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My 2012 EODF presentation

Nicolay Worren
Nicolay Worren

This document discusses the debate around separation versus integration in organization design. It provides three arguments for separation: 1) to avoid conflict of interest, 2) to minimize coordination costs, and 3) to avoid goal conflicts. The document uses examples from Nestle to illustrate how establishing separate units can pursue innovation goals independently from existing business units. Overall, the document analyzes the tradeoffs between separation and integration and presents arguments for why separation of responsibilities may be preferable in some cases.

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Separation versus integration in organization design Nicolay Worren European Organisation Design Forum conference, Vevey, Switzerland, May 10-11, 2012
The dilemma Vs. Separation Integration
Three arguments for separation 1. 2. 3.
The governance perspective Nestl辿 Corporate Governance Report Separation of responsibilities
Underlying principle
Universal? Let the wolf take care of the sheep Let the fox guard the hen house Let the dingo take care of the kids Letting the ram take care of the bag of oats. Giving the keys to the thief
Three arguments for separation 1. Avoid conflict of interest 2. 3.
Three arguments for separation 1. Avoid conflict of interest 2. 3.
Integration leads to coordination... which leads to coordination costs. Time in meetings Corporate e-mail traffic (billions of messages per year) 35 30 25 20 15 1960 10 5 0 2003 2004 2005 2006 1982
When theres no role separation, everybody needs to coordinate with everybody 1 2 3 4 5 6 7 8 9 10 Advisor 1 (responsible for employee survey and x x x x x x x x division 1) 1 Advisor 2 (responsible for performance mngt x x x x x x x and division 2) 2 Advisor 3 (responsible for leadership x x x x x x x development and division 3) 3 Advisor 4 (responsible for competence x x x x x x x x management and division 4) 4 Advisor 5 (responsible for succession planning x x x x x x x and division 5) 5 Advisor 6 (works on performance mngt, x x x x x x x responsible for division 6) 6 Advisor7 (works on leadership development, x x x x x x x responsible for division 7) 7 Advisor 8 (works on employee survey, x x x x x x responsible for division 8) 8 x Advisor 9 (works on employee survey) 9 Advisor 10 (works on competence x management) 10 Source: Worren (2012)
Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3.
Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3.
Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3.
Pursuing different goals in same vs different unit Q: What's the best way to organize for innovation? Option 1 Option 2 Option 3 Functional structure Cross-functional team Structurally independent Manager Manager Manager Mfg Sales R&D Mfg Sales R&D Existing New New business business business 25% succeeded 90% succeeded Source: OReilly, C. A. & Tushman, M. L. (2004)
Nestl辿 does it The corporate team set up a separate unit, fully owned by Nestl辿, but completely independent from the main organization Informant in case study of innovation in Nestl辿 by Raisch & Tushman (2011)
Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3. Avoid goal conflicts
Resources Blog: Article Book www.organizationdesign.net http://www.amazon.co.uk

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My 2012 EODF presentation

  • 1. Separation versus integration in organization design Nicolay Worren European Organisation Design Forum conference, Vevey, Switzerland, May 10-11, 2012
  • 2. The dilemma Vs. Separation Integration
  • 3. Three arguments for separation 1. 2. 3.
  • 4. The governance perspective Nestl辿 Corporate Governance Report Separation of responsibilities
  • 6. Universal? Let the wolf take care of the sheep Let the fox guard the hen house Let the dingo take care of the kids Letting the ram take care of the bag of oats. Giving the keys to the thief
  • 7. Three arguments for separation 1. Avoid conflict of interest 2. 3.
  • 8. Three arguments for separation 1. Avoid conflict of interest 2. 3.
  • 9. Integration leads to coordination... which leads to coordination costs. Time in meetings Corporate e-mail traffic (billions of messages per year) 35 30 25 20 15 1960 10 5 0 2003 2004 2005 2006 1982
  • 10. When theres no role separation, everybody needs to coordinate with everybody 1 2 3 4 5 6 7 8 9 10 Advisor 1 (responsible for employee survey and x x x x x x x x division 1) 1 Advisor 2 (responsible for performance mngt x x x x x x x and division 2) 2 Advisor 3 (responsible for leadership x x x x x x x development and division 3) 3 Advisor 4 (responsible for competence x x x x x x x x management and division 4) 4 Advisor 5 (responsible for succession planning x x x x x x x and division 5) 5 Advisor 6 (works on performance mngt, x x x x x x x responsible for division 6) 6 Advisor7 (works on leadership development, x x x x x x x responsible for division 7) 7 Advisor 8 (works on employee survey, x x x x x x responsible for division 8) 8 x Advisor 9 (works on employee survey) 9 Advisor 10 (works on competence x management) 10 Source: Worren (2012)
  • 11. Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3.
  • 12. Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3.
  • 13. Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3.
  • 14. Pursuing different goals in same vs different unit Q: What's the best way to organize for innovation? Option 1 Option 2 Option 3 Functional structure Cross-functional team Structurally independent Manager Manager Manager Mfg Sales R&D Mfg Sales R&D Existing New New business business business 25% succeeded 90% succeeded Source: OReilly, C. A. & Tushman, M. L. (2004)
  • 15. Nestl辿 does it The corporate team set up a separate unit, fully owned by Nestl辿, but completely independent from the main organization Informant in case study of innovation in Nestl辿 by Raisch & Tushman (2011)
  • 16. Three arguments for separation 1. Avoid conflict of interest 2. Minimize coordination cost 3. Avoid goal conflicts
  • 17. Resources Blog: Article Book www.organizationdesign.net http://www.amazon.co.uk