Assignment

STRATEGIC HR MANAGEMENT

STUDENT WORKBOOK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building the Future: HR’s Role in Organizational Design

By Steve Weingarden, Ph.D.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Project team

Author: Steve Weingarden, Ph.D. SHRM project contributor: Bill Schaefer, SPHR, CEBS External contributor: Sharon H. Leonard

Copy editing: Katya Scanlan, copy editor

Design: Jihee Lombardi, senior design specialist

© 2011 Society for Human Resource Management. Steve Weingarden, Ph.D. For more information, please contact:

SHRM Academic Initiatives

1800 Duke Street, Alexandria, VA 22314, USA Phone: (800) 283-7476 Fax: (703) 535-6432

 

 

11-0100-SW

 

 

© 2011 Society for Human Resource Management. Steve Weingarden, Ph.D. 11

 

 

 

 

Case Overview

 

 

 

 

This case study provides a history and overview of organizational design (OD). You will use the information in the overview to complete an exercise as a hypothetical organizational design consultant working with a real company of their choice.

You will read about the definition and purpose of organizational design, methods of measurement, six models of organizational structure and two models on how to apply organizational structure principles.

This case provides an overview of organizational design and includes a scenario- based structured exercise. It is intended for advanced undergraduate students. Students studying human resources (HR) will likely benefit most, but general business students should gain insight from the module, particularly regarding the role of HR in organizational design.

 

Learning Objectives

You will participate in a structured exercise about organizational design, learning overarching principles and critically applying those principles to a hypothetical consulting situation. At the end of the case, you will be able to:

1. Identify how organizations gain sustainable competitive advantage through human capital strategies such as organizational design.

2. Describe HR’s role in developing human capital strategies and HR’s effect on an organization’s success.

3. Apply an organizational design consulting model to an organization.

 

 

 

 

Organizational Design: An Overview

 

 

Read this section before attempting the structured exercise.

 

Definition and Purpose of Organizational Design

Organizations are composed of deliberately selected and deselected people who coordinate their efforts toward a specific goal (Etzioni, 1964). The ultimate purpose of an organization is to achieve a specific goal or mission. The people selected (whether self-selected or chosen) and deselected are significant in some manner that helps the organization achieve the desired goal.

Organizational design centers on the organization’s human resource needs to achieve the organization’s specific goal. Organizational design answers the question, “What is the best organizational structure?” and has two objectives:

1. To facilitate the flow of information within the organization.

2. To integrate organizational behavior across different parts of the organization so the behavior is coordinated (Duncan, 1979; see also Stanford, 2007 for a similar definition).

Organizational structure and its connection to strategy are core components of the organizational design process.

 

 

22 © 2011 Society for Human Resource Management. Steve Weingarden, Ph.D.

 

 

© 2011 Society for Human Resource Management. Steve Weingarden, Ph.D. 21

 

 

 

 

 

 

 

 

 

 

 

 

Organizational design centers on the human resource requirements an organization needs to achieve its specific goal.

 

Expertise in “A” Expertise in “B”

 

 

Coordination of Behavior

 

 

 

 

 

 

 

 

Coordination of Behavior

Coordination of Behavior

 

 

 

 

 

 

 

 

 

Coordination of Behavior

Information Flow

Information Flow

Organizational Mission

and Goals

Information Flow

Information Flow

 

 

 

Expertise in “C” Expertise in “D”

 

 

 

 

 

The organizational design definition presented in this case is simplified; scholars tend to define organizational design more broadly. For scholars, organizational design often refers to all aspects of the relationship between the organizational work and the employee (Sandler, 1974). This relationship includes organizational strategy and structure as well as more granular issues such as work processes and leadership (e.g., see Burton, DeSanctis and Obel, 2006; Nadler, Tushman and Nadler, 1997). In fact, it is the organizational design process—specifically the structuring process— that is the pivotal connector between the business of the organization (e.g., top-level leadership and organizational strategy and goals) and the other forms of HR support (e.g., workflow process design, selection, development and compensation).

An example of this connection is provided through an integrated management system known as requisite organization. One implementation map of requisite organization involves an eight-step process:

 

Step Process
1	Build the senior leadership team.
2	Design the organizational strategy.
3	Determine the structure needed to implement the strategy.
4	Design the working relationships between functions.
5	Ensure people are in the right roles for now and in the future.
6	Manage performance; ensure that managers are skilled at managerial leadership.
7	Strengthen the role of managers who are responsible for managing other managers.
8	Build the compensation system.

 

Adapted from Dutrisac, Koplowitz and Shepard (2007).

This case focuses on how to determine the structure needed to implement strategy and set the foundation for other HR processes.

The HR practitioner’s main role in the organizational design process is that of partner. There are three core aspects of this partnering relationship:

1. To provide leaders with structural diagnosis through identification of the root causes of organizational performance issues.

2. To help leaders evaluate a range of design options by offering clear design criteria.

3. To ensure that leaders align their organizational design decisions to short-term and long-term strategic goals by identifying critical organizational activities and current areas of strength and weakness (Corporate Executive Board, 2009).

 

 

 

 

 

With these aspects of the relationship in mind, the HR practitioner best contributes to the partnership by:

· Providing tools that measure the current internal and external environment and current organizational structure.

· Offering knowledge of various organizational structures, including the pros and cons associated with each structure.

· Reinforcing that leaders consider strategy as a cornerstone in their design and structure decisions.

These activities represent the strategic role of HR, encouraging HR professionals to engage with others in the organization to create the right culture and build the right organization (SHRM, 2007).

Most of the HR practitioner’s organizational design work occurs when an organization’s design needs to be revisited or redesigned because changes in the competitive environment require changes for the organization and its goals; a redesign may be needed to maintain or achieve alignment (Nadler, Tushman, & Nadler, 1997).

In fact, it is critical to identify the current organizational strategy and the internal and external environment of the organization to develop the structure. Structures must fit the current and future environment of an organization. Reorganization is needed when the current structure does not align with the situation (Bolman and Deal, 2003). To understand the current and future organizational strategy,

it is essential that the OD consultant, whether internal or external, has access and input into the knowledge gained through senior leadership decisions regarding organizational direction. The OD consultant must have the available scope to identify the number of items that go into organizational design decisions (Robinson & Robinson, 2005).

The first step to determine the most appropriate organizational design is to identify aspects of the organizational environment. A large component of the internal environment is determining where an organization is in the organizational life cycle. Organizational life cycle models depict stages where an organization is born, develops, grows, matures and dies.

One of the more delineated models of the organizational life cycle is summarized on the following page.

 

 

 

 

 

 

Passage organization Description
courtship	· There is no organization. · Founders are in love with an idea.
Infant	· Very busy doing. · Risk is introduced. · Focus is on short-term results. · Idea generation is no longer vital.
Go-go	· Moves fast and often intuitively. · Danger of having too many opportunities viewed as priorities. · Short-term focused but with vision. · Founders may be using strategies that are no longer efficient.
adolescent	· Planning and coordinating for the long term. · Less focus on short-term results. · Employees desire organizational stability.
Prime	· Stable and predictable results. · Plans and procedures are in place for achieving efficiency. · Awareness of external environment. · May become more inward-focused toward the end of this stage.
mature	· Results-oriented. · Institutionalized systems. · More interpersonal relationships. · Sense of urgency is lost.
aristocratic	· Admiration of the past and desire to maintain status quo. · More interested in how something is done (ritual) than what is done or why it is done. · Less awareness of external competition. · May see increased prices for product or service.
early Bureaucracy	· Results stray from earlier higher levels. · In-fighting and expulsion of some leaders.
Bureaucracy	· Very little is accomplished. · Peaceful and friendly. · Agreement without action.
Death	· No results. · Organization is dissolved.

 

Adapted from Adizes (1979).

 

 

 

 

 

There are no guarantees that an organization will make it from one stage to the next. In fact, one of the key opportunities for an OD consultant is to recognize indicators that suggest an organization is in a risky or an unhealthy stage and aid in making adjustments. One example might be the recognition that an organization has extreme levels of formalization (e.g., an inappropriate desire for everything to be written) as part of a greater overall syndrome. Reverence for documentation might suggest that an organization is in the bureaucracy phase, which would place it at risk of death. An OD consultant could help redirect the organization to a healthier stage.

In addition to the organization’s life cycle, other aspects of the organizational environment should be considered for organizational design or redesign (Duncan, 1979).

 

 

Internal environment external environment

 

 

Organizational goals

Talent management strategy

Cross-functional cooperation and conflict

 

 

Adapted from Duncan (1979).

Customer and client profiles Suppliers’ profiles Competitors’ profiles Sociopolitical environment

Industry technology environment

 

 

 

The above list is intended to be overly inclusive (Duncan, 1979). Each organization will have varying environmental factors that influence decision-making. Ideally, the OD consultant will ask questions (e.g., “What are your strategies?”, “Who are your key clients?”, “How is your competitive environment changing?”) about the most relevant environmental demands or will identify those key demands through direct client focus.

 

 

 

 

 

Measuring the Current Organizational Structure

An analysis of an organization’s internal and external environment is necessary when deciding what structure will best aid the organization.

Understanding of the internal environment is achieved through the measurement of the following structural dimensions:

 

Structural Dimension Description
Specialization	Degree to which an organization’s activities are divided into specialized roles.
Standardization	Degree to which an organization has standard rules or procedures.
Formalization	Degree to which instructions and procedures are written down.
centralization	Degree to which the authority to make certain decisions is located at the top of the management hierarchy.
configuration	The shape of the role structure of the organization. This includes: · Chain of command: the number of vertical levels or layers on the organizational chart. · Span of control: the number of direct reports per manager; number of horizontal levels or layers on the organizational chart.

 

Adapted from Pugh (1973).

These dimensions are usually measured through a survey and subsequent analysis.

It should be noted that in measuring the internal organization, the question then arises, “What level for each dimension is appropriate?” It is important to understand that the structural dimensions are more for comparison purposes rather than overall intensity measurement. These dimensions are especially useful in defining a profile for where an organization may be in terms of:

· Self-perception of culture.

· External perception by