Process by Jay R. Galbraith. (Jossey-Bass Publishers, 1995)
of modern organizations are becoming increasingly involved in
organization design: first, to create knowledge-based organizations,
and second, to create effective, rapid responses to powerful customers.
Designing Organizations is a leader's concise guide to the creating
and managing of an organization. It focuses primarily on the structure
and process sections of the Star Model (discussed previously).
examines the forces that are shaping today's organizations-buyer
power, variety, speed, and change-and how they affect organization
design. As a result of buyer power, more organizational structures
are being designed around market segments or specific customers.
Variety forces management to bring more people into the decision
processes, primarily through decentralization. Change requires
that companies make more decisions more frequently, and thus to
expand their decision-making capacity. Speed requires that decisions
be moved to points of direct contact with the work, to meet shorter
the section Choosing an Effective Design, Galbraith introduces
the concepts of Structure and Process. The structure of the organization
determines the placement of power and authority. Structure policies
fall into four areas:
SPECIALIZATION: the type and number of job specialties
used in performing the work;
SHAPE: the number of people constituting the departments;
DISTRIBUTION OF POWER: the classic issues of centralization
and decentralization, and the more modern concept of movement
of power to the departments;
DEPARTMENTALIZATION: the basis for forming departments
at each level of the structure. The standard dimensions on which
departments are formed are functions, products, workflow processes,
markets, and geography.
and decision processes cut across the organization's structure.
Management processes are both vertical and horizontal:
VERTICAL PROCESSES allocate the resources of funds and talent.
They are usually business planning and budgeting processes. The
needs of different departments are centrally collected, and priorities
are decided for the budgeting and allocation of the resources
to capital, research and development, training, etc.
HORIZONTAL PROCESSES (also known as Lateral Processes)
are designed around the workflow (e.g., new product development
or customer order fulfillment). These processes are becoming the
primary vehicle for managing in today's organizations. Lateral
processes can be carried out in a range of ways, from voluntary
contacts between employees to complex and formally chartered teams.
Organizations offers us both time-tested knowledge and current
innovative trends. It is intended to provide a contrast to the
oversell that often accompanies popular ideas. Sometimes the hype
diminishes the usefulness of new ideas by turning them into fads.
This book portrays new ideas as useful tools that should be understood
by every leader and consultant to be kept in every their toolboxes
and taken out only when appropriate.
the book falls short, however, is in the implementation of the
tools introduced. Over and over again, I found myself wishing
that Galbraith would say more about how to use the concepts and
how to integrate them into an already existing organization and
Websites and Other Resources we've found about this topic include:
The Association for the Management of Organization Design www.amod2000.org
This is the website of a nonprofit organization that promotes
the knowledge and practice of organization design.
Mohrman, S.A., Cohen, S.G., and Mohrman, A.M. Designing team-based
organizations: New forms for knowledge work. (1995). San Francisco:
is a research-based, how-to book on designing an organization
in which teams are the fundamental units of performance. It presents
a systemic rather than an occasional approach to teams as an alternative
to hierarchies as a form of organization structure.
available as companions to this book are:
and leading team-based organizations: A workbook for organizational
and leading tram-based organizations: A leaders/facilitator's
E.E. The ultimate advantage: Creating the high-involvement
organization. (1992). San Francisco: Jossey-Bass Publishers.
book, particularly Part Two, looks at designing a structure for
employee involvement in organizations, which Lawler views as a
source of competitive advantage for organizations.
S. and Lawrence, P. Matrix. (1977). Reading, Massachusetts:
book is the classic on matrixed structures. It provides guidelines
and tools for the development of matrix organizations which Davis
and Lawrence believe is the viable answer to the age-old centralization
vs. decentralization question.