ORGANIZATIONAL DESIGN: TRUST AND CONTROL
3. CAN TRUST AND CONTROL APPROACHES TO ORGANIZATION DESIGN BE RECONCILED?
4.2 Informing the practice of organizational design
The results of this chapter should also be reflected in future practice of designing effective organizations. First, the analysis has shown that it may be dangerous to rely on just one - though coherent - logic of design. The trust-logic has more recently been proposed as a way for improving performance of organizations by way of granting employees more autonomy. On the other hand, companies have begun to implement rather traditional control structures in order to assure compliance with various legal regulations. Whenever both performance and compliance play an equally important role (which should be the usual case in for-profit organizations), reliance on either model will lead to undesirable results. Due to the interdependencies between trust and control, a simple combination of the two approaches will probably not work either.
The practicing manager should start with a situational analysis of the relevant contingencies and the demands that have to be met by the organization. After all, the demands are met by the members of the organization. Therefore, a very important next step is to establish those behaviors that are critical for achieving each functional demand. In turn, the determinants of the critical behaviors have to be clarified. The manager may then ask how likely it is that the members of the organization conduct the critical behaviors or if deviations that are worth mentioning have to be
expected. Thus, the practitioner will gain an informed assumption of the relevant (critical) behavior. It is hence a vital recommendation to refrain from applying broad behavioral assumptions as many theoretical approaches do. Usually, these assumptions are too general for the purpose of designing particular structures and applying them may lead to undesirable side-effects.
Third, the desired behaviors might best be facilitated by a combination of structure-building and structure-flanking design elements. It is imperative to note that there is usually not a one-to-one relationship between a particular functional demand and a certain structure. Rather, depending on the contingent behavioral assumption applied, different combinations of structural and flanking mechanisms may be most appropriate to yield the desired outcome.
Finally, there is evidence that companies often neglect to control the results of reorganizations (v. Werder & Grundei, 2006). However, this seems to be crucial in order to gain feedback about the appropriateness of the chosen design elements and thus to constantly improve the organizational design. Therefore, companies should regularly control for the degree of goal achievement as well as the fit between demands, behavior and design in order to initiate necessary adaptations and to facilitate learning (indicated by the dotted line arrow in figure 3.2).
REFERENCES
Adler, P.S., 2001, Market, hierarchy, and trust: The knowledge economy and the future of capitalism. Organization Science, 12: 215-234.
Banaga, A., Ray, G., and, Tomkins, C , 1995, A conceptual framework for corporate governance and effective management. Corporate Governance -An International Review, 3: 128-137.
Buderath, H.M., 2004, Auswirkungen des Sarbanes-Oxley-Acts auf die Interne Revision, Betriebswirtschaftliche Forschung und Praxis, 56: 39-50.
Burton, R.M., and Obel, B., 1998, Strategic Organizational Diagnosis and Design, 2nd ed., Kluwer, Boston.
Child, J., and McGrath, R.G., 2001, Organizations unfettered: Organizational form in an information-intensive economy. Academy of Management Journal, 44: 1135-1148.
Child, J., and Rodrigues, S.B., 2003, Corporate governance and new organizational forms:
Issues of double and multiple agency. Journal of Management and Governance, 7: 337- 360.
Conger, J.A., and Kanungo, R.N., 1988, The empowerment process: Integrating theory and practice. Academy of Management Review, 13: 471-482.
Daft, R.L., 2000, Management, 5th ed., Dryden, Fort Worth.
Dalton, D.R., Metzger, M.B., and Hill, J.W., 1994, The "new" U.S. sentencing commission guidelines: A wake-up call for corporate America, Academy of Management Executive, 8(1): 7-13.
The relationship between trust and control 63
Das, T.K., and Teng, B.S., 1998, Between trust and control: Developing confidence in partner cooperation in alliances, Academy of Management Review, 23: 491-512.
Davis, J.H., Schoorman, F.D., and Donaldson, L., 1997, Toward a stewardship theory of management, Academy of Management Review, 22: 20-47.
Deci, E.L., 1975, Intrinsic Motivation, Plenum, New York.
Donaldson, L., 1996, The normal science of structural contingency theory, in: Handbook of Organization Studies, S.R. Clegg, C. Hardy, and W. R. Nord, Sage, London, pp. 57-76.
Donaldson, L., and Davis, J.H., 1991, Stewardship theory or agency theory: CEO governance and shareholder returns, Australian Journal of Management, 16: 49-64.
Eisenhardt, K.M., 1985., Control: Organizational and economic approaches. Management Science,?^!: 134-149.
Eisenhardt, K.M., 1989, Agency theory: An assessment and review. Academy of Management Review, 14: 57-74.
Enzle, M.E., and Anderson, S.C, 1993, Surveillant intentions and intrinsic motivation.
Journal of Personality and Social Psychology, 64: 257-266.
Forrester, R., 2000, Empowerment: Rejuvenating a potent idea, Academy of Management Executive, 14(3): 67-80.
Galbraith, J.R., 1974, Organization design: An information processing view. Interfaces, 4(3):
28-36.
Galbraith, J.R., 1977, Organization Design, Reading, Addison-Wesley.
Galbraith, J.R. 1994, Competing with Flexible Lateral Organizations, 2nd ed., Reading, Addison-Wesley.
Gebert, D., 2000, Zwischen Freiheit und Reglementierung. Widerspruchlichkeiten als Motor inkrementalen und transformationalen Wandels in Organisationen - eine Kritik des punctuated equilibrium-Modells, in: Organisatorischer Wandel und Transformation, G.
Schreyogg, and P. Conrad, 10, Gabler, Wiesbaden, pp. 1-32.
Gebert, D., 2004, Dilemma-Management, in: Handworterbuch Unternehmensfuhrung und Organisation, G. Schreyogg, and A. v. Werder, 4th ed., Schaffer-Poeschel, Stuttgart, pp.
195-204.
Gemiinden, H.G., and Salomo, S., 2004, Innovationsmanagement, in: Handworterbuch Unternehmensfuhrung und Organisation, G. Schreyogg, and A. v. Werder, 4th ed., Schaffer-Poeschel, Stuttgart, pp. 505-514.
Ghoshal, S., 2005, Bad management theories are destroying good management practices.
Academy of Management Learning and Education, 4: 75-91.
Ghoshal, S., and Moran, P., 1996, Bad for practice: A critique of the transaction cost theory.
Academy of Management Review, 21: 13-47.
Gibson, C.B., and Birkinshaw, J., 2004, The antecedents, consequences, and mediating role of organizational ambidexterity. Academy of Management Journal, 47: 209-226.
Grandori, A., 2004, Reframing corporate governance: Behavioral assumptions, governance mechanisms, and institutional dynamics, in: Corporate Governance and Firm Organization: Microfoundations and Structural Forms, A. Grandori, Oxford University Press, Oxford, pp. 1-27.
Gresov, C , and Drazin, R., 1997, Equifmality: Functional equivalence in organization design.
Academy of Management Review, 22: 403-428.
Grundei, J., 1999, Effizienzbewertung von Organisationsstrukturen (Efficiency evaluation of organizational structures), Gabler, Wiesbaden.
Hutten, C , and Stromann, H., 2003, Umsetzung des Sarbanes-Oxley Act in die Unternehmenspraxis, Betriebs-Berater, 58: 2223-2227.
Inkpen, A.C., and Currall, S.C., 2004, The coevolution of trust, control, and learning in joint ventures. Organization Science, 15: 586-599.
Jaffee, D., 2001, Organization Theory: Tension and change, McGraw-Hill, Boston.
Jansen, J.J.P., Van den Bosch, F.A.J., and Volberda, H.W., 2005, Exploratory innovation, exploitative innovation, and ambidexterity: The impact of environmental and organizational antecedents, Schmalenbach Business Review, 57: 351-363.
Jensen, M.C., and Meckling, W.H., 1976, Theory of the firm: Managerial behavior, agency costs and ownership structure, Journal of Financial Economics, 3: 305-360.
Kerr, S., 1975, On the folly of rewarding A while hoping for B, Academy of Management Journal, 18: 769-783.
Lampel, J., 2004, The benefit of doubt: Shadow norms and governance in trust-based organizations, in: Corporate governance and firm organization: Microfoundations and Structural Forms, A. Grandori, Oxford University Press, Oxford, pp. 232-245.
Langfred, C., 2004, Too much of a good thing? Negative effects of high trust and individual autonomy in self-managing teams. Academy of Management Journal, 47: 385-399.
Lawler, E.E. III., 1993, Creating the high-involvement organization, in: Organizing for the Future: The New Logic for Managing Complex Systems, J. Galbraith, and E.E. Lawler, Jossey-Bass, San Francisco, pp. 172-193.
Lewin, A.Y., and Volberda, H.W., 1999, Prolegomena on coevolution: A framework for research on strategy and new organizational forms. Organization Science, 10: 519-534.
Lichtman, CM., and Hunt, R.G., 1971, Personality and organization theory: A review of some conceptual literature. Psychological Bulletin, 76: 271-294.
March, J.G., 1991, Exploration and exploitation in organizational learning, Organization Science, 2: 71-87.
Mayer, R.C., Davis, J.H., and Schoorman F.D., 1995, An integrative model of organizational trust. Academy of Management Review, 20: 709-734.
McAllister, D.J., 1995, Affect- and cognition-based trust as foundations for interpersonal cooperation in organizations. Academy of Management Journal, 38: 24-59.
McEvily, B., Perrone, V., and Zaheer, A., 2003, Trust as an organizing principle.
Organization Science, 14: 91-103.
McGregor, D., 1960, The Human Side of Enterprise, McGraw-Hill, New York.
McKnight, D.H., Cummings, L.L., and Chervany, N.L., 1998, Initial trust formation in new organizational relationships. Academy of Management Review, 23: 473-490.
Merchant, K.A., 1985, Control in Business Organizations, Pitman, Boston.
Miller, D., and Friesen, P.H., 1984, Organizations - A Quantum View, Prentice-Hall, Englewodd Cliffs.
Mills, P.K., and Ungson, G.R., 2003, Reassessing the limits of structural empowerment:
Organizational constitution and trust as controls. Academy of Management Review, 28:
143-153.
Morrison, E.W., and Milliken, F.J., 2000, Organizational silence: A barrier to change and development in a pluralistic world. Academy of Management Review, 25: 706-725.
Nadler, D., and Tushman, M.L., 1997, Competing by Design: The Power of Organizational Architecture, Oxford University Press: New York.
Osterloh, M., and Frey, B.S., 2004, Corporate governance for crooks? The case for corporate virtue, in: Governance and Firm Organization: Microfoundations and Structural Forms Corporate, A. Grandori, University Press, Oxford, pp. 191-211.
Ouchi, W.G., 1979, A conceptual framework for the design of organizational control mechanisms. Management Science, 25: 833-848.
The relationship between trust and control 65
Paine, L.S., 1994, Managing for organizational integrity, Harvard Business Review, 72(2):
106-117.
Pfeffer, J., 1994, Competitive Advantage Through People, Harvard Business School Press, Boston.
Pinchot, G.IIL, 1985, Intrapreneuring, Harper and Row, New York.
Poole, M.S., and Van de Ven, A.H., 1989, Using paradox to build management and organization theories. Academy of Management Review, 14: 562-578.
Poppo, L., and Zenger, T., 2002, Do formal contracts and relational governance function as substitutes or complements.^. Strategic Management Journal, 23: 707-725.
Randolph, W.A., and Sashkin, M., 2002, Can organizational empowerment work in multinational stiiing?,!, Academy of Management Executive, 16(1): 102-115.
Rousseau, D.M., Sitkin, S.B., Burt, R.S., and Camerer, C , 1998, Not so different after all: A cross-discipline view of trust, Academy of Management Review, 23: 393-404.
Simon, H., 1985, Human nature in politics: The dialogue of psychology with political science, American Political Science Review, 79: 293-304.
Simons, T., 2002, Behavioral integrity: The perceived alignment between managers' words and deeds as a research focus. Organization Science, 13: 18-35.
Sitkin, S.B., 1995, On the positive effect of legalization on trust. Research on Negotiation in Organizations, S'. 185-217.
Spreitzer, G.M., 1996, Social structural characteristics of psychological empowerment, Academy of Management Journal, 39: 483-504.
Strickland, L.H., 1958, Surveillance and trust, Journal of Personality, 26: 200-215.
Sundaramurthy, C , and Lewis, M., 2003, Control and collaboration: Paradoxes of gOYQrnmiCQ, Academy of Management Review, 28: 397-415.
Tushman, M.L., and Nadler, D.A.,1978, Information processing as an integrating concept in organizational design, Academy of Management Review, 3: 613-624.
Tushman, M.L., and Romanelli, E., 1985, Organizational evolution: A metamorphosis model of convergence and reorientation, in: Research in Organizational Behavior, L.L.
Cummings, and B.M. Staw, 7, JAI Press, Greenwich, pp. 171-222.
Vardi, Y., and Wiener, Y., 1996, Misbehavior in organizations: A motivational framework.
Organization Science, 7: 151-165.
Volberda, H.W., 1996, Toward the flexible form: How to remain vital in hypercompetitive environments. Organization Science, 7: 359-374.
V. Werder, A., and Grundei, J. 2001. Organization design: An action-theoretic approach.
Paper presented at the Informs International Conference 2001, Maui, HI.
V. Werder, A., and Grundei, J. 2004. Konzeptionelle Grundlagen der Center-Organisation (Conceptual foundations of organizing corporate centers). In: A. v. Werder and H. Stoeber (Eds.): Center-Organisation: Gestaltungskonzepte, Strukturentwicklung und Anwendungsbeispiele (Organization of corporate centers: Concepts for design, corporate development and examples of application). Schaeffer-Poeschel, Stuttgart: 11-54.
V. Werder, A., and Grundei, J. 2006. Konzeptionelle Grundlagen des Organisations- Controllings (Conceptual foundations of controlling organizational design). In: A. v.
Werder, H. Stoeber, and J. Grundei (Eds.): Organisations-Controlling: Konzepte und Praxisbeispiele (Controlling organizational design: Concepts and practical experiences).
Gabler, Wiesbaden (forthcoming).
Williamson, O.E., 1985, The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting, Free Press, New York.
Williamson, O.E., 1993, Opportunism and its critics, Managerial and Decision Economics, 14:97-107.