Flexible Organizations: Using Organizational Design as a Competitive Advantage

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Flexible Organizations Versus Traditional Organizations

If global, turbulent markets require organizations to be flexible adopting whatever configuration is needed, then executives, academicians, and consultants must rethink current value judgments - judgments that imply flattened organizations are "good" and hierarchical organizations are "bad." Hierarchical organizations are becoming synonymous with the inefficiencies of a poorly run bureaucracy. Flattened organizations are becoming the paragon of virtue, although no significant studies have proven that they outperform well-run hierarchies. Indeed, the emphasis has shifted from managing and leading to creating teams and allowing them to find the secret to good management. What organizations are learning, however, is that no matter how the organization is configured, there is no substitute for good management.

If nothing else, believing that flattened organizations are the answer to survival is a cultural trap. Americans are creating flattened organizations which meet their unspoken cultural assumptions about relationships, authority, and creativity. Flattened organizations resemble the American cultural dream of equality and fairness, creating a society in which anyone, regardless of background, can succeed and find happiness. Many other cultures, however, do not share these values and find flattened organizations a chaotic, non-productive way to work (Carroll, Delacroix, and Goodstein, 1990).

The concept of flexible organizations avoids this cultural trap and current bias that one organizational design is better than the other. It avoids overtones of political correctness and refocuses the issue on what works best. This concept uses bottom line measures, such as market share, profitability, key operating ratios, and customer satisfaction measures to decide which design performs better, making performance the key issue for the organization.

So, the design questions become which organizational design performs better in a particular market and location, and which design best enhances the company's core competencies - the employees' intellectual and physical capabilities that the company uses for competitive advantage. The executive's operating focus becomes how to create congruency - the fit among all organizational components consistent to the chosen organizational design - so that the organization is the most efficient.

Like any other philosophical shift, the implications for leading, guiding, and managing organizations are immense. Exhibit #1 illustrates how the key constructs of organization leadership might shift from a traditional organizational design approach to the flexible organization approach.

Executive Focus

In the traditional organization, executives associate organizational design with management style. Executives who have good interpersonal skills, are comfortable with delegating, and enjoy the intellectual challenge of a healthy debate, favor flatter, more participative designs. Executives who have a high need for control, a genius for detail and a strong ability to organize, prefer hierarchical, closely managed configurations. Debates among the differing styles are often endless and pointless, for the argument regresses into one of personal preference.

In the flexible organization, organizational design is an internal business strategy issue, equally important to developing the corporate strategy. Just as executives ask "what is the best strategy to succeed in a market," they also must ask "what is the best organizational design to align the work force with the corporate strategy?" [TABULAR DATA FOR EXHIBIT 1 OMITTED] The executive focus remains strategic, searching for the organizational configuration that will gain a competitive advantage for the corporation or strategic business unit.

Design Preference

Traditional organization executives frequently overlook the importance of organizational design. They tend to view organizations mechanistically, focusing on the pieces rather than the whole. They adjust or align organizational components, such as reward systems or measures, and ignore the changes in other components caused by the realignment. Their management experience has taught them to focus more on refining the parts rather than the whole. They replicate other companies' designs because they do not understand how to redesign theirs. They make the mistake of assuming that an organizational design that works well for a market leader in their industry or a similar industry, will work in their company.

Flexible organization executives are more innovative, preferring organization configurations based on several factors. They examine their company's market needs, the host country's culture, the competitors and the nature of the industry, and the core competencies. They assess how different organizational designs can provide a competitive advantage in differing scenarios. In short, they manage organizational design as they manage any other aspect of their organizations, as an strategic initiative that needs to be revisited regularly to ensure that it is contributing maximum value to the corporations' performance.

Change Strategy

To create flexibility, executives not only need to understand the process of change, but the strategy of change (Van De Ven and Poole, 1995). The steps in strategizing change are:

* Determine and select the organizational design that best matches the corporate strategy (alignment),

* Assess whether the organization's employees can work well in the preferred design, and

* Develop an action plan (strategy) on how to …