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Organization Development

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Lesson 35
Restructuring Organizations
Network-Based Structures:
A network-based structure manages the diverse, complex, and dynamic relationships among multiple
organizations or unit5, each specializing in a particular business junction or task. Sonic contusion over the
definition of a network has been clarified recently by a typology describing four basic types of networks.
·  An internal market network exists when a single organization establishes each subunit as an
independent profit center that is allowed to buy and sell services and resources from each other as
well as from the external market. Asea Brown Boveri's (ABB) fifty worldwide businesses consist of
twelve hundred companies organized into forty-five hundred profit centers that conduct business
with each other.
·  A vertical market network is composed of multiple organizations linked to a focal organization that
coordinates the movement of resources from raw materials to end consumer. Nike, for example,
has its shoes manufactured in different plants and then organizes their distribution through retail
outlets.
·  An inter-market network represents alliances among a variety of organizations in different markets
and is exemplified by the Japanese keiretsu and the Korean chaebol.
·  An opportunity network is the most advanced form of network structure. It is a temporary
constellation
of
organizations
brought
together
to
pursue
a
single
purpose. Once accomplished, the network disbands.
These types of networks can be distinguished from one another in terms of whether they are single or
multiple organizations, single or multiple industry, and stable or temporary. For example, an internal market
network is a stable, single-organization, single-industry structure; an opportunity network is a temporary,
multiple-organization structure that can span several different industries.
As shown in Figure 46, the network structure redraws organizational boundaries and links separate business
units to facilitate task interaction. The essence of networks is the relationships among organizations that
perform different aspects of work. In this way, organizations do the things that they do well; for example,
manufacturing expertise is applied to production, and logistical expertise is applied to distribution. Network
organizations use strategic alliances, joint ventures, research and development consortia, licensing
agreements, and wholly owned subsidiaries to design, manufacture, and market advanced products, enter
new international markets, and develop new technologies.
Network-based structures are known by a variety of names, including shamrock organizations and virtual,
modular, or cellular corporations. Less formally, they have been described as "pizza" structures, spider
webs, starbursts, and cluster organizations. Companies such as Apple Computer, Benetton, Sun
Microsystems, Liz Claiborne, MCI WorldCom, and Merck have implemented fairly sophisticated vertical
market and inter-market network structures. Opportunity networks also are commonplace in the
construction, fashion, and entertainment industries, as well as in the public sector.
Figure 46: The Network Organization
Network structures typically have the following characteristics.
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·
Vertical desegregation. This refers to the breaking up of the organization's business functions, such
as production, marketing, and distribution, into separate organizations performing specialized work. In
the film industry, for example, separate organizations providing transportation, cinematography, special
effects, set design, music, actors, and catering all work together under a broker organization, the studio.
The particular organizations making up the opportunity network represent au important factor in
determining its success.'" More recently, disintermediation, or the replacement of whole steps in the
value chain by information technology, specifically the Internet, has fueled the development and
numbers of network structures.
·
Brokers. Networks often arc' managed by broker organizations that locate and assemble member
organizations. The broker may play a central role and subcontract for needed products or services, or it
may specialize in linking equal partners into a network. In the construction industry, the general
contractor typically assembles and manages drywall, mechanical, electrical, plumbing, and other
specialties to erect a building.
·
Coordinating mechanisms. Network organizations generally are not controlled by hierarchical
arrangements or plans. Rather, coordination of the work in a network falls into three categories:
informal relationships, contracts, and market mechanism. First, coordination patterns can depend
heavily on interpersonal relationships among individuals who have a well-developed partnership.
Conflicts are resolved through reciprocity; network members recognize that each likely will have to
compromise at some point. Trust is built anti nurtured over time by these reciprocal arrangements.
Second, coordination can be achieved through formal contracts, such as ownership control, licensing
arrangements, or purchase agreements. Finally, market mechanisms, such as spot payments,
performance accountability, and information systems, ensure that all parties are aware of each others'
activities.
Network  structures  have  a  number  of  advantages  and  disadvantages,  as  shown
in Table 16. They are highly flexible and adaptable to changing conditions. The ability to form partnerships
with different organizations permits the creation of a "best-of-the-best" company to exploit opportunities,
often global in nature. They enable each member to exploit its distinctive competence. They can
accumulate and apply sufficient resources and expertise to large, complex tasks that single organizations
cannot perform. Perhaps most important, network organizations can have synergistic effects whereby
members build on each other's strengths and competencies, creating a whole that exceeds the sum of its
parts.
Table 16
Advantages, Disadvantages and Contingencies of the Network-Based Form
Advantages
Disadvantages
Contingencies
·  Managing lateral relations
·  Highly  complex  and
·
Enables highly flexible
and adaptive response to
across
autonomous
uncertain environments
·  Organizations of all sizes
organizations is difficult
dynamic environments
·  Motivating members to
·
Creates a "best-of-the-
·  Goals of organizational
best"  organization  to
relinquish autonomy to
specialization
and
focus
resources
on
join  the  network  is
innovation
troublesome
customer  and  market
·  Highly
uncertain
·  Sustaining  membership
needs
technologies
·
and  benefits  can  be
Enables
each
·  Worldwide operations
problematic
organization to leverage a
·  May give partners access
distinctive competency
·
to
proprietary
Permits  rapid  global
knowledge/technology
expansion
·
Can produce synergistic
results
The major problems with network organizations are in managing such complex structures. Galbraith and
Kazanjian describe network structures as matrix organizations extending beyond the boundaries of single
firms but lacking the ability to appeal to a higher authority to resolve conflicts. Thus, matrix skills of
managing lateral relations across organizational boundaries arc critical to administering network structures.
Most organizations, because they are managed hierarchically, can be expected to have difficulties managing
lateral relations. Other disadvantages of network organizations include the difficulties of motivating
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organizations to join such structures and of sustaining commitment over time. Potential members may not
want to give up their autonomy to link with other organizations and, once linked, they may have problems
sustaining the benefits of joining together. This is especially true if time network consists of organizations
that are not the "best of breed." Finally, joining a network may expose the organization's proprietary
knowledge and skills to others.
As shown in Table 16, network organizations are best suited to highly complex and uncertain environments
where multiple competencies and flexible responses are needed. They seem to apply to organizations of all
sizes, and they deal with complex tasks or problems involving high interdependencies across organizations.
Network structures fit with goals that emphasize organization specialization and innovation.
Downsizing:
Downsizing refers to interventions aimed at reducing the site of the organization. This typically is
accomplished by decreasing the number of employees through layoffs, attrition, redeployment, or early
retirement or by reducing the number of organizational units or managerial levels through divestiture,
outsourcing, reorganization, or delayering. In practice, downsizing generally involves layoffs where a certain
number or class of organization members is no longer employed by the organizations. Although
traditionally associated with lower-level workers, downsizing increasingly has claimed the jobs of staff
specialists, middle managers, and senior executives.
An important consequence of downsizing has been the rise of the contingent workforce. These less
expensive temporary or permanent part-time workers often are hired by the organizations that just laid elf
thousands of employees. A study by the American Management Association found that nearly a third of the
720 firms in the sample had rehired recently terminated employees as independent contractors or
consultants because time downsizings had not been matched by an appropriate reduction in or redesign of
the workload. Overall cost reduction was achieved by replacing expensive permanent workers with a
contingent workforce.
Downsizing is generally a response to at least four major conditions. First, it is associated increasingly with
mergers and acquisitions. One in nine job cuts during 1998 were the result of the integration of two
organizations; second, it can result from organization decline caused by loss of revenues and market share
and b1 technological and industrial change. In southern California, an economy traditionally dependent on
the defense industry, more than one hundred thousand jobs have been lost to relocation or elimination as
that industry has contracted and consolidated. Third, downsizing can occur when organizations implement
one of the new organizational structures described above. For example, creation of network- based
structures often involves outsourcing work to other firms that is not essential to the organization's core
competence. Fourth, downsizing can result from beliefs and social pressures that smaller are better. In the
United States; there is strong conviction that organizations should be leaner and more flexible. Hamel and
Prahalad warned, however, that organizations must be careful that downsizing is not a symptom,
"corporate anorexia." Organizations may downsize for their own sake and not think about future growth.
They may lose key employees who are necessary for future success, cutting into the organization's core
competencies and leaving a legacy of mistrust among members. In such situations, it is questionable
whether downsizing is developmental as defined in OD.
Application Stages:
Successful downsizing interventions tend to proceed by the following steps:
1. Clarify the organization's strategy. As a first step, organization leaders specify corporate strategy
arid communicate clearly how downsizing relates to it. They seek to inform members that
downsizing is not a goal h itself, hut a restructuring process for achieving strategic' objectives.
Leaders need to provide visible and consistent support throughout the process. They can provide
opportunities for members to voice their concerns, ask questions, and obtain counseling if
necessary.
2. Assess downsizing options and make relevant choices. Once corporate strategy is clear, the
full range of downsizing options can he identified and assessed. Table 17 describes three primary
downsizing methods: workforce reduction, organization redesign, and systemic change. A specific
downsizing strategy may Use elements of all three approaches. Workforce reduction is aimed at
reducing the number of employees, usually in a relatively short timeframe. It can include attrition,
retirement incentives, outplacement services, and layoffs. Organization redesign attempt to
restructure the firm to prepare it for the next stage of growth. This is a medium term approach that
can be accomplished by merging organizational units, eliminating management layers, and
redesigning tasks. Systemic change is a longer-term option aimed at changing the culture and
strategic orientation of the organization. It can involve interventions that alter the responsibilities
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and work behaviors of everyone in the organization and that promote continual improvement as a
way of life in the firm.
Case, a manufacturer of heavy construction equipment, used a variety of methods to downsize,
including eliminating money-losing product lines; narrowing the breadth of remaining product
lines; bringing customers to the company headquarters to get their opinions of new product design
(which surprisingly resulted in maintaining, rather than changing, certain preferred features, thus
holding down redesign costs); shifting production to outside vendors, restructuring debt; amid
spinning off most of its 250 stores. Eventually, these changes led to closing five plants and to
payroll reductions of almost 35 percent. The number of jobs lost would have been much greater,
however, if Case had not implemented a variety of downsizing methods.
Unfortunately, organizations often choose obvious solutions for downsizing, such as layoffs,
because they can be implemented quickly. This action produces a climate of fear and defensiveness
as members focus on identifying who will be separated from the organization. Examining a broad
range of options and considering the entire organization rather than only certain areas can help
allay tears favoritism and polities are the bases for downsizing decisions. Moreover, participation of
organization members in such decisions can have positive benefits. It can create a sense of urgency
for identifying and implementing options to downsizing other than layoffs. Participation can
provide members with a clearer understanding of how downsizing will proceed and can increase
the likelihood that whatever choices are made are perceived as reasonable and fair.
3. Implement the changes. This stage involves implementing methods for reducing the size oh
time organization. Several practices characterize successful implementation. First, downsizing is
best controlled from the top down. Many difficult decisions are required, and a broad perspective
helps to overcome people's natural instincts to protect their enterprise or function. Second,
identify arid target specific areas of inefficiency and high cost. The morale of the organization can
be hurt if areas commonly known to be redundant are left untouched. Third, link specific actions
to the organization's strategy. Organization members need to be reminded consistently that
restructuring activities are part of a plan to improve the organization's performance. Finally,
communicate frequently using a variety of media. This keeps people informed, lowers their anxiety
over the process, and makes it easier for them to focus on their work.
Table 17
Three Downsizing Tactics
Downsizing Tactic
Characteristics
Examples
Workforce reduction
Aimed at headcount reduction
Attrition
Short-term implementation
Transfer and outplacement
Fosters a transition
Retirement incentives
Buyout packages
Layoffs
Organization redesign
Aimed at organization change
Eliminates functions
Moderate-term implementation
Merge units
Fosters transition and potentially Eliminate layers
transformation
Eliminate products
Redesign tasks
Systemic redesign
Aimed at culture change
Change responsibility
Long-term implementation
Involve all constituents
Fosters transformation
Foster continuous improvement
and innovation
Simplification
Downsizing a way of life
4. Address the needs of survivors and those who leave. Most downsizing eventually involves reduction
in the size of the workforce, and it is important to support not only employees who remain with the
organization but also those who leave. When layoffs occur, employees are generally asked to take on
additional responsibilities and to lean new jobs, often with little or no increase in compensation. This added
workload can he stressful, arid when combined with anxiety over past layoffs and possible future ones, it
can lead to what researchers have labeled time "survivor syndrome." This syndrome involves a narrow set
of self-absorbed and risk-averse behaviors that can threaten the organization's survival. Rather than
working to ensure the organization's success, survivors often are preoccupied with whether additional
layoffs will occur, with guilt over receiving pay and benefits while co workers are struggling with
termination, and with the uncertainty of career advancement.
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Organizations can address these survivor concerns with communication processes that increase the amount
and frequency of information provided. Communication should shift from explanations about who left or
why to clarification of where the Company is going, including its visions, strategies, and goals. The linkage
between employees' performance and strategic success is emphasized so that remaining members feel they
are valued. Organizations also can support survivors through training and development activities that
prepare them for the new work they are being asked to perform. Senior management can promote greater
involvement in decision making, thus reinforcing the message that people are important to the future
success and growth of the organization.
Given the negative consequences typically associated with job loss, organizations have developed an array
of methods to help employees who have been laid off. These include outplacement counseling, personal
and family counseling, severance packages, office support for job searches, relocation services, and job
retraining. Each service is intended to assist employees in their transition to another work situation.
1. Follow through with growth plans. This final stage of downsizing involves implementing an
Organization renewal and growth process. Failure to move quickly to implement growth plans is a key
determinate of ineffective downsizing For example, a study of 1,020 human resource directors reported
that only 44 percent of the companies that had downsized in the previous live years shared details of their
growth plans with employees; only 34 percent told employees how they would lit into the company's new
strategy. Organizations must ensure that employees understand the renewal strategy and their new roles in
it. Employees need credible expectations that, although the organization has been through a tough period,
their renewed efforts can move it forward.
Results of Downsizing:
The empirical research on downsizing is mostly negative. A review conducted by the National Research
Council concluded, "From the research produced thus tar, downsizing as a strategy for improvement has
proven to be, by and large, a failure." A number of studies base documented the negative productivity and
employee consequences. One survey of 1,005 companies that used downsizing to reduce costs reported
that fewer than half of the firms actually met cost targets. Moreover, only 22 percent of the companies
achieved expected productivity gains, and consequently about 80 percent of the firms needed to rehire
some of the same people that they had previously terminated. Fewer than 33 percent of the companies
surveyed reported that profits increased as much as expected, and only 21 percent achieved satisfactory
improvements in shareholder return on investment. Another survey of 1,142 downsized firms found that
only about a third achieved productivity goals.39 In addition, the research points to a number of problems
at the individual level, including increased stress and illness, loss of sell-esteem, reduced trust and loyalty,
and marriage and family disruptions.
Research on the effects of downsizing on financial performance also shows negative results. One study
examined an array of financial performance measures, such as return on sales, assets, and equity, in 210
companies that announced layoffs. It found that increases in financial performance in the first year
following the layoff announcements were not followed by performance improvements in the next year. In
no case did a firm's financial performance after a layoff announcement match its maximum levels of
performance in the year before the announcement. These results suggest that layoffs may result in initial
improvements iii financial performance, hut such gains are temporary and not sustained at even pre-layoff
levels. In a sin3ilar study of sixteen firms that wrote off more than 10 percent of their net worth in a live-
year period, stock prices, which averaged 16 percent below the market average before the layoff
announcements, increased on the day that the restructuring was announced but then began a steady decline.
Two years after the layoff announcements, ten of the sixteen stocks were trading below the market by 17
percent to 48 percent, and twelve of the sixteen were below comparable firms in their industries by 5 to 45
percent.
These research findings paint a rather bleak picture of the success of downsizing. The results must be
interpreted cautiously, however, for three reasons.
First, many of the survey-oriented studies received responses from human resources specialists who might
have been naturally inclined to view downsizing in a negative light.
Second, the studies of financial performance may have included a biased sample of firms. If the companies
selected for analysis had been poorly managed, then downsizing alone would have been unlikely to improve
financial performance. There is some empirical support for this view because low-performing firms are
more likely to engage in downsizing than are high-performing firms.
Third, disappointing results may be a function of the way downsizing was implemented. A number of
organizations have posted solid financial returns following downsizing, such as Florida Power and Light,
General Electric, Motorola, Texas instruments, Boeing, Chrysler, and Hewlett-Packard. A study of thirty
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downsized firms in the automobile industry showed that those companies that implemented effectively the
process described above scored significantly higher on several performance measures than did firms that
had no downsizing strategy or that implemented the steps poorly. Several studies have suggested that where
downsizing programs adopt appropriate CD interventions or apply strategies similar to the process outlined
above, they generate more positive individual and organizational results. Thus, the success of downsizing
efforts may depend as much on how effectively the intervention is applied as on the size of the layoffs or
the amount of delayering.
Reengineering:
The final restructuring intervention is reengineering--the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in performance Reengineering transforms how
organizations traditionally produce and deliver goods and services. Beginning with the Industrial
Revolution, organizations have increasingly fragmented work into specialized units, each focusing on a
limited pan of the overall production process. Although this division of labor has enabled organizations to
mass-produce standardized products and services efficiently, it can be overly complicated, difficult to
manage, and slow to respond to the rapid and unpredictable changes experienced by many organizations
today. Reengineering addresses these problems by breaking down specialized work units into more
integrated, cross-functional work processes. This streamlines work processes and makes them faster and
more flexible; consequently they are more responsive to changes in competitive conditions, customer
demands, product life cycles, and technologies.
As might be expected, reengineering requires an almost revolutionary change in how organizations design
their structures and their work. It addresses fundamental issues about why organizations do what they do,
and why do they do it in a particular way. Reengineering identifies and questions the often unexamined
assumptions underlying how organizations perform work. This effort typically results in radical changes in
thinking and work methods a shift front specialized job, tasks, and structures to integrated processes that
deliver value to customers. Such revolutionary change differs considerably from incremental approaches to
performance improvement, such as continuous improvement and total quality management, which
emphasize Incremental changes in existing work processes. Because reengineering radically alters the status
quo, it seeks to produce dramatic Increases In organization performance.
In radically changing business processes, reengineering frequently takes advantage of new Information
technology. Modern information technologies, such as teleconferencing, expert systems, shared databases,
and wireless communication, can enable organizations to reengineer. They can help organizations to break
out of traditional ways of thinking about work and embrace entirely new ways of producing and delivering
products. At IBM Credit, for example, an integrated information system with expert systems technology
enables one employee to handle all stages of the credit-delivery process. This eliminates the handoffs,
delays, and errors that derived from the traditional work design, in which different employees performed
sequential tasks.
Whereas new information technology can enable organizations to reengineer themselves, existing
technology can thwart such efforts.4' Many reengineering projects fail because existing information systems
do not provide the data needed to operate integrated business processes. The systems do not allow
Interdependent departments to interface with each other they often require new Information to be entered
by hand into separate computer systems before people in different work areas can access it. Given the
inherent difficulty in trying to support process-based work with specialized information systems,
organizations have sought to develop information technologies that are more suited to reengineered work.
The most popular software system, SAR was developed by a German company of the same name. With
SAI firms can standardize their information systems because the software processes data on a range of
tasks and links ft all together, thus integrating the information flow among different pans of the business.
Because they believe that SAP may be the missing technological link to reengineering, many of the largest
consulting firms that provide reengineering services, such as Anderson Consulting, Deloitte Touché, and
Price water house Coopen, have developed their own SAP consultants.
Reengineering also is associated with interventions having to do with downsizing, the shift from functional
to process-based structures, and work design. Although these Interventions have different conceptual and
applied backgrounds, they overlap considerably in practice. Reengineering can result in production and
delivery processes that require fewer people and fewer layers of management. Conversely, down sizing may
require subsequent reengineering interventions. When downsizing occurs without fundamental changes in
how work is performed, the same tasks simply are being performed with a smaller number of people. Thus,
expected cost savings may not be realized because lower productivity offsets lower salaries and fewer
benefits.
Reengineering also can be linked to transformation of organization structures and work design. Its focus on
work processes helps to break down the vertical orientation of functional and self-contained--unit
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organizations. The endeavor identifies and assesses core business processes and redesigns work to account
for key task interdependencies running through them. That typically results in new jobs or teams that
emphasize multifunctional tasks, results-oriented feedback, and employee empowerment characteristics
associated with motivational and socio-technical approaches to work design. Regrettably, reengineering has
failed to apply these approaches attention to individual differences in people's reactions to work to its own
work-design prescriptions. It advocates enriched work and teams, without consideration for the wealth of
research that shows that not all people are motivated to perform such work.
Application Stages:
Reengineering is a relatively new intervention and is still developing applied methods. Early applications
emphasized identifying which business processes to reengineer and technically assessing the work flow.
More recent efforts have extended reengineering practice to address issues of managing change, such as
how to deal with resistance to change and how to manage the transition to new work processes. The
following application steps are included in most reengineering efforts, although the order may change
slightly from one situation to another.
1. Prepare the organization. Reengineering begins with clarification and assessment of the
organization's
context,
including
its
competitive
environment,
strategy, and objectives. This effort establishes the need for reengineering and the strategic
direction that the process should follow. Changes in an organization' competitive environment can
signal a need for radical change in how it does business. As preparation for reengineering at GTE
Telephone Operations, for example, executives determined that although deregulation had begun
with coin-operated telephones and long-distance service, it soon would spread to the local
network. They concluded that this would present an enormous competitive challenge and that the
old way of doing business, reinforced by years of regulatory protection, would seriously saddle the
organization with high costs.
2. Specify organization strategy and objectives. The business strategy determines the focus of
reengineering and guides decisions about the business processes that are essential for strategic
success. In the absence of such information, the organization may reengineer extraneous processes
or ones that could be outsourced. GTE executives recognized that the keys to the firm's success in
a more competitive environment were low costs and customer satisfaction. Consequently, they set
dramatic goals of doubling revenues while halving costs and reducing product development time
by 75 percent. Defining these objectives gave the reengineering effort a clear focus. A final task in
this preparation step is to communicate clearly throughout the organization why reengineering is
necessary and the direction it will lake. GTE's communications program lasted a year and a half,
and helped ensure that members understood the reasons underlying the program and the
magnitude of the changes to be made. Senior executives were careful to communicate, both
verbally and behaviorally, that they were fully committed to the change effort. Demonstration of
such unwavering support seems necessary if Organization members are to challenge their
traditional thinking about how business should he conducted.
3. Fundamentally rethink the way work gets done. This step lies at the heart of reengineering and
involves these activities: identifying and analyzing core business processes, defining their key
performance objectives, and designing new processes. These tasks are the real work of
reengineering and typically are performed by a cross-functional team who is given considerable
time and resources to accomplish them.
a.
Identify and analyze core business processes. Core processes are considered essential for
strategic success. They include activities that transform inputs into valued outputs. Core processes
typically are assessed through development of a process map that lists the different activities
required to deliver an organization's products or services. GTE determined that its core processes
could be characterized as "choose, use, and pay." Customers first choose a telephone carrier, then
use its services, and pay for them. GTE developed a process map for these core processes that
included the work flow for getting customers to choose, use, and pay for the firm's service.
Analysis of core business processes can include assigning costs to each of the major phases of the work
flow to help identify costs that may be hidden in the activities of the production process. Traditional cost-
accounting systems do not store data in process terms; they identify costs according to categories of
expense, such as salaries, fixed costs, and supplies. This method of cost accounting can he misleading and
can result in erroneous conclusion about how best to reduce costs.
For example, the material control department at a Dana Corporation plant in Plymouth, Minnesota,
changed from a traditional to a process-based accounting system. The traditional accounting system
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showed that salaries and fringe benefits accounted for 82 percent of total costs--an assessment that
suggested workforce downsizing was the most effective way to lower costs. The process-based accounting
system revealed a different picture, however: it showed that 44 percent of the department's costs involved
expediting, resolving, and reissuing orders from suppliers and customers. In other words, almost half of
their costs were associated with reworking deficient orders.
Business processes also can be assessed in terms of value-added activities the amount of value contributed
to a product or service by a particular step in the process. For example, as part of its invoice collection
process, Corky's Pest Control, a small service business dependent on a steady stream of cash payments,
provides its customers with a sell-addressed, stamped envelope. Although this adds an additional cost to
each account, it more than pays for itself in customer loyalty arid retention, and reduced accounts
receivables arid late payments handling. Conversely, Organizations often engage in process activities that
have little or no added value. For instance, in a Denver hospital an employee on each workshift checked a
pump that circulated oxygen. Eight years earlier, the pump had failed and caused a death. Since that time, a
new pump had been installed with fault-protection equipment and control sensors that no longer required
the physical inspection. Yet because of habit, the checking process remained in place and drained resources
that could be used more productively in other areas.
b. Define performance objectives. Challenging performance goals are set in this step. The highest
possible level of performance for any particular process is identified, and dramatic goals are set for speed,
quality, cost, or other Inca- sores of performance. These standards can derive from customer requirements
or from benchmarks of the best practices of industry leaders. For example, at Andersen Windows, the
demand for unique window shapes pushed the number of different products from 28,000 to more than
86,000 in 1991. The pressure on the shop floor for a "batch of one" resulted in 20 percent of all shipments
containing at least one order discrepancy. As part of its reengineering effort, Andersen set targets for ease
of ordering, manufacturing, and delivery. Each retailer and distributor was sold an interactive,
computerized version of its catalogue that allowed customers to design their own windows. The resulting
design is then given a unique "license plate number" and the specifications are sent directly to the factory.
By 1995, new sales had tripled at some retail locations, the number of products had increased to 188,000,
and fewer than one in two hundred shipments had a discrepancy.
c. Design new processes. The last task in this third step of reengineering is to redesign current business
processes to achieve breakthrough goals. It often starts with a clean sheet of paper and addresses the
question "If we were starting this company today, what processes would we need to create a sustainable
competitive advantage?" These essential processes are then designed according to the following guidelines:
·  Begin and end the process with the needs and wants of the customer.
·  Simplify the current process by combining and eliminating steps.
·  Use the "best of what is" in the current process.
·  Attend to both technical and social aspects of the process.
·  Do not be constrained by past practice.
·  Identify the critical information required at each step in the process.
·  Perform activities in their most natural order.
·  Assume the work gets done right the first time.
·  Listen to people who do the work.
An important activity that appears in many successful reengineering efforts is implementing "early wins" or
"quick hits." Analysis of existing processes often reveals obvious redundancies and inefficiencies for which
appropriate changes may be authorized immediately. These early successes can help generate and sustain
momentum in the reengineering effort.
4. Restructure the organization around the new business processes. This last step in
reengineering involves changing the organization's structure to support the new business
processes. This endeavor typically results in the kinds of process-based structures that were
described earlier in this chapter. An important element of this restructuring is implementing new
information and measurement systems that reinforce a shift from measuring behaviors, such as
absenteeism and grievances, to assessing outcomes, such as productivity, customer satisfaction, and
cost savings. Moreover, information technology IS one of the key drivers of reengineering because
it can drastically reduce the cost and time associated with integrating and coordinating business
processes.
Table of Contents:
  1. The Challenge for Organizations:The Growth and Relevance of OD
  2. OD: A Unique Change Strategy:OD consultants utilize a behavioral science base
  3. What an “ideal” effective, healthy organization would look like?:
  4. The Evolution of OD:Laboratory Training, Likert Scale, Scoring and analysis,
  5. The Evolution of OD:Participative Management, Quality of Work Life, Strategic Change
  6. The Organization Culture:Adjustment to Cultural Norms, Psychological Contracts
  7. The Nature of Planned Change:Lewin’s Change Model, Case Example: British Airways
  8. Action Research Model:Termination of the OD Effort, Phases not Steps
  9. General Model of Planned Change:Entering and Contracting, Magnitude of Change
  10. The Organization Development Practitioner:External and Internal Practitioners
  11. Creating a Climate for Change:The Stabilizer Style, The Analyzer Style
  12. OD Practitioner Skills and Activities:Consultant’s Abilities, Marginality
  13. Professional Values:Professional Ethics, Ethical Dilemmas, Technical Ineptness
  14. Entering and Contracting:Clarifying the Organizational Issue, Selecting an OD Practitioner
  15. Diagnosing Organizations:The Process, The Performance Gap, The Interview Data
  16. Organization as Open Systems:Equifinality, Diagnosing Organizational Systems
  17. Diagnosing Organizations:Outputs, Alignment, Analysis
  18. Diagnosing Groups and Jobs:Design Components, Outputs
  19. Diagnosing Groups and Jobs:Design Components, Fits
  20. Collecting and Analyzing Diagnostic information:Methods for Collecting Data, Observations
  21. Collecting and Analyzing Diagnostic information:Sampling, The Analysis of Data
  22. Designing Interventions:Readiness for Change, Techno-structural Interventions
  23. Leading and Managing Change:Motivating Change, The Life Cycle of Resistance to Change
  24. Leading and managing change:Describing the Core Ideology, Commitment Planning
  25. Evaluating and Institutionalizing Organization Development Interventions:Measurement
  26. Evaluating and Institutionalizing Organization Development Interventions:Research Design
  27. Evaluating and Institutionalizing Organization Development Interventions
  28. Interpersonal and Group Process Approaches:Group Process
  29. Interpersonal and Group Process Approaches:Leadership and Authority, Group Interventions
  30. Interpersonal and Group Process Approaches:Third-Party Interventions
  31. Interpersonal and Group Process Approaches:Team Building, Team Building Process
  32. Interpersonal and Group Process Approaches:Team Management Styles
  33. Organization Process Approaches:Application Stages, Microcosm Groups
  34. Restructuring Organizations:Structural Design, Process-Based Structures
  35. Restructuring Organizations:Downsizing, Application Stages, Reengineering
  36. Employee Involvement:Parallel Structures, Multiple-level committees
  37. Employee Involvement:Quality Circles, Total Quality Management
  38. Work Design:The Engineering Approach, Individual Differences, Vertical Loading
  39. Performance Management:Goal Setting, Management by Objectives, Criticism of MBO
  40. Developing and Assisting Members:Career Stages, Career Planning, Job Pathing
  41. Developing and Assisting Members:Culture and Values, Employee Assistance Programs
  42. Organization and Environment Relationships:Environmental Dimensions, Administrative Responses
  43. Organization Transformation:Sharing the Vision, Three kinds of Interventions
  44. The Behavioral Approach:The Deep Assumptions Approach
  45. Seven Practices of Successful Organizations:Training, Sharing Information