Practicing Organization Development (A guide for Consultants) - Part 46 doc

design of the organization’s internal structures, processes, and procedures that produce desired products or services. The performance of an organization is measured by its productivity, market share, return on investment, and employee satisfaction and retention. An organization’s character directly affects its performance. Specifically, when exchanges between the organization and its environment are effective and its internal-design features fit together and reinforce strategic behavior, performance is likely to be high (Mohrman, Mohrman, Ledford, Cummings, Lawler, & Associates, 1990; Worley, Hitchin, & Ross, 1996). Figure 17.1 illustrates these two major components of organizational character: organization-environment relations and internal-design components. The figure relies heavily on open-systems theory, which views organizations as embedded in a larger environment (Cummings & Worley, 2001). The environment provides an organization with inputs (such as raw materials) that are con- verted by transformation processes (such as manufacturing and assembly) into outcomes (such as products and services). The environment also provides feedback to the organization about how well it is performing. The organization’s transformation processes include several interrelated design components. A key concept in open-systems theory is congruency or fit among the components. They must fit with one another to attain the most effective results (Hanna, 1988; Mohr, 1989). Interventions that include more of these components increase their chance of effectiveness (Macy, Bliese, & Norton, 1994). The open-systems model applies to different levels within an organization, as well as the whole organization. It is an appropriate model for a large-system change effort because its components must be viewed with the total organization in mind. The environment must provide the organization with needed inputs; the design components must promote effective and efficient performance; and the feedback system must provide knowledge of results. A large-system intervention attempts to improve the two key aspects of an organization’s character: the organization-environment relationship (how appropriate the inputs are for the organization) and the internal-design component (how well the design components match each other). An intervention directly influences the organization’s character which, in turn, affects organizational performance. Examples of large-system interventions are described later in the chapter. First, the two areas are defined further. Organization-Environment Relationship The organization-environment relationship is defined as the fit or symbiosis between an organization’s inputs and design components. The key inputs include strategy and environment. Strategy defines how an organization will use its resources to gain a com- petitive advantage in the environment (Chaffee, 1985; Hill & Jones, 2004). It INTERVENTIONS IN LARGE SYSTEMS 421 24_962384 ch17.qxd 2/3/05 12:25 AM Page 421 includes choices about which functions the organization will perform, which products or services it will produce, and which markets and populations it will serve. By its nature, strategy defines the relevant environment within which the organization chooses to compete (Porter, 1985). Consequently, the environment consists of external elements and forces that affect an organization’s ability to attain its strategic objectives. The environment includes suppliers, customers, competitors, and regulators. It also includes cul- tural, political, technical, and economic forces. Environments range along a continuum from static to dynamic (Emery & Trist, 1965). At the dynamic end of the range, the environment changes rapidly and unpredictably, such as might be found in many high-technology industries. It requires organizational strategies and designs that promote fast and innovative responses; the organization’s design should be organic with flexible design components (Burns & Stalker, 1961; Lawrence & Lorsch, 1967). At the static end of the continuum, the environment changes slowly and predictably such as 422 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION Figure 17.1. Model of a Large System CultureTechnology Performance Management System Strategy Environment Structure Organizational Feedback Systems Organizational Performance Inputs Design Components Outcomes 24_962384 ch17.qxd 2/3/05 12:25 AM Page 422 might be found in many regulated industries. It calls for a more formalized structure that supports standardized behavior and responses. OD consultants, along with the organizational members, must assess an organization’s environment in order to plan a large-system intervention. Internal-Design Components In addition to the organization-environment relationship, an organization’s performance depends on the alignment among its design components. The following five design components are shown in Figure 17.1: technology, structure, organizational feedback systems, performance-management systems, and culture. Technology includes the methods an organization uses to convert raw materials into products or services. It involves production methods, equipment, and work flow. Total-quality processes, such as statistical process control, are also part of technology. Structure is the way in which an organization divides tasks into departments or groups and coordinates them for overall task achievement. Alternative structures are departments differentiated by function (such as engineering, manufacturing, and sales), by product and service (such as detergents, food, and paper), or by a combination of these (a matrix). Structures can also be based on business processes (such as product development, order fulfillment, and customer support). Organizational feedback systems are the methods an organization uses to gather, assess, and disseminate information relevant to organization performance. Management information systems help an organization ensure that each subunit’s activities are consistent with its objectives. Performance-review systems serve the same function with employees and teams. Performance management systems focus on selecting, developing, and rewarding people. These systems help shape employees’ behavior and activities within an organization. For example, reward systems induce people to join, remain, and work toward specific objectives. They provide employees with incentives for achieving the organization’s goals. Culture includes the basic assumptions, values, and norms shared by organizational members (Schein, 1985). It guides and coordinates members’ deci- sions and behaviors by providing a shared understanding of what actions are required for successful performance. Because culture is so pervasive and central to an organization’s design and can significantly impact success or failure of strategic change, it is central among the design components shown in Figure 17.1 (Abrahamson & Fombrun, 1994; Cameron & Quinn, 1999). Research suggests that organizations achieve high performance when all five design components fit with one another and mutually reinforce behaviors needed to achieve the organization’s strategic objectives (Galbraith, 1973). For example, when an organization’s strategy and environment call for standardized INTERVENTIONS IN LARGE SYSTEMS 423 24_962384 ch17.qxd 2/3/05 12:25 AM Page 423 behavior, its design elements should emphasize formality and efficiency, such as those found in traditional bureaucracies. Conversely, when an organization’s strategy and environment demand innovation and change, its design elements should promote flexibility and experimentation, such as those found in high- involvement organizations. CHARACTERISTICS OF LARGE-SYSTEM INTERVENTIONS Large-system interventions have a number of common features that distinguish them from other OD interventions. These characteristics are as follows: • They are triggered by environmental jolts and internal disruptions; • They provoke revolutionary or transformational change; • They incorporate new organizing paradigms; • They are driven and led by senior executives; • They require an organizational learning system; and • They involve multiple organization levels and large numbers of members. Environmental jolts and internal disruptions can be compelling reasons for large-system change. Such interventions generally occur in direct response to at least three kinds of disturbance: 1. Industry discontinuities such as dramatic changes in legal, political, economic, and technological conditions that shift an organization’s ground rules; 2. Changes in a product’s life cycle that require different business strategies; and/or 3. Internal organizational dynamics such as changes in size, strategy, or leadership (Tushman, Newman, & Romanelli, 1986). These disruptions jolt an organization at a fundamental level, and if they are identified correctly during diagnosis, they can provide the strong “felt need” necessary to embark on large-system change. Large-system interventions involve revolutionary changes that dramatically reshape an organization. Such changes generally transform all of the organization’s design components. Although evolutionary changes that fine-tune an organization can also occur during large-system interventions, the primary focus is revolutionary change (Greiner, 1972; Tushman & Romanelli, 1985). 424 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 24_962384 ch17.qxd 2/3/05 12:25 AM Page 424 Most large-system interventions attempt to restructure organizations. The goal is to create commitment-based organizations that are better suited than the old compliance-based organizations to adapt to rapidly changing conditions. Commitment-based organizations have many mutually reinforcing elements, including the following: • Lean and flexible structures; • Information and decision making diffused throughout the organization; • Decentralized teams and business units accountable for specific products, services, processes, or customers; • Participative management and teamwork; • Strong customer orientation; and • Total-quality concepts and practices. An organization’s senior executives must lead and take an active role in large- system interventions (Kotter, 1996). Change leadership generally involves the following three critical roles (Tichy & Devanna, 1986; Tushman, Newman, & Nadler, 1988): 1. Envisioner. Someone who articulates a clear and credible vision of the new organization and its strategy and generates pride and enthusiasm. 2. Energizer. Someone who demonstrates excitement for changes and models the behaviors linked to them. 3. Enabler. Someone who allocates resources for implementing change, uses rewards to reinforce new behaviors, and builds effective top-management teams and management practices. The innovation and problem solving necessary for large-system change require considerable organization and personal learning (Mohrman & Cummings, 1989; Quinn, 1996; Senge, Kleiner, Roberts, Ross, Roth, & Smith, 1999). Learning helps to manage the uncertainty involved in a major change effort by bringing new information to the organization and by providing a constructive element of control. Unlearning old ways is equally important as people’s traditional values, worldviews, and behaviors are challenged and replaced with new ones. Because members spend considerable time and effort in learning how to change them- selves, organizations must create processes, procedures, and norms that support a learning orientation for the whole organization. Large-system interventions require heavy involvement and commitment from members throughout the organization. Consequently, OD consultants attempt INTERVENTIONS IN LARGE SYSTEMS 425 24_962384 ch17.qxd 2/3/05 12:25 AM Page 425 to involve everyone or at least a cross section of the organization when planning and implementing large-scale change. Ideally, this involves getting all or a majority of organization members in the same room at the same time. As members of the system directly communicate and interact with one another, they begin to understand the issues confronting the system and to devise better responses to them. An increasingly popular method for bringing members together for large- system change is large-group interventions (Bunker & Alban, 1996; Owen, 1997). These include such techniques as “conference boards,” “future searches,” “open space technology,” and “appreciative inquiry,” each having its own proponents and rhythm. The basic philosophy underlying large-group interventions is that, in order to change a system, one must have the “whole system” in the room at the same time. While pragmatically this may sometimes be impossible to accomplish, at least representatives of all relevant stakeholders should be included. This technology has been used in organizations to bring people together to discuss plans for plant closures, strategies for creating innovative products and methods, restructuring organizations, and a host of other issues that potentially involve all organizational members (Barros, Cooperrider, & Chesterland, 2000; Coghlan, 1998; Purser, Cabana, Emery, & Emery, 2000; Watkins & Mohr 2001). EXAMPLES OF SELECTED INTERVENTIONS Organization development interventions that are applicable to large systems generally fall into two categories: those that create changes in the organization- environment relationship and those that reshape the internal-design components of an organization. Examples of both interventions are presented in the following sections. Organization-Environment-Relationship Interventions Two interventions that are used to restructure organization-environment rela- tionships are open-systems planning (OSP) and network organizations. Open-Systems Planning. This large-system intervention helps organizations assess their larger environment and develop strategies for relating to it (Krone, 1974). It results in a clear strategic mission for the organization and options for influencing the environment to support that mission. Open-systems planning treats organizations as open systems that must interact with a suitable environment to survive and develop. Members’ perceptions play a key role in this relationship (Covin & Kilmann, 1990). Members can choose to ignore or attend to the environment’s various signals. They can either be aware of their filters and biases or ignore them, which will determine 426 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 24_962384 ch17.qxd 2/3/05 12:25 AM Page 426 whether unconscious and unexamined assumptions rule their reactions. Mem- bers’ responses, in turn, affect how the organization interacts with the environment (Cummings & Srivastva, 1977). To develop a coordinated and effective response to the environment, members must be willing to consider multiple perspectives and, from them, develop a commonly shared and accurate view of the environment. An example of an inaccurate view occurred when automobile manufacturers in the United States did not recognize or acknowledge the American public’s interest in product quality in the 1980s. This enabled the more quality-conscious Japanese automakers to gain a strong foothold in America. Open-systems planning helps an organization adapt to its environment as well as proactively influence it. An active stance goes beyond responding to the environment to include influencing it in desired directions. Open-systems planning is typically carried out in six sequential steps (Jayaram, 1976). The first stage is to identify environmental domains that affect an organization’s strategy. These domains include key customers, regulatory agencies, competitors, and suppliers. Then the demands placed on the organization’s current functioning by each domain are specified. The second step is to assess how the organization currently responds to environmental demands, which in turn will help determine how effectively the organization is relating to its environment. The third step is to help members identify the organization’s mission, its underlying purpose, and its distinctive competencies. OD consultants can encourage members to go beyond the organization’s official statement of purpose and to clarify how well its mission currently relates to the environment. Based on this analysis, members may decide to change the organization’s mission to one more appropriate to external conditions. The fourth step is to create a realistic future scenario that describes environmental demands and how the organization is likely to respond to them. When creating this scenario, the consultant should assume that the organization will continue to respond to the environment much as it has in the past. The fifth step is to create an ideal future scenario that describes the environmental demands that will confront the organization and the most desirable responses to them. The consultant will have to review the first three steps and ask members what they think an ideal scenario would look like. Members should be encouraged to brainstorm and consider innovative possibilities. The sixth step is to compare the organization’s present situation with its ideal future and prepare an action plan designed to move the organization toward the desired future. Other OD methods consistent with open systems planning include integrated strategic change (Worley, Hitchin, & Ross, 1996), scenario planning (Ringland, 1998; van der Keijden, 1996), and transition management (Beckhard & Harris, INTERVENTIONS IN LARGE SYSTEMS 427 24_962384 ch17.qxd 2/3/05 12:25 AM Page 427 1987). There are differences in these techniques, of course, but all rely on (a) an assessment of the environment, (b) recognition and subsequent modifica- tion of the organization’s responses, and (c) visioning or creation of a desired future. Network Organizations. A consultant can use concepts of networking to help an organization join in partnerships with other organizations to solve problems and perform tasks that are too complex and multisided for single organizations to handle alone (Cummings, 1984; Gray, 1989; Snow, 1997). Such multi-organization partnerships are used increasingly to respond to the complexities of today’s dynamic environments (Rycroft, 1999). Examples include joint ventures, research and development consortia, public-private partnerships, and customer-supplier networks (Achrol, 1997; Chisholm, 1998; Halal, 1994). Network organizations tend to be loosely coupled, nonhierarchical, and under-organized. Consequently, they require OD interventions that help members recognize the need for such partnerships and develop mechanisms for organizing their joint efforts. OD interventions to create and develop network organizations generally follow four stages that are typical of planned change in under-organized settings: identification, convention, organization, and evaluation. In the identification stage, a consultant identifies potential network members. The organization or person who begins a networked organization generally takes the lead. The main activities during this stage are determining criteria for mem- bership and identifying organizations that meet them. Leadership is key in the early stages to get the network off the ground and organized. Often a network of leaders emerges that mimics the characteristics of the network (Feyerherm, 1994). In the convention stage, the consultant brings potential members together to assess the feasibility of forming a network organization. At this point, the potential members evaluate the costs and benefits of forming and determine an appropriate task definition. Key activities in this stage include reconciling members’ self-interests with those of the network collective and working through differences. In the organization stage, the network takes shape. Members organize them- selves for task performance by creating key roles and structures. Legal obliga- tions and member rights are determined at this point. In the evaluation stage, the consultant gives the members feedback about their performance so they can start identifying and resolving problems. The members assess how the network is working and how it can be improved. Internal-Design-Component Interventions This section describes four interventions that reshape the internal-design components of an organization so they fit better with one another. These interventions are sociotechnical systems (STS), structural design, reward systems, and high-involvement organizations. 428 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 24_962384 ch17.qxd 2/3/05 12:25 AM Page 428 Each intervention emphasizes different design components. Sociotechnical systems involve technology and performance-management elements; structural design addresses structure and technology; reward-system interventions include performance management and feedback systems; high-involvement organizations emphasize change in an organization’s culture and, consequently, affect most design components. Sociotechnical Systems (STS) Interventions. STS is based on the premise that a work system is comprised of social and technical parts and is open to its environment (Cummings & Srivastva, 1977; Trist, Higgin, Murray, & Pollack, 1963). Because the social and technical elements must work together to accomplish tasks, work systems produce both physical products and social/psychological outcomes. The key is to design work so that the two parts yield positive outcomes; this is called joint optimization (van Eijnatten, Eggermont, de Goffau, & Mankoe, 1994). This contrasts with traditional methods that first design the technical component and then fit people to it. This often leads to suboptimal performance at high social costs. In addition to joint optimization, STS is also concerned with the work system and its environment. This involves boundary management, which is a process of protecting the work system from external disruptions while facilitat- ing the exchange of necessary resources and information (de Leede, kees Loose, Verkerk, 1993; Pasmore, 1988). OD consultants use the following guidelines to design sociotechnical systems (Barko & Pasmore, 1986; Cherns, 1987; Taylor & Felton, 1993): • Work is organized in a way that is compatible with the organization’s objectives. This often leads to a participative process that promotes employee involvement in work design. • Only those minimal features needed to implement the work design are specified. The remaining features are left to vary according to the unique technical and social needs that arise in the work setting. This provides employees with the freedom necessary to control technical variances quickly and close to their sources. • Employees who perform related tasks are grouped together to facilitate the sharing of information, knowledge, and learning. This typically results in self-managed work teams. • Information, power, and authority are vested in those performing the work to reduce time delays in responding to problems and to enhance employee responsibility. • Workers are trained in various skills so they have the necessary expertise to control variances and the flexibility needed to respond to changing conditions. INTERVENTIONS IN LARGE SYSTEMS 429 24_962384 ch17.qxd 2/3/05 12:25 AM Page 429 Structural-Design Interventions. Structural-design interventions focus on the structure of an organization (Galbraith, 1973). They involve dividing the organization’s tasks into specific groups, units, or processes and then coordinating them to achieve overall effectiveness. This results in four basic organizational structures: functional, self-contained units, matrix, and networked. When selecting a structure for an organization, OD consultants consider the following four factors: environment, size, technology, and goals (Daft, 2004). The functional structure is hierarchical. Different specialized units, such as research, engineering, manufacturing, and marketing, report upward through separate chains of command and join only at the organization’s top levels. This structure offers several advantages: It reinforces specialized skills and resources; it reduces duplication of scarce resources; and it facilitates communication within departments. The major disadvantages of a functional structure include a short-term focus on routine tasks, narrow perspectives, and reduced communication and coordination among departments. The functional structure works best when the organization’s environment is relatively stable, the organization is small to medium in size, and it is engaged in routine tasks that emphasize efficiency and technical quality (McCann & Galbraith, 1981). The self-contained-unit structure is organized around a product line, geo- graphical area, customer base, or a common technology. Each self-contained unit includes all relevant skills and processes within its boundaries. Hence, employees with all the needed functional expertise are internal to the unit. The major advantage of this organizational structure is that the key interdependencies and resources within each unit are coordinated toward an overall outcome. The major disadvantage is that there is heavy duplication of resources and expertise. The self-contained-unit structure works well in large organizations facing dynamic environments and having multiple products and customers (Mohrman, Cohen, & Mohrman, 1995). Matrix organizations are designed to take advantage of both the functional and self-contained-unit structures by imposing a lateral structure of product or program management onto the vertical, functional structure (Joyce, 1986). Consequently, some managers report to two bosses. Functional departments focus on specialized resources, and product teams concentrate on outputs. A matrix structure works best in a large organization that faces an uncertain environment, has high technological interdependencies across functions, and has product specialization and innovation goals. This structure offers the advantage of managing interdepartmental interdependencies and allowing for skill diversification and training. Its primary disadvantages are that it is dif- ficult to manage and control, and employees face ambiguous roles and incon- sistent demands (Larson & Gobeli, 1987). These problems can be overcome by changing employees’ mindsets and skills to promote lateral relations and 430 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 24_962384 ch17.qxd 2/3/05 12:25 AM Page 430 . information relevant to organization performance. Management information systems help an organization ensure that each subunit’s activities are consistent with its objectives. Performance-review. to restructure organization- environment rela- tionships are open-systems planning (OSP) and network organizations. Open-Systems Planning. This large-system intervention helps organizations assess. with the organizational members, must assess an organization s environment in order to plan a large-system intervention. Internal-Design Components In addition to the organization- environment