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in Action
Pilot testing an Organization Design simulation
Nicolay Worren
10:35 Introduction
11:00 Simulation
12:00 Break
12:15 Debriefing
Background
Traditionally, one has distinguished between ”top down”
and ”bottom up” design perspectives
Strategic
design
Operational design
The theoretical ideal is to perform the operational design in
a manner that minimizes coordination cost
Within the
same unit A B
Across
different A B
units
1.
Identifying A B C E F
interdependencies
D
”Unit A” ”Unit B”
2.
Grouping of
roles/units A B C E F
based on the
D
interdependencies
Today, we skip the first stage by using colors to indicate who
is interdependent and thus should be grouped together
1.
Identifying A B C E F
interdependencies
D
”Unit A” ”Unit B”
2.
Grouping of
roles/units A B C E F
based on the
D
interdependencies
The simulation task is analogous to a company that decides to
move from one grouping criterion to another (a)
= Geography A
1 Initial: Geographical organization
= Geography B
Unit A Unit B
450
414
400 398
386
366
350 350
338
330
300 306
278
262
250 250
Cost
200
150
100
50
36 40
28 32
20 24
12 16
4 8
0 0
0 1 2 3 4 5 6 7 8 9 10
Number of switches
10:35 Introduction
11:00 Simulation
12:00 Break
12:15 Debriefing in
Starting configuration (with N = 36)
1 1 1 1 1 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 5 5 5 5 5 6 6 6 6 6 7 7 7 7 7 7
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
1 6 11
1 2 12
3
2 7
3 4 5 8 9 10 13 14 15
16 21
26
17
4 22
5 6
27
18 19 20 23 24 25
28 29 30
31
32
7 36
33 34 35
Note: Players are shown in consecutive order but may be seated in any order around the designated table
What’s the analogy?
• Colors
– People that you are dependent upon (e.g., that work on the same process
as you do)
• Tables
– The formally defined units (e.g., departments)
• Coordination cost
– The cost associated with collaborating, communicating, exchanging
information etc within and across units
• Switching costs
– The costs that arise as a result of transferring people to another unit (e.g.,
training in new role, temporarily reduced productivity, etc.)
There is a small set of simple rules that we need to follow
The goal : To minimize table and total group coordination cost by grouping same
color around table
1. You should agree around the table about which person to move
2. All moves are reciprocal (i.e., between two tables) – you must
receive a person from the table you are moving a person to
3+3=6 1+3=4
Individual
coordination 6 4 4 4 4 6
cost
Table
coordination 14 14
cost
6 + 4 + 4 = 14 4 + 4 + 6 = 14
De-briefing
A gradual reduction in coordination cost was achieved
Changes in total system cost with number of switches
Only the last move
600 stands out as
suboptimal
0
500 4
8
12
16 20 24 28
32 36 40
400
Cost
300
100
0
0 1 2 3 4 5 6 7 8 9 10
Number of switches
Number of switches
0 31 32 33 34 35 36
1 31 32 33 34 35 36
2 31 32 10 34 35 36
3 31 32 10 34 35 36
4 31 32 10 34 35 36
What’s analogous to what we experience in real life?
1. Organizations sometimes change the ”grouping criterion”
– E.g., they move from a functional to process based structure, or from geographical to
product based structure)
2. One must try to increase both individual, team and overall performance
3. At some point, ”switching” (i.e., reconfiguration) costs will exceed the benefits
(reduction in coordination costs)
What simplifying assumptions were made?
1. In real life there are more options. One can:
– Move people
– Move tasks
3. People who are interdependent cannot be identified by means of the color of their
clothing!
In sum: What’s new?
• The simulation creates an experiential setting for learning about key organization
design principles
process
Continuing this line of work may contribute to making organization design a more
analytical discipline
Thanks
• To you – for participating
– Posten
– Expert
– Ringnes (Solo)
– Kiwi
Bio
• Independent consultant
– 12 years of experience with organization re-design, process
improvement, strategic HR, and strategy facilitation
• Blog: www.nicolayworren.com
• Contact: nicolay@worren.com