Lateral Approaches to Organization Design

Transcription

1 Lateral Approaches to Organization Design June 22, 2015 Webinar with Sue Mohrman Center for Effective Organizations University of Southern California Marshall School of Business (213)

2 Some of Sue s focuses Dr. Susan A. Mohrman CEO Senior Research Scientist Widely known for organization design and effectiveness and large scale change research The design of knowledge based firms Knowledge creating systems Sustainability and how to design complex collaborations to foster it Examination of the research process itself How to create academic/company partnerships to yield useful knowledge

3 Complexity and Organization Design Core Trade offs of Organization Design Evolving Design Complexity Lateral Approaches (3)

4 Star Model Strategy Work Processes/ Capabilities People Structure Rewards Management Processes Adapted from: Galbraith (1994) (4)

5 Hierarchical, Functional Organization General Director of Engineering Director of Marketing Director of Manufacturing Administrative Director Software Engineer Hardware Engineer Tech Support Product Marketing Marketing Support Mfg Engineer Operations HR Finance Info Systems etc. etc. etc. etc. etc. etc. etc. QA Testing Mfg QA Mfg Testing Comp & Benefits QA Specialist QA Specialist QA Specialist Training Specialist etc. etc. Comp Benefits Specialist Comp. Specialist Comp. Analyst (5)

6 Organizational Glue and self-containment to reduce complexity Hierarchical Control Goals, Plans, and Metrics Vertical Information Systems Standard Processes Self-contained Units Cross-Unit Lateral Designs Adapted from J. Galbraith. (6)

7 Divisional Structure Group V P General Division A Admin V P General Division B Eng. Dir. Mkt. Dir. Mfg. Dir. Admin. Dir. Eng. Dir. Mkt. Dir. Mfg. Dir. SM35I (7)

8 Generic Divisional Structure CEO What goes in the Center? General Division A The Center General Division B Function Head Function Head Function Head Function Head Function Head Function Head Function Head Function Head Function Head (8)

9 The World is Not What It Was It was: Now it s: Stable Simple Domestic Focused on performance Dynamic Complex Global Focused on sustainability (9)

10 Forces of Change Expansion of scale and scope General Discontinuous change Director of Engineering Director of Marketing Director of Manufacturing Administrative Director Software Engineer Hardware Engineer Tech Support Product Marketing Marketing Support Mfg Engineer Operations HR Finance Info Systems Introduction of new dimensions of performance etc. etc. etc. etc. etc. QA Testing Mfg QA Mfg Testing Comp & Benefits etc. etc. Technology advances QA Specialist QA Specialist QA Specialist Training Specialist etc. etc. Comp Benefits Specialist Comp. Specialist Comp. Analyst Increased competition Changing workforce expectations Performance pressures Rate of change (10)

11 Managing Complexity Core Challenge: A functional organization is no longer adequate to handle complexity of size, diversity of product, customer, and geography; speed and change. Cross functional leadership and action capabilities need to be developed deeper in the organization: by building lateral structures across the functions, or by building self contained multi functional units. (11)

12 Related Units Opportunities for Leverage Customers buy multiple products that cut across businesses Products and services configurable into a system Efficiency in administrative and back office functions Common product or process technologies Common skill/competency requirements Opportunities for leverage Tension between self-contained business units and leverage (12)

13 Multiple Dimensions examples Functional/discipline knowledge across multiple business units Customer knowledge and opportunities across businesses Functions and customers across geographies Product/Service processes and knowledge across geographies and customers Industry knowledge and opportunities across functions, geographies, product/services (13)

14 Self-Contained Business Units Group GM Business Unit A Functions, Custom Services, Product Teams Business Unit B Functions, Custom Services, Product Teams Business Unit C Functions, Custom Services, Product Teams May seek out synergies across units, if in best interests of the involved divisions Units optimize their own performance (14)

15 Group as System to be Optimized Group GM Business Unit A Functions, Custom Services, Product Teams Business Unit B Functions, Custom Services, Product Teams Business Unit C Functions, Custom Services, Product Teams Seeks out synergies in products, technologies and markets, if in best interests of group Optimize group-level performance (15)

16 Lateral Approaches LINE ORGANIZATION UNIT MATRIX ORGANIZATION MANAGEMENT POSITIONS Dimension Champions, Project/Program FORMAL OVERLAY TEAMS LATERAL INTEGRATING ROLES Liaison Roles, Mirror Organizations, Overlapping Membership ELECTRONIC COORDINATION Project-Ware, Group-Ware, CRM Systems, Social Media BUILDING INFORMAL LATERAL FOUNDATION Personal Networks, Co-Location, Rotations, Interdepartmental Events, IT Connections ORGANIZATIONAL PROCESSES Standard Processes, Goals, Measures, Plans & Reviews (16)

17 Lateral Organization Executive Team Councils Centers of Excellence Shared Services Team Team Leadership Team Business Unit 1 Process Team Cross Unit Opportunity Teams Leadership Team Business Unit 2 Process Team Team Team Team Team Team Team (17)

18 All Designs are Trade-offs The key ongoing trade-off decision: The advantages of speed, ownership, focus and accountability that accrue to self contained units versus The advantages of leverage and ease of cross organization coordination that come from sharing, integration, commonality, lateral, and matrix relationships (18)

19 Types of Leverage Resources Economies of scale Doing it once Focus Sharing Expertise Embodied in experts Knowledge and Learning Diffusion, dissemination Encoding Activities: Across products and services, markets and functions Coordinated activities Multiple applications (19)

20 Managing complexity effectively requires an organization to be highly skilled at designing and managing various approaches to the lateral organization (20)

21 Lateral Councils CEO Region 1 Region 2 Business Unit 1 Business Unit 2 Finance Supply Chain R&D Healthy Foods Council Healthy Foods Council: Develops a business plan and charters and manages projects that build a healthy foods business that will be integrated into the BU s. (21)

22 Lateral Mechanisms in (Example from Large Pharma) CEO Therapy Area Discovery Development Manufacturing Sales & Marketing Regions Drug Discovery Teams Development Teams Market Development Leader Local Commercialization and Market Delivery Teams Compound Discovery Clinical & Regulatory Marketing Strategy & Materials Manufacturing & Distribution Sales & Market Development W O R K F L O W (22)

23 The Convergence Transition Self Contained Product Organization Highly Integrated Solutions Organization Business Unit 1 Engineering Business Unit 2 Engineering Business Unit 3 Engineering Platform A Platform B Customer A Solution Customer B Solution Operations Marketing Operations Marketing Operations Marketing Platform C Customer C Solution (23)

24 (Simplified) Domestic Aerospace and Defense Company with International Sales CEO Division A Division B Program 1 Program 2 Program 1 Program 2 Engineering Engineering Engineering Engineering Operations Operations Operations Operations Business Development Business Development Business Development Business Development Int l Sales Int l Sales Int l Sales Int l Sales (24)

25 (Simplified) Aerospace and Defense Company with International Business Development and Operations CEO Division A Region 1 Region 2 Division B Program 1 Engineering Program 2 Engineering Business Develop ment Operations Shared Services Operations Shared Services Business Develop ment Program 1 Engineering Program 2 Engineering Program A2 Operations Operations Program A2 Operations Operations International Operations Business Development Program B1 Program B2 Business Development Business Development Business Development Program B2 Int l Sales Regional Operations Teams are matrixed to Programs for A2, B1 and B2 Program 1 International Operations is solid line to Program 1 (25)

26 (Simplified) Regional Structure in Outsourcing Firm Providing Services to Government Customers CEO Region 1 Region 2 Region 3 Contract 1 Contract 2 Contract 3 Contract 1 Contract 2 Contract 3 Contract 1 Contract 2 Contract 3 Contract 4 Key: Color shaded boxes = Service Lines (26)

27 (Simplified) Structure Outsourcing Firm Providing Services to Governments and Private Sector Customers CEO Global Private Services Division Region 1 Region 2 Region 3 Service Line A Contract 1 Service Line B Contract 1 Service Line C Contract 1 Contract 1 Contract 2 Contract 3 Contract 1 Contract 2 Contract 3 Contract 1 Contract 2 Contract 3 Contract 4 Contract 2 Contract 2 Contract 2 Contract 3 Contract 3 Contract 3 (27)

28 Knowledge Forums for Advancing Organizational Capabilities Forum Leader Forum Leader (e.g. for Service global talent sourcing) Line 1) Region Region A A Service Recruitment Line 1 Global Brand Business Management Unit 2 Recruitment Region Region B B Recruitment Service Line 1 Private Services Division Service Line 1 Centers of Excellence: collects information defines process based on best practice sponsors tools and advancement shares lessons learned continual improvement spearheads talent rotation Regions and Global Business Units: provide input based on local knowledge tailor test and learn (28)

29 Networks Executive Team Integrating Councils Shared Services Management Team Unit 1 Management Team Unit 2 Integrating Teams Opportunity Team Integrating Teams Team Team Team Knowledge Network Team Team Team (29)

30 Local Foods Network: A Web of Interdependent Connections Key: Focal System Other Systems in Industry Industry Suppliers General Suppliers Community Stakeholders Industry Associations Professional Associations (30)

31 The Lateral Organization is Carefully Designed Strategy Work Processes/ Capabilities People Rewards Structure Management/Governance Processes Lateral Organization Adapted from: Galbraith (1994) (31)

32 Organizing for Innovation, Agility, and Sustainability Ambidextrous organizations IT as a driver of innovation and design Open innovation The agile organization Design for sustainability (32)

33 Back End Product Generation NPD Team NPD Team Product Line 1 Team Product Enhancement Product Line 2 Team Product Enhancement (IBM Simplified) Front End Pulls Product Bundles Products Customizes Products & Service Provides Services Customer Focused Team/Business Unit (Multiple Product Solutions) Product Line 1 Supply Chain Shared Services Product Line 2 Shared Services Customer Focused Team/Business Unit (Multiple Product Solutions) (33)

34 The Ambidextrous Organization: Designs in the Capacity for Two Different Kinds of Performance General Engineering Manufacturing Global Business Unit 1 Global Business Unit 2 Global Business Unit 3 New Market / New Venture Contracts Support Team Project 1 (Cross Functional Team) Project 2 (Cross Functional Team) (34)

35 Open Innovation Partnerships Crowd Sourcing Knowledge Linkages Internal Company Innovation New Businesses Partnerships Licensing (35)

36 Encyclopedia Britannica and Wikipedia Wikipedia W 3.5 million articles in the English Wikipedia Many in up to 269 languages Created and edited by thousands of volunteers Encyclopedia Britannica 32 volume set of books 65,000 articles Written in English by 4,000 scholars (36)

37 Governance: Mechanisms purposefully designed to align behavior across the organization with: Strategy Purpose Goals Policies and guidelines of the organization Legal and ethical requirements Stakeholder expectations In order to achieve valued outcomes. (37)

38 Decision Making/Governance in a Multiple Dimensional Organization Cannot rely on uni dimensional hierarchical authority Councils, Boards and other representative forums (with clear charters) must be established for strategically critical decisions that commit multiple units to integrated action These decisions provide the framework for lateral processes and structures The executive team is the highest level decision making forum and escalation path Goals and objectives and rewards along all vertical and horizontal chains must be aligned with these decisions (38)

39 Matrix Organizations Require Organizational Clarity Structures and Processes Common work and business processes Clear charters for lateral and vertical units Information sharing and information technology Matrix (multi cell) planning and goal setting (organizational and individual level) Matrix (multi cell) decision griding Top management team providing integrated strategic leadership Multiple input performance management systems (39)

40 Design Communication Processes & Systems Content of Information Communication Media Accountabilities When? Ongoing Tactical Coordination Performance Related Goals, Feedback Learning and Improvement Strategic Environmental Scanning and Planning (40)

41 Design Communication Processes & Systems - Examples Content of Information Communication Media Accountabilities When? Ongoing Tactical Coordination Customer Issues CRM System Sales, Field Service s and Product Team Members By end of work day Performance Related Goals, Feedback Learning and Improvement Any critical path delay and Project Management Groupware Functional team members By Friday AM prior to end of work team meeting Strategic Environmental Scanning and Planning (41)

42 Planning and Goal Setting Strategic planning reflects all three dimensions Product planning drives the technology roadmap Working with customer plans, project commitments, and functional capital/investment capability Functional plans constructed to execute product plans (by cell) Iteration & commitment to contribution in each cell Metrics determined Regular reviews and updates Rewards reflect multiple dimensions Product Function Functional Plans to Support / Execute Product and Customer Strategies (42)

43 Decision-Making Responsibility Chart Parties to Decisions Decisions KEY: E=Escalation Path; D=Decision Authority; R=Recommend; I=Input; N=Need to Know; U=Uninvolved (43)

44 Matrix Organizations Require Individual Technical, Informal, and Interpersonal Competence Social network linkages Cross functional familiarity Negotiation skills Enlistment skills Business model understanding and business case formulation Collaboration skills Conflict resolution skills (44)

45 Charter Format Team mission: Team goals: Stakeholders: Customers: s: Co Performers: Resources: Decision authority: Requirements for integration with other groups: Communication responsibilities: Escalation paths: Review processes: (45)