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Effectiveness Through Strategy And Organizational Design

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Effectiveness Through Strategy And Organizational Design

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Organization Design is a process for shaping the way organizations are structured and run.
It involves many different aspects of life at work, including team formations, shift patterns, lines of reporting, decision-making procedures, communication channels, and more.
Organization Design – and redesign – can help any type of organization to achieve its goals. Sometimes, a large-scale reorganization is necessary. At other points, more subtle shifts in structures and systems can ensure that an organization continues to thrive.

Organization Design is a process for shaping the way organizations are structured and run.
It involves many different aspects of life at work, including team formations, shift patterns, lines of reporting, decision-making procedures, communication channels, and more.
Organization Design – and redesign – can help any type of organization to achieve its goals. Sometimes, a large-scale reorganization is necessary. At other points, more subtle shifts in structures and systems can ensure that an organization continues to thrive.

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Effectiveness Through Strategy And Organizational Design

  1. 1. Effectiveness Through Strategy And Organizational Design Seta A. Wicaksana Founder and CEO www.humanikaconsulting.com and hipotest.co.id
  2. 2. Seta A. Wicaksana 0811 19 53 43 wicaksana@humanikaconsulting.com • Business Psychologist • Pendiri dan Direktur Humanika Consulting dan hipotest.com • Anggota Komite Nominasi dan Remunerasi Dewan Komisaris PT Askrindo • Sekretaris Prodi MM Program Pasca Sarjana Universitas Pancasila • Dosen Tetap dan Peneliti di Fakultas Psikologi Universitas Pancasila • Pembina Yayasan Humanika Edukasi Indonesia • Wakil Ketua Asosiasi Psikologi Forensik Indonesia wilayah DKI • Penulis Buku: Sobat Way (2016), Industri dan Organisasi: Pendekatan Integratif dalam menghadapi Perubahan (2020), Human Faktor Engineering: Integratif Desain Manusia dan Lingkungan Kerja (2021), Psikologi Industri dan Organisasi (2021), Psikologi Umum (2021), Manajemen Pengembangan Talenta (2021), PIODiagnostik: Pengukuran Psikologi di Lingkungan Kerja (2021), Transformasi Digital: Perspektif Organisasi, Talenta dan Budaya Organisasi (2021), Psikologi Pelayanan (2021) dan Psikologi Konsumen (2021). • Dosen Tidak Tetap di: Program Pasca Sarjana Ekonomi di Univ. Pancasila, STP TRISAKTI, Fakultas Psikologi Universitas Mercu Buana, STIKOM IMA • Certified of Assessor Talent Management • Certified of Human Resources as a Business Partner • Certified of Risk Professional • Certified of HR Audit • Ilmu Ekonomi dan Manajemen (MSDM) S3 Universitas Pancasila • Fakultas Psikologi S1 dan S2 Universitas Indonesia • Sekolah ikatan dinas Akademi Sandi Negara
  3. 3. Modules Organization And Changing The Organizations Effectiveness Through Strategy And Organizational Design
  4. 4. Organization and Changing
  5. 5. Organization Design • Organization Design is a process for shaping the way organizations are structured and run. • It involves many different aspects of life at work, including team formations, shift patterns, lines of reporting, decision-making procedures, communication channels, and more. • Organization Design – and redesign – can help any type of organization to achieve its goals. Sometimes, a large-scale reorganization is necessary. At other points, more subtle shifts in structures and systems can ensure that an organization continues to thrive.
  6. 6. The Impact of Organization Design Increased efficiency. Faster and more effective decision- making. Improved quality of goods and services. Higher profits. Better customer relations. Safer working conditions. A happier, healthier, and more motivated workforce. Greater preparedness for future challenges.
  7. 7. If there are flaws in its design, an organization can suffer serious problems • Ineffective problem-solving. • Wasted time. • Lack of coordination between different parts of the business. • Inconsistent quality of work. • Failures of legal compliance. • Reputational damage. • Low morale, leading to high staff turnover. • Missed targets and poor performance.
  8. 8. The Triggers and Impacts What Triggers Organizational Design? Changes in the Environment Launched a New Strategy Current Design Is Not Fit for Purpose 1. Consider The Impact 2. Create a Collaborative Plan of Action 3. Communicate and Provide Support
  9. 9. 1. Consider the Impact you'll need to consider the impact that a change in your organization's design will have by assessing it against a number of factors. These include: • Strategy. If your organization's strategy is built around innovation, a hierarchical structure may be a block. But, if your strategy is based on low-cost, high-volume delivery, then a rigid structure with tight controls may be the best fit. • Size. You could paralyze a small organization by creating too many specialized teams. Conversely, specialization in a larger organization can mean you benefit from economies of scales. Your organizational design may need to change, too, as your business grows. The Greiner Curve is a useful tool for recognizing growth milestones and understanding the sorts of changes that need to take place to ensure your organization continues to thrive. • Environment. If your market environment is unpredicatable or volatile, your organization needs to be flexible enough to react. However, elements of a more rigid, hierarchical structure may still be important to protect you against turbulence, and to ensure that key functions – such as compliance and financial accounting – are carried out accurately and on time. • Controls. Some activities need special controls (such as patient services in hospitals, money handling in banks, and maintenance in air transport), while others are more effective when there's a higher degree of flexibility. • Incentives. These should support any new organizational design. For example, if you want to grow by acquiring new customers, then you'll have to refocus the incentives that you offer to your sales team accordingly. If you don't, then that team may be working out of sync with everyone else.
  10. 10. 2. Create a Collaborative Plan of Action Once you've considered these and any other relevant factors, you'll likely have a suitable structure in mind. So, the next step is to ensure that you've selected the most appropriate options and to create an action plan to help you put the new design in place. There are a number of tools to help you to do this, such as SWOT and PEST analysis, using focus groups and surveys, internal audits, and collaborative process reviews. Doing this will also enable you to gain buy-in from people across the organization and ensure that it suits the purposes of both the organization and its employees.
  11. 11. 3. Communicate and Provide Support Good Organization Design involves not only changing the systems by which people work, but also supporting people to adapt successfully. For example, your analysis might persuade you to move to a matrix structure. But that won't succeed unless people get support to work outside their former departments. You'll need to ensure that communication is clear and effective, and that performance management approaches are relevant and fair. With your ideal design in mind as a map to follow, draw up a clear plan for the way it will work in the context of your organization. Be precise about roles and responsibilities and define exactly how your new systems and processes will operate. Then, organize your people to follow this new design. There may be changes in personnel and working locations. Make sure that everyone's practical needs are met, allowing them to perform their role in the organization. You'll also need to check that all the necessary support functions are in place, and that you have a plan for successfully managing change. Whatever model you're working to, ensure that the management structure is in place to launch the new design, and to support it in the long term. And keep returning to your reasons for changing. Ongoing analysis of performance measures and business-level results will show whether your new organization design is working, and alert you whenever further changes are required.
  12. 12. Tips THE NEW DESIGN WILL HAVE IMPLICATIONS FOR EVERY AREA OF THE BUSINESS. ENSURE THAT YOU TAKE INTO ACCOUNT THE IMPACT ON CUSTOMERS AND SUPPLIERS. CHECK THAT YOUR IT RESOURCES AND COMMUNICATION PROCESSES ARE FIT FOR PURPOSE. AND THINK WHAT IT WILL MEAN WHEN YOU'RE NEXT RECRUITING AND ONBOARDING NEW HIRES.
  13. 13. Key Points There are three key steps that can help you to implement a new organization design. These are: Considering the impact. Creating a collaborative plan of action. Communicating and providing support. Typically, there are three key triggers for Organization Design: a change in the environment, a change in strategy, or a current design that is no longer fit for purpose. Organization Design is a process for shaping the way your organization operates, to help you to pursue your strategies and meet your goals. It involves setting up structures and systems, as well as helping people to adapt to new ways of working.
  14. 14. The Organization
  15. 15. Dimensions of Organization Design Structural dimensions provide labels to describe the internal characteristics of an organization. They create a basis for measuring and comparing organizations. Contingency factors encompass larger elements that influence structural dimensions, including the organization’s size, technology, environment, culture, and goals. Contingency factors describe the organizational setting that influences and shapes the structural dimensions. Contingency factors can be confusing because they represent both the organization and the environment Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
  16. 16. Structural Dimensions Formalization pertains to the amount of written documentation in the organization. Documentation includes procedures, job descriptions, regulations, and policy manuals. These written documents describe behavior and activities. Formalization is often measured by simply counting the number of pages of documentation within the organization. Specialization is the degree to which organizational tasks are subdivided into separate jobs. If specialization is extensive, each employee performs only a narrow range of tasks. If specialization is low, employees perform a wide range of tasks in their jobs. Specialization is sometimes referred to as the division of labor. Hierarchy of authority describes who reports to whom and the span of control for each manager. The hierarchy is depicted by the vertical lines on an organization chart. The hierarchy is related to the span of control (the number of employees reporting to a supervisor). Centralization refers to the hierarchical level that has the authority to make decisions. When decision-making is kept at the top level, the organization is centralized. When decisions are delegated to lower organizational levels, it is decentralized. Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
  17. 17. Contingency Factors Size can be measured for the organization or specific components, such as a plant or division. Because organizations are social systems, size is typically measured by the number of employees. Organizational technology refers to the tools, techniques, and actions used to transform inputs into outputs. It concerns how the organization produces the products and services it provides for customers and includes such things as flexible manufacturing, advanced information systems, and the Internet. The environment includes all elements outside the boundary of the organization. The industry, government, customers, suppliers, and the financial community are key elements. The organization’s goals and strategy define the purpose and competitive techniques that set it apart from other organizations. Goals are often written down as an enduring statement of company intent. A strategy is a plan of action describing resource allocation and activities for dealing with the environment and reaching the organization’s goals. Goals and strategies define the scope of operations and the relationship with employees, customers, and competitors. An organization’s culture is the underlying set of key values, beliefs, understandings, and norms shared by employees. These underlying values and norms may pertain to ethical behavior, commitment to employees, efficiency, or customer service, and they provide the glue to hold organization members together. Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
  18. 18. Performance: Major Stakeholder Groups and What They Expect Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
  19. 19. Five Basic Parts of an Organization • Technical Core. The technical core includes people who do the basic work of the organization. This part actually produces the product and service outputs of the organization. • Technical Support. The technical support function helps the organization adapt to the environment. Technical support employees such as engineers, researchers, and information technology professionals scan the environment for problems, opportunities, and technological developments. • Administrative Support. The administrative support function is responsible for the smooth operation and upkeep of the organization, including its physical and human elements. This includes human resource activities such as recruiting and hiring, establishing compensation and benefits, and employee training and development, as well as maintenance activities such as cleaning of buildings and service and repair of machines. • Management. Management is a distinct function, responsible for directing and coordinating other parts of the organization. Top management provides direction, planning, strategy, goals, and policies for the entire organization or major divisions. Middle management is responsible for implementation and coordination at the departmental level. In traditional organizations, middle managers are responsible for mediating between top management and the technical core, such as implementing rules and passing information up and down the hierarchy
  20. 20. Organic and Mechanistic Designs
  21. 21. Mechanical vs Organic CHARACTERISTIC MECHANICAL STRUCTURE ORGANIC STRUCTURE Complexity High – with an emphasis on horizontal separation into functions, departments and divisions. Usually lower – less differentiation and functional separation. Formality High – lots of well- defined lines of control and responsibility. Lower – no real hierarchy, and less formal division of responsibilities. Participation Low – employees lower down the organization have little involvement in decision making. Higher – ower-level employees have more influence on decision makers. Communication Downward – information starts at the top and trickles down to employees. Lateral, upward and downward – information flows through the organization with fewer barriers.
  22. 22. Mintzberg’s Five Organization Types
  23. 23. Mintzberg’s Five Organization Types Entrepreneurial Structure. The organization with an entrepreneurial structure, is typically a new, small start-up company. It consists mainly of a top manager and workers in the technical core. The organization is managed and coordinated by direct supervision from the top rather than by middle managers or support departments. Top management is the key part of the structure. Few support staff are needed. The primary goal of the organization is to survive and become established in its industry. There is little formalization or specialization. This form is suited to a dynamic environment because the simplicity and flexibility enable it to maneuver quickly and compete successfully with larger, less adaptable organizations. Machine Bureaucracy. The machine bureaucracy is very large, typically mature, and the technical core is often oriented to mass production. It has fully elaborated technical and administrative departments, including engineers, market researchers, and financial analysts who scrutinize, routinize, and formalize work in the high-volume production center. The narrow middle management area reflects the tall hierarchy for control. This form reflects extensive formalization and specialization, with a primary goal of efficiency. This form is suited to a simple, stable environment. It would not do well in a dynamic environment because the bureaucracy is not adaptable. Professional Bureaucracy. The distinguishing feature of the professional bureaucracy is the size and power of the technical core, which is made up of highly skilled professionals, such as in hospitals, universities, law firms, and consulting firms. The technical support staff is small or nonexistent, because professionals make up the bulk of the organization. A large administrative support staff is needed to support the professionals and handle the organization’s routine administrative activities. The primary goals are quality and effectiveness, and although there is some specialization and formalization, professionals in the technical core have autonomy. Professional organizations typically provide services rather than tangible goods, and they exist in complex environments
  24. 24. Mintzberg’s Five Organization Types Diversified Form. Organizations with a diversified form are mature firms that are extremely large and are subdivided into product or market groups. There is a relatively small top management and a small technical support group for the top level. There is a larger administrative support staff to handle the paperwork to and from the divisions. In the exhibit, four independent divisions are shown below the headquarters, and the bulge across the middle indicates that middle management is key. Each of the independent divisions illustrates a machine bureaucracy with its own technical and administrative support staff, but on occasion, a division may resemble the entrepreneurial structure, professional bureaucracy, or even adhocracy. The diversified form helps to solve the problem of inflexibility experienced by a too- large machine bureaucracy by dividing it into smaller parts. Adhocracy. Adhocracy develops in a complex, rapidly changing environment. The design goal is frequent innovation and meeting continually changing needs, as in the aerospace and defense industries. Shows the various parts (middle management, technical, and administrative support) merged together into an amorphous mass in the middle. The main structure consists of many overlapping teams rather than a vertical hierarchy. Adhocracies are usually young or middle-aged and can grow quite large. The organization has professional employees, and the technical and administrative support staff are part of the mix of ongoing innovation teams and projects rather than being placed in separate departments. Employees are engaged in the administration and support of their own teams. The production center, illustrated with dashed lines, is separate from the fluid and innovative core above it. If standardized production is done within the organization, it would occur in this operating core quite separate from the ongoing innovation in the professional center above it. In the professional center, adhocracy is decentralized.
  25. 25. Two Organization Design Approaches
  26. 26. EFFICIENT PERFORMANCE VERSUS THE LEARNING ORGANIZATION From Vertical to Horizontal Structure From Routine Tasks to Empowered Roles From Formal Control Systems to Shared Information From Competitive to Collaborative Strategy From Rigid to Adaptive Culture
  27. 27. Effectiveness Through Strategy And Organizational Design
  28. 28. The role of strategic direction in organization design The primary responsibility of top management is to determine an organization’s purpose, goals → strategy → design → effectiveness. • Purpose: Each organization exists for a purpose, which is referred to as the overall goal or mission. The mission describes the organization’s vision, its shared values and beliefs, and its reason for existence. Sometimes it’s called the official goals. • Strategy is defined by the top management. They define the purpose and strategic direction. This purpose and strategic direction is translated into organizational design choices. The effectiveness of organizational efforts is evaluated. This is not always rational, but often a political process. • Design: reflects the way goals and strategies are implemented, it is the administration and execution of the strategic plan. It influences the prospects of success. The design also influences strategy, because strategy is often determined within the current structure, so the current design constraints put limits on goals and strategy. • Effectiveness of organizational efforts is evaluated: the extent to which the goals are realized. These performance measurements feed back into the internal environment. Past performance is assessed when setting new goals and strategic direction for the future.
  29. 29. How strategies affect organization design
  30. 30. Other Factors Affecting Organization Design A poor fit with the contingency factors can lead to decline or even the demise of the organization Organization design is a result of numerous contingencies Strategy Environment Size and life cycle Technology Culture Typologies are ideal types. In practice, it is messier: hybrid elements and different strategies are often pursued in different divisions or product lines.
  31. 31. Assessing organizational effectiveness • Organizational effectiveness • Broad concept • Evaluates the degree to which an organization realizes its goals • Efficiency • Limited concept • Number of resources used to produce a unit of output • Effectiveness • Evaluation of multiple (official and operative) goals • Overall effectiveness can be difficult to measure as organizations are large, diverse, and fragmented. • Managers determine what to measure (based on goals, strategy, and design)
  32. 32. An integrated effectiveness model Two value dimensions (focus and structure) Four approaches (open system, rational goals, internal process, human relations) Usefulness
  33. 33. An integrated effectiveness model All three of the approaches above have something to offer → competing values model balances a concern with different kinds of aspects of effectiveness rather than focusing on one approach. • Indicators: • Two value dimensions (focus and structure) • Focus • Internal focus: a management concern for the well-being and efficiency of employees. • External focus: an emphasis on well-being with respect to the environment. • Structure • Stability: a management value for efficiency and top-down control. • Flexibility: a management value for learning and change
  34. 34. An integrated effectiveness model Four approaches: • Open systems emphasis • Dominant value is a good relationship with the environment to acquire resources and grow. • Similar approach to the resource-based approach. • Rational goal emphasis • Similar to the goal-based approach. • Internal process emphasis • Organizations that are well established in the environment and only want to maintain their current position would reflect this emphasis. • Similar to the internal process approach, less concerned with human resources than with other internal processes that lead to efficiency. • Human relations emphasis • Management’s concern is for the development of human resources. • Employees are given opportunities for autonomy and development. • Emphasis is more concerned on employees than on the environment.
  35. 35. Four Approaches
  36. 36. An integrated effectiveness model • Usefulness: • It integrates diverse concepts of effectiveness into a single perspective, incorporating the ideas of output goals, resource acquisition, and human resource development as goals the organization tries to accomplish. • The model calls attention to effectiveness criteria as management values and shows how opposing values exist at the same time. Managers are understood to decide which values and goals will take priority in the organization. The four competing values exist simultaneously but not all will receive equal priority.
  37. 37. Learning and Giving for Better Indonesia www.humanikaconsulting.com

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