Organization Design

Dr. Sourav Mukherjee

Module - 1
Title - Introduction to Organization Design

In this course, we are going to talk about Organization Design. So, the first question that
we need to answer, is what exactly is organizational design? For the time being, let us
understand design, as a key enabler of organization strategy. I guess all of you
understand what a strategy is. But let me simplify that a little bit for you. All
organizations exist for creating value for its stakeholders.

Who are these stakeholders? They are the owners or the investors, they’re the customers
or the clients and they are the employees. There may be others, but let us focus on these
three categories. Now strategy refers to what the organization is going to do, to create
value for its stakeholders. If that is what strategy is, then organization design tells you
how should organizations go about creating value for its stakeholders in a sustainable
manner.

When we talk about value creation, it can happen in a variety of ways. For example,
pharmaceutical companies create value by inventing new drugs. But there are also a lot
of other pharma companies in India especially, who create value by manufacturing low-
cost generic drugs. Think of emergency ambulance services, which create value by rapid
response to a patient in need.

Finally, if you think of GE Medical, they create value by designing high quality medical
equipment. Now, all of the above organizations whether it is the pharmaceutical
companies or the emergency ambulance services, GE Medical need to worry about the
design of their organizations in order to sustain themselves.

If I have to be a innovator, I need to design my organization in a way so, that people are
always experimenting they are trying to come up with new drugs and they are also not
very afraid to fail; because one of the important aspect of invention is living with
failures. But if I have to rapidly respond to a patient in need, I cannot sit an experiment, I
will need to have systems and processes.

So, that as soon as I hear the call for help, my people, my equipment, my car, everything
should be ready to reach the patient and give him or her the emergency support that is
needed. So, that is exactly what we will do in this particular course. We will look at how
organizations create value, from the healthcare sector. And then we will step back and

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 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Introduction to Organization Design

ask ourselves, if we want to create this value, then what is the best way of designing
ourselves, designing this organization.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means
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 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Linking Design with Strategy

Now, let us try to understand this design aspect in a slightly greater depth. First and
foremost, when we are talking of organization design we are talking of employees, we
are talking of people. In other words, we are talking of human resources. Now one of the
interesting aspect of people or human resources is about their diversity. By the term
diversity here I mean diversity of thoughts, ideas, values and perspectives.

This is not necessarily the diversity that we imply through gender or caste, but we
believe that when we have people from multiple genders, when we have people from
multiple economic background then they all bring in diversity of thoughts and ideas. So,
let us start thinking about it for a while.

We have lot of people coming and joining organizations who have a very different way
of thinking. They have different kind of abilities and we need all their work in order to
achieve the strategy of the organization; that is something that we call as unity of effort.
So, there is a paradox in organization.

While we have people coming from different varieties, different kinds of people with
different skills in your own industry, you will have people who are highly qualified as
doctors, there are physiotherapists, there are nursing staff, there are administrators who
need to run the hospitals, there are innovators who are working on equipment, but if you
are running an organization, be it a hospital, be it a pharmaceutical enterprise or be it any
other service you need to focus their efforts.

So, that the organization strategy is achieved. So, the challenge is that how do I harness,
how do I leverage this diversity to achieve unity of effort. So, in plain and simple terms,
all that stuff that we do in organizations with people. So, that we take advantage of their
diversity to achieve organizational strategy or organizational objective is what design is
about. Design comprises three elements.

The first one is structure. What does structure do? Structure tells us who reports to
whom? Which particular department should be reporting to which particular department
head? Should we have an overall CEO? Should we have business unit heads? Should we
have functional heads? What is their responsibility? If I want to purchase something how
much money can I spend? Or do I need to get an approval which effectively means
decision making rights?
© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
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 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Linking Design with Strategy

All of these are part of organization structure. Most organizations will represent the
structure in a diagram called organogram. Bigger the organization, more complex the
organogram becomes. I would not be surprised if an organization of the size of 300 or
400 is unable to represent their organogram in a piece of paper, but at least we know that
who reports to whom? What are those boxes? What are those lines?

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
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 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Dimensions of Design

Apart from structure, we also have a lot of rules and regulations and processes in
organizations. So, that is the second dimension of design. How do I source my raw
material? How do I manage my inventory? How do I move my patient from one
specialization to another? What do I do, in case I want to understand how to come up
with a new medicine?

What is the process of conducting clinical trials? Any organization that you look at, will
have lots and lots of rules and regulations, processes, sometimes people will call them a
standard operating procedures, maybe you can call them protocols. But organizations are
based on these rules. Come to think of it, the term organization is derived from the term
to organize and moment we are talking about to organize, there will have to be rules,
regulations and processes.

So, that is my second-dimension structure and process. But you will realize, that not
everything that we want to do in an organization can be written down in a piece of paper
as a rule; neither can it be drawn as boxes or lines. There is plenty in organization that
we need to understand as norms. This is what we believe, this is what is accepted in this
organization.

All of that stuff, which as employees we follow in organizations but, which are not
necessarily written in a piece of paper falls within the domain of organization culture.
So, as far as organization design is concerned, we will always talk about these three
elements; structure, process and culture. Think of them as three legs of a stool. You will
have to constantly keep them in synchronized with each other.

If you want to have an innovative organization, there has to be certain element of

structure, certain element of process, certain element of culture which should all come
together to excite your people to be innovative. If you want to be very efficient, then a
separate kind of structure, separate set of process, separate set of culture should
constantly guide them. So, that they are always very efficient, they are focused on cost
and they are serving the customer in a best possible manner.

So, structure, culture and process should always work in tandem with each other and that
is exactly what we are going to learn as we go along. To summarize, an organization

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means
– electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Dimensions of Design

design, takes advantage of the diversity of human beings or human resources in our
organization to achieve unity of effort and they do it by means of their structure, process
and culture.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means
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 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Ayurveda Online Case Debrief

In order to understand the link between strategy and design let us look at an interesting
case which is called Ayurveda Online. Now Ayurveda online is an entrepreneurial
organization which is founded by this boy Advaith, who has created a platform for
patients, to connect to ayurveda doctors and to procure medicines. The case will tell you
that after an year’s operation, Ayurveda has roughly a turnover of about 0.5 million
Indian rupees.

Now, what is happening is that in front of Advaith there are some growth options. You
will have to help Advaith to decide, which growth option he should pursue? Because
each of the growth options will need him to think carefully about, what he can do and
probably what he cannot do and then also try and think what kind of organization he is
going to build.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Solutions to Ayurveda Online

We can look at various growth options before Ayurveda online. Let us look at these 3
options, 1 it can tie up with retailers, number 2, it can tie up with reputed manufacturers
of Ayurveda products and number 3, it can geographically expand its current business
model. Now, what are the advantages and disadvantages of each of these?

As you know that the retailers are not really interested to sell only Ayurveda medicines.
So, if he wants to tie up with retailers he also needs to sell non medicinal Ayurveda
products which effectively means from a business standpoint that he has to diversify.
Now obviously, this is going to give him greater margins. Because if he has a formal tie
up with the retailers, they will pay him more.

But how is he going to sell non-medical Ayurveda products. Because today, it is his
doctors who are prescribing these medicines and there is a very direct link between the
doctors and what he is selling. Can he convince the doctors to even suggest non-medical
products? Will the ethics of the doctors allow them to do so. He also need to think
whether by tying up with retailers he will have to invest in distribution.

Will he have to stock products and naturally all of these will add to the complexity of his
business. In his second option, he can tie up with reputed manufacturers of Ayurveda
products. Now which means that he effectively becomes a retailer; obviously, this is
going to give him a pan India presence.

It will give him greater margins, because the manufacturer will be able to give him the
retailer far greater share of profits, but then he has to also diversify not only into non-
medical products, but into whole lot of other activities which may be distribution, which
may be looking at logistics, which naturally will need a lot of investment and moment
you are talking of investment you have to start thinking about how will I raise that
money?

The third option that he has is just to maintain his current business model, but go to other
geographies. On the face of it this might seem simple. But think about it for a while are
all markets the same is selling Ayurveda products very similar in Bangalore compared to
selling those products in Calcutta?

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Solutions to Ayurveda Online

At some level may be, but at another level now he needs to think about the peculiarities
of each of these geographies. Who are the doctors there? What kind of patients would
you typically have? Are there certain characteristics of the terrain itself which might
make certain delivery of products easy or difficult?

In effect, there is a need of local knowledge that is very important to run a business. How
is he going to get that local knowledge? Maybe he can tie up with somebody, maybe he
can go and recruit someone. What I have done so far is I have not given you any answer,
but I am trying to tell you that how each of the growth options will need Advaith to think
very deeply about what he wants to do and how he is going to implement the strategy
which he finally decides.

I will also leave you with one more question here, is there any other option apart from
these three?

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Case Analysis and Discussion

In all strategy exercises one of the options that you would sometimes forget is almost to
do nothing. There are growth options for Ayurveda online, but there is also this option of
not doing anything just continue to do what you are. Continue to stay small, continue to
serve the limited number of patients that you are doing now.

Well in that particular case even though he may be feeling bad that today he cannot serve
all customers he will have to live with that feeling. So, choices are not easy to make. If
you want to serve more customers then you will have to embrace a lot more complexity.
Complexity in terms of your strategy, complexity in terms of organization design that is
where we need to focus now that, if I plan to grow then how complex will my
organization become and today am I in a situation to handle that kind of complexity?

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means
– electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Organization Design Dimensions

Let us now look at the kind of Organization Design that Ayurveda needs to have. For
those three growth options that we have discussed. When I talk of design, let me point
out certain dimensions of it. Number one new organization roles. For each of my growth
options what kind of roles do I need to create in the organization? How many number of
employees am I going to recruit? What should be the extent of specialization among
these employees?

Should I do everything on my own or should I purchase certain activities from the

marketplace? Do I outsource some of my critical activities? What is my key identity?
What exactly do I want to do? What is my ambition? What is my passion? All of these
dimensions need to be answered before you can understand the complexity involved in
each of the growth options.

Let me now look at each of these dimensions and then start thinking how they will pan
out in case of each of the growth options. If I pick up the option of tying up with
retailers, then one of the issues that you need to think of is, how do I market those non-
medicinal products? What should be my social media strategy? How will I let my
customers know that today I can also give them access to non-medicinal Ayurvedic
products?

You will have to think about financing. Will I borrow from the banks? Will I get in an
equity investor? Shall I go to a venture capitalist? What kind of partners will I tie up
with? How much trust can I have among the partners? What would be the bargaining
power of the partners? Will they try to take advantage of maybe the brand that I have
developed?

When you start thinking of employees, he can start wondering, whether he should have
full time employees or part time employees. Remember, two of his friends are today
working as part time employees. And when he checked with them, they said that they are
not so keen to join him full time, because they are quite comfortable in their respective
organizations where they are working.

Can he work with contractual employees? If he decides to employ somebody, should he

hire freshers and train them or should he pick up people from the marketplace who are
experienced, but; obviously, they will come at a higher price. Because good, experienced
© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means
– electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Organization Design Dimensions

people will demand greater salaries. When it comes to the issue of specialization, do you
need generalists or do you need specialists?

You have both kinds in hospitals; you have a general physician, whom we need and also
you have high specialization, especially in tertiary care hospitals. Do you need functional
specialists? Do you need somebody who is an expert in finance, expert in marketing,
expert in human resource management. Do you need someone who is a domain expert?
By domain, we mean a business area.

In your industry, it can be about logistics, it can be about understanding medical

equipment, what kind of people do I need in the organization and what should they focus
on describe specialization. What should I do myself and what should I go and buy from
the marketplace? Today, if you are a small organization, you may not be able to do all
the activities yourself.

Think of accounting, can you really retain a lot of accountant or would you go to the
market and tie up with an organization which can actually do the books of accounts for
you. Each of them have their advantages and disadvantages. You may sometimes need
legal advice. You cannot afford to hire a lawyer full time. But maybe you can tie up with
a firm which can provide you with legal advice, whenever you need that.

And the key question, that I need to answer is, why do I exist? What is it that I really
want to do to create value for my customers? Remember, he originally started by solving
a specific problem. Someone, was unable to reach the doctor, he made a connection. And
then he started growing, he started discovering that he can do more. Someone who needs
a connection to a doctor also needs a connection to buy medicines.

But then he realizes there are lot of other patients who just needs a connection to a doctor
and they can find medicines on their own. And, he also have a set of customers and he
also has a set of customers, who are not going to the doctors, but who are using his
platform to find medicines. So, as the business is growing, he is discovering that he can
create value in multiple ways.

But finally, strategy is also about making the right choices. It is also about asking
yourself, what are you good at? And you should focus a lot, on what you are good at.
And then, if you still need something else to be done, you can either build it as a
© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means
– electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Organization Design Dimensions

competency, you can train yourself or you can tie up with a partner and they may be very
good at that particular activity and as a consequence without even you building the
competence, you can create value for your customers.

So, there are these various ways by which you can conduct different activities that are
necessary to create value for your clients or customers. It is not necessary, that you have
to do everything yourself. But if you do it yourself, then there are certain advantages and
there are certain disadvantages. Just in the same way, if you purchase something from
the marketplace, if you are outsourcing something, they also have its advantages and
disadvantages.

And as we progress in the course, we will discuss each of these elements in far greater
details. The advantage of going to the markets, thinking about specialization, thinking
about the different roles that you need to create, all of these put together should give you
the answer, that what is the best design that I can have for achieving my strategic
objective.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
data, illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means
– electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Internal and External Analysis

Let us now try to put all of these together. Every organization remember starts with a
purpose. Why do I want to do? What I want to do? You might find that there are very
few hospitals in rural India and therefore, you decide to start a low cost hospital in
villages or you might find that there are lot of patients who are dying after meeting an
accident because we are unable to reach an ambulance close to the place where accident
has happened on time.

And therefore, you have created something called a rapid response services. But once we
have decided what you want to do, you need to make some analysis. What kind of
business are you going to build? Is it going to be a for profit commercial enterprise in
which case you need to understand who is going to pay you for those services, is the
beneficiary does the beneficiary have enough money to pay you for your services.

And your services also should be delivered in a manner such that the price that you are
expecting from the beneficiary or from the customer is more than the cost that you incur.
So, all of these will need smart analysis. Apart from trying to understand how much your
customers can pay you, you also need to worry about competition.

If there are a lot of hospitals nearby or if there are large hospitals who have a tie up with
the doctors in your locality then opening a new hospital might create a lot of challenges.
You are not going to get answer to all the questions that you raise during the analysis.
And that is where you need to make some assumptions.

So, assumptions and analysis are absolutely necessary before you can decide what should
be your strategy which means what exactly are you going to do to address the problem
that you want to solve, what kind of business you are going to build. Once you have a fix
on the strategy you start thinking about organization design.

We discussed some of these elements whom am I going to recruit, what kind of rules am
I going to create, do I need a lot of specialists people, do I need doctors, do I need
paramedics, do I need PhD, do I need sales people. Once we have the design in place you
can start your venture and hopefully you will perform well.

But once you perform well the story does not stop there. Because you started this venture
you started this business in order to sustain itself, in order to grow. Think of what is
© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Internal and External Analysis

happening to ayurveda online he started by trying to solve a problem and now he realizes
that there is more that he can do.

It might also happen that because you are very successful there are others who are
noticing you and they might just start competing with you, they might start wondering
that if you are delivering this service then why cannot we do it because we are bigger we
have a stronger brand and we cannot do it even better. So, what exactly do you do at that
kind of situation?

Well, you have to make yourself ready for dealing with a competition which means that
you are constantly thinking about two things. One is who are my customers and
competitors and what are the markets and second thing internally what I need to do so
that I can remain competitive so that I can serve my customers. So, these may be called
as an outside view and an inside view of organization.

The outside view involves looking at the competition, the customers and understanding
all their actions. The inside view is about building resources and competencies. What are
those skills, what are those activities? What kind of training methods do I develop? What
kind of people do I recruit? And as I speak you will get a sense that when we talk about
the inside view that is what we will talk a lot about organization design.

Because here we are talking of human resources, here we are talking of people remember
I talk to you come with a lot of diversity and those diversities I need to develop as
specific skills and competencies for my organization so that I can create value for my
customers. It might mean that I will have to have high degree of quality processes, some
of you may have heard about six sigma which is to ensure that there are hardly any
defects in the whole system that I am creating.

Or I might need to be very very efficient because I am serving of customers who are not
very rich, who will be probably depending on their meager savings. And hence it is
necessary for me to deliver good quality service at a low price. At the same time I cannot
afford to start making losses because if I make losses then very quickly one of my
stakeholders who are the investors will lose confidence in me.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title – Internal and External Analysis

So, as a strategist and as a designer you are trying to keep a lot of things in the air, you
are trying to balance it is like a juggling. It is like juggling multiple balls. You have to
worry about clients, customers, competition, products, services, employees,
competencies, skill sets and as we go along you will also have to keep on thinking about
how do I keep my people motivated, how do I make sure that they are giving their best
they are bringing their best selves to the organization, they are embracing the purpose
with which I found this organization.

So, all of these elements you will have to keep your eye on, but for the rest of the course
we will talk a lot about organization design. And yet as we talk of organization design
we will constantly refer to the strategy aspect of it. Sometimes we will talk about
competencies, sometimes we will talk about alliances. And that is the reason why even
though we talk about design you will have to keep this entire picture in your mind.

And have to understand that finally, my performance is a function of a whole lot of

activities that I do in the organization of which design is a very critical element because
design involves probably the most important ingredient of making the organization
successful which is its people or which is its employees.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Course Digest

Let us now try to understand, what we are going to do during the rest of the course. So, if
you look at what we have done so far we have tried to understand, how design is a very
critical enabler of organization strategy. Once you decide the strategy you start thinking
about the design. But for an existing organization the design that you already have can
also put some constraints on your strategy.

So, this is an interesting relationship that you need to keep in mind. Number one design
usually follows strategy because design is a way of implementing a strategy. But suppose
you already have a large company you already have 300 employees working for you,
then you cannot behave like an entrepreneurial organization. One of the characters of
entrepreneurial organizations is that they experiment a lot.

And if they experiment a lot failures are bound to happen, that is why statistics tells us
that almost 9 out of 10 entrepreneurial organizations will fail they will not survive
beyond 1 or 2 years. But if you have a large organization, then you cannot afford to fail
and as a consequence your ability to take risks will not be the same as an entrepreneurial
organization. That is where we say that the existing design of the organization will
constrain the strategic choices that you can make.

After this, we will look at an important aspect of organization and ask ourselves the
question, that where should an organization boundary exist? Which means which
activities should be done within the organization and which activities should be done
outside the organization. If I am a hospital should I get into manufacturing of medical
equipments? Usually hospitals do not and usually manufacturers of medical equipments
do not open hospitals.

But you may be surprised that sometimes such an arrangement can always happen. If you
are a very large company, then you can decide that I will have an unit which
manufactures medical equipment and I will also have hospitals. Because at the end of the
day I am catering to patients and I am doing it, so that they can get the best treatment. An
example I can think of is Aravind Eye Care, who are primarily into services doing
cataract operations.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
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 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Course Digest

But remember they also went into manufacturing of interocular lenses. Because they
realized that importing of lenses is very expensive and they wanted to serve the poor
patients who could not afford such expensive lenses and hence they went into
manufacturing of lenses. So, every organization needs to ask itself this question that what
activities should be done within the boundary of the organization and what are those
activities which should be done by the markets?

As before each of them has their advantages and disadvantages. The third subject that we
will be talking about is control systems. As I told you before that in organizations we
need design to utilize diversity of people to achieve unity of effort. Now that involves a
little bit of influence that involves control, when you talk of processes rules and
regulations it means that I am telling people to behave in a particular manner.

If you think of culture that is also a means by which we are telling our employees, what
is acceptable and what is not? Patient care, there may be certain rules saying how you
should take care of your patient, but to have compassion to have kindness that is
culturally embedded in an organization great service organizations take care of their
clients be it patients, be it customers.

Now, that is a cultural aspect and there has to be some method in teaching each of your
employees how to care for your customers. Those are the various control systems that we
are going to talk about in this particular course. We will also talk about different kind of
organization structures, structures as I told you can be represented in a piece of paper
those boxes and lines that you often see when they show you an organization chart.

But well there are different kinds there is the functional structure, there are business unit
structures, sometimes if you are doing some construction activities you might have a
project based structure or you may have also heard about matrix structure. Each of them
have their advantages and disadvantages and that is what we will be discussing when we
are discussing all these various organizational structures.

Then we will look into the design of a unit, a team and we will tell ourselves that who
takes decisions there, what are the kind of rules and regulations there, what kind of
specialization exists within that unit. And depending upon our answer to each of these

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Organization Design
Dr. Sourav Mukherjee
Module - 1
Title - Course Digest

three elements, you will find that those units are good at doing certain things, but may
not be good at doing certain other things.

If a hospital administrator wants to plan how to manage all the doctors, then there is
certain element of decision making rules and regulations, specialization that he or she
needs to think about. When you are thinking of managering in the same hospital, when
you are thinking of creating a cafeteria, then the elements of decision making
centralization rules and regulations need to be very different.

Because you are creating value in completely different ways, when you are talking about
a group of doctors versus a set of people who are running a cafeteria, that is what we are
going to come and discuss. That how do you make up your mind about how much to
control in terms of decision making, how much rules and regulations to implement and
what is the extent of specialization you need to get the objective of that particular unit.

And finally, we will also talk a lot about organization culture, how culture plays a very
important role in ensuring we achieve what we set out to do as an organization. And as
you are growing as an organization, what are the various things that you need to keep in
mind when change is happening.

Because change is happening not only to your organization structure, but you need to
change certain processes, you need to change the culture, you need to expect behavior
change among your people. None of these things are easy. So, we will discuss, what are
some of the good practices of managing change.

© All Rights Reserved. This document has been authored by Professor Dr.Sourav Mukherjee and is permitted for use only within the
course "Organization Design" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means –
electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the author.