Organizational Design, Diagnosis, and Development

Session 9

Interorganizational Designs

Objectives

• To clarify what Interorganizational Design (IOD) is and how it functions.

• To review the reasons for increased use of IODs

• To distinguish between IOD designs with and without shared ownership

• To consider management issues regarding IODs

Joint Ventures, Networked Organizations & Virtual Organizations

• The networked organization has a common board

• Joint ventures and virtual organizations involve the development of an organizational form two or more independent organizations which are often competitors. The parent companies stay separate.

Virtual Organizations

• VOs are more limited in participation and time, more temporary than other IODs

• Creation of a complementary resource base of different organizations by a project team

• Co-operation of partners by common business understanding

• Integration of resource base by transaction governance system

• Formulation of a common network strategy and• Socialization by trust between involved partner.

(Siebert, 1998)

Coordinating Mechanism

• Total control

• Ownership control (mergers, acquisitions, joint ventures, minority investments)

• No ownership control (coordinated contracting, franchises, licenses)

• Markets

Enabling Factors for IODs

• Environment

• Technology

• Size

Designs with Ownership

• Mergers & acquisitions

• Joint ventures

• Minority investments

Designs without Ownership

• Coordinated contracting

• Coordinated revenue links– Franchising– Licensing agreements

Management Issues

• Pitfalls– Sharing in a competitive environment– Outsourcing

• Other issues– Purpose for formation– Boundaries– Value creation– Stability and Control

Backwards & Forwards

• Summing up: Today we considered many variations of interorganizational designs: those that specify ownership such as joint ventures and minority investments; no ownerships such as coordinated contracting, franchises and licensing agreements; and the concept of virtual organizations. Managerial

issues for such designs were discussed.• Looking Ahead: Nest time we begin the examination

of organizational diagnosis and development with a look at the change process in organizations.