Managing Interdependencies in Complex Organizations
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The document discusses the management of interdependencies in complex organizations, specifically focusing on the relationships between sub-units and how their actions impact one another. It emphasizes the importance of identifying and configuring interdependencies to enhance organizational effectiveness and proposes diagnostic questions and design rules to facilitate this process. The document highlights the increasing complexity of interdependencies and the necessity for alignment across various dimensions to prevent misalignment in dynamic organizational structures.
Managing Interdependencies in Complex Organizations
- 1. Managing Interdependenciesin ComplexOrganizations Nicolay WorrenPresented at the Organization Design Forum Conference 2006
- 2. Plan for the session Background and definition
- 5. Creating alignment across dimensions of interdependencies
- 6. SummaryWe focus on interdependencies between sub-units as they carry out work processes Department ADepartment BInterdependency exists when actions in one unit engaged in its process(es) affect important outcomes in another unit or process – for example, the quality of deliverables, delivery time, customer satisfaction, employee satisfaction, costs, and so on (and vice versa).
- 7. The concept of interdependency according to Thompson (1967)DesignEngineeringProductionDepartment ADepartment BDepartment CSequential interdependenceComputer systemNurseAnesthesistSurgeonPooled interdependenceReciprocal interdependence LimitationsDifficult to operationalizeAggregates qualitatively different interdependencies into one construct
- 8. The concept of interdependency in business process re-engineering, Six Sigma, and LeanActivity 1Activity 3Department AActivity 2Department B LimitationsOnly considers one dimension: Activities Simplistic ”design rules” to resolve coordination problems
- 9. We differentiate between five different interdependency dimensions
- 10. Unpredictable interdependencies that may critically affect outcomesUnpredictable interdependencies, but not critically affecting outcomesHIGHUncertaintyPredictable interdependencies affecting less important outcomesPredictable interdependencies that critically affect outcomesLOWHIGHLOWCriticalityThe degree of interdependency with any other sub-unit relates to uncertainty and criticality Different coordination mechanisms can be employed to deal with uncertain and critical interdependencies. Interdependencies can be manipulated The organization design literature has had a tendency to view interdependencies as static.
- 11. However, dependencies may be added, removed, or changed (strengthened /weakened). What is an appropriate interdependency depends on the function that a unit is supposed to perform.ABABAddABABRemoveChange degreeABAB
- 12. Plan for the session Background and definition
- 15. Creating alignment across dimensions of interdependencies
- 16. SummaryIn order to manage interdependencies, one must be able to identify themWe have proposed a set of ”diagnostic questions” covering the five dimensions.
- 17. These can be used to uncover existing interdependencies. To improve interdependencies, one must first understand the function of the sub-unit The existing interdependencies may not be the appropriate ones given the sub-unit’s function (purpose) or the organizational-level strategies and goals. ”Acquire and manage customers””Deliver projects on time and cost””Provide reliable IT services”FUNCTIONSalesEngineeringIT??DESIGN PARAMETERFrom a normative point of view, i.e., from a design perspective, one can ask what Interdependencies should exist – or be strengthened or reduced - to improve the unit’s ability to fulfill its function.
- 18. Plan for the session Background and definition
- 21. Creating alignment across dimensions of interdependencies
- 22. SummaryWe propose a set of ”design rules” to configure interdependencies Design rules are action-oriented ”hypotheses about the future” of the form: “In situation S, to achieve objective O, perform action A”Design rules can be tested by implementing changes and observing the effects.
- 23. We have identified 17 generic design rules based on best practice and academic research. Based on: Romme, A. G. L (2003). Making a difference: Organization as design. Organization Science, 14, 5, 558-573.
- 24. Example case: The Engineering department of ProTech Dependency dimension: Products sold at fixed price yet customized to customer requirements. ActivitiesGovernanceSocial networkResourcesManagement teamCommitmentsSalesCost estimates and sales order CustomerContract and specificationsFinished productEngineering
- 25. How design rules can be applied to address issues
- 26. Example case: The Engineering department of ProTech Dependency dimension: Products sold at fixed price yet customized to customer requirements. ActivitiesGovernanceSocial networkResourcesManagement teamCommitmentsSales and marketingstrategyCommitment re. delivery dateSalesCost estimates and sales order CustomerContract and specificationsConfirmationof capacityFinished productEngineering
- 27. Plan for the session Background and definition
- 30. Creating alignment across dimensions of interdependencies
- 31. SummaryAlignment may be operationalized as correspondence across interdependency dimensionsHigh degree of alignment: GovernanceSocial network=…and the IT department enjoys strong and reliable informal ties to the members of this councilThe governance model for IT defines the IT council as the main decision making bodyLow degree of alignment: GovernanceSocial network≠The governance model for IT defines the IT council as the main decision making body…but the IT department is more strongly tied to the CFO, who is strongly influencing decisions.
- 32. In modern organizations, there is rising complexity, and, we would argue, an increased risk of misalignmentBefore:Now:The more dynamic and distributed manner of working has lead to increasing flexibility and speed.But it has also led to a sharp rise in the number of interfaces that any one person must handle, and the risk of serious misalignment / lack of coherency. For example, organizations may be centralized on one dimension and decentralized on another.
- 33. Plan for the session Background and definition
- 36. Creating alignment across dimensions of interdependencies
- 37. SummaryKey messagesOrganizational functioning is dependent upon effective sub-unit interdependenciesManaging interdependencies, however, is becoming an increasingly complex taskThere are multiple types of interdependencies, and they should all be identified during organization design processesGeneric ”design rules” may help in configuring and improving interdependencies
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