Tuesday, 15 December 2009

Network Organisations

I came across this introductory article online. It's a useful thought provoker about organisational structures .....

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Organisational Design for Delivering Profitable Projects

"The typical twentieth-century organisation has not operated well in a rapidly changing environment. Structure, systems, practices, and culture have often been more of a drag on change than a facilitator. If environmental volatility continues to increase, as most people now predict, the standard organisation of the twentieth-century will likely become a dinosaur."
- John P Kotter

Organisational structures change with the changing business and social environment. Increasingly, organisations are project-based, expanding and contracting as projects of different sizes come and go. In some cases the organisation exists only for one major project, eg a film production. However in most cases there is a core organisation which continues between projects, and indeed holds the projects together. The individual projects are not only tied together administratively but more importantly are linked in terms of a central business strategy, charitable purpose or artistic mission. The core organisation selects projects strategically to fit its mission and core skills. In this way, synergies are achieved.

To work effectively in the project-based environment, organisations need to take on new forms. The traditional steady-state company with a fixed number of employees and a traditional hierarchical structure is not suited to this new environment. Instead, new models are emerging. Broadly speaking, we can call these new forms Network Organisations.

The old hierarchical pyramid which suits industrial age companies is not the most efficient way to manage knowledge-based companies. The 'wiring' of information-age organisations needs to be different and more complex. This has given rise to the concept of the Network Organisation. The characteristics of a network organisation are: 
- Independent teams
- Departments which share common values
- Projects which support each other
- Multiple links between projects
- Information and Communications Technology is used to connect the projects.
- There is a key co-ordinating role for the Chief Executive to construct the teams and manage the interrelationship of projects (a kind of 'air traffic control').

An example of a networked organisation is Asea Brown Boveri. This giant corporation split its business into 1,300 companies as separate and distinct business units. All the energy and resources of the corporate centre are then geared to facilitating cross-company co-operation, with computer networks and knowledge sharing being at the centre of this process. Another company is Thermo-Electron, where 80% of staff work for group companies called 'spin-outs'.

Note: This web page is not intended to provide comprehensive coverage of the subject, merely a brief introduction to provoke thought and to lead to a more in depth understanding and application of the topic, either through further reading - or from me as your management consultant, executive trainer or personal coach in a consultancy project, training course, workshop or seminar.

References and Further Reading

Front Cover

Kotter, John P. Leading Change. Harvard Business School Press. 1996.

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