Week #4: Perspectives on Design from Strategy Scholars
Central to this article is the question: "How do environmental turbulence and complexity affect the appropriate formal design of organizations?" The authors claim that informal designs — networks for hierarchies, social relations for formalized coordination, and clustering around process or capability over functions, products, or regions — have had the spotlight due to technological change and globalization impacting how we work, the quickness of change, and increased competition. (They note that not all new forms of organizing is entirely new.) Unlike other studies, this one uses modeling (agent-based) to conduct analysis as opposed to empirical studies.
Design is considered to have two parts:
- an organizational archetype, and
- more granular elements that are common across archetypes
The design elements this study concerns itself with are:
- amount of information processing
- richness of information flows
- degree to which the incentive system rewards low-level managers for firmwide performance
I found this last design element the most interesting. It says how much “we’re in this together”.
In support of their modeling analysis, they make it a point to distinguish “careful observation” from “rigorous modeling”. This might relate to some of what I’ve gathered from other sources where empirical research is more grounded in what is rather than what could be. Their models don’t necessarily require there to be a firm with a certain set of characteristics, but the assumption is that it would be feasible for one to exist. This begs the question, what other benefits or drawbacks are there to modeling, especially when compared to empirical studies?
The authors have two questions guiding their hypotheses:
- How should managers design their firms for turbulent and complex environments?
- Are there any design elements that are appropriate in situations of great turbulence or complexity regardless of the archetype in which they are embedded?
I was a little confused by their use of binary decision-making, where they define a ‘choice configuration’. How can there be interdependence if all decisions are modeled as binary? In the same paragraph though it states that firms are “conceptualized as systems of interdependent choices”. I thought so too, but I don’t yet follow how this choice model allows for such connectedness.
What has motivated these researchers to focus on department heads? I think it might be that they are actually focused on unit autonomy and these department heads represent those units who can possess autonomy — or not, depending on the archetype. I say unit autonomy, but it was previous defined as both decision rights and financial or budgetary control (Weigelt & Miller, 2013). Is this financial aspect implied in autonomy or is it only in the decision-making capacity?
What structural design choices are these department heads making in a firm with only two departments?
I am also wondering why they choice two departments. Surely this does not lend itself to a complicated situation should there have been more departments. Was it simply a matter of computational power running their model? Can they discern a significant difference between the various archetypes with only two departments?
Looking at the archetypes on a scale of “department head power”, I began to wonder if organizational democracy implies autonomy. I arrived at the answer: no. Then, I wondered if you can have autonomy in organizational democracy. Maybe in a “think outside the box, but color inside the lines” kind of way? Maybe it’s autonomy at low-levels, where direction and empowerment is predetermined. I will have to keep my eyes open to this idea.
I was surprised to see how well the hierarchy performed, but even more surprised how well the centralized did:
both the lateral communication firm and centralized firm achieve the balance of speedy improvement and diverse search required to succeed in an environment that is both turbulent and complex. (p. 117)
It might have to do with my own sense of these terms — the centralized archetype further strips away all influence a department head has to those superior to them.
Lastly, I am having trouble understanding what is meant as part of their conclusion:
Third, we show that the challenging task of formal design becomes more manageable if one can identify constructs that mediate between environmental conditions and design choices. Improvement speed and search diversity serve as intermediate constructs in our context. (p. 119)
Does this suggest that formal design needs better understanding of fit between the firm and its environment, i.e., better or more application of contingency theory?
Archetypes
Liaison Archetype “introduces modest coordination: Before they take action, department heads meet in a coordinative session to discuss their plans.” (Sounds like a mechanism Galbraith described.)
Terminologies
As best I can describe, turbulence has to do with rate of environmental change (e.g., change in technology), while complexity has to do with the number of forms to consider (e.g., archetypes). Later on, they say "an environment is turbulent, dynamic, etc., if the mapping from firm actions to performance outcomes changes frequently, profoundly, and in ways that are difficult to predict.
Their use of the words speed and search are a bit more tricky. Perhaps speed is in information process between agents, but search less so. Search is often times used in "diversity of search".
In an exchange with my advisor, he noted:
You are thinking along the right lines about these concepts. Turbulence is definitely about change: the frequency and degree to which an environment undergoes change, which can make information quickly outdated/inaccurate. Complexity is has been described in various ways, but these authors tend to think of it in terms of interdependence. Perhaps a good way to think about it is that complexity relates to the number of elements that must be considered as well as the degree to which choices about those elements are interdependent. A complex environment entails more interdependent elements, which generally makes things harder.
(He attached the Imitation of Complex Strategies paper by Jan Rivkin, to further explain the idea of complexity in more detail.)
Neither here nor there: thoughts on academic writing
One thought occurs to me after having read this, my sixth or seventh academic paper. As a newbie, the language used in these papers is sometimes daunting. The length at which we go on describing something baffling. (I once read seven pages, only to turn to the eighth page to see a graph which was the first time I felt as though I understood.) Rife with nuance, clarity, and exactness, I appreciate the work, yet sometimes I find myself wishing for the HBR digest version. Then I am reminded of the many HBR articles that leave me disappointed. Much of what I read has me thinking, “yeah, of course” and wanting more. Perhaps there is something in between an academic journal publication and an HBR article. Writing that is a little more plain, but keeps the nuances, methodologies, and citations as it connects new research or thoughts with the on-going academic conversation.
References
Siggelkow, N. & Rivkin, J. (2005) Speed and Search: Designing Organizations for Turbulence and Complexity. Organization Science, Vol. 16, No. 2, pp. 101-122.
Weigelt, C., & Miller, D.J. (2013). Implications of internal organization structure for firm boundaries. Strategic Management Journal, 34, 1411-1434.