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Course Introduction
Organizational Development Defined
Organizational development (OD) is an interdisciplinary field spanning business, industrial/organizational psychology, human resources management, sociology, and many other disciplines. There are many definitions of OD, but consider the following by Beer (1980):
Organization development is a system-wide process of data collection, diagnosis, action planning, intervention, and evaluation aimed at (1) enhancing congruence among organizational structure, process, strategy, people, and culture; (2) developing new and creative organizational solutions; and (3) developing the organization’s self-renewing capacity. It occurs through the collaboration of organizational members working with a change agent using behavioral science theory, research, and technology.
This definition highlights the fact that leaders, change agents, and people within the organization directly influence the design of the organization through their actions and decision making. Implicit in design-related activities is the need for change. Therefore, organizational development as a discipline provides a larger backdrop for design and change efforts in organizations as seen in the following definitions.
“Organization design is the making of decisions about the formal organizational arrangements, including the formal structure and the formal processes that make up an organization” (Nadler & Tushman, 1988).
“Organizational design is the deliberate process of configuring structures, processes, reward systems, and people, practices and policies to create an effective organizational capable of achieving the business strategy” (Galbraith, Downey, & Kates, 2002).
You probably noticed some consistent themes when reading these definitions. Anderson (2018) notes the following themes. Click on each for more detail.
Organization design is a set of deliberate decisions
This implies a conscious effort to make choices among competing alternatives and underlies the intentionality of organizational design. As organizations mature, they will naturally evolve and change. Sometimes these changes are well-thought out, like a deliberate change to the business strategy, while other times the change may occur without conscious attention, like the expansion of controls and processes that unintentionally limit flexibility. Sometimes, the external environment forces rapid change on an organization, like the COVID pandemic. Regardless of the change parameters, organizational development implies a conscious management of organizational components to enable an effective response.
Organizational design is a process
Organizations are dynamic and fluid entities that are in a constant state of flux in order to evolve, grow, and adapt to the external environment. Therefore, the process of organizational design is an ongoing activity and change is ever-present. Every organization decision has design and change implications, whether a company decides to enter a new market, discontinue a product line, enhance or reduce services, or grow through an acquisition or merger. “To some extent, managers are making design decisions all the time. Every time a specific job is assigned, a procedure created, a method altered, or a job moved, the organizational design is being tinkered with” (Nadler & Tushman, 1988).
Organizational design assumes a systems approach to organization
Organizations are open systems that interact with their environment in dynamic ways by exchanging information, materials, and energy through inputs, transformational processes, and outputs. As the environment changes, the organization must change and adapt in response. Thus, open systems thinking is the process of considering how people, processes, structures, and policies all exist in an interconnected web of relationships. A systems perspective assumes the following (Deszca, Ingols, & Cawsey, 2019):
- A system is the product of interrelated and interdependent parts and is a complex set of interrelationships that cannot be explained by linear cause-effect relationships
- A system seeks equilibrium and when it’s in equilibrium, it will only change if some energy is applied
- Things that occur within and/or to open systems (e.g., issues, events, forces) should not be viewed in isolation, but rather should be seen as interconnected, interdependent components of a complex system.
These assumptions reinforce the premise that changes in one part of the organization will inevitably affect operations in another. This is an important reminder for change practitioners as they make daily decisions in organizations and they should avoid quick fixes to the latest management problem. “The causes of a problem may be complex, may actually lie in some remote part of the system, or may lie in the distant past. What appears to be cause and effect may actually be coincidental symptoms” (Carnall, 2007).
Finally, organizations have a history of balancing and refining forces over time. In other words, reinforcing those activities that work and discarding those that don’t in the eternal search of efficiency. Accordingly, organizations achieve a certain equilibrium or balance over time and any proposed changes that disrupt this balance will almost certainly encounter resistance. We will learn more about this idea of equilibrium in future modules as we discuss congruence, alignment, fit, and culture.
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Organizational design is based on the organization’s strategy
Strategic choices that a company makes will affect all aspects of the system and drives the accomplishment of goals and objectives. Form follows function in that the business strategy shapes organizational design decisions. Therefore, successful design decisions require a deep understanding of the context in which the organization competes, the business model, its value proposition, and the capabilities it needs to be effective. Different strategies require different designs, so every company is different in how it is organized. For example, an organization in the technology sector requires a design that embraces constant innovation and new products where a low-cost manufacturer requires a design that enables an efficient and stable production process.
So when we talk about organizational change, we refer to the planned alterations of organizational components to improve efficiency and effectiveness.