Overview All successful designs must stem from the enterprise’s strategic objectives. Whether the processes used are formal or informal is immaterial as long as the aforementioned condition is met. The more complex the business, strategy and objectives, the more formal the design process should be to ensure a successful outcome. Despite this well known fact many design efforts are often conducted with an ad-hoc process involving a few senior executive using little analysis or alignment with strategy. The outcome of these efforts is normally poor. A classic example is the redesign of General Motors in 1984. The STAR model (fig. 6.5) is a design framework developed by Jay R. Galbraith a renowned organizational design expert. It has become the cornerstone by which to think about design and has 5 elements: Strategy, Structure, Processes, Rewards and People. By using the STAR methodology Designers begin with well defined success factors. The first and most critical element is strategy. An enterprises strategy sets the direction the firm will pursue over a defined period of time often 3-5 years. Much has been written about strategy much of it in the 1980’s and the best treatise of the topic offered by Michael Porter at Harvard. The basis of Porter’s teaching is a successful strategy must be informed by 5 specific choices: What are our aspirations? Where will we play? How will we win? What capabilities must be in place to succeed? What management systems are required?
Each of these questions must be carefully answered before a design can be contemplated. It’s easy to understand why a design can only be as effective as the strategy from which it is derived. Once the strategic objectives are clear and the choices affirmed can the Designer then address what structures are possible. Structure simple determines the location of decision-making power. This is a critical feature of any design since decision making authority determines how resources will be used to achieve specific objectives yielding results which create value and value is the core of the enterprise’s existence. Decision making itself is a complex subject involving very carefully defined rules, often termed decision rights, where certain individuals within an organization have the right to make the final decision, opine on a decision or have no opinion at all.
Benedictine University Organizational Design, MGMT 553A The STAR Model S. A. Di Biase, Ph.D.
Well defined decision rights combined with a design aligned well with strategy provide the basis of a successful organization. Following strategy and structure are processes. Processes are the methods by which decisions are communicated and implemented effecting how the organization does work. Vertical processes, or those that move top to bottom in an organization, allocate resources such as money and people. Outputs form vertical processes are items like the budget and annual plan. Horizontal processes are those by which the direction from vertical processes are implemented to do the work such as new product development, performance evaluation etc. The final elements of the STAR model are rewards and people. Rewards and people are intimately linked in driving behavior of the people who actually do the work creating the value which sustains the organization. Rewards are outcomes which shape behavior of individuals working within a given design and must be carefully aligned with the strategy, structure and processes to be effective. For instance, if the rewards system drives behaviors which are incongruent with strategy then people will behave in their own self interest which could be at odds with the best interests of the company. In today’s fast changing business climate, processes, rewards and people are becoming more critical than structure. Strategy is always dominate but where flexibility and speed...