Lateral Approaches to Organizationceoprogram.usc.edu/20150622-mohrman.pdf · Lateral Approaches to Organization Design June 22, 2015 ... Marketing Director of Manufacturing ... scope

© 2015 University of Southern California

Lateral Approaches toOrganization Design

June 22, 2015Webinar with

Sue MohrmanCenter for Effective OrganizationsUniversity of Southern California

Marshall School of Business(213) 740‐9814

[email protected]://ceo.usc.edu


• Widely known for organization design and effectiveness and large‐scale change research

• The design of knowledge‐based firms • Knowledge creating systems• Sustainability and how to design

complex collaborations to foster it• Examination of the research process

itself• How to create academic/company

partnerships to yield useful knowledge

Some of Sue’s focuses

Dr. Susan A. Mohrman

CEO Senior Research Scientist

© 2015 University of Southern California (3)

Complexity and Organization Design

•Core Trade‐offs of Organization Design•Evolving Design Complexity•Lateral Approaches


Star Model

Adapted from: Galbraith (1994)

Strategy

Rewards

People Structure

ManagementProcesses

WorkProcesses/Capabilities

(4)


Hierarchical, Functional Organization

(5)

BenefitsSpecialist

ManagerSoftwareEngineer

ManagerHardwareEngineer

QASpecialist

TestingManager

ManagerTech

Support

MfgQA

Manager

MfgTestingManager

CompManager

Comp.Specialist

Comp.Analyst

Comp &BenefitsManager

etc. etc. etc. etc. etc.

etc. etc.

etc. etc.

General Manager

Director ofMarketing

Director ofManufacturing

AdministrativeDirector

ManagerProduct

Marketing

ManagerMarketingSupport

ManagerMfg

Engineer

ManagerOperations

Manager HR

FinanceManager

ManagerInfo

Systems

QASpecialist

QASpecialist

TrainingSpecialist

QAManager

Director ofEngineering


Organizational “Glue” – andself-containment to reduce complexity

Adapted from J. Galbraith.

Self-containedUnits

Hierarchical ControlGoals, Plans, and MetricsVertical Information SystemsStandard Processes

Cross-Unit Lateral Designs


Divisional Structure

SM35I (7)

Admin. Dir.Mkt. Dir. Mfg. Dir.

General ManagerDivision A

Eng. Dir.

Group V P

Mkt. Dir. Mfg. Dir.

General ManagerDivision B

Eng. Dir.

AdminV P


Generic Divisional Structure

CEO

General ManagerDivision B

The“Center”

General ManagerDivision A

What goes in the Center?

Function Head

Function Head

Function Head

Function Head

Function Head

Function Head

Function Head

Function Head

Function Head


The World is Not What It Was…

It was:

Stable Simple Domestic Focused on

performance

Now it’s:

Dynamic Complex Global Focused on

sustainability


Forces of Change

BenefitsSpecialist

ManagerSoftwareEngineer

ManagerHardwareEngineer

QASpecialist

TestingManager

ManagerTech

Support

MfgQA

Manager

MfgTesting

Manager

CompManager

Comp.Specialist

Comp.Analyst

Comp &BenefitsManager

etc. etc. etc. etc. etc.

etc. etc.

etc. etc.

General Manager

Director ofMarketing

Director ofManufacturing

AdministrativeDirector

ManagerProduct

Marketing

ManagerMarketingSupport

ManagerMfg

Engineer

ManagerOperations

Manager HR

FinanceManager

ManagerInfo

Systems

QASpecialist

QASpecialist

TrainingSpecialist

QAManager

Director ofEngineering

Introduction of new

dimensions of performance

Expansion of scale and

scope

Increased competition

Technology advances

Discontinuous change

Rate of changePerformance

pressures

Changing workforce

expectations


Managing Complexity – Core Challenge:

A functional organization is no longer adequate to handle complexity of size, diversity of product, customer, and geography; speed and change. Cross functional leadership and action capabilities need to be developed deeper in the organization:

• by building lateral structures across the functions, or

• by building self‐contained multi‐functional units.

(11)


Related Units—Opportunities for Leverage

Customers buy multiple products that cut across businesses

Products and services configurable into a system

Efficiency in administrative and back office functions

Common product or process technologies Common skill/competency requirements

Opportunities for leverageTension between self-contained

business units and leverage

(12)


• Functional/discipline knowledge across multiple business units

• Customer knowledge and opportunities across businesses

• Functions and customers across geographies• Product/Service processes and knowledge across geographies and customers

• Industry knowledge and opportunities across functions, geographies, product/services

Multiple Dimensions—examples


Self-Contained Business Units

(14)

Group GM

May seek out synergies across units, if in best interests of the involved divisions

Units optimize their own performance

Business Unit A

Business UnitB

Business UnitC

Functions,Custom Services,Product Teams




Group as System to be Optimized

(15)

Seeks out synergies in products, technologies and markets, if in best interests of group

Optimize group-level performance

Group GM

Business Unit A


Business UnitB


Business UnitC


Group GM

© 2015 University of Southern California (16)(16)

Lateral Approaches

LINE ORGANIZATION UNIT

MATRIX ORGANIZATION

MANAGEMENT POSITIONSDimension Champions, Project/Program Manager

FORMAL OVERLAY TEAMS

LATERAL INTEGRATING ROLESLiaison Roles, Mirror Organizations, Overlapping Membership

ELECTRONIC COORDINATIONProject-Ware, Group-Ware, CRM Systems, Social Media

BUILDING INFORMAL LATERAL FOUNDATIONPersonal Networks, Co-Location, Rotations, Interdepartmental Events, IT Connections

ORGANIZATIONAL PROCESSESStandard Processes, Goals, Measures, Plans & Reviews


Lateral Organization

(17)

Shared Services

Team

Executive Team

Councils Centers of Excellence

Business Unit 1Leadership Team

Process Team

TeamTeamTeam Team

Business Unit 2Leadership Team

Process Team

TeamTeamTeam Team

Team

Cross Unit Opportunity

Teams


All Designs are Trade-offs

(18)

The key ongoing trade-off decision:The advantages of speed, ownership, focus

and accountability that accrue toself‐contained units

The advantages of leverage and ease of cross organization coordination that come from sharing, integration, commonality,

lateral, and matrix relationships

‐ versus ‐


Types of Leverage

Resources

• Economies of scale• Doing it once• Focus• Sharing

Activities:Across products and services,

markets and functions

• Coordinated activities• Multiple applications

Expertise

• Embodied in “experts”

Knowledge andLearning

• Diffusion, dissemination• Encoding


Managing complexity effectively requires an

organization to be highly skilled at designing and

managing various approaches to the lateral organization


Lateral Councils

CEO

Region1

Region2

Business Unit 1

Business Unit 2 Finance Supply

Chain R&D

Healthy Foods Council

Healthy Foods Council: Develops a business plan and charters and manages projects that build a healthy foods business that will be integrated into the BU’s.


W O R K F L O W

Lateral Mechanisms in (Example from Large Pharma)

CompoundDiscovery

Clinical &Regulatory

Manufacturing& Distribution

Sales & MarketDevelopment

Marketing Strategy& Materials

CEO

Discovery Development Manufacturing Sales & Marketing Regions

Drug Discovery Teams

Development Teams

Market Development Leader Local Commercialization andMarket Delivery Teams

(22)

Therapy Area


Highly IntegratedSolutions Organization

Platform A

Platform B

Platform C

Customer A Solution

Customer BSolution

Customer C Solution

Self‐ContainedProduct Organization

Business Unit 1

‐ Engineering

‐ Operations

‐Marketing

Business Unit 2

‐ Engineering

‐ Operations

‐Marketing

Business Unit 3

‐ Engineering

‐ Operations

‐Marketing

The Convergence Transition


(Simplified) Domestic Aerospace and Defense Companywith International Sales

CEO

Division A Division B

Int’l Sales

Business Development

Engineering

Program 1

Operations

Int’l Sales


Engineering

Program 2

Operations

Int’l Sales


Engineering

Program 1

Operations

Int’l Sales


Engineering

Program 2

Operations


(Simplified) Aerospace and Defense Company with International Business Development and Operations

CEO

Division A Division B


Int’l Sales

Engineering

Program 1

Operations

InternationalOperations


Engineering

Program 2

Operations


Engineering

Program 1

Operations


Engineering

Program 2

Operations

Region 2

Program B1

SharedServices

Operations

Program B2

Program B2

Shared Services

Operations BusinessDevelop‐ment

Region 1

BusinessDevelop‐ment

Regional Operations Teams are matrixed to Programs for A2, B1 and B2Program 1 International Operations is solid line to Program 1

Program A2

Program A2


(Simplified) Regional Structure in Outsourcing Firm Providing Services to Government Customers

CEO

Region 1 Region 3Region 2

Contract 1

Contract 2

Contract 3

Contract 1

Contract 2

Contract 3

Contract 1

Contract 2

Contract 3

Contract 4

Key: Color shaded boxes = Service Lines


Con‐tract 1

Con‐tract 2

Con‐tract 3

Con‐tract 1

Con‐tract 2

Con‐tract 3

(Simplified) Structure Outsourcing Firm Providing Services to Governments and Private Sector Customers

Region 1 Region 3Region 2

Service Line A

Con‐tract 1

Con‐tract 2

Con‐tract 3

Con‐tract 4

Global Private Services Division

‐ Contract 1

‐ Contract 2

‐ Contract 3

CEO

‐ Contract 1

‐ Contract 2

‐ Contract 3

‐ Contract 1

‐ Contract 2

‐ Contract 3

Service Line B

Service Line C


Knowledge Forums for Advancing Organizational Capabilities

Forum Leader(e.g. for global

talent sourcing)

Region B

Recruitment

Global Business Unit 2

Recruitment

Region A

Recruitment

Centers of Excellence: collects information defines process based on best

practice sponsors tools and advancement shares lessons learned continual improvement spearheads talent rotation

Regions and Global Business Units: provide input based on local knowledge tailor test and learn

Forum Leader(e.g. for Service

Line 1)

Region AService Line 1

Private Services Division‐Service

Line 1

Region BService Line 1

Global Brand Management


Networks

Integrating Councils

Management TeamUnit 1

Integrating Teams

Team TeamTeam

Executive Team

Shared Services

Integrating Teams

Team TeamTeam

Management TeamUnit 2

Knowledge Network

Opportunity Team

(29)


Local Foods Network: A Web of Interdependent Connections

Key:Focal SystemOther Systems in IndustryIndustry SuppliersGeneral SuppliersCommunity StakeholdersIndustry AssociationsProfessional Associations


The Lateral Organization is Carefully Designed

Adapted from: Galbraith (1994)

Strategy

Rewards

People Structure

Management/GovernanceProcesses

WorkProcesses/Capabilities

Lateral Organization


Organizing for Innovation, Agility, and Sustainability

• Ambidextrous organizations• IT as a driver of innovation and design• Open innovation• The agile organization• Design for sustainability


Shared Services

CustomerFocused

Team/Business Unit(Multiple Product

Solutions)

CustomerFocused

Team/Business Unit(Multiple Product

Solutions)

Product Generation “Pulls” Product“Bundles” Products“Customizes” Products & Service“Provides” Services

Supply Chain

ProductLine 1

ProductEnhancement

Product Line 2 Team

NPDTeam

ProductEnhancement

Product Line 1 Team

NPDTeam

ProductLine 2

Back End Front End(IBM Simplified)

Shared Services


The “Ambidextrous” Organization:Designs in the Capacity for Two Different Kinds of Performance

Support TeamContracts

Project 1(Cross

Functional Team)

Project 2 (Cross

Functional Team)


General Manager

Engineering Manufac‐turing



New Market / New Venture


Open Innovation

Internal CompanyInnovation

Partnerships

Crowd Sourcing

KnowledgeLinkages

New Businesses

Partnerships

Licensing


Encyclopedia Britannica and Wikipedia

Encyclopedia Britannica

32 volume set of books 65,000 articles

Written in English by

4,000 scholars

3.5 millionarticles in the

English Wikipedia

Created and edited by

thousands of volunteers

Many in up to 269

languagesW

Wikipedia


Governance:

• Strategy• Purpose• Goals• Policies and guidelines of the organization• Legal and ethical requirements• Stakeholder expectations

Mechanisms purposefully designed to align behavior across the organization with:

In order to achieve valued outcomes.


Decision Making/Governance in a Multiple Dimensional Organization

Cannot rely on uni‐dimensional hierarchical authority Councils, Boards and other representative forums (with clear charters) must be established for strategically critical decisions that commit multiple units to integrated action

These decisions provide the framework for lateral processes and structures

The executive team is the highest level decision‐making forum and escalation path

Goals and objectives and rewards along all vertical and horizontal chains must be aligned with these decisions


Matrix Organizations Require Organizational Clarity – Structures and Processes

Common work and business processes Clear charters for lateral and vertical units Information sharing and information technology Matrix (multi‐cell) planning and goal‐setting (organizational and individual level)

Matrix (multi‐cell) decision griding Top management team providing integrated strategic leadership

Multiple input performance management systems


Ongoing TacticalCoordination

Performance Related Goals, Feedback

Learning and Improvement

Strategic EnvironmentalScanning and Planning

Content of Information

CommunicationMedia

AccountabilitiesWhen?

Design Communication Processes & Systems


Ongoing TacticalCoordination

Performance Related Goals, Feedback

Learning and Improvement

Strategic EnvironmentalScanning and Planning

Content of Information

CommunicationMedia

AccountabilitiesWhen?

Design Communication Processes & Systems -Examples

Customer Issues

CRM System Sales, Field Service Managers and Product Team Members

By end of work day

Any critical path delay

E-mail and Project Management Groupware

Functional team members

By Friday AM prior to end of work team meeting


Planning and Goal Setting

Strategic planning reflects all three dimensions

Product planning drives the technology roadmap—Working with customer plans, project commitments, and functional capital/investment capability

Functional plans constructed to execute product plans (by cell)

Iteration & commitment to contribution in each cell

Metrics determined Regular reviews and updates Rewards reflect multiple

dimensions

Function

Functional Plans to Support /Execute Product and CustomerStrategies

Pro

duct


Decision-Making Responsibility Chart

(43)

KEY: E=Escalation Path; D=Decision Authority; R=Recommend; I=Input;N=Need to Know; U=Uninvolved

DecisionsParties to Decisions


Matrix Organizations Require Individual Technical, Informal, and Interpersonal Competence

Social network linkages—Cross functional familiarity

Negotiation skills “Enlistment” skills Business model understanding and business

case formulation Collaboration skills Conflict resolution skills


Charter Format

(45)

Team mission:Team goals: Stakeholders: Customers: Managers: Co‐Performers:

Resources:Decision authority:Requirements for integrationwith other groups:Communication responsibilities:Escalation paths:Review processes:

Lateral Approaches to Organizationceoprogram.usc.edu/20150622-mohrman.pdf · Lateral Approaches to Organization Design June 22, 2015 ... Marketing Director of Manufacturing ... scope

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