1. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Implementing Organizational Change: Theory into Practice Chapter 4 Organizational Redesign 4-1 Craig W. Fontaine, Ph.D.

2. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 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 4-2

3. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Where are we in the change process… Diagnosis exposes the current realities of organizational life, with particular attention to the fit between patterns of employee behavior and the strategic requirements of the firm. Combined with mutual engagement, diagnosis provides both the motivation for and target of change. Now, employees can engage in a process of organizational redesign to help shape required new behaviors. Redesign provides a sense of direction for the change effort. This chapter will analyze the complexities of design choices made to support change implementation. 4-3

4. Building a Vocabulary Organizational redesign: the process of changing an organization’s design in response to shifting dynamics in the organization’s environment. Organization design: the arrangements, both formal and informal, that an organization calls upon in order to shape employee behavior. 4-4 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

5. 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 4-5 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

6. Organizational Redesign Sequencing 4-6  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. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

7. 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.” Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall “In selecting change pilots, select units where the change is most likely to be successful.”

8. CARE – Mini-case/Pilot Studies Dr. Gayle found when she became CEO that country officers raised most of their own funds and were used having a lot of autonomy, and not thinking about the greater whole. Gayle believed the approach undermined CARE’s overall effectiveness. The organizational change would require both improved information sharing across country units and better measure of results Pilot Study - Cross ‐ country collaboration across 39 sub ‐ Saharan African countries Another example: Duke University’s Children’s Hospital focused its initial transformation on a single unit: pediatric intensive care. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

9. Good Pilot Selection Criteria Self-contained unit or process with clear customer and measurable outcomes. Unit or process of strategic company importance Unit or process that exemplifies future company state Unit or process where success is most likely Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

10. Good Pilot Selection Criteria Self-contained unit or process with clear customer and measurable outcomes. Unit or process of strategic company importance Unit or process that exemplifies future company state Unit or process where success is most likely Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

11. Understanding Design Change Challenges All organizations face common design challenges: They all require some level of differentiated activity They all need some amount of integration They all require some type of control mechanism They must decide how and where to locate decision making 4-11 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Three challenges are key: balancing differentiation and integration, balancing control and creativity, and allocating decision-making rights.

12. Differentiation Differentiation is 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. High differentiation enables different functions, departments, and units in an organization to develop their own responses to their particular goals and unique competitive environments. 4-12 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

13. Dimensions of Differentiation DimensionExamples Goals A sales function may have the goal of increasing revenues, while 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, while 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, while 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, while a research and development laboratory would find such rules stifling of creativity 4-13 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

14. Integration Differentiation is necessary but not sufficient to achieve outstanding performance – it must be matched by integration. Integration is the required level of coordination across differentiated functions, units, and division. Levels of differentiation must be matched by appropriate levels of integration. Organizations operating in a complex and dynamic competitive environment will have to develop increasingly sophisticated mechanisms for integration to match the requirement for high differentiation. 4-14 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

15. Controls Control: Control refers to design elements called upon to establish order, create predictability, and ensure efficiencies of operation. Traditional (Mechanistic Controls): fixed job descriptions with strict individual accountability; close, watchful supervision a heavy emphasis on rules, procedures hierarchically based differences of status and authority pay incentives tightly linked to performance information distributed on a strict “need ‐ to ‐ know” basis Traditional controls, on the other hand, may hamper an organization’s flexibility and creativity. 4-15 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

16. Decision-making rights Decision-making rights: the determination of who should make what decisions in organizations The ideal design is one that grants decision- making rights to “those who have the best information relevant to the decision” 4-16 “ 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 ” Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

17. Challenge of Multinational Organizations Multinational organizations face special challenges regarding the allocation of decision ‐ making rights. 4-17 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall “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 t he divisions.”

18. Building a Vocabulary Decision-making rights: the determination of who should make what decisions in organizations 4-18 “ 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 ” Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

19. Need to create commitment Employee commitment: the internalized desire of employees to expend energy and discretionary effort on behalf of the goals of the organization 4-19 “ H igh employee commitment can improve organizational performance by enhancing productivity, creativity, collaboration, and the willingness to change. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

20. Informal Design Elements for Building High Commitment 4-20 ElementWhat 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 reinforced through performance feedback Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

21. Building a Vocabulary Synergies: the advantages of efficiency and effectiveness conferred by the combined effect of interaction and collaboration among multiple units Collaboration involves willing cooperation among individuals and groups with a common goal 4-21 “Collaboration requires effective teamwork across units and functions of an organization.” Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

22. 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 4-22 “By enriching jobs along any or all of five characteristics, organizations can increase the motivation and commitment of employees performing those tasks” Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

23. Using Job Enrichment to Increase Commitment 4-23 Job Dimension DescriptionEnrichment 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 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

24. Teamwork 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 inter-related activities and processes 4-24 “Don’t just place employees on teams and expect the performance benefits of teamwork; organizations will need to create the context required of teamwork ” ““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” Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

25. Team Types Team TypeHow 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 4-25 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall