Chapter 10
Organization Design
Purpose and Overview
• Purpose
– To explore how decisions are made about
designing organizational structures
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Purpose and Overview
• Overview
– The Meaning of Organizational Design
– Levels of Organization Design
– Systematic Assessment Before Design
– Designs for a Variety of Health Services
Organizations
– Influences on Future Organization Designs
– Organization in Transition
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The Meaning of
Organizational Design
• Building blocks of organization are
arranged to improve effectiveness and
adaptive capacity
– Authority
– Responsibility
– Accountability
– Information
– Rewards
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The Meaning of
Organizational Design
• Organization Design
– A dynamic process controlling outcomes and
process
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The Meaning of
Organizational Design
• Management’s Role
– Redesign: needs change as organization's
needs change
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The Meaning of
Organizational Design
• Management’s Role
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The Meaning of
Organizational Design
• When a design should be reconsidered
– Severe performance problems
– Change in environment that affects internal
policies
– New programs or product lines
– Leadership change
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Levels of Organization Design
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Levels of Organization Design
• Designing a Position
– Identify:
• Major responsibilities and roles
• Skills and training necessary
• To whom the person and work are
accountable
• The relationship of other peer positions
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Levels of Organization Design
• Designing a Work Group
– Clarify
• Specific purpose of group
• Time frame for completing problem solving
• Boundaries of group's authority
– Appoint a leader
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Levels of Organization Design
• Designing Work Groups
– Group units to maximize use of:
• Knowledge and skill
• Work process
• Time
• Commonality of clients or patients
• Geographic location
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Levels of Organization Design
• Designing a Total Organization
– Enormous challenge
– Extensive investment
– Behavioral flexibility
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Levels of Organization Design
• Designing a Network
– Coordination of services and client flow
– Analyze interorganizational relationships
• Decide which organizations should have
most power
• Identify resource transactions
• Diffusing innovations
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Levels of Organization Design
• Designing a Health System
– Centralization vs. decentralization
• Setting policy
• Initiating activities
• Granting final approval
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Systematic Assessment Before
Design
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Designs for a Variety of Health
Services Organizations
• Differentiation
• Integration
• All organizations must do both
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Designs for a Variety of Health
Services Organizations
• The Continuum of Organizational Design
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Designs for a Variety of Health
Services Organizations
• Functional Design
– Specialized labor divided into departments
– Most useful when organization has few
products or goals
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Designs for a Variety of Health
Services Organizations
• Functional Design
– Enables decision making on a centralized,
hierarchical basis
– Unsuitable when:
• Organization grows
• Organization diversifies
• Poor departmental coordination allows top
heavy decision making
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Designs for a Variety of Health
Services Organizations
• Functional Design
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Designs for a Variety of Health
Services Organizations
• Divisional Design
– Organizational divisions and semiautonomous
units
– Decentralizes decisions to lowest level
– Difficulties arise when priorities are
determined at higher organizational levels
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Designs for a Variety of Health
Services Organizations
• Divisional Design
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Designs for a Variety of Health
Services Organizations
• Matrix Design
– Improves coordination and communication
across organization
– Characterized by dual authority system
– Reporting to managers
– Disadvantages due to dual authority system
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Designs for a Variety of Health
Services Organizations
• Matrix Design
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Designs for a Variety of Health
Services Organizations
• Parallel Design
– Bureaucratic or functional organization
• Responsible for routine activities
– Parallel side
• Responsible for complex problem solving
requiring participatory mechanisms
– Commonly seen with CQI/TQM
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Designs for a Variety of Health
Services Organizations
• Parallel Design
– Advantages
• Increased performance and quality
– Disadvantages
• Time in meetings
• Increased cost of operations
• Conflicts between two structures
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Designs for a Variety of Health
Services Organizations
• Parallel Design
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Designs for a Variety of Health
Services Organizations
• Product/Service Line or Program Design
– One person in charge of product or group
– Advantages:
• Increased operational efficiencies
• Enhanced market share
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Designs for a Variety of Health
Services Organizations
• Product/Service Line or Program Design
Key Factors for Success
– Management system linking clinical, financial,
and volume data by product
– Financial system that disaggregates costs
and revenues to assign accountability
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Designs for a Variety of Health
Services Organizations
• Product/Service Line or Program Design
Key Factors for Success
– Innovation and risk taking rewards
– Health care provider involvement in:
• Technology
• Diagnosis and treatment
• Quality improvement
• Patient-centered issues
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Designs for a Variety of Health
Services Organizations
• Product/Service Line or Program Design
Key Factors for Success
– Strong support staff
– Align authority and responsibility
– Integrative mechanisms across product lines
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Designs for a Variety of Health
Services Organizations
• Product/Service Line or Program Design
Key Factors for Success
– Comprehensive management development
– Ability to work with more than one manager
– Communication skills
– Conflict management skills
– Computer literacy
– Creativity
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Designs for a Variety of Health
Services Organizations
• Product/Service Line
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Influences on Future
Organization Designs
• The Mission
– Specificity is important to determine design
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Influences on Future
Organization Designs
• The Future Environment
– Changing demographic characteristics
– Public and consumer sophistication
– Range of services provided outside
traditional hospitals
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Influences on Future
Organization Designs
• The Future Environment
– Involvement in community to address
underlying health issues
– Increasing competition
– Increasing regulatory pressures
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Influences on Future
Organization Designs
• The Future Environment
– Changing reimbursement systems
– Expanding private sector involvement
– Involvement of trustees, physicians, and other
health professionals in strategic planning
– External standards for professional conduct
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Influences on Future
Organization Designs
• The Future Environment
– Demand for accountability and value
– Focus on patient safety and quality of care
– Rapidly developing medical technologies
– Information demands
– Development of information systems
– Artificial intelligence
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Influences on Future
Organization Designs
• The Organization
– Greater emphasis on teamwork
– Social contract accountability for governance
– Corporatization of health services
organizations
– Demands to improve the quality of care
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Influences on Future
Organization Designs
• The Organization
– Demands to control costs, efficiency,
productivity, and value
– Comprehensive and integrated clinical and
financial information systems
– Constrained financial resources
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Influences on Future
Organization Designs
• The Organization
– Changing working relationships
– Increasing use of information technology
– Increasing need to coordinate activities
internally
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Influences on Future
Organization Designs
• The Organization
– Managing conflict creatively
– Collaboration among public and private
organizations to address preventable
diseases
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Influences on Future
Organization Designs
• Culture
– Focus on "customer" and patient-centered care
– Patient satisfaction surveys to modify care
– Broad sets of performance indicators
– Community-based care
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Influences on Future
Organization Designs
• Culture
– Use of evidence and health outcome measures
– Challenges to traditional ways of operations
– Value of employees committed to organization
– Value of employees who are adaptable
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Influences on Future
Organization Designs
• Culture
– Value of nonhierarchical leaders who can lead
change processes
– Emphasis on teamwork and collaboration with
nontraditional partners
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Influences on Future
Organization Designs
• Culture
– Integrating functions and clinical processes
– Trust development
– Creating a culture of patient safety
– Promoting ethical work practices
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Influences on Future
Organization Designs
• Human Resources
– Acute shortage of nursing personnel
– Emphasis on cross-training vs. traditional
professional training
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Influences on Future
Organization Designs
• Human Resources
– Emphasis on horizontal teams and
collaborative practices
– Pressure to substitute "cheaper" health care
workers for more expensive health
professionals
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Influences on Future
Organization Designs
• Human Resources
– More women in management require flexibility
• Accessibility of day care and job sharing
– Greater ethnic and cultural diversity of
workforce
– Need to experiment with new work
arrangements
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Influences on Future
Organization Designs
• Human Resources
– Physicians becoming employees
– Shortages of key health services
professionals
– Increasing need for managers with
professional training
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Influences on Future
Organization Designs
• Human Resources
– Increasing unionization of workers
– Closer scrutiny by unions as some organizations
retrench
– Need to educate all employees in strategic
management
– Adopting a marketing orientation
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Influences on Future
Organization Designs
• Human Resources
– Succession planning, career planning, and
management development
– Pressure to provide continuing education,
especially for clinical managers
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Influences on Future
Organization Designs
• The Political Process
– Informal leaders may be helpful
– Better management to identify key players in
redesign process
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Organization in Transition
• Life Cycles
– Four phases (Starkweather and Kisch):
• Search
• Success
• Bureaucratic
• Succession
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Organization in Transition
• Designs for Quality Improvement
– Quality of care
– Quality is an organizational problem
– Emphasize:
• Organizing work around patient
• Reframing role of hospital in health
services system
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