The Importance of Design

The Importance of Design

It is a cliché to say that organizations are faced with an unprecedented array of challenges. It is perhaps less obvious to note that the most urgent and pervasive among these challenges can only be addressed by the continual and deliberate orches- tration of organization design on an ongoing basis. Design drives the way strategies are formulated or formed, and determines whether and how they can be implemented. It is the vehicle by which firms recognize the need for adaptation, determine its course, and put change into effect. It is the framework that enables and allows collective be- havior to occur.

The importance of design is illustrated by Bartlett and Ghoshal’s (2002, p. 4) retrospection on their experiences with transnational compa- nies: “Throughout our five-year study, we were continually impressed by the fact that most man- agers of worldwide companies recognized what they had to do to enhance their global competi- tiveness. The challenge was how to develop the organizational capability to do it.”

The same point is underscored by a recent McKinsey & Company study (Bryan & Joyce, 2007) that showed that, by the mid-1990s, the competitive advantages and subsequent downfalls of firms such as ABB, Citigroup, IBM, P&G, and Xerox were, in large part, attributable to organi- zation design failures, such as the weaknesses of reporting and authority structures, an inability to build and leverage capabilities across products or geographies, and a failure to adapt organization- ally to trends such as globalization. Bryan and Joyce concluded that organization design “is the key to unlocking the opportunities of the 21st century” (2007, p. 16).

The importance of design (and its neglect) is also shown by reflecting on how we, as scholars, approach and develop new ideas. Some theorists of strategy insist that firms should develop and

leverage unique, inimitable, and valuable re- sources (e.g., Wernerfelt, 1984). Others maintain that firms need to cumulatively develop their ca- pabilities in ways that maintain their uniqueness and competitive advantage (Teece, Pisano, & Shuen, 1997). But only appropriate organizational designs can configure resources to achieve these things (Galbraith, 1995, 1999; Miller, 2003; Na- dler & Tushman, 2003). The importance of de- sign also undergirds discussions of innovation, often promoted as the central capacity of contem- porary organizations. If, as advocates of innova- tion suggest, particular innovations or adaptations are required in specific environments, then tai- lored organizational designs are needed to survive, support, and effect such change.

Yet, for the most part, recent organization scholarship has not spoken to these issues. More- over, whenever design is mentioned, it is typically in a highly specialized or abstract way. Some de- sign elements may be referenced, such as human resource practices or aspects of information sys- tems or structure, but they are disconnected from the full pattern—“configuration,” in our terms— of design. Similarly, discussion of strategic alliances may dwell on whether the form of alli- ance should be through shared equity or a fixed contract, but little is said about how to manage such relationships through information sharing, improving accountability and performance, and integrating human resource practices. In the rare instances where a broader view of design is em- braced, it tends to be highly abstract and simplis- tic—such as the M-form described by scholars of international diversification.

One striking indication of how attention has turned away from organization design is the dif- ference between two highly influential handbooks published four decades apart. March’s (1965) Handbook of Organizations had a clear interest in the internal management and organization of dif- ferent types of organizations. It included several chapters that dealt broadly with issues of manage- ment and organization; a primary emphasis of each of these chapters was the management of organizational design. In contrast, Clegg, Hardy, Lawrence, and Nord’s (2006) award-winning Handbook of Organization Studies takes much less

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