Greenwood and Miller (2010) Argue That Organizational

Greenwood and Miller (2010) argue that organizational design is critical to organizational performance, and companies that neglect to seek out the optimal design will experience substandard results. Organizational design, however, is not easy to change wholesale, which means that companies do not often evaluate their design -- a change in leadership is one of the few reliable catalysts for the re-thinking of organizational design.

Often, therefore, organizational design often happens piecemeal, without any overarching strategy. For example, many companies offshore tasks, but in doing this they might view the offshoring as an operational decision, or even an accounting one. They do not realize that they are making an important change to their organizational design (Larsen, Manning & Pedersen, 2013). A company offshoring will think about controls, but not realize that the entire offshoring decision has significant implications for their organizational design -- companies that no longer make things are marketing and design organizations only.

Gebauer, Fischer and Fleisch (2010) argue that firms seeking to emphasize service need to reflect this in their organizational design. For example, they studied several manufacturing entities, and noted that the ones who were able to more successfully transition to a service-oriented model supported that shift with an adjustment in organizational design. The design indicates the perspective the organization has on its business -- if there is greater emphasis within the design, specifically with span of control -- on service, then service is more likely to improve. They noted in particular the case of IBM, which created a division for IBM Global Services instead of bundling those services by customer or geography as had previously been done. With a new division, marketing and service efforts both improved, leading to improvement in revenues as a result.

Personal Response: I think the issue of organizational design is an interesting one. We tend to study this in terms of envisioning an organization from scratch but of course in the real world that's not how it works. An organization starts as a large entity with established design and reporting relationships. Changing that will typically come as a part of a larger change process (M&A, divestiture, new CEO, etc.) What strikes me the most about this is that the organizational design process should be more flexible than that. The leaders of the organization should always be willing to look at design.