Organisational Design

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Nine tests of organisation design
The weight of research and insight into organisational design is heavy and growing. Michael Goold and Andrew Campbell cut through the complexity and emerge with a new approach to organisation design which includes a rigorous framework for design choices based on nine key tests of organisational effectiveness. Michael Goold is a director of the Ashridge Strategic Management Centre. His research interests are concerned with corporate strategy and the management of multi-business companies, and he runs the Centre’s programme on Group Level Strategy. Product-market strategies

What are the factors that should guide the choice of organisation design? There are many managerial rules of thumb about things such as spans of control and reporting relationships. In addition, academics and consultants have produced a huge amount of work on organisation design. But our research told us that managers still lack a practical

and systematic framework to guide their organisation choices. An important purpose of our work has been to condense previous ideas on organisation design into a few core principles, on which to base a usable framework. Less an intellectual triumph than a practical checklist for addressing the most important issues,

FIGURE 1: FRAMEWORK FOR ORGANISATION DESIGN

GOOD DESIGN PRINCIPLES

Specialisation principle

Email: michael.goold
Corporate strategy

Co-ordination principle

@ashridge.org.uk ORGANISATION DESIGN
People Control and commitment principle Knowledge and competence principle

Constraints

Innovation and adaptation principle

4
DIRECTIONS

FIT DRIVERS

www.ashridge.com/directions

The Ashridge Journal Summer 2002

Ashridge Business School

http://www.ashridge.org.uk

FIGURE 2: NINE TESTS FOR ORGANISATIONAL DESIGN

Product-market strategies

GOOD DESIGN TESTS
Specialist cultures test
Specialisation principle

Andrew Campbell is a director of the Ashridge Strategic Management Centre and visiting professor at City University. Previously Redundant hierarchy test
Knowledge and competence principle

Market advantage test

Corporate strategy

Difficult links test
Co-ordination principle

Parenting advantage test

ORGANISATION DESIGN
People

he was a Fellow in the Centre for Business Strategy

People test Accountability test
Constraints Control and commitment principle

at the London Business School, and a consultant at

Feasibility test Flexibility test

FIT TESTS

Innovation and adaptation principle

McKinsey & Co.

Email: andrew.campbell

our framework is grounded on some basic principles. The first and most important, the fit principle, embraces four drivers of fit – productmarket strategies, corporate strategies, people and constraints. The other good design principles are the specialisation principle, the co-ordination principle, the knowledge and competence principle, the control and commitment principle, and the innovation and adaptation principle (Figure 1). The principles are broad in nature and not always easy to convert into prescriptive guidance. They are more valuable in orienting managers than

in resolving particular organisational dilemmas. However, as we worked with the principles, we found ways to convert them into some practical tests. Perhaps the most important contribution of this lies in the insights and understandings that the tests produce. The tests match the fit drivers and the good design principles. (See Figure 2).

@ashridge.org.uk

The fit tests
One almost universally agreed proposition is that organisations need to be fit for purpose. Strategy, 5
DIRECTIONS

www.ashridge.com/directions

The Ashridge Journal Summer 2002

Ashridge Business School

http://www.ashridge.org.uk

Nine tests of organisation design

therefore, should be a key driver of organisation design, and we have found it useful to distinguish between product-market strategies and...
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