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Corporate Tides: The Inescapable Laws of Organizational Structure

Corporate Tides: The Inescapable Laws of Organizational Structure

by Robert Fritz
  'Organizations follow inescapable structural laws. They do so because they must. They have no choice about it. This is as true for the successful organization as it is for the dysfunctional organization. So when an organization downsizes, and within two years hires back many of the people it had eliminated, or when it attempts to expand the market for its product, but then finds the higher sales have led to lower profits, or when it ignores the plans that were made and committed to, or when it seems to resist needed change efforts, the organization is simply following structural laws which produce inevitable patterns of behavior.'
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Organization Structures and Design

Organizational Design

In Designing Your Organization (2007:1), Kates and Galbraith define organizational design in the following way:

"Organizational design is the deliberate process of configuring structures, processes, reward systems, and people practices to create an effective organization capable of achieving the business strategy. The organization is not an end to itself; it is simply a vehicle for accomplishing the strategic tasks of the business. It is an invisible construct used to harness and direct the energy of the people who do the work."

Kates and Galbraith argue that an organization's structure is too often a barrier to effective performance.

Organizational Structure

"Structure is an entity (such as an organization) made up of elements or parts (such as people, resources, aspirations, market trends, levels of competence, reward systems, departmental mandates, and so on) that impact each other by the relationship they form. A structural relationship is one in which the various parts act upon each other, and consequently generate particular types of behavior." (Fritz, 1996:4)

In his classic Corporate Tides, Fritz points out that, in practice, organizational structures are rarely designed in a deliberate manner. Small structures grow into larger ones and individual units become the focus of managerial power. Fritz says that (1996:5): 'Departments and divisions become entrenched as power systems.' Any structural change is likely to meet resistance from these power systems.

Fritz also argues that organizations are structured either to advance or to oscillate. Advancement is a positive move from on state to another that acts as a foundation for further advances. Fundamental to structural advancement is the concept of resolution when an outcome is achieved and a particular problem is resolved. According to Fritz (1996:6), management in an organization that is structured to advance coordinate 'individual acts into an organizational tapestry of effective strategy.' When all the individuals in this utopian organization are acting together, the result is synergy, allowing the achievement of 'enormous feats.'

The alternative is structural oscillation. Fritz (1996:6) explains this: 'Oscillating behavior is that which moves from one place to another, but then moves back towards its original position.' So many organizations set out on some change program, full of enthusiasm and energy. But, six months later, the enthusiasm has evaporated and the program peters out leaving very little changed.

Labovitz and Rosansky (1997:7) consider that senior managers can achieve alignment to ensure advancement through:

* Carefully crafting and articulating the essence of their business and determining the Main Thing.

* Defining a few critical strategic goals and imperatives and deploying them throughout their organizations.

* Tying performance measures and metrics to those goals.

* Linking those measures to a system of rewards and recognition

* Personally reviewing the performance of their people to ensure the goals are met.

Labovitz and Rosansky criticize traditional structures of organization that are based on the notion of breaking up a managerial problem into pieces: departments and divisions. As they point out (1997:8): "Psychologists have long recognized that human beings like people who are like themselves and tend to reject people who are different from them. Yet organizations continue to create differences between people in the interest of efficiency. Line versus staff, management versus labor, field versus corporate, international versus domestic, East versus West, accounting versus sales - the list goes on. No wonder it's so hard to focus people around common goals when they are so different from each other simply by virtue of what they do and where they do it. Specialization and expertise can be a wedge that drives people further apart and makes it difficult for them to work together."

Roberts (2004: 32) argues that whereas strategic choice and organizational design are are immensely complex - indeed, 'mindbogglingly complicated' - there is an underlying logic based on the concept of 'fit':

"(...) Certain strategies and organizational designs do fit one another and the environment, and thus produce good performance, and others do not. Moreover, there are frequently recognizable, understandable, and predictable relations among the environmental features and the choice variables of strategy and organization that determine which constellations of choices will do well and which are less likely to do so. These relations arise for both technological and behavioral reasons. Recognizing these relations and understanding their implications can guide the design problem."

References
Fritz, R. (1996) Corporate Tides: The Inescapable Laws of Organizational Structure , Berrett-Koehler

Labovitz, G. and Rosansky, V. (1997) The Power of Alignment: How Great Companies Stay Centered and Accomplish Extraordinary Things , John Wiley & Sons.

Roberts, J. (2004) The Modern Firm: Organizational Design for Performance and Growth, Oxford University Press.


The Modern Firm

The Modern Firm: Organizational Design for Performance and Growth

by John Roberts
 Business firms around the world are experimenting with new organizational designs, changing their formal architectures, their routines and processes, and their corporate cultures as they seek to improve their current performance and their growth prospects.
In this book, John Roberts argues that there are predictable, necessary arrangements among these changes that will improve performance and growth. The organizations that are successful will establish patterns of fit among the elements of their designs, their competitive strategies, and the external environment in which they operate, and will go about this in a holistic manner.
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Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges

Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges

by by Amy Kates and Jay R. Galbraith
  A thoroughly revised second edition of the leader's concise guide to the process of creating and managing an organisation, no matter how complex, that will achieve unique competitive advantages and be poised to respond effectively and rapidly to customer demands.
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