Authors:

ANNA GRANDORI & GIUSEPPE SODA

Industry and Innovation,
Vol. 13, No. 2, 151172, June 2006

PRESENTED BY:
MUHAMMAD ISHTIAQ ISHAQ
Criticizes organization forms as discrete alternatives and
coherent set attributes.
Proposes model with coordination mechanisms and rights
allocations
Quantitative methods of network analysis as applied to
relations among firms resources and activities.
Field experiment in a medium size firm
Available approaches to organizational design share various
limits that a relational approach can contribute to overcome.
Limits are:
Design is intended as a process of choice between known discrete
forms rather than as a process of the search for forms devised ad
hoc to solve specific problem.
Start with independent variables considered as given and
typically assumes one-to-one correspondence between the state of
independent variables and the superior form.
based on observed forms rather than on criteria for developing
forms
The prevailing criterion for choosing an organization structure is
information cost reduction, with little acknowledgment of
knowledge as a distinct input to organization design




Theoretically, the approach is based on an integration
classic contingency theory,
Transaction cost economics
Resource-based and knowledge-based organizational
analyses
complementarity-based design and
Relational view of organization forms
Initial collection of resources and activities exists (Nodes).
The appropriate unit of analysis in organization design
should lie within the following lower and upper bounds:
Technical inseparability sets a lower bound
Nodes should include only similar activities or resources that
generates complementarities and need for coordination.
A heuristic of relative elementarity provides an upper bound:
nodes should in any case be more elementary sub-systems
with respect to the system of activity that is to be designed

Complementarities among specialized resources give rise to
different types of interdependence and only
interdependent activities need to be coordinated.
Two basic configurations can be distinguished:
Complementary resources are pooled to generate activities;
activities are interdependent because they use the same
resource pool, that is, they have a common input
(resourcebased or pooled interdependence);
Complementary activities perform operations that increase
the value of resources; they can do so in a sequence, whereas
activities are interdependent because they exchange
resources (transactional or sequential interdependence), or
they can do so in parallel.
The two design criteria used are:
The likelihood of bringing about any Pareto-improvement in
outcomes, or, rather of producing errors and mis-adaptations.
The speed and cost of the process of adjustment (a
coordination cost criterion).
If the supply of resources is unlimited with respect to
the demand of activities, and the best use of resources
in the various activities is known and stable, then no
information-based coordination is needed: no price
for signaling the relative economy in the use of
resources is to be made, no program to indicate what
activity should be performed when, no communication
and decision device for adjusting the content of any
activity to that of any other
Uses network analysis as a procedure for organization
design.
This perspective brings network analysis and organization
design closer, classic independent variables of organization
design can be seen as networks of tasks and resources, and
dependent variables as combinations (networks) of
coordination mechanisms.
In addition, the repertory of measures of network
structurecentrality, density, structural equivalence,
connectivity, structural holescan be thought of as
indicators of some of the traditional dimensions of
organizational structure centralization, lateral all to all
integration, substitutability, decomposability and linking
pin-based integration.
The general measures of network connectivity are also
informative about the overall level of interdependence in
the system. We shall consider density measures (the
number of actual links on the total number of potential
links) and transitivity measures (the number of sets of
three nodestriplesthat are actually connected, on the
total number of potentially connected triples).

In particular, transitivity measures allow to asses whether
interdependencies are predominantly linear (suggesting
that the network is chain shaped); or rich in cycles and re-
cycles (suggesting that the network is a web).
Medium sized Italian company, called Mobil Green S.p.A.

Once resource and activity nodes have been identified,
interdependences can be assessed.
For each pair of activities one or more values of
interdependence have been assigned, measuring the level
of interdependence of either transactional or resource-
based origin.
In this specific case, we have found four types of
interdependence relations, characterized by Q-uncertainty,
by resource-constrained Q-uncertainty, by C-uncertainty
and by resource-constrained A-uncertainty.
The second step of the relational procedure is the
assessment of the current coordination mechanisms used
in the company.
The method used is a correlation analysis between
interdependence matrices and coordination matrices to
detect sub-optimal matches.
For each coordination mechanism described in the theory
section computed an activity by activity matrix where if Xij
is equal to 1 the mechanism is used to coordinate I and j
activities; Xij takes value 0 if the mechanism is not used.
To evaluate the degree of match between
interdependencies and actual coordination mechanisms
researchers computed a QAP analysis among the matrices.
But let us control it further by comparing these highly
interdependent activities for each pair, the actual
mechanisms used by Mobil Green and the prescribed
superior mechanisms.
After analyses, not only A-uncertain constrained links are
under-coordinated by slack and queues, procedures or
simple communications; but also some of them are
overcoordinated by all-to-all negotiations.

The approach to organization design presented here is
based on a procedure, not on a repertory of alternative
forms which allows solving new design problems, to devise
structures in new fields where no repertory exists and to
solve complicated organizational problems.
The devised organizational arrangement is a nexus of
overlaid multiple coordination mechanisms which is
consistent with the proposition that as sources of
complexity add up in a relation, the larger and more mixed
the superior set of coordination mechanisms should
become.
Third, the superior model of specialization and division of
labor is also often mixed: some units are and should be
partitions of tasks, while other units are and should be
partitions of resources.
Fourth, to the extent that coordination networks do follow
the patterns of complementarity and interdependence
among activities and resources, they should not be
expected to be necessarily denser within firms.
The boundaries of property rights over assets are sensitive
to partially different considerations than the boundaries of
tightly coupled coordination.
Finally, further steps in developing generative and
relational approaches to design can be taken. In the
approach presented here, the nodes of networks are
resources and activities.
A further step would be to consider mechanisms
themselves as nodes and to study the interactions among
mechanisms themselves, that is, their relations of
complementarity, substitutability, preferential attachments
and the like, through relational and network methods.

That would lead to a relational approach to organization
and organization design in an even stronger sense than the
one advanced here.