The Beginning of Organizational Design

In the 1970s, there began to be an understanding that the creation of organizations is really all about Design. And yet, a discipline of organizational design had never evolved with its own methods. At the same time, organizations were changing, adapting to new environment, that of the globalized world. Customers began to become the focus of organizations, as was innovation. Organizations had gotten so strong, idividuals were finding it hard to fit into them. Into this steps Jay Galbraith and begins to create a methodology of organizational design.

There are three main design problems in the design of organizations: figuring out the design of the organization; figuring out how you get there (how you make the organization); and figuring out what principle or purpose is going to tell if the organization is successful. In this, it is almost like the creation of an art: what do you do? How do you do it? And what's the purpose?

Gilbraith said that design is fundamentally about strategy and making strategic choices. An organization needs to find coherence between three big things: the purpose of the organization, the mode of the organization, and the people within an organization. This coherence needs to be maintained over time; it is the primary thing to ensure success. He then set about to create a method of doing just this.

His method is this:

• Strategy. Identify a domain. What are the boundaries of your organization? What products and services are you going to offer? What customers or clients are you going to serve? What technology are you going to use? Where is the work going to be located?

  Strategy also involves setting objectives and goals. How will the organization relate to others? Identify objectives (implicit or explicit), then translate those into aspirational goals. Then translate those into operational goals.

• Choose a Mode of Organizing. Analyze the work that needs to be done and get it down to reasonable parts. Then divide up the work and coordinate it.
• Choose Policies to Integrate People. Select the people to work with. Design the tasks themselves, then design a reward system for completing those tasks.

There is a loose correlation between this process and what we think of as the design process. Deeply, there are the same sorts of design problems in designing organizations as there are in designing "posters and toasters."

Originally posted on Thursday, March 3, 2005