leading & managing in complex organizations “organizational design” day 1 – afternoon...
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Leading & Managing inComplex Organizations
“Organizational Design”
Day 1 – Afternoon Session
Michael J. Deegan, M.D., D.M.
Learning Objectives
Describe the purpose of an organization, its major components, and the contribution each makes to organizational effectiveness.
Explain how an organization’s age, size, technical systems, power structure and environment influence its design & operation.
Appreciate how innovation & disruptive business models may influence the design of future organizations.
“The Organizational Skeleton”
PURPOSE & GENERAL DESIGN CONCEPTS
“ An organization’s formal structurescreate the playing field and rules forall activities that take place in theoverarching system.”
*[Heifetz, Adaptive Leadership, pg. 54]
Strategy(Direction)
People(Skills & Mindsets)
Rewards(Motivation)
Processes(Information Flow)
Structure (Authority / Decision- Making)
GalbraithDesign Domains
Galbraith JR: Designing Organizations; Jossey-Bass. 2002
- Specialization- Shape- Power Distribution- Departments
Organizational Archetypes
Functional Product Customer – Market Process Geographic Matrix Network Combinations
Work Coordination Mechanisms*
Mutual Adjustment
Direct Supervision
Standardization of Work Processes “ “ “ Outputs “ “ Worker Skills
after Mintzberg
Mutual Adjustment
M
A
OO
Operator 1 Operator 2
Manager
Analyst
Direct Supervision
M
A
O O
Standardization
M
A
O O
Input Skills
Specified Training
Work Processes
Specified Steps
Outputs
Specified Features
POWER SHIFT –Manager → Analyst
Increasing Work Complexity
MutualAdjustment
Direct Supervision
·Span of control·Chain of command
Standardization
· Processes · Outputs · Skills
Fayol Weber Taylor
Work Standardization Framework
Highly Standardized
LittleStandardization
Craft
Routine
Non-Routine
Engineering
LO
WH
IGH
Wo
rk A
nal
ysis
Work Variety
LOW HIGH
CarpenterGeneral Manager
University Faculty StrategicPlanning
Tax Accounting
IT SystemDevelopment
Bank Cashier
Call Center staff
Adapted from Cichocki & Irwin, Organizational Design, 2011.
MA?
RN?
Physician?
Coordinating Mechanisms
Bu
reau
crat
izat
ion
→
[ Env
ironm
enta
l Sta
bilit
y →
]
Decentralization →[ Environmental Complexity → ]
DirectSupervision
StandardizeWork Processes
Standardize Outputs
Standardize Skills
MutualAdjustment
?
Environmental Stability – Complexity Framework
Simple Complex
Complexity
Moderate to High Uncertainty
HighUncertainty
LowUncertainty
Low to Moderate Uncertainty
Un
sta
ble
Sta
bleS
tab
ility
Adapted from Cichocki & Irwin, Organizational Design, 2011.
Contextual Factors that Influence Organizational Design *
Age and Size
Technical System(s)
Environmental Factors
Power Relationships
*Mintzberg, Structure in Fives
Contextual Factors: Age & Size
• The older the organization the more formal its behavior• Structure often reflects age when the industry was created• The larger an organization the more elaborate its structure• The larger the organization the larger the average size of its units• The larger an organization the more formalized its behavior
*Mintzberg, Structure in Fives
Contextual Factors: Technical Systems
• ↑ technical system requirements → formal operations → ↑ bureaucracy in operating core
• sophisticated technical system → elaborate staff with increased decentralization to technostructure
• operating core automation → converts bureaucratic structure into organic one
*Mintzberg, Structure in Fives
Contextual Factors: Environment
• dynamic environment → organic structure• complex environment → decentralized structure or design• diverse markets → split units• hostile environment → centralize administrative functions• disparate environment → decentralize selectively to serve
*Mintzberg, Structure in Fives
Contextual Factors: Power
• ↑ external control → centralize, formalize structure
• ↑ member power needs → excess centralization
• fashion favors structure of the day - even if inappropriate
*Mintzberg, Structure in Fives
STRUCTURALALTERNATIVES
Strategic Apex
Technostructure Support StaffMiddle Line
Operating Core
Generic Mintzberg Model
Key Elements of Organizational Structure
Key Part of Organization
Primary Work Coordinating Mechanism
Centralization – Decentralization of Power - Authority
Strategic Apex
Technostructure Support StaffMiddle Line
Operating Core
Generic Mintzberg Model
Where the work of producing an organization’s products or services is performed
New layer(s) of managersproviding guidance between apex and operating core
Technical professional staff focused on work process design & standardization
CEO & executive team- strategy, financing, external relations
Operational support functions
Mintzberg’s Five Structural Options
∙ Simple Structure
∙ Machine Bureaucracy
∙ Professional Bureaucracy
∙ Divisional Form
∙ Adhocracy
Simple Structure
APEX
Operating Core
Support Staff
Informal – Organic - Dynamic
Solo Physician Office
Simple Structure
Primary Coordinating Mechanism: Direct Supervision
Key Part of Organization: Strategic Apex
Main Design Features: Centralization Dynamic organic structure
Contextual Elements: Small Young Simple dynamic environment Little or no technostructure
Simple Structure*
“The simple structure is characterized, above all,by what is not elaborated. Typically, it has no technostructure, few support staff, a loosedivision of labor, and a small managerial hierarchy.Little of its behavior is formalized and it makesminimal use of planning and training. It is, above all, organic.” “Coordination in the simple structure is effected largely by direct supervision. Specifically, powerover all important decisions tends to be centralizedin the owner - manager.”
*Mintzberg, Structure in Fives, pg. 157.
Machine Bureaucracy
AutomobileManufacturing
The Machine Bureaucracy
Primary Coordinating Mechanism: Standardized Work Processes
Key Part of Organization: Technostructure
Main Design Features: Formalized behavior Vertical and Horizontal job specialization Functional groupings Large operating unit size Vertical centralization and limited horizontal decentralization
Contextual Elements: Old, large Regulating technical systems Simple, stable environment External regulation and controls
Professional Bureaucracy
Higher EducationHealth Care Delivery
The Professional Bureaucracy
Prime Coordinating Mechanism: Standardization of Skills [internal vs. external]
Key Part of Organization: Operating Core
Main Design Features: Training [medical school, residency; allied health professional training] Horizontal job specialization Vertical and Horizontal Decentralization
Contextual Elements: Complex, stable environment – true today? Non-regulating technical systems – true today?
Operating Core-Care delivery systems &
processesPhysicians, nurses,
others
MiddleManagementTechnostructure
Finance
Informationsystems
Quality - Safety
Board of Trustees
MedicalStaff
Organization
-Majority independent, not hospital employed-Number from a few dozen to > 1,000 → “a thousand points of veto”-Multiple specialties & support needs-3 to 4 generations of practitioners-Medical education across US & world-Voluntary & Employed physicians-Contractual relationships
Design of a US Acute Care Hospital
“C”Suite Support staffBusiness systems
Strategic Apex
Technostructure
Support StaffMiddle Line
Operating Core
Generic Mintzberg Model
Pull ToStandardize
Pull ToBalkanize
Pull ToCentralize
Pull ToConsolidate
Pull ToProfessionalize
Competing Interests Within an Organization
Mintzberg’s Five Organizational Structures*
Structural Configuration
Prime Coordinating Mechanism
Key Part of Organization
Type of Decentralization
Simple Structure
Direct Supervision
Strategic Apex Vertical & Horizontal Centralization
Machine bureaucracy
Work ProcessStandardization
Technostructure Limited Horizontal Decentralization
Professional bureaucracy
Worker SkillsStandardization
Operating Core Vertical & Horizontal Decentralization
Divisional Form
OutputStandardization
Middle Line Limited Vertical Decentralization
Adhocracy Mutual Adjustment
Support Staff Selective Decentralization
NEWER BUSINESS MODELS
Business Model Typology*
Solution Shop
Value-Added Process Business
Facilitated Network Business
*Christensen, The Innovators Prescription, McGraw Hill, 2009
Solution Shop
∙ Organizations designed to identify [diagnose] and recommend solutions to unusual or unique challenges [problems]
∙ Deliver value to customers using expertise resident in their expert staff – most problems unique and require customized solutions
∙ Examples: consulting firms, advertising agencies, R & D firms, legal firms, general hospitals, specialty physician practices
Value Added Process Business∙ Transforms resource inputs – people, materials, energy, equipment, information, capital – into outputs of higher value
∙ Work is often repetitive and the ability to deliver value rests in the work processes, staff, equipment and other operating functionality
∙ Examples: restaurants, auto manufacturing, smart phones – many medical events or procedures are value-adding process activities [cataract surgery, joint replacement surgery, minute clinics]
Facilitated Network Business
∙ Organizations that operate systems in which customers buy and sell and deliver and receive things from other participants
∙ The networked users are an integral part of the product and contribute to its overall value
∙ Examples: commercial banking, casinos, online investment brokers, Amazon & E-bay Sermo, PatientsLikeMe, disease management networks, Optum are healthcare examples
“The General Hospital is not a viablebusiness model. In the absence of an array of cross-subsidies, restraints oncompetition, and philanthropic lifesupport, most would collapse.” [pg.420]*
“Hospitals suffer from extraordinarily highcomplexity-driven overheads as theyattempt to manage the myriad patient pathways that snake through their facilities.”
*Christiansen CM: The Innovator’s prescription: McGraw Hill, 2009.
Disruptions Within & Across Business Model Type *
Network facilitatorValue-adding ProcessSolution Shop
Dis
rupti
on w
ithin
abu
sine
ss m
odel
type
Dis
rupti
on th
at c
hang
es
busi
ness
mod
el ty
pe
BCGBain CapitalBloomberg
ToyotaWalmartTargetCanon
SkypeElectronicclearing networks
FordKodakTurboTax
eBayGoogle
AmazonGeek Squad
*Christensen CM: The Innovators Prescription, pg. 27
Map of Common Medical Conditions*
Trea
tmen
t E
ffic
acy
Understanding Disease CausationIntuitive Empirical Precise
Migraine
Depression
IBDMS
AAAAppendicitis
Asthma
Prostate Cancer
Strep Throat
Fractures
MI
CVA
Pulmonary Embolism
Intu
itiv
eE
mp
iric
alP
reci
se
* adapted from Christensen, The Innovators Prescription, McGraw Hill, 2009
Type of Medical Practice Required to Diagnose & Treat a Variety of Chronic Conditions
Intuitive: lack of clarity requires multi-disciplinary solution shop
• Systemic lupus• Parkinson’s disease• Fibromyalgia• Bipolar disorder• Infertility• Crohn’s disease• Epilepsy
Rules-Based: single physician can diagnose & treat using evidence-base-based rules
• Type II Diabetes• GERD• Hepatitis C• Heart Failure• Hyperlipidemia• Hypertension• Ischemic heart disease
Disrupting the Business Model of a Physician’s Practice*
Hand Off Hand Off
PCP
NP
Rules-based Precision MedicineFee-for-outcome profit formula
Chronic disease managementFee-for-membership profit formula
PCP
Nurse
Networks
Intuitive medicine practiceFee-for-service profit formula
PCP
Specialist
Wellness Examinations
*Christensen, The Innovators Prescription, McGraw Hill, 2009
Primary Care Physician Practice
Sophisticated Technology that Simplifies
Low cost InnovativeBusiness models
EconomicallyCoherent Value Network
Regulations &Standards that Facilitate Change
Elements of Disruptive Innovation
Christiansen CM: The Innovators Prescription, McGraw Hill, 2009.
Scientific &
Technologic Progress
Intuitive Medicine:
Resource regulation
Empirical Medicine:
Process regulation
Precision Medicine:
Outcome regulation
Time
Com
plex
ity o
f Dx
& R
x
Unpredictable, iterative
Straight-forward
Matching Regulation [ & Reimbursement?] with the Changing Nature of Medical Practice
Adapted from Christiansen CM: The Innovators Prescription, McGraw Hill, 2009.
← Watson
“One of Thomas Kuhn’s most prominentconclusions was that when a newparadigm was emerging from the work of scientists, the experts in the old paradigm, remained convinced, even totheir dying days, the new paradigm cannot possibly be true. The reason is the old paradigm has sopowerfully shaped their beliefs…their mindsliterally cannot see the phenomena leadingto the new paradigm.” [pg. 412]*
Christiansen CM: The Innovator’s Dilemma; McGraw Hill, 2009.