FLESHING OUT THE SUPERSTRUCTURE

Presented by J. B. Nangpuhan II (MPA Student) for the class (Organizational Design) of Dr. S. K. Kim at Chonnam National University, South Korea. 2010

SUMMARY

KEY TERMS:

·         planning – 계획

·         liaison – 연락

“Two main groups of lateral linkages have received extensive treatment in the contemporary literature on organizational design. These are the planning and control systems that standardize outputs, and liaison devices that grease the wheels of mutual adjustment.”


I.        PLANNING AND CONTROL SYSTEMS

The purpose of a plan is to specify a desired output – a standard – at some future time. The purpose of control is to assess whether or not that standard has been achieved. Planning and control go together at which point to regulate outputs, and indirectly, behavior as well. Plans may specify (standardize) the quantity, quality, cost, and timing of outputs, as well as their specific characteristics (such as size and color). Planning includes the following:

·         Budgets – are plans that specify the costs of outputs for given periods of time;

·         Schedules – are plans that establish time frames for outputs;

·         Objectives – are plans that detail output quantities for given periods of time; and

·         Operating plans – are those that establish a variety of standards, generally the quantities and costs of outputs.

Typically, planning systems, as well as the reporting systems that feed back the control information, are designed in the technostructure, by analysts with titles such as Planner, Budget Analyst, Controller, MIS Analyst, Production Scheduler, and Quality Control Analyst.

Two kinds of planning and control systems as shown in Figure 4-1 are the following:

A.      Performance Control

Performance control focuses on the regulation of overall performance of a given unit and is concerned primarily with after-the-fact monitoring of results. This is a key design parameter in market-based structures. The performance of the unit in terms of objectives, budgets, operating plans, and various other kinds are measured and the results are fed back up the hierarchy by the MIS. This suggests two important points: 1.) Performance control systems map onto the bases for grouping in the organization. In this case, the planning system establishes output standards for each unit and the control system assesses whether or not these have been met; and 2.) Performance control is concerned with overall results for given periods of time, not with specific decisions or actions at specific points in time.

Performance control influences decision making and action taking only indirectly by establishing general targets that the decision maker must keep in the back of his mind as he makes specific decisions in the front. Performance control is used everywhere because every organizational unit is given a budget. Cost control is always crucial and can be easily measured.

However, performance control systems are most relied upon where the interdependencies between units are primarily of a pooled nature – namely, where the units are grouped on the basis of market. The major concern here is that the unit performs adequately, that it makes an appropriate contribution to the central organization without squandering its resources. The unit’s overall behavior is regulated by performance controls. It is typically crucial for market-based units because they are self-contained and generally given considerable freedom to act.

Performance control systems can serve two purposes: to measure and to motivate. Systems such as management by objectives (MBO) have been developed to give unit managers a say in the establishment of standards so that they will be committed to them and therefore strive harder to achieve those standards. However, this motivational aspect introduces a variety of problems: 1) The manager has a strong incentive to set the standards low enough to ensure that they can easily be met. This is because the manager is given the right to participate in the setting of performance standards and the influence to distort the feedback sent up to the MIS; 2) The problem of choosing the planning period. Long planning periods loosen the connection while short planning periods defeat a prime purpose of the system – to give the manager freedom of action; and 3) The problem of motivation arises with standards that cannot be realized for reasons beyond the manager’s control – say, bankruptcy of a major customer.

B.      Action Planning

As shown in Chapter 3, direct supervision effected through the superstructure and standardization of work processes effected through behavior formalization emerge as key mechanisms to coordinate the work in functional structures. However, sometimes they cannot contain all the interdependencies so the organization must turn to planning and control systems to standardize outputs. This is where action planning comes in the organization. If there is no action planning to be done, there will be failure in carrying out the work flows as proven by the example provided by Simon about Napoleon’s army.

Two points should be noted about action planning: 1.) Action planning does not necessarily respect unit autonomy unlike performance control. Action plans specify decisions that call for specific actions – to market new products, build new factories, sell old machines. 2.) Action planning turns out to be a less than pure form of standardizing outputs and also less than pure form of standardizing work processes. This second point can be expressed in terms of an increasingly tight regulation as follows:

·         Performance control imposes general performance standards over a period of time, with no reference to specific actions.

·         Action planning imposes specific decisions and actions to be carried out at specific points in time.

·         Behavior formalization imposes the means by which decisions and actions are to be carried out.

Action planning emerges as the means by which the nonroutine decisions and actions of an entire organization, typically structured on a functional basis, can be designed as an integrated system. Behavior formalization designs the organization as an integrated system too for the routine activities.

The hierarchy of Action Planning and Performance Control Systems

Action planning and performance control systems as two separate hierarchical systems with certain “crossovers.” Performance control is shown as a system in which overall objectives at the top give rise to subobjectives, budgets, and other output standards, which in turn are elaborated into ever more detailed subobjectives, budgets, and standards until they merge at the bottom of the structure as operating plans. Organizational actions as the final outcome are shown as a dotted line to indicate indirect influence between the plans and actions. The arrows in the diagram are two-sided indicating that the performance control system as both top-down and bottom-up as the case may be. Top-down if the objectives decided at the strategic apex are elaborated into ever more detailed performance standards as they pass down the hierarchy. Bottom-up if the units at the bottom establish their own performance standards and these are aggregated up the hierarchy by unit until they emerge at the strategic apex as composite standards. However, in practice, combination of both will be used.

The action planning system is essentially top-down. Theoretically, the strategic planning begins by systematically assessing the organization’s strengths and weaknesses in terms of trends in the environment. Then formulates an explicit and integrated set of strategies it intends to follow in the future. Strategies are then developed into “programs” at which these programs are elaborated and scheduled then eventually emerge as a set of specific operating specifications. In general, performance control system and action planning system can be linked most probably at the beginning parts of each system as further shown in the figure.

Planning and Control Systems by Part of the Organization

Various forms of both action planning and performance control can be found at all levels of the hierarchy. Action planning in the strategic apex and upper levels of the middle line have strategic planning and capital budgeting; in the middle levels there is programming and PERT (program evaluation and review technique) or CPM (critical path method) scheduling techniques; in the operating core there is production scheduling. Performance control have objectives, budgets, and standards can be set for units and positions at any level, from strategic apex to the operating core. At the top is the setting of overall organizational objective; high up in the middle line are commonly found the financial reporting systems that treat major market units as profit or investment centers; elsewhere in the middle line are the standard costing systems to control aggregated performance and MBO systems to motivate line managers; and near the bottom are operating plans and quality control systems.

The more global the responsibilities of a unit is, the greater the propensity to control its overall performance rather than its specific actions. For market based units, performance control system is a critical device for control. But then, grouping by market is common at the higher levels than at the lower levels, performance control would be favored in the upper reaches of the middle line. If the basis for grouping the highest-level units is functional, then action planning may very well start right in the strategic apex. In the technostructure, there is little use of performance control and action planning systems. In the support staff, planning and control systems vary considerably. Only those units that act as relatively autonomous entities and that have easily measured outputs can be controlled primarily by performance standards. 

II.      LIAISON DEVICES

In recent years, organizations have developed a whole set of devices to encourage liaison contacts between individuals, devices that can be incorporated into the formal structure. Liaison devices represent the most significant contemporary development in organization design. Liaison devices in the 1960s include “task forces,” then “matrix structure,” then later the “integrators.” This brought confusion to the reader if these just different names for the same phenomenon or distinctly new contribution. To resolve many of these problems, Jay Galbraith (1973) proposed a continuum of these liaison devices from the simplest to the most elaborate. Galbraith’s scheme was reduced to four basic types of liaison devices – liaison positions, task forces and standing committees, integrating managers, and matrix structure.

A.      Liaison Positions

When a considerable amount of contact is necessary to coordinate the work of two units, a “liaison” position may be established formally to route the communication directly, bypassing the vertical channels. The position emerges as a nerve center of the organization with considerable power since he serves at the crossroads of communication channels. The position carries no formal authority and its power is informal as it derives from knowledge, not status. Some liaison positions serve between different line units while some line and staff groups.

B.      Task Forces and Standing Committees

The meeting is the prime vehicle used in the organization to facilitate mutual adjustment. There are two liaison devices to institutionalize the meeting. The task force is a committee formed to accomplish a particular task and then disband. The standing committee is a more permanent interdepartmental grouping, one that meets regularly to discuss issues of common interest. Many standing committees exist at middle levels of the organization, and others are formed at the strategic apex, a common one being the executive committee.

C.      Integrating Managers

The organization may designate an integrating manager or a liaison position with formal authority when more coordination by mutual adjustment is required. Integrating managers can include brand managers, project managers, unit managers and so on. The formal power of the integrating manager always includes some aspects of the decision processes that cut across the affected departments, but it never (by definition) extends to formal authority over the departmental personnel. To control their behavior, the integrating manager must use his decisional authority and his power of persuasion and negotiation. Galbraith lists three stages in the extension of the decisional power of the integrating manager: 1. He can be given power to approve completed decisions – e.g. to review the budgets of the departments; 2. He can enter the decision process at an earlier stage – e.g. to draw up in the first place the budget that the department must then approve; and 3. He can be given control of the decision process – e.g to determine the budget and pays the departments for the use of their resources.

D.      Matrix Structures

By using the matrix structure, the organization avoids choosing one basis of grouping over another; instead, it chooses both. Matrix structure represents the effort, organizationally speaking, to ‘have your cake and eat it, too’ (Sayles, 1976:5). This can be done by setting up a dual authority structure where matrix structure sacrifices the principle of unity of command. As shown in Figure 4-3(d), formal authority comes down the hierarchy and then splits, creating joint responsibilities and doing away with the notion of an unbroken chain of authority. This process is considered by classical writers as anathema since it violated the principles and destroyed the neatness of the structure.

In the matrix structure, different line managers are equally and jointly responsible for the same decisions and are therefore forced to reconcile between themselves the differences that arise. This balance of formal power is what distinguishes matrix structure from other means of handling residual interdependencies, including the other liaison devices. Sayles suggest that matrix structure is for organizations that are prepared to resolve their conflicts through informal negotiation among equals rather than recourse to formal authority. Matrix structure is for grown up organizations.

Two kinds of matrix structures can be distinguished: 1. A permanent matrix structure – the interdependencies remain more-or-less stable including the units and the people in them. As an example, this can be found in the administration of some cities; and 2. A shifting matrix structure – geared to project work where the interdependencies, the market units, and the people in them shift around frequently. This can be found where outputs change frequently, e.g. research laboratories.

However, some problems related to matrix structure are the following. Matrix structure is no place for those in need of security and stability. Most often than not, confusion, stress, and conflict occurs so it requires highly developed interpersonal skills and considerable tolerance for ambiguity. There is also a problem of maintaining the delicate balance of power between the different sorts of managers. There is also the problem of the cost of administration and communication in these structures.

A Continuum of the Liaison Devices

The discussion of these four liaison devices is being summarized in Figure 4-5 which was borrowed from Galbraith and modified. The figure forms a continuum, with pure functional structure at one end and pure market structure at the other. Such positions generate a mild market orientation in the functional structure or a mild functional orientation in the market structure, thereby reducing slightly the informal power of the line managers as shown by the diagonal line that cuts across the figure.  A stronger modification is the superimposition of tasks forces or standing committees on either of the pure structures. The strongest modification is the introduction of a set of integrating managers. Such managers are given some formal decisional power but others retain their traditional line authority including that over the personnel. Standing midway between the two pure structures is the matrix structure which represents an equal balance of power between the two as dual command replaces unity of command. 

The Liaison Devices and the Other Design Parameters

The greater the use of the liaison devices is, the smaller the average size of organizational units. This is especially pronounced for task forces and standing committees as well as for temporary matrix structures where the essential work is carried out in groups. In the matrix structure, there are possibilities of the proliferation of managers in the organization since many employees now have two bosses. In the design of individual positions, liaison devices are to be used where the organization cannot standardize its behaviors but must instead rely on mutual adjustment to coordinate its activities. The liaison devices are tools primarily of organic structures. Liaison devices are generally used where work is, at the same time, (1) horizontally specialized, (2) complex, and (3) highly interdependent.

LIAISON DEVICES BY PART OF THE ORGANIZATION

The liaison devices appear to be best suited to the work carried out at the middle levels of the structure, involving many of the line managers as well as staff specialists. In general, given the nature of work of middle managers – largely ad hoc but somewhat amenable to structure – it is often expected the set of liaison devices to be the most important design parameter of the middle line. Within staff units doing specialized, complex, and highly interdependent work – both in much of the technostructure and the upper levels of the support staff – the set of liaison devices are expected to be the prime design parameter.

In cases where the operating core is manned by professional whose work interdependencies require them to function in teams – as in research centers – mutual adjustment is the key coordinating mechanism, and task forces and shifting matrix structures key design parameters.  In the strategic apex, some use is also made of the liaison devices where sometimes liaison positions are designated to link the strategic apex to other parts of the organization. But wider use of the liaison devices at the top of the organization is probably restricted by the very fluid and unprogrammed nature of the work there. Even the flexible liaison devices are simply too structured.

Reference:

Mintzberg, H. (1993). Structure in Fives: Designing Effective Organizations. Upper Saddle River, NJ: Prentice-Hall, Inc. 73-94