Rack BD — Organizational Design

TAOP Resources Library -- Aisle B (Theories)

Resources: Main Page | Research Methods (A) | Major Theories (B) | Issues and Contemporary Topics (C) | Professional Education (D)

Aisle B (Major Theories): Classical Theories (BA) | Org. Behavior – Individual (BB1) | Org. Behavior – Groups & Teams (BB2) | Org. Behavior – Systems & Culture (BB3) | Contingency Theories (BC) | Org. Design (BD) | Org. Development & Change (BG) | Human Relations Theories (BH) | Institution Theories (BI) | Leadership Theories (BL) | Modern Management Perspectives (BM) | Postmodern & Critical Theories (BQ)

Rack BK (Structures & Organizational Design): Job Design | Organizational Design | Control Structures

Jump to: Importance | Theories | Research Areas | TAOP Episodes | References

What is Organization Design Theory and Why is it Important?

Organization design is a theoretical perspective that overlaps with others (see organization development & change, Rack BG) but is distinctive in its own right. The field of organizational design encompasses the structures, processes, and systems that organizations utilize to achieve their goals and adapt to their environments. Theorizing in organizational design covers a broad array of important topics like innovation, enhancing performance, employee engagement, and overall organizational effectiveness. What should be emphasized is that despite the emphasis on understanding structures and other tangible artifacts of organization, this perspective does not ignore the human element. In fact, the design of the individual job and therefore conceptions of “fit” in an organization is also included in this perspective.

At its core, organizational design addresses the fundamental challenge of how to structure collective human effort effectively. Prominant design scholar Jay Galbraith (2014) calls this “a prescriptive body of knowledge,” as opposed to other subfields of organization theory that is descriptive, seeking to understanding the organization in its context. This makes organization design very relevant as it understands how choices in structures and processes influence every aspect of organizational life. For example, when an organization decides to use a matrix structure versus a traditional hierarchy, this shapes communication patterns, decision-making processes, innovation capacity, relationships between structures and outcomes, and the shaping of power relations (and resulting inequalities) within the organization.

Organizational design perspectives can also help address how organizations structure themselves (or are structured) to deal with external factors such as matters of complexity and the balancing of contradictory or competing demands. One can see this in the long-running shifts away from vertical integration where the supply chain of a firm is wholly owned by that firm (Coase, 1937) to the contemporary gig economy where the firm owns very little in assets and relies on individual contractors to provide their services (see Episode 40). There are benefits and challenges at each of this spectrum whereby the latter may be better for adaptation and innovation but greater vertical integration may avoid the pitfalls of external dependence for resources (Galbraith, 2014).

There is a maxim that says, “Every system is perfectly designed to get the results its gets.”1 So what are the options for organizing and what factors should be considered for weighing those options? That’s what this field is about.

1Attributed to several scholars although Arthur Jones is among the most credited for it.


Some Leading Design Theories & Concepts

Organizational design parallels the early movements of organization studies from classic management theory to the 1970s. From scientific management and administration theory (Rack BA) to the human relations movement (Rack BH) and contingency theory (Rack BC), structuring to satisfy the organizations’ purposes while accounting for and eventually promoting the needs of the individual members were part and parcel to the theoretical development. According to Galbraith (2014), in the 1970s there were two streams that emerged and diverged with respect to explaining the roles of structures and processes and its relationships with the organizations’ cultures and climates. These two streams are described below, followed by others that have emerged since.

Strategic Design. The first stream was more from the managerial perspective, represented by the work of Joan Woodward (see Episode 60) on various industrial organizational forms and Alfred Chandler (1974) on the emergence of middle management (see Episode 74). Woodward identified several forms of organizational structures common within particular industries due to the nature and character of the goods and services produced. For example, some industries were more successful employing product-based structures whereby the subdivisions within the firm were fully integrated toward the production of a particular product or assigned an encapsulated project, while others were task-oriented whereby subdivisions controlled all assets in a firm related to one function (e.g., human resources, budget, operations) with integration on an as-needed basis becoming important. This allowed for pooling of like resources. Likewise, Chandler found that differences in organizational structures emerged from different strategies including within an industry. A particularly noteworthy case was in his treatment of national expansion of railroads whereby some were more centrally managed while others were more decentralized. Books like Stanford (2015) provide a wide range of foundational and contemporary designs.

Sociotechnical Systems Theory. On the more processual side of things, this stream represents more of a more bottom-up perspective and is represented by the work of Eric Trist. In Episodes 34 and 114, we discussed the seminal work that brought about the theory — Trist and Bamforth’s (1951) study of a technological change introduced for coal-mining that failed due to its breaking apart of the social fabric. A related perspective is that of Alvin Gouldner, who is his (1974) study of gypsum mines, deduced how patterns of bureaucracy emerge as the result of top-down, bottom-up, and mutually agreed rules — with the latter being the most successful in terms of consistent application and acceptance by managers and workers alike (see Episode 78).

Job Design. A third stream revolves around the specifications for a single position — the tasks, responsibilities, and relationships associated with each job in the organization. One of the seminal works in this subfield is Hackman and Oldham (1975, see Episode 77) that identified five “core” job dimensions of skill variety, task variety, task significance, levels of autonomy, and levels of feedback.


Contemporary Research Areas

As organization design is more prescriptive than other theories, research is heavily focused on practical application of design strategies and choices. This is but a representative sample of the topics being studied, grouped into broad themes. Several of these themes are also covered in the “hot topics” section of this resource center (Aisle C). Additional suggestions welcome.

Organizational Learning and Adaptive Organizational Designs. A key area of research covers general adaptability of organization designs to be flexible and responsive to changing environments (see Rack CA). For example, how can scientific research teams be designed so to maintain robustness and adaptability in dynamic contexts (Wang & Rong, 2015)? Or how can hospital organizations be designed to foster learning cultures to enhance knowledge management and improve patient care (Lyman et al., 2019)? This area of research is increasingly relevant as organizations face uncertainties and must develop resilient structures that can withstand external shocks.

Designing to Leverage Digital Transformations and AI. Each new technology (especially potentially disruptive ones like AI) potentially brings with it some design challenges. As organizations increasingly adopt digital technologies (see Rack CD), research on their impacts on organizational designs has become prominent, such as studies into how artificial intelligence (AI) influences firm performance and the organizational structures that support AI-based transformation projects (Wamba-Taguimdje et al., 2020). Also, research on organizational agility emphasizes the need for designs that enable organizations to respond swiftly to market changes and disruptions, such as how an organization’s design can be used to mediate the negative impacts of innovation on performance (Ahmad, 2022).

Design Thinking and Innovation. Design thinking is related to organization design in that it is a cognitive skill under which solutions to design problems can be developed. Rooted in the works of Herbert Simon (1969) and then formalized by David Kelley, design thinking introduces a human-centered approach leveraging empathy, creativity, and experimentation to improve organizations (see Kelley, T. & Kelley, D., 2013). Research into the application of design thinking principles to organizational design has gained attention as a means to foster innovation. For example, Carlgren et al. (2016) highlights some benefits of design thinking as a human-centered approach to innovation, emphasizing the importance of understanding user needs in the design process.


114: Sociotechnical Systems — Trist & Bamforth (revisited)

With over 110 episodes in our catalogue, we decided it was time to take a step back and revisit one of our earlier episodes that continues to come up time and again. Episode 34, covering Trist & Bamforth’s study on the longwall method of coal-getting, was referenced in sixteen (16) episodes since its release. That is more than any other episode! This re-release includes a new supplement further the conversation to contemporary issues and a sidecast on the use of this study as a cautionary tale for professional education.
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105: Manifest & Latent Roles — Alvin Gouldner

Alvin Gouldner wrote the article, “Cosmopolitans and locals: Toward an analysis of latent social roles” in 1957 to propose that through the 1950s latent roles had been seriously overlooked by scholars. Manifest roles, described as those roles and role identities that are directly related to one’s defined position in the organizational structure, had been the sole focus. Latent roles comprised the complementary roles that members made salient but were not officially recognized. Instead, managers might dismiss such roles as “irrelevant, inappropriate, or illegitimate” to recognize formally despite them being essential in the organization’s social fabric
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85: Carnegie-Mellon Series #6 — Organizations

In this episode, we discuss the second edition of James March and Herbert Simon’s classic text ‘Organizations.’ In addition to the well-known concepts such as bounded rationality and satisficing, the book introduces an important critique of the mechanistic view that “classic” organization theory to that point approached organizations and its members. How do decisions get made? What causes individuals or join, stay in, or leave organizations? What about the causes and effects of conflict? We explore all this and more.
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83: Organizational Design — Jay Galbraith

We discuss several works by Jay Galbraith on the theory and practice of organizational design, which is about creating organizations to provide better outcomes and serve the organization’s purpose and strategy. This episode begins with a focus on one of Jay Galbraith’s earlier publications, an article titled, “Organizational Design: An Information Processing View” for designing organizations to make better decisions in times of high uncertainty, and then brings in his more recent works promoting his five-point “Star Model,” a design tool for use by managers.
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77: Job Design – Hackman & Oldham

We discuss a 1975 article by J. Richard Hackman and Greg R. Oldham in the Journal of Applied Psychology titled, “Development of the Job Diagnostic Survey.” The purpose of the instrument was to help managers increase the motivational potential of jobs. They developed the JDS through the studies of existing jobs to determine what makes a job motivating and also how to improve the motivating potential of jobs from how they are defined and described. It remains a seminal reading in job design today. With Special Guest Lisa Cohen from McGill University.
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76: Comparative Analysis of Organizations – Charles Perrow

We discuss a 1967 article from Charles Perrow, “A Framework for the Comparative Analysis of Organizations.” Perrow proposed a framework for comparing organizations, largely around “technology” which in contemporary times would be taken to mean the work to be performed. The framework allows analysis of the character of the work being done, nature of the raw material (e.g., tangible objects or intangible symbols), and associated task and social structures.
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74: Emergence of Middle Management — Alfred Chandler

Alfred Chandler’s award-winning book, “The Visible Hand: The Managerial Revolution in American Business” provides an excellent summary of the history of American commerce from the pre-industrial era to the mid-20th century, and how new technologies and a changing society led to the creation of the modern industrial enterprise. The “visible hand” refers to the transparency and prominence of this new class of manager who coordinated and controlled these growing enterprises,
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67: Professions & Professionalism — Andrew Abbott

The text for this episode is Andrew Abbott’s 1989 book The System of Professions: An Essay on the Division of Expert Labor. This book is a watershed in our understanding of professions and their work. While previous literature had a focus on distinctive occupational groups and their professionalization projects, Abbott invited us to think more systemically about the interdependencies and how professions compete with each other over “jurisdictions,” claims of ownership and responsibility over expert knowledge and its applications.
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57: Reward Systems – Steven Kerr

Why do organizations espouse one thing but do another? This is essentially what Steven Kerr asks in his popular 1975 article in the Academy of Management Journal, “On the Folly of Rewarding A, While Hoping for B,” on reward systems. Using examples ranging from politics and war to business and public sector settings, Kerr found a common pattern: that the organization’s goals are too often not supported by the things they actually reward and encourage.
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56: Cooperative Advantage – Charles Clinton Spaulding

In this episode, we acknowledge the extraordinary contributions of Charles Clinton Spaulding, an important management thought leader who, like many African-Americans prior to the U.S. civil rights movement, has been sadly overlooked in the management canon. In 1927, with the U.S. in recession, Spaulding wrote a reflection of his experiences as a business leader in the Pittsburgh Courier, a widely-read newspaper, hoping to help fellow African-American business leaders overcome the economic downturn.
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44: Transaction Costs and Boundaries of the Firm – Williamson and Malone

We explore an important reading that bridges organization theory with economics — Oliver E. Williamson’s article, “The Economics of Organization: The Transaction Cost Approach,” where he asserts that the assumption of firms operating on a profit motive has not helped organization theorists understand and explain the behaviors of firms. He thus argued that transactions, not the products or services the firm provides, is a better unit of analysis.
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41: Images of Organization – Gareth Morgan

We tackle Gareth Morgan’s classic book Images of Organization, originally published in 1986. This lengthy and detailed volume synthesizes an incredible range of organization theories and concepts over the previous century and presents them under the umbrella of eight distinct metaphors. Each metaphor represents a different way of understanding the existence and  dynamics of organizations, their members, and their interactions with the environment.
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24: Learning by Knowledge-Intensive Firms — Bill Starbuck

We discuss another of the classics from the Journal of Management Studies, a paper from 1992 by William Starbuck, entitled “Learning by knowledge-intensive firms”. This time, we are very happy to be joined by the author of the work, Professor William Starbuck, one of the leading experts in Organization Theory, whose research covers an incredible number of areas of expertise, as shown in his biography. This paper is the first to discuss knowledge intensive firms, concept based on the economists’ notions of capital and labour intensive firms, and which are defined as those firms where “knowledge has more importance than other inputs” (p.715).
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22: Human-Machine Reconfigurations – Lucy Suchman

We discuss Lucy Suchman’s book “Human-Machine Reconfigurations: Plans and Situated Action” that studied the interaction of humans with a state-of-art photocopier designed to be more user friendly and more helpful in solving user problems. Yet videos showed that people found it complicated and difficult. Suchman shows that these interaction problems are greatly due to the underpinning assumptions about users’ behavior, more specifically, due to the idea that humans’ actions are based on the following of plans, which she refutes.
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20: High Reliability in Practice – USN Rear Admiral Tom Mercer

Based around a classic work by Weick and Roberts (1993) on Collective Mind in Organizations – where the authors observed and analyzed the way people on the deck of an aircraft carrier function in a collective manner – this episode brings you a discussion of how concepts of High Reliability (see also Episode 11) flesh out in real life!
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18: Gig Economy, Labor Relations and Algorithmic Management

We discuss an article by Sarah O’Connor exploring the impact of gig economy and algorithmic management on the employees – what their experience is like, how their work is structured, and whether being a gig economy employee is everything it panned out to be. Gig economy, as well as its benefits and limitations, has been subject to much debate in social policy and labour relations.
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6: Bureaucracy – Max Weber

We discuss two chapters of Max Weber’s 1922 book Economy and Society. Weber was most interested in bureaucracy. He believed that bureaucratic coordination of activities is a hallmark of the modern and civilized society. This was not least because bureaucracies are organized according to rational principles, and rationality is an ongoing intellectual effort that is subject to education and discipline. In a bureaucratic organization offices are ranked in a hierarchical order and their operations are characterized by impersonal rules.
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Available Resource Pages

Rack BC — Contingency Theory

Curated list of resources regarding the major theories regarding the organizational context and how particular situations influence organizational structures, behaviors, and so on. Includes classic contingency theories and pragmatism.
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Rack BI — Institution Theory

Curated list of resources on theories related to strategic management, including competitive forces models, resource-based perspectives, and organizational strategies and strategic change
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Rack BL — Leadership Theories

Curated list of resources on theories related to leadership in organizations including classic trait theory, behavioral theories of leadership, and transactional / transformational leadership
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References

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Ahmad, A. (2022). Antecedents of technological innovation and further impact on organizational performance. Journal of Digitovation and Information System, 2(1), 1-16. https://doi.org/10.54433/jdiis.2022100009

Carlgren, L., Rauth, I., & Elmquist, M. (2016). Framing design thinking: the concept in idea and enactment. Creativity and Innovation Management, 25(1), 38-57. https://doi.org/10.1111/caim.12153

Coase, R. H. (1937). The nature of the firm. Economica, 4(16), 386-405.

Galbraith, J. R. (1973). Designing complex organizations. Boston: Addison-Wesley.

Galbraith, J. R. (1974). Organization design: An information processing view. Interfaces, 4(3), 28-36.

Galbraith, J. R. (1977). Organization design. Boston: Addison-Wesley.

Galbraith, J. R. (2014). Designing organizations: Strategy, structure, and process at the business unit and enterprise levels, 3rd ed. New York: Jossey-Bass.

Gouldner, A. (1954). Patterns of Industrial Bureaucracy. New York: Free Press.

Hackman, J. R., & Oldham, G. R. (1975). Development of the job diagnostic survey. Journal of Applied Psychology, 60(2), 159-170.

Kelley, T., Kelley, D. (2013). Creative confidence: Unleashing the Creative Potential Within Us All. United Kingdom: Crown.

Lyman, B., Jacobs, J., Hammond, E., & Gunn, M. (2019). Organizational learning in hospitals: a realist review. Journal of Advanced Nursing, 75(11), 2352-2377. https://doi.org/10.1111/jan.14091

Simon, H. A. (2019/1969). The Sciences of the Artificial, reissue of the third edition with a new introduction by John Laird. MIT press.

Wamba-Taguimdje, S., Wamba, S., Kamdjoug, J., & Wanko, C. (2020). Influence of artificial intelligence (AI) on firm performance: The business value of AI-based transformation projects. Business Process Management Journal, 26(7), 1893-1924. https://doi.org/10.1108/bpmj-10-2019-0411

Wang, S. and Rong, L. (2015). The organizational design method for scientific research team based on computational organization theory. https://doi.org/10.2991/jimet-15.2015.102

Woodward, J. (1980). Industrial organization: Theory and practice, 2nd ed. New York: Oxford University Press.


Jump to: Importance | Theories | Research Areas | TAOP Episodes | References

Rack BK (Structures & Organizational Design): Job Design | Organizational Design | Control Structures

Aisle B (Major Theories): Classical Theories (BA) | Org. Behavior – Individual (BB1) | Org. Behavior – Groups & Teams (BB2) | Org. Behavior – Systems & Culture (BB3) | Contingency Theories (BC) | Org. Design (BD) | Org. Development & Change (BG) | Human Relations Theories (BH) | Institution Theories (BI) | Leadership Theories (BL) | Modern Management Perspectives (BM) | Postmodern & Critical Theories (BQ)

Resources: Main Page | Research Methods (A) | Major Theories (B) | Issues and Contemporary Topics (C) | Professional Education (D)