Design Strategies
The ability of an organization to successfully utilize coordination bygoal setting, hierarchy, and rules depends on the combination of the frequencyof exceptions and the capacity of the hierarchy to handle them. As the taskuncertainty increases the organization must again take organization designaction. It can proceed in either of two general ways. First, it can act in twoways to reduce the amount of information that is processed. And second, theorganization can act in two ways to increase its capacity to handle more in-formation. The two methods for reducing the need for information and thetwo methods for increasing processing capacity are shown schematically inFigure 1. The effect of all these actions is to reduce the number of exceptional
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cases referred upward into the organization through hierarchical channels.The assumption is that the critical limiting factor of an organizational form isits ability to handle the non-routine, consequential events that cannot beanticipated and planned for in advanced. The non-programmed events placethe greatest communication load on the organization.
1. Rules and Programs2. Hierarchical Referral3. Goal Setting4. Creation of Slack Resources5. Creation of Self-Contained Tasks6. Investment in Vertical information\ Systems7. Creation of Lateral Relations Reduce the Need for Information Processing Increase the Capacity to Process Information Figure 1. Organization Design Strategies
1. Creation of Slack Resources
As the number of exceptions begin to overload the hierarchy, one re-sponse is to increase the planning targets so that fewer exceptions occur. Forexample, completion dates can be extended until the number of exceptionsthat occur are within the existing information processing capacity of theorganization. This has been the practice in solving job shop scheduling prob-lems [Pounds, 1963]. Job shops quote delivery times that are long enough tokeep the scheduling problem within the computational and information pro-cessing limits of the organization. Since every job shop has the same problemstandard lead times evolve in the industry. Similarly budget targets could beraised, buffer inventories employed, etc. The greater the uncertainty, thegreater the magnitude of the inventory, lead time or budget needed to reducean overload.
All of these examples have a similar effect. They represent the use ofslack resources to reduce the amount of interdependence between subunits[March and Simon, 1958, Cyert and March, 1963]. This keeps the requiredamount of information within the capacity of the organization to process it.Information processing is reduced because an exception is less likely to occurand reduced interdependence means that fewer factors need to be consideredsimultaneously when an exception does occur.
The strategy of using slack resources has its costs. Relaxing budget targetshas the obvious cost of requiring more budget. Increasing the time to comple-tion date has the effect of delaying the customer. Inventories require theinvestment of capital funds which could be used elsewhere. Reduction of de-sign optimization reduces the performance of the article being designed.Whether slack resources are used to reduce information or not depends on therelative cost of the other alternatives.
The design choices are: 1) among which factors to change (lead time,overtime, machine utilization, etc.) to create the slack, and 2) by what amount
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should the factor be changed. Many operations research models are useful inchoosing factors and amounts. The time-cost trade off problem in projectnetworks is a good example
The ability of an organization to successfully utilize coordination bygoal setting, hierarchy, and rules depends on the combination of the frequencyof exceptions and the capacity of the hierarchy to handle them. As the taskuncertainty increases the organization must again take organization designaction. It can proceed in either of two general ways. First, it can act in twoways to reduce the amount of information that is processed. And second, theorganization can act in two ways to increase its capacity to handle more in-formation. The two methods for reducing the need for information and thetwo methods for increasing processing capacity are shown schematically inFigure 1. The effect of all these actions is to reduce the number of exceptional
--------------------------------------------------------------------------------
Page 3
cases referred upward into the organization through hierarchical channels.The assumption is that the critical limiting factor of an organizational form isits ability to handle the non-routine, consequential events that cannot beanticipated and planned for in advanced. The non-programmed events placethe greatest communication load on the organization.
1. Rules and Programs2. Hierarchical Referral3. Goal Setting4. Creation of Slack Resources5. Creation of Self-Contained Tasks6. Investment in Vertical information\ Systems7. Creation of Lateral Relations Reduce the Need for Information Processing Increase the Capacity to Process Information Figure 1. Organization Design Strategies
1. Creation of Slack Resources
As the number of exceptions begin to overload the hierarchy, one re-sponse is to increase the planning targets so that fewer exceptions occur. Forexample, completion dates can be extended until the number of exceptionsthat occur are within the existing information processing capacity of theorganization. This has been the practice in solving job shop scheduling prob-lems [Pounds, 1963]. Job shops quote delivery times that are long enough tokeep the scheduling problem within the computational and information pro-cessing limits of the organization. Since every job shop has the same problemstandard lead times evolve in the industry. Similarly budget targets could beraised, buffer inventories employed, etc. The greater the uncertainty, thegreater the magnitude of the inventory, lead time or budget needed to reducean overload.
All of these examples have a similar effect. They represent the use ofslack resources to reduce the amount of interdependence between subunits[March and Simon, 1958, Cyert and March, 1963]. This keeps the requiredamount of information within the capacity of the organization to process it.Information processing is reduced because an exception is less likely to occurand reduced interdependence means that fewer factors need to be consideredsimultaneously when an exception does occur.
The strategy of using slack resources has its costs. Relaxing budget targetshas the obvious cost of requiring more budget. Increasing the time to comple-tion date has the effect of delaying the customer. Inventories require theinvestment of capital funds which could be used elsewhere. Reduction of de-sign optimization reduces the performance of the article being designed.Whether slack resources are used to reduce information or not depends on therelative cost of the other alternatives.
The design choices are: 1) among which factors to change (lead time,overtime, machine utilization, etc.) to create the slack, and 2) by what amount
--------------------------------------------------------------------------------
Page 4
should the factor be changed. Many operations research models are useful inchoosing factors and amounts. The time-cost trade off problem in projectnetworks is a good example
