Designing Organizations That are Built to Change

 

January 2010

Copyright © Massachusetts Institute of Technology, 2006. 

All rights reserved.

Many executives talk about the need for greater flexibility and adaptablity from their companies. But the truth is that most businesses have organized themselves in ways that inherently discourage change.

As the pace of globalization and social change quickens, executives are correctly calling for greater agility, flexibility and innovation from their companies. Largely ignored in these pleas, however, is the simple fact that organizations have been designed to seek sustainable competitive advantages and stability. Indeed, buried deep in the managerial psyche, and bolstered by decades of theory and practice, is the assumption that stability is not only desirable and effective but also attainable.

In their classic book, The Social Psychology of Organizations, Daniel Katz and Robert L. Kahn note, “One can define the core problem of any social system as reducing the variability and instability of human actions to uniform and dependable patterns.” The popularity of process improvement efforts, from total quality management to Six Sigma programs, provides ample evidence of the consuming desire for stability and predictability in today’s organizations. In fact, those are the very qualities rewarded by the financial markets.

It is not surprising, then, that most large-scale change efforts fail to meet their expectations. A major problem is that many of those efforts have focused primarily on developing more effective change models or seeking the latest approach for overcoming resistance to change. But even the most advanced change models will stumble when they face organizational designs and management practices that are inherently anti-change.

The truth is that the effectiveness of change efforts is largely determined by organizational design, or how a company’s structure, processes, reward systems and other features are orchestrated over time to support one another as well as the company’s strategic intent, identity and capabilities. In a world that is perpetually changing, an organization’s design must support the idea that the implementation and re-implementation of a strategy is a continuous process. However, a number of traditional organizational design features tend to discourage — and not encourage — change. Thus, to transform themselves into organizations that are “built to change,” companies need to rethink a number of these basic design assumptions.

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