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Managing Interdependencies in Complex Organizations

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Managing Interdependencies in Complex Organizations

  1. 1. Managing Interdependenciesin ComplexOrganizations <br />Nicolay Worren<br />Presented at the Organization Design Forum Conference 2006<br />
  2. 2. Plan for the session <br /><ul><li>Background and definition
  3. 3. Identifying interdependencies
  4. 4. Configuring interdependencies
  5. 5. Creating alignment across dimensions of interdependencies
  6. 6. Summary</li></li></ul><li>We focus on interdependencies between sub-units as they carry out work processes <br />Department <br />A<br />Department <br />B<br />Interdependency exists when actions in one unit engaged in its process(es) affect important outcomes in another unit or process – for example, the quality of deliverables, delivery time, customer satisfaction, employee satisfaction, costs, and so on (and vice versa). <br />
  7. 7. The concept of interdependency according to Thompson (1967)<br />Design<br />Engineering<br />Production<br />Department <br />A<br />Department <br />B<br />Department <br />C<br />Sequential interdependence<br />Computer system<br />Nurse<br />Anesthesist<br />Surgeon<br />Pooled interdependence<br />Reciprocal interdependence<br /> Limitations<br />Difficult to operationalize<br />Aggregates qualitatively different interdependencies into one construct<br />
  8. 8. The concept of interdependency in business process re-engineering, Six Sigma, and Lean<br />Activity 1<br />Activity 3<br />Department A<br />Activity 2<br />Department B<br /> Limitations<br />Only considers one dimension: Activities <br />Simplistic ”design rules” to resolve coordination problems<br />
  9. 9. We differentiate between five different interdependency dimensions <br />
  10. 10. Unpredictable interdependencies that may critically affect outcomes<br />Unpredictable interdependencies, but not critically affecting outcomes<br />HIGH<br />Uncertainty<br />Predictable interdependencies affecting less important outcomes<br />Predictable interdependencies that critically affect outcomes<br />LOW<br />HIGH<br />LOW<br />Criticality<br />The degree of interdependency with any other sub-unit relates to uncertainty and criticality <br /><ul><li>Different coordination mechanisms can be employed to deal with uncertain and critical interdependencies. </li></li></ul><li>Interdependencies can be manipulated <br /><ul><li>The organization design literature has had a tendency to view interdependencies as static.
  11. 11. However, dependencies may be added, removed, or changed (strengthened /weakened). </li></ul>What is an appropriate interdependency depends on the function that a unit is supposed to perform.<br />A<br />B<br />A<br />B<br />Add<br />A<br />B<br />A<br />B<br />Remove<br />Change <br />degree<br />A<br />B<br />A<br />B<br />
  12. 12. Plan for the session <br /><ul><li>Background and definition
  13. 13. Identifying interdependencies
  14. 14. Configuring interdependencies
  15. 15. Creating alignment across dimensions of interdependencies
  16. 16. Summary</li></li></ul><li>In order to manage interdependencies, one must be able to identify them<br /><ul><li>We have proposed a set of ”diagnostic questions” covering the five dimensions.
  17. 17. These can be used to uncover existing interdependencies. </li></li></ul><li>To improve interdependencies, one must first understand the function of the sub-unit <br /><ul><li>The existing interdependencies may not be the appropriate ones given the sub-unit’s function (purpose) or the organizational-level strategies and goals. </li></ul>”Acquire and manage customers”<br />”Deliver projects on time and cost”<br />”Provide reliable IT services”<br />FUNCTION<br />Sales<br />Engineering<br />IT<br />?<br />?<br />DESIGN PARAMETER<br />From a normative point of view, i.e., from a design perspective, one can ask what Interdependencies should exist – or be strengthened or reduced - to improve the unit’s ability to fulfill its function. <br />
  18. 18. Plan for the session <br /><ul><li>Background and definition
  19. 19. Identifying interdependencies
  20. 20. Configuring interdependencies
  21. 21. Creating alignment across dimensions of interdependencies
  22. 22. Summary</li></li></ul><li>We propose a set of ”design rules” to configure interdependencies <br /><ul><li>Design rules are action-oriented ”hypotheses about the future” of the form: </li></ul>“In situation S, to achieve objective O, perform action A”<br /><ul><li>Design rules can be tested by implementing changes and observing the effects.
  23. 23. We have identified 17 generic design rules based on best practice and academic research. </li></ul>Based on: Romme, A. G. L (2003). Making a difference: Organization as design. Organization Science, 14, 5, 558-573. <br />
  24. 24. Example case: The Engineering department of ProTech <br />Dependency dimension: <br />Products sold at fixed price yet customized to customer requirements. <br />Activities<br />Governance<br />Social network<br />Resources<br />Management team<br />Commitments<br />Sales<br />Cost estimates and sales order <br />Customer<br />Contract and specifications<br />Finished product<br />Engineering<br />
  25. 25. How design rules can be applied to address issues <br />
  26. 26. Example case: The Engineering department of ProTech <br />Dependency dimension: <br />Products sold at fixed price yet customized to customer requirements. <br />Activities<br />Governance<br />Social network<br />Resources<br />Management team<br />Commitments<br /><br />Sales and marketingstrategy<br /><br />Commitment re. delivery date<br />Sales<br />Cost estimates and sales order <br />Customer<br />Contract and specifications<br /><br /><br />Confirmationof capacity<br />Finished product<br />Engineering<br />
  27. 27. Plan for the session <br /><ul><li>Background and definition
  28. 28. Identifying interdependencies
  29. 29. Configuring interdependencies
  30. 30. Creating alignment across dimensions of interdependencies
  31. 31. Summary</li></li></ul><li>Alignment may be operationalized as correspondence across interdependency dimensions<br />High degree of alignment: <br />Governance<br />Social network<br />=<br />…and the IT department enjoys strong and reliable informal ties to the members of this council<br />The governance model for IT defines the IT council as the main decision making body<br />Low degree of alignment: <br />Governance<br />Social network<br />≠<br />The governance model for IT defines the IT council as the main decision making body<br />…but the IT department is more strongly tied to the CFO, who is strongly influencing decisions. <br />
  32. 32. In modern organizations, there is rising complexity, and, we would argue, an increased risk of misalignment<br />Before:<br />Now:<br />The more dynamic and distributed manner of working has lead to increasing flexibility and speed.<br />But it has also led to a sharp rise in the number of interfaces that any one person must handle, and the risk of serious misalignment / lack of coherency. <br />For example, organizations may be centralized on one dimension and decentralized on another. <br />
  33. 33. Plan for the session <br /><ul><li>Background and definition
  34. 34. Identifying interdependencies
  35. 35. Configuring interdependencies
  36. 36. Creating alignment across dimensions of interdependencies
  37. 37. Summary</li></li></ul><li>Key messages<br />Organizational functioning is dependent upon effective sub-unit interdependencies<br />Managing interdependencies, however, is becoming an increasingly complex task<br />There are multiple types of interdependencies, and they should all be identified during organization design processes<br />Generic ”design rules” may help in configuring and improving interdependencies<br />
  38. 38. Interested in organization design? Follow my blog<br />www.nicolayworren.com<br />Subscribe by pressing this button!<br />

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