Organizational Design →
- 11 Jul 2012
- Research & Ideas
Book Excerpt: ’The Future of Boards’
In an excerpt from The Future of Boards, Professor Jay Lorsch discusses why directors are newly questioning their roles. Closed for comment; 0 Comments.
- 11 Jul 2012
- Research & Ideas
The Future of Boards
In The Future of Boards: Meeting the Governance Challenges of the Twenty-First Century, Professor Jay Lorsch brings together experts to examine the state of boards today, what lies ahead, and what needs to change. Open for comment; 0 Comments.
- 08 Jun 2012
- Working Paper Summaries
Location Choices Under Strategic Interactions
How do firms decide their location when expanding geographically? This paper explores how strategic interaction among competitors affects firms' geographic expansion across time and markets. HBS professor Juan Alcacer builds a model in which two firms that differ in their capabilities enter sequentially into two markets with different potentials for profit. The model is solved using game theory under three learning scenarios that capture the ability of a firm to transfer its capabilities across markets: no learning, local learning, and global learning. Three equilibrium strategies emerge: accommodate, marginalize, and collocate. Alcacer identifies how these strategies are more or less likely to emerge depending on three parameters: initial relative firm capabilities, relative market profitability, and learning rates. For managers, the paper illustrates different ways that firms can use location choices across time and geographic markets as a tool to enhance or preserve their competitive position within an industry. Key concepts include: Strategic interaction affects how firms locate. It is crucial to look beyond location traits and firm traits to consider the complex and critical influence of strategic interaction. The lens of strategic interaction helps explain not only one location decision at a point in time, but also a set of location decisions across time. A firm's operations abroad are an important source of sustainable competitive advantage in oligopolistic competition. This paper also provides a theoretical framework for understanding the mechanisms and constraints emerging from competition in product markets that regulate the number of contacts between firms across markets. Closed for comment; 0 Comments.
- 18 May 2012
- Working Paper Summaries
Organization Design for Distributed Innovation
MIT professor Eric von Hippel first coined the term "distributed innovation" to describe a system in which innovation emanates not only from the manufacturer of a product but from many sources including users and rivals. Over the years, systems of distributed innovation—so-called business ecosystems—have become increasingly prevalent in many industries. These entities generally encompass numerous corporations, individuals, and communities that might be individually autonomous but related through their connection with an underlying, evolving technical system. In this paper, prepared for the 1st Organizational Design Conference, held at Harvard Business School in August 2012, HBS professor Carliss Baldwin examines four central themes: 1) Distributed innovation as the unintended consequence of modularity; 2) The advantage of business ecosystems for creative problem-solving; 3) Organizational design of business ecosystems; and 4) Competition and technological innovation in business ecosystems. Overall, Baldwin argues that the potential benefits of distributed innovation must be recognized, and the field of organization design must broaden its traditional focus on the individual firm to encompass this compelling new approach for creating value. Key concepts include: In the future, the key problem for organization design will be the management of distributed innovation in dynamic systems. Specifically, how should diverse entities be integrated into a coherent network that generates goods in the present and new designs for the future? Organization designers must think about how to distribute property rights, people, and activities across numerous self-governing enterprises in ways that are advantageous for the group as well as for the designer's own firm or community. Many creative problem-solvers will not (or simply cannot) work effectively under standard employment or supply contracts. That is why distributed innovation in a business ecosystem is such a desirable organizational form. The rise of modular systems occurred hand-in-hand with the upsurge of ever-cheaper information technology in the second half of the 20th century. Distributed innovation was an unintended consequence of modularity. Closed for comment; 0 Comments.
- 10 May 2012
- Working Paper Summaries
The Flattened Firm—Not as Advertised
For decades, management consultants and the popular business press have urged large firms to flatten their hierarchies. Flattening (or delayering, as it is also known) typically refers to the elimination of layers in a firm's organizational hierarchy, and the broadening of managers' spans of control. While flattening is said to reduce costs, its alleged benefits flow primarily from changes in internal governance: by pushing decisions downward, firms not only enhance customer and market responsiveness, but also improve accountability and morale. But has flattening actually delivered on its promise and pushed decisions down to lower-level managers? In this paper, Julie Wulf shows that flattening actually can lead to exactly the opposite effects from what it promises to do. Wulf used a large-scale panel data set of reporting relationships, job descriptions, and compensation structures in a sample of over 300 large U.S. firms over roughly a 15-year period. This historical data analysis was complemented with exploratory interviews with executives (what CEOs say) and analysis of data on executive time use (what CEOs do). Results suggest that flattening transferred some decision rights from lower-level division managers to functional managers at the top. Flattening is also associated with increased CEO involvement with direct reports—the second level of top management—suggesting a more hands-on CEO at the pinnacle of the hierarchy. In sum, flattening at the top is a complex phenomenon that in the end looks more like centralization. Yet it is crucial to consider different types of decisions and activities and how they vary by level in the hierarchy. Key concepts include: Firms may flatten structure to delegate decisions, but doing so can lead to unintended consequences for other aspects of internal governance. For instance, a manager may flatten structure to push decisions down and then hire and develop division managers suited to "being the boss." If flattening actually pushes decisions up, division managers are now out of sync with the organization: They don't have autonomy to make decisions and there is a mismatch between managerial talent and decision rights. A change in structure has implications not only for who makes decisions, but also for how decisions are made. Flatter structures involve different roles for the CEO and the senior team. Closed for comment; 0 Comments.
- 16 Apr 2012
- Research & Ideas
The Inner Workings of Corporate Headquarters
Analyzing the e-mails of some 30,000 workers, Professor Toby E. Stuart and colleague Adam M. Kleinbaum dissected the communication networks of HQ staffers at a large, multidivisional company to get a better understanding of what a corporate headquarters does, and why it does it. Closed for comment; 0 Comments.
- 12 Mar 2012
- Research & Ideas
Crowded at the Top: The Rise of the Functional Manager
It's not lonely at the top anymore—today's CEO has an average of 10 direct reports, according to new research by Julie M. Wulf, Maria Guadalupe, and Hongyi Li. Thank a dramatic increase in the number of "functional" managers for crowding in the C-suite. Key concepts include: The number of managers reporting directly to the CEO has doubled, from an average of 5 direct reports in 1986 to an average of 10 today. In 2008, companies averaged 2.9 general managers, compared with 1.6 in 1986, according to data from several surveys. The average number of functional managers reporting directly to the CEO increased much more dramatically, from 3.1 in the late 1980s to 6.7 in 2008. Two main factors have driven the C-suite sea change: an overall increase in IT investments and an overall decrease in firm diversification. As hierarchical flattening occurs, companies are pushing some decisions toward the top, casting doubt on the common idea that firms flatten in order to push ideas down the organization. Closed for comment; 0 Comments.
- 17 Feb 2012
- Working Paper Summaries
Breaking Them In or Revealing Their Best? Reframing Socialization around Newcomer Self-Expression
How can organizations build strong, sustainable employment relationships from the very start? To date, the socialization literature has focused on transmitting and maintaining culture so that new employees accept the organizational values and behavioral norms. Many organizations require newcomers to wear standard wardrobes, forbid personal possessions, follow detailed verbal scripts, and enforce appropriate displays of emotion all designed to hinder individuality. In two studies described in this paper, the authors found that organizational and employee outcomes were better when socialization tactics encouraged authentic self-expression of newcomers' personal identities and signature strengths. Organizational socialization is optimized when organizations start by recognizing and highlighting newcomers' unique identities at the very beginning of the employment relationship, when identity negotiation is a critical concern for both parties. Key concepts include: Given the appropriate encouragement, newcomers can frame their new role and the necessary tasks as opportunities to use their personal strengths, thereby engaging with the work in a more personally fulfilling and productive manner. Both organizations and their members benefit when the concepts of newcomer authenticity and self-expression are integrated into socialization processes. There are surprisingly large and valuable changes in employees' quality and retention when organizations make relatively small investments in socialization practices that focus on newcomers' personal identities. Perhaps the best way to develop organizational commitment is for the organization to commit to each of its individuals by highlighting and encouraging the daily use of their unique strengths. Closed for comment; 0 Comments.
- 08 Feb 2012
- Working Paper Summaries
Team Scaffolds: How Minimal In-Group Structures Support Fast-Paced Teaming
It is increasingly necessary for 24/7 shift operations to include some component of team-based work. But how can organizations support such work among constantly changing groups of people in a setting where stable teams are not feasible? This research investigates an organizational structure the authors call team scaffolds: a role set with collective responsibility for accomplishing interdependent tasks. Studying the implementation of team scaffolding in a high-stakes setting, a city hospital emergency room, the authors observed that workers readily affiliated with the temporary teams—even without ongoing relationships—and worked together intensely during the short duration of these groupings, even developing a competitive dynamic with other team scaffolds. The role sets established job placeholders in an interdependent group so that people starting up a shift could take their places in the set and immediately understand the interdependence and accountability they shared with others. Overall, this design improved the ability and motivation of clinicians to engage in teaming. Key concepts include: Team scaffolds, as team shells that can be instantly populated with transitory teams, is an organizational structure that may have broad applicability for supporting teams of people who work intense shifts together in virtual or actual settings. Implementing the team scaffolding organizational design in a city hospital triggered significant changes in teaming networks and behaviors in ways that improved operational performance. With team scaffolds the hospital supported teaming among people who were often strangers and among people who might work together intensely for six hours and then not again for a month. In the team scaffold, people starting a shift would come in and occupy their place in the role set. Closed for comment; 0 Comments.
- 27 Jan 2012
- Working Paper Summaries
Discretion Within the Constraints of Opportunity: Gender Homophily and Structure in a Formal Organization
Research has demonstrated that people associate most with others who are similar to themselves, including others of the same sex. What are the implications of such patterns for organizations? This study, written by Adam M. Kleinbaum, Toby E. Stuart, and Michael L. Tushman, offers evidence of how and by whom formal lateral structures serve to link together an otherwise siloed organization. Analyzing millions of e-mail interactions among tens of thousands of employees of a single large firm, the researchers find that it is women more than men who tend to bridge formal structural boundaries in organizations. Thus women play a potentially valuable role in creating ties throughout an otherwise siloed multidivisional corporation. Despite the influence of a firm's formal organizational structure, people often have plenty of discretion to exercise choice. Same-sex interaction results from discretionary choice within the boundaries of the firm's opportunity structure. These results suggest (but do not prove) that same-sex interaction especially by woman can help to span formal organizational boundaries that are otherwise difficult to traverse. The findings raise questions for future research about whether conventional wisdoms regarding gender differences in social network structure remain accurate in current-day organizations. Key concepts include: There are significant differences in how gender interacts with organizational and geographic boundaries to influence individuals' tendency to communicate with members of their same sex. In the large company under study, men engage in same-sex interaction within the opportunity structure created by organizational structure, while women tend to connect with other women who are outside their business units and offices. It is business unit and office boundaries that most strongly influence the opportunity set of potential interaction partners for organizational actors. One of the conventional wisdoms is that same-sex interaction among marginalized people tends to reinforce the stratification of power in organizations. But these findings suggest that communication among women could serve to reinforce, not undermine, their positions in the organization. Closed for comment; 0 Comments.
- 25 Jan 2012
- Working Paper Summaries
Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management
The size of a CEO's executive team has increased dramatically in recent decades, but little has been known about its composition. Using a rich dataset of US firms from 1986 to 2006, this paper documents the dramatic increase in the number of functional managers in the executive team. The size of the team in these firms doubled over the time period from five to 10 positions, with approximately three-fourths of the increase attributable to functional managers (such as Chief Financial Officer, Chief Marketing Officer, and so on) rather than general managers. The paper explores the drivers of these changes. Findings are critical for practitioners, and specifically CEOs, as they structure their executive teams and more generally as they make decisions to implement or execute strategy. Key concepts include: Standard classifications of firms as being either "centralized" or "decentralized" are too simple to accurately represent the organizational changes firms undergo at the top level. Evidence suggests that firms are doing both. General managers of business units perform more activities as they move closer to the CEO, which is reflected in higher pay and a higher fraction of firm-performance based pay—consistent with decentralization or delegation to general managers. Yet, as shown in this paper, there are also more functional managers in the executive team coordinating across business units and performing some activities of the general manager's job, which is reflected in lower pay for general managers—consistent with centralization of certain functional activities within headquarters. In addition, CEOs seem to be more involved in internal operations in firms with broader spans of control—again a form of centralization. CEOs should design the structure of their top teams based on firm scope and the opportunities for synergies, while recognizing the distinction between different types of functions and the importance of the nature of the information that is required to perform different activities. Closed for comment; 0 Comments.
- 09 Jan 2012
- Research & Ideas
Location, Location, Location: The Strategy of Place
Business success in one geographic location doesn't necessarily follow a company to a new setting. Professor Juan Alcácer discusses the importance of taking a long-term strategic view. Key concepts include: Many companies think of geographic strategy as a short-term checkers match rather than as a long-term chess game. Establishing new locations is resource intensive, so a wrong decision can sap the energy out of an organization and cause it to lose focus. Open for comment; 0 Comments.
- 17 Nov 2011
- Sharpening Your Skills
Sharpening Your Skills: Organizational Design
In this collection from our archives, Harvard Business School faculty discuss specific challenges that can be solved with the right organizational design. Closed for comment; 0 Comments.
- 28 Sep 2011
- Research & Ideas
The Profit Power of Corporate Culture
In the new book The Culture Cycle, Professor Emeritus James L. Heskett demonstrates that developing the right corporate culture helps companies be more profitable and provides sustainable competitive advantage. Open for comment; 0 Comments.
- 08 Sep 2011
- What Do You Think?
What’s Apple’s Biggest Challenge: Replacing Steve or Wall Street?
Summing Up: Steve Jobs' influence on Apple is pervasive--maybe too much so. Jim Heskett's readers think Apple faces an almost impossible task in replacing the visionary founder. Closed for comment; 0 Comments.
- 04 Aug 2011
- Working Paper Summaries
A Dynamic Perspective on Ambidexterity: Structural Differentiation and Boundary Activities
Firms renew themselves by exploring new business models even as they exploit existing ones. But to conduct "explore and exploit" simultaneously, organizations must reconcile associated internal tensions and conflicting demands. Sebastian Raisch and Michael L. Tushman explore the shifting nature of differentiation and integration in organizations attempting to explore and exploit. Key concepts include: Whereas exploration is related to flexibility, decentralization, and loose cultures, exploitation is associated with efficiency, centralization, and tight cultures. Organizational ambidexterity is a firm's ability to simultaneously exploit and explore with equal dexterity. The paper updates the organizational ambidexterity concept by considering the underexplored roles of time, paradox, and locus. Based on a longitudinal data set of six business initiatives, the researchers find that organizations engage in a dynamic process of managing antagonistic boundary activities in order to explore and exploit. The locus of integration shifts from the corporate team to the business unit level when the new initiative gains economic and cognitive legitimacy. Closed for comment; 0 Comments.
- 08 Jul 2011
- Working Paper Summaries
Delegation in Multi-Establishment Firms: Adaptation vs. Coordination in I.T. Purchasing Authority
Scholars have intensely studied the similarities and differences between organizations that are decentralized in their decision making versus those favoring more command-and-control central authority. What leads to a firm following a decentralized approach, and can that approach be predicted? Professor Kristina McElheran advances previous, largely theoretical, research on this subject to explore in the real world the economic determinants affecting how IT purchasing authority in 3,000 multi-establishment companies was allocated between central headquarters and outlying establishments. Key concepts include: Theoretically, organizations are expected to delegate authority when local choices are most important to the overall value of the firm, when local information advantages are significant, or when the cost of processing firm-wide information at the center grows too great. Centralization is predicted when the value of firm-wide coordination dominates these adaptation and information-processing concerns. The research confirmed most of those assumptions, but surprisingly, and contrary to leading models, found that the larger the size of the firm the less likely it was to delegate IT purchasing authority. Contrary evidence was also found in firms that produce a great variety of products and in units that operate outside the mainstream of the parent. These findings provide some of the first empirical evidence supporting prominent team theory models of organizational design, where demands for adaptation and coordination conflict within the organization and determine decision rights based on their relative importance as well as the information-processing and communication costs within the firm. Closed for comment; 0 Comments.
- 03 May 2011
- Working Paper Summaries
How Do Risk Managers Become Influential? A Field Study of Toolmaking and Expertise in Two Financial Institutions
Most organizations have technical experts on staff—accountants, finance professionals, internal auditors, risk managers-but not all experts are listened to at higher levels. To understand how expert influence on strategic thinking can be increased, Matthew Hall, Anette Mikes, and Yuval Millo followed the organizational transformation of risk experts in two large UK banks. One transformation was successful, the other not. Are your experts merely "box-tickers," or are they influential "frame-makers"? Key concepts include: In the first bank, the transformation of the role of experts was a movement from tacit knowledge, communicable person-to-person, to tools-mediated, highly communicable knowledge that was evident from a variety of organizational documents, practices, and technologies, and embedded in the organization's decision-making processes. These transformed experts, called frame-makers, avoided detaching themselves completely from the resulting knowledge and maintained a high degree of personal involvement in producing analysis and interpretation while participating in executive decision-making. While toolmakers may be successful in becoming frame-makers they might also fall into one of three less influential roles: box-ticker, disconnected technician, or ad hoc advisor. The second bank saw a struggle between conflicting risk management worldviews, which ultimately divided the risk function, and prevented the risk managers from reaching the influential role of frame-makers. Closed for comment; 0 Comments.
- 21 Jan 2011
- Working Paper Summaries
Learning from Customers in Outsourcing: Individual and Organizational Effects
In farming out work to an external service provider, companies often count on volume-based learning--the idea that outsourced workers will build experience and improve their productivity if there is a large volume of work for them to do, and that the bigger the volume, the more productive and efficient they'll eventually become. However, there are several factors that challenge that education process. This paper explores whether and how repetition can breed competence in a business setting, using data from a provider of outsourced radiological services. Research was conducted by Harvard Business School professor Robert S. Huckman, Jonathan R. Clark (HBS PhD 2010) of Pennsylvania State University, and Bradley R. Staats (HBS MBA 2002, DBA 2009) of the University of North Carolina at Chapel Hill. Key concepts include: In addition to technical aspects of the task, volume-based learning depends on the interpersonal interactions between the individual completing the task and the customer. The rate at which a worker learns depends independently on the customer, knowledge domain, and technology within which the worker accumulates volume-based experience. Workers learn faster from completing an individual task for a specific customer than they do from completing multiple tasks for multiple customers. Spreading a worker's experience over multiple customers may hinder the learning process, particularly with respect to the needs of specific customers. Closed for comment; 0 Comments.
Book Excerpt: ‘Talk, Inc.’
In their book Talk, Inc. Boris Groysberg and Michael Slind show how several global companies are adapting the principles of face-to-face conversation to improve companywide corporate communication. Closed for comment; 0 Comments.