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S03 of 12
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Leading organizations

Leading through design

There is no best structure, only a fit between structure, strategy, people and culture.

01

Readings

Michael Goold and Andrew Campbell · Harvard Business Review, 2002

Do You Have a Well-Designed Organization?

Run any design through nine tests: four on fit, five on good design.

  • Fit tests: market advantage, parenting advantage, people, and feasibility.
  • Good design tests: specialist cultures, difficult links, redundant hierarchy, accountability, and flexibility.
  • Most structures grow by politics and accident. The tests make design a deliberate choice.

Nadler and Tushman, via Mercer Delta · Course file, background

The congruence model

Performance comes from fit between the work, the people, the formal organization and the informal culture.

  • Inputs (environment, resources, history) feed a strategy.
  • Four parts turn strategy into output: work, people, formal organization, informal organization.
  • The fit between parts matters more than any one part. A great engine in the wrong car still fails.
02

See it

Four structures, one company

Lab 03.A
LeaderSalesProductFinance

Grouped by expertise. Deep skill, efficient, but slow when work crosses functions.

Efficiency and depth5/5
Market focus2/5
Speed and adaptability2/5
Clear accountability4/5

Bars are an illustrative comparison to support discussion, not measured data.

Congruence model: tap a pair to test the fit

Lab 03.B
InputsstrategyOutputWorkPeopleFormal orgInformal org
Tap any line between two parts.

Fit questions from the Mercer Delta congruence model paper, Figure 5.

Run your own team through the nine tests

Lab 03.C
Tests passed0/9

Each failed test is a design problem worth naming.

03

Frameworks

Nine tests of organization design

Goold and Campbell

S03

Four fit tests, five good design tests.

Market advantageDoes the design put enough attention on the sources of advantage in each market?
Parenting advantageDoes it help the corporate center add value?
PeopleDoes it fit the strengths and limits of the people you have?
FeasibilityDoes it work within your real constraints, like law, IT and stakeholders?
Specialist culturesDoes it protect units that need a culture different from the rest?
Difficult linksDoes it give a clear answer for coordination that will not happen on its own?
Redundant hierarchyDoes every layer add value?
AccountabilityCan each unit be held to clear measures?
FlexibilityCan it adapt and allow new strategies to emerge?

Congruence model

Nadler and Tushman

S03

Performance comes from fit between work, people, formal and informal organization.

InputsEnvironment, resources, history
StrategyWhere and how to compete
WorkThe tasks that must get done
PeopleSkills, needs, expectations
Formal organizationStructure, systems, processes
Informal organizationCulture, norms, relationships
OutputSystem, unit and individual performance

Four basic structures

Course videos

S03

Each structure optimizes one thing and pays for it somewhere else.

FunctionalGrouped by expertise. Deep skill and efficiency. Slow across functions.
DivisionalGrouped by product, region or customer. Focus and speed per market. Duplicated work.
MatrixTwo bosses: function and product. Balances two priorities. Confusing, slow, political.
Flat or networkFew layers, teams form around work. Fast and adaptive. Unclear authority as it grows.
04

Check yourself

Q1A matrix structure trades simplicity for

Q2Which is a Goold and Campbell fit test?

Q3In the congruence model, the informal organization is

0 of 3 answered.
05

Think it through

  1. P1If you designed your team from scratch tomorrow, what would you change first, and which test does it fail today?
  2. P2Where is the informal organization doing work the formal one cannot?