Using Organizational Architecture to Lead Change

11 Pages Posted: 4 Jul 2009

See all articles by James A. Brickley

James A. Brickley

University of Rochester - Simon Business School

Clifford W. Smith

Simon Graduate School of Business, University of Rochester

Jerold L. Zimmerman

University of Rochester - Simon Business School

Abstract

Finally, the authors apply the framework to another important leadership issue: corporate ethics. In response to the scandals of the past decade and the passage of Sarbanes-Oxley, many U.S. companies have issued formal codes of conduct, appointed ethics officers, and instituted training programs in ethics. But a key question for top management is whether the incentives established by the firm's organizational architecture reinforce or undermine the code of conduct. In this sense, ensuring consistency in organizational design is an important leadership function - one that is critical to encouraging ethical behavior as well as the pursuit of shareholder value. This organizational framework is especially useful for evaluating the likely effects of major corporate initiatives such as “Six Sigma” or the “Balanced Scorecard.” For example, it could be used to help top management determine whether, and under what circumstances, decentralization is likely to improve decision-making and performance, as well as the changes in the firm's performance management and incentive systems that would be required to make decentralization work. The authors illustrate the application of this framework with the case of Xerox's (eventually) successful attempt to create a customer-oriented workforce in the 1980s. But a more effective demonstration of the importance of these principles, as the authors go on to suggest, might well be the same company's well-known failure to realize the commercial promise of the many inventions by its research group in Palo Alto. Effective leadership involves more than developing and communicating the right strategic vision for the company. To encourage employees to carry out the corporate vision, companies must ensure consistency among the following three main components of their “organizational architecture:”

The authors illustrate the application of this framework with the case of Xerox's (eventually) successful attempt to create a customer-oriented workforce in the 1980s. But a more effective demonstration of the importance of these principles, as the authors go on to suggest, might well be the same company's well-known failure to realize the commercial promise of the many inventions by its research group in Palo Alto.

This organizational framework is especially useful for evaluating the likely effects of major corporate initiatives such as “Six Sigma” or the “Balanced Scorecard.” For example, it could be used to help top management determine whether, and under what circumstances, decentralization is likely to improve decision-making and performance, as well as the changes in the firm's performance management and incentive systems that would be required to make decentralization work.

Finally, the authors apply the framework to another important leadership issue: corporate ethics. In response to the scandals of the past decade and the passage of Sarbanes-Oxley, many U.S. companies have issued formal codes of conduct, appointed ethics officers, and instituted training programs in ethics. But a key question for top management is whether the incentives established by the firm's organizational architecture reinforce or undermine the code of conduct. In this sense, ensuring consistency in organizational design is an important leadership function - one that is critical to encouraging ethical behavior as well as the pursuit of shareholder value.

Suggested Citation

Brickley, James A. and Smith, Clifford W. and Zimmerman, Jerold L., Using Organizational Architecture to Lead Change. Journal of Applied Corporate Finance, Vol. 21, No. 2, pp. 58-66, Spring 2009. Available at SSRN: https://ssrn.com/abstract=1428129 or http://dx.doi.org/10.1111/j.1745-6622.2009.00226.x

James A. Brickley (Contact Author)

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-160L
Rochester, NY 14627
United States
585-275-3433 (Phone)
585-442-6323 (Fax)

Clifford W. Smith

Simon Graduate School of Business, University of Rochester ( email )

Carol Simon Hall 3-202C
Rochester, NY 14627
United States
585-275-3217 (Phone)
585-442-6323 (Fax)

Jerold L. Zimmerman

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States
585-275-3397 (Phone)
585-442-6323 (Fax)

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