Sack Balicki Lejeune EIASM Paper March 09

8/14/2019 Sack Balicki Lejeune EIASM Paper March 09

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EIASM 2009

A Balanced Architectural Approach toDevelop Dynamic Capabilities

A paper presented to the

EIASM WORKSHOP ON INFORMATION AND

ORGANIZATIONAL DESIGN

by

Ira Sack, Stevens Institute of Technology, [email protected]

Richard J. Balicki, Johnson & Johnson, [email protected]

Albert Lejeune, ESG-UQAM, [email protected]

Brussels, April 20-21


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Introduction

In the field of strategic management the hard-soft distinction is a tradition since 1981

[PA1981]. The first three of the 7 S's (Strategy, Structure, Systems) defined by Pascale

and Athos - called hard factors - were the hallmark of American management. They

became in the 90s a departure point for a transformational journey towards Purpose,

Process, and People [BG1994, 1995a, 1995b]. The remaining four factors (Skills, Staff,

Style, and Shared Values) were called soft factors and still characterize an organizational

culture of learning and sharing. The goal of this paper is to actualize this hard-soft

distinction in the new architectural context that sometimes makes enterprise architecture

a substitute for strategy, enabling the development of new competences and dynamic

capabilities [RWR2006].

Dynamic capabilities are defined as the ability to integrate, build, and reconfigureinternal and external competencies to address rapidly-changing environments

[TPS1997]. This paper shows how a balanced hard/soft architecture is key to reconfigure

both internal and external competencies through dynamic capabilities. This was the case

when the large Canadian traditional banks had to compete with the Internet banks.

Quickly, the bank became available where the customer business was. As the number of

branches quickly diminished, the integration level of the traditional, automated branches,

and ATMs was completed. The precision of the market data made the manned or

electronic doors adequately positioned. The network was rationalized and each entry

point contributed to the profits by building transactions volume. To the contrary, the new

Internet banks didnt experience the same degree of success.

This paper is organized this way: We first propose our definition of a balanced hard/soft

architecture and expose the Hierarchical Layered Approach to Organizational Design. We

then go further in explaining the balanced hard/soft architecture and finally illustrate that

balanced architecture as an organizational pattern of dynamic capabilities enabling the

reconfiguration of both internal and external competencies.

Hard and Soft Contracts and Architectures

Routine workflows as well as routine job skills, roles, and behaviors of people and

structure in processes may and should be specified as precisely as possibleotherwise,

we may not know how to implement them (i.e., their semantics) or exactly what their

implementations are supposed to do (i.e., their functionality). Such precise specifications

may take the form of hard (aka traditional) contracts: precise formal contracts as, for


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organization have been put forth using an information theory metaphor. Frequently, these

models combine aspects of both the classical and neo-classical schools.

promotes effective application

Interdependence / Alignment Between Hard and Soft Architectures

enables

HardArchitecture

SoftArchitecture

Figure 1: A Balanced Organizational ArchitectureAdapted from [MSB1999]

To be, and remain, competitive it is imperative that the knowledge-based organization

of the 21

st

century deal with the analysis and design of both hard and soft contracts andarchitectures and their interdependence/alignment. This results in a balanced

organizational architecture as depicted in Figure 1.

The Hierarchical Layered Approach to Organizational

Design

There are innumerable approaches to organizational design. From the logical design

perspective, they are little more than incomplete lists and pictures in vague or inadequate

frameworks; i.e., they do not have clear semantics. Examples include design by executive

bullet or summary lists, critical success factors, the ever-present management matrices, a

few beautiful PowerPoint graphics, and so on. To simplify and make organizational

design and managerial practice more disciplined we may describe the organization in

terms of consciously employed levels of abstraction. This same approach has been

profitably used in such diverse areas as information technology, IT-enabled business

transformation, and elsewhere.

The hierarchical layered organizational model (HLOM) is used to represent an

organization in the historical context of organization theory (OT). It is motivated by a

desire to give a proper account for the complexity

3

of organizational design contexts andenable the manager-designer

4(aka manager-architect) to use it to think about a variety

of organizational characteristics. The choice of layers of abstraction is informed by OT

(as defined for example in D2006 or R1990) and the preferences and needs of the

manager-architect who selects an appropriate set of ordered layers and subsequently

adapts a set of explicit assumptions about each layer and the interrelationships between

layers. Each layer is an organizational construct that denotes all aspects of a


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(organizational) contextual dimension that has been conspicuously identified by OT and

design literature as well as long-range managerial practice. These contextual dimensions

are chosen by a given manager-architect in light of the scope and purpose of his or her

intended design goals. By using layering the manager effectively implements the

principle ofseparation of concerns and thus helps assure design correctness.

A core assumption of our approach to organization design is that the layers of

abstraction help the designer (manager-architect) define, integrate, and operationalize

relevant organizational domains in terms of their behaviors as specified by means of

organizational contracts.

Examples of classical OT contextual dimensions (aka organizational contexts) include

strategy, structure, and technology whereas modern OT contextual dimensions include

information andprocess.

Major principles and assumptions of HLOM

An HLOM is a logical representation of abstract layers that is characterized by the

following principles and assumptions [MSB1999]:

-There are a finite number of organizational constructs (i.e., distinct layers (types)

differentiated by their corresponding behaviors) each of which denotes a significant

organizational context identified with the help of OT or over some long period of

managerial practice (say, at least a decade).

-The highest layer in the hierarchy is known as the Environment Layer. The organization

is regarded as an element (component) of the environment.

- Each layer may be characterized in terms of the systematic behavior of its elements

(components).

- An organizations behavior has both deliberate and emergent properties. (Indeed,

without the ability to identify/name emergent properties there would be little, if any need

for representing the organization in terms of (a hierarchy of) layers. For example, some

(but not all) schools of organizational theorists consider size to be an emergent

characteristic of structure. Emergent properties move design away from the machine

metaphor towards a systems metaphor.)

-Though each layer may be specified independently, upper layers of the framework are

regarded as higher-level abstractions (types) of lower layers.


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-Lower layers may be regarded as nested in higher layers.

-The scope of each layer consists of elements that may be modeled to any degree of

granularity. For example, task, activity, work cycle, and process are increasingly higher

degrees of granularity that may be selected in the Process Layer.

- If desired, any layer may be hierarchically decomposed into further sublayers. See

Figure 2 for an example of an organizational type referred to as the Process View (Fig.

2c) that is formed by decomposing the technology layer in the organizational type

referred to as the Systems View (Fig. 2b) into the human, information, and tool layers (in

descending order as listed).

- Reuse of any behavior specification at any level implies reuse of all its lower layer

constituents.

-There is no need to distinguish between specification and implementation. Each layer

represents a specification of the layers below it and an implementation of the layers

above it.

- Although layers are specified solely by their behavior, they may be afterward

operationalized by structural properties.

-Behavior is an integrating mechanism that is specifiable by means of contracts.

-Contracts are specified both within and between layers.

In Figure 2 we depict illustrative examples of layered organizational types. Note that

either a different choice or different ordering of layers will result in a different

organizational type. For the definition and rationale of each of the layers shown as well as

historical background and insight concerning these and other important layers and

organizational types, the reader may consult [MSB1999].


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Environment

Strategy

Function

Structure

Technology

Human

Information

Tool

Structure

Process

Strategy

Environment

Environment

Strategy

Structure

Technology

Process

Classical View Systems View Process View(a) (b) (c)

Figure 2: Different Organizational Types Adapted from [MSB1999]

Organizational domains: hard (traditional)

A hard behavior at a given level, or involving several levels of our nested hierarchy,

can be specified via a design schema known as an organizational molecule. An

organizational molecule serves as the fundamental building block of organizational

architecture. It embodies architectural principles (e.g., modularity, reusability, separation

of concerns, etc.) that can promote design goals. Intuitively, an organization molecule is a

schema that can be used to frame organizational design decisions about a whole

(known more formally as the composite) and each of its parts (known more formally as

the components). In organizational design based on a hard architecture, it is necessary to

give a precise and complete (at a given level of abstraction) form to our intuition. In our

approach to organization design, the hard molecule arises from the more general notionof a behavioral category known as a managed collection: a group of elements and their

relationships constrained as a group. It is thus a behavioral category where the

relationships between the elements are predefined and, in addition, the group is

identifiable as a single element. The relationships may apply to a single situation or to a

generalization of similar situations. Elements and situations are classified and considered

to exist at a certain level(s) of abstraction. W ith respect to high-level organizational

design, the most important form of a hard molecule is given by the following managed

collection (in which elements are identified with organizational components and the

situation with an organizational domain):

fit: Composition (org. domain, {org. component1,, org. componentn})

In the above schema, the name of the association appears firstfit. Composition is

the composition association as defined in business modeling and organization modeling.

(For a thorough description and implications of composition in organization modeling

consult [MSB1999].) In our linear formula for fit, org. domain (the composite)


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represents an organizational domain and all the org. components represent the

components of that domain). Note that as a result of composition there must be at least

one emergent property of org. domain; i.e., a property possessed by org. domain but

not by any of its org. components.

Using the notion of composition, we have thus characterized a given organizational

domain through its behavior. This is tantamount to regarding a given org. domain as a

set of behaviors, each of which corresponds to a particular interaction of its components.

Thus, for example, a hardprocess molecule can be given in linear notation as follows:

work: Composition (process, {human, structure, information, tool})

Thus, as shown below, a Performance Review may be regarded as an organization

specific process that is an instantiation of the more generic work" specification (a

composition between the process domain and the set of its components: human, structure,information, and tool).

The iterative process of successively adding information to a design (e.g., a process

specification) sufficient to make an implementation (choice) is known as refinement. As

discussed in [MSSB2008] refinement is a series of design decisions where each decision

adds information to a prior, higher level decision such that managerial choice is

facilitated. Through the refinement process a managerial style emerges. As an illustration

many organizations rely on standards at various refinement levels to help reduce

managerial choice. In effect, the table above only reflects a first step in the refinement

process.

Organizational domains: soft (nontraditional)

In organizational design of soft domains we do not focus on creating and satisfying a

formal logical specification. Instead our motivation is to arrive at an acceptable

agreement (with a relational or psychological contract) or to satisfy a task requirement

(knowledge contract). For soft architectural design purposes, we may think of a soft

molecule as being a design construct with a loose emphasis on logic but a heavy

Figure 3. Performance Review Process Components

ProcessDomain StructureHuman Information Tool

PerformanceReview Lateral Employee Goals&Objectives PerformanceReviewdocument

Supervisor Development Plan

ProcessTaskComponent


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emphasis on commitment. It is used to describe management intention or

implementation. Although a soft domain5

cannot be designed by a progressive

refinement process, it may be framed at a higher level of abstract in the same manner as a

hard molecule and its design can be subject to a limited amount ofrefinement.

The process of establishing an employment contract as shown in Figure 4 may be

understood as an interaction over time between structure, human, information, and tool

components. Figure 4 reveals an initial refinement of the process molecule to establish an

employment contract. Our soft molecule helps us to investigate the situational facts as

they develop and unfold through psychological, social, or cognitive processes that

underlie the establishment, maintenance, and evolution of soft contracts.

The information component in this example represents interpretative information or

what is in the heads of the persons involved in the process as well as explicit job

requirements.

Process Task Component

Process Domain Structure Human Information Tool

Establishing an Lateral Employee Job requirements Mission statement

Employment Contract Employer Job demands Company cultural statements

Past experiences Employee training programs

Figure 4. Interaction for Establishing Employment Contract

Comparison of Contracts for Hard and Soft Domains

In Table 1 we provide a selected set of distinguishing characteristics between hard and

soft contracts. The specifics of the table are based on the works of ([MSB1999],

[R1995], and [MG2001]). The characteristics shown in the table should not be interpreted

as exact, but rather as guides for helping the manager-architect make a judgment as to the

type of contract to be considered. (According to both [MG2001] and [MSSB2008] there

is a hardness-softness contract continuum.) Certain terms used in the table are explained

in the text following the table and in endnotes 6-12.

To begin, hard contracts are precise, explicitly defined relationships arrived at using

early knowledge binding6. Soft contracts, on the other hand, are imprecise, tacit in nature

and are arrived at using late knowledge binding7. Hard contracts tend to be transactional

perhaps being embedded within a relational context. Soft contracts are predominantly

relational with perhaps some degree of hardness. Hard contracts tend to be finite, that is,

they have a specified end while having a wide range of duration. Soft contracts tend to be


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open-ended and long in duration. Hard contracts usually assume transactions are discrete

and presentiated8. Soft contracts typically rely on future cooperative efforts of the parties

involved. They also focus on human relations, along with a high degree of loyalty,

dynamism, commitment, and promise to another party(ies). Hard contracts are oriented

towards logic and economics, with a low degree of loyalty, have a high degree of

stability, and a sense of obligation. Hard contracts are easy to measure and test for

correctness without reference to human values. Soft contracts are about people relations

and thus are difficult to measure; they involve the whole person or organization. These

relationships are not transferable. Contract fulfillment of soft contracts is more subjective

and therefore difficult to verify. Soft contracts are emic9

in nature. They tend to define the

analytical side of human relationships. Hard contracts, are etic10

in nature. They are based

on external conditions and are characterized by discrete and possibly repeating

exchanges. Soft contracts are based on norms11, trust, and personal relationships. Soft

contracts are also enduring and interimistic12. If parties are involved, hard contracts

typically have a clear separation of roles. Soft contracts may, or may not, have a clearseparation. In some cases there may be overlapping roles. Both hard and soft contracts

produce positive exchanges but hard contracts produce outcomes with each exchange

while soft contracts produce outcomes over an extended period of time. Soft contracts

maintain flexibility through constant re-negotiation and dialogue or voice. Hard

contracts maintain flexibility by providing exit options for the parties. Hard contracts

achieve solidarity through formal bargaining and legal enforcement.


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Characteristic Soft Contract Pole Hard Contract Pole

Degree of Formalism Imprecise Precise

Knowledge Binding Late Early

Knowledge Characteristic Tacit Explicit

Basis for behavior Predominantly relational

Some transactional

Transactional

Termination Open-ended Close-endedContext dimensions Behavioral norms LogicalEconomic

Other dimensions

Stability Dynamic Stable

Loyalty High Low

Duration Long ShortLong

Time projection Typically relies on future cooperative

effort

Usually considers transactions as

discrete and presentiated

Assurance Promise

Commitment

Obligation

Measurability Difficult to monetize or measure Easy to measure

Degree of Involvement Whole person or organization;

Non-transferable

Specific individual or organization

Type of Modeling Emic Etic

Type of Exchange Enduring

Interimistic

Discrete

Repeated

Adaptation based on Norms

Trust

Personal relationships

External conditions

Role Integrity Overlapping Clear separation

Mutuality Positive outcomes from exchanges overtime

Positive outcomes from each exchange

Flexibility By re-negotiationUse of voice

By the potential use of exit

Solidarity Commitment

Bonding

Arms-length bargaining

Legal enforcement

Restraint of Power Voluntary Subject to limitations by the law

Conflict Resolution Informal

Internal processes

Formal

External processes

Table 1. Hard and Soft Contract Characteristics

They are also constrained by the limitations of the law or traditional invariants. Soft

contracts are achieved through commitment, bonding, and voluntary restraint of power.

Soft contracts typically resolve conflicts through informal and internal processes. Hard

contracts resolve conflicts through formal external processes. According to the noted

legal scholar MacNeil, all economic contracts are relational (i.e., may be embedded in a

relational contract), but for analytical purposes we may ignore the social and

psychological context in which traditional discrete economic contracts are developed

[MG2001].

Traditional Banks vs. Internet Banks in the Canadian

Financial Services Industry

Hard and soft organizational behaviors are interdependent. Appropriate soft contracts

establish and maintain social relations and promote shared ideals and beliefs that enable


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Transaction

preparation

Bank-environment

information flow

Bank

Improving

corporate

image

Environment

Transaction

completion

Environment-bank

information flow

Environment

Speed, quality

and agility

Bank

Transaction

support

Bank-bank

information flow

Bank

Building on

the Knowledge

Bank

Figure 5. The Transaction Process as Information Flows

In July 2002, 14 domestic banks, 33 foreign bank subsidiaries, and 20 foreign bank

branches were operating in Canada (Department of Finance, 2002). Highly digitalized,

the transaction process is conceptually similar for both the bricks and mortar and the

virtual banks. The transaction process is a dynamic system which is composed of the

interplay of the three information flows. The process has three parts. The transaction

preparation (ATMs deployment, portals, advertising, merchants management, etc.)

generates corporate information (where, when, how to operate an ABM, what services are

available, etc.) to offer transaction opportunities to the customer. Using thoseopportunities, a customer making, for example, a deposit at an ATM will trigger the

completion of the transaction process. The transaction support (data cleansing and

structuring, data processing, CIF updating, data warehousing, analytical tools, reports

creation, etc.) is essential for effective organizational response to new information flows.

The transaction process displays hard and soft properties. The soft dimensions refer to

informal and imprecise and/or hidden arrangements that will permit the creation of new

routines, new knowledge, more flexibility, and open information exchanges by intelligent

delivery channels supported by the local IT platform. The hard dimensions refer to the

formal, precise, and visible arrangements that must be aligned with the soft dimensions.

From our data on 5 large banks, we will present for each information flow three

patterns and the resulting characteristic(s) in the order of the transaction process: 1. The

transaction preparation 2. The transaction completion 3. The transaction support.

For each information flow, we will present only one pattern by summarizing the

combination of hard and soft elements. Each pattern and its observable characteristics


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some unmanned, some small boutiques for specialists, and some are full service flagship

heavy footprint. (V.-P., Network Management at the Bank A, Toronto). The best

bankers have learned that the customer is no longer looking for a branch but for a

relationship supported by many doors or delivery channels.

Contract: Improving corporate image

Hard elements

Multiplication of

the ATMs and the

bank logo in the

environment, the

INTERAC network,

the automated

branch etc.

Enables ->


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understand the precise nature of market segments, the products and services desired by

customers, the technology changes and competitor positions in the market. Our research

identifies the following characteristics and patterns when environmental flow is utilized

effectively: 1. Increasing knowledge of the customer. 2. Using IT to increase

responsiveness. 3. Improving service quality. 4. Speed, quality, and agility.

Speed, quality, and agility

The full utilization of the environmental information flow requires integration with the

wider IT platforms of the bank at the branch level. Combinations of CIF and other hard

and soft elements at the branch level lead to competitive advantage. As one banker put it,

The local platform is really the lifeblood of how a bank serves their clients. Information

technology investments cant be limited to the CIF. Even if the banks didn't have CIF they

would need a computer platform to access their service systems. What kind of network

capability you need in terms of platforms and for decision support systems? What

emerging tools, personal computing tools do we need to develop and provide to bankers

to help them in this complex environment to deal with clients? That, I would say, raises

the need for a network is beyond the CIF. (V.-P. Information Systems, Bank B,

Toronto)

The massive deployment of ATMs exchanging data with the CIF led to a new scenario

regarding selling techniques. Once a banker has predicted the customer's need, he has

identified a gap that the bank can fill. He may then blend the use of the CIF with the 32

self-service delivery and merchandising techniques and perhaps some very useable

graphics to present the new opportunity to the customer. The main soft element

sustaining the environmental flow is the customer relationship strategy. That strategy is

not a matter of IT investments but a matter of culture, values, and soft contracts. Another

key soft dimension is the learning capability at the organization level. In the 90s a bank

had to learn and to change some routines and decisions processes. The hard elements are

largely IT-based and cannot differentiate the banks in the Canadian market. But not all

the hard elements are digital: the branch redesign requires a thread of hard contracts. The

vision, the quality and the new concept deployment speed will all impact the bank image.


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Contract: Speed, quality and agility

Hardelements

IT platforms

and analytical

software

Enables ->


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Building on the knowledge using the information flows

In the Canadian banking industry, the growth of the internal information flow has

required all members and units to take on new roles. Take the back office, for example. Ithas become a processor and router of information instead of a mere processor of

transactions. This provides an ease of connectivity between the various units that supply

information and those that use it. This organizational resource is necessary for the 37

efficient internal flows and the effective utilization of the flows that come into the

organization..

It is an essential part of the corporate software of the firm. This requires continuous

improvement and evolution of this function. As one manager put it, Over the next ten

years, there will be technological changes in financial institutions. Centers like this one

will be significantly reduced by, say, three quarters. A lot of manual work will eventuallybe done either by the banking machine, phone services, or home computers. That said,

there will always be a small part at central operations such as this, but, there is still

going to be a major reduction that is going to happen. The branch will absorb a part of

it, banking machines will absorb a part and finally the user is going to absorb a part

too. (Director, Processing Center, Bank B, Montreal) The system encourages employees

to create new information as well. The employees have to be continuously trained to

follow-up on the changes to operations and procedures.

Contract: Building on the Knowledge

Hard

elements

Information

systems and

technology;

back-office and

branchesredesign

Enables ->


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They also have to improve their knowledge of the customers and the new products. As

one manager put it: The banking machine allows us to have the employees do work that

is much more interesting for them, especially for our tellers. Its a way of enhancing the

value of their job behind the counter. Were at the stage where theyve gone back to

school, I have 25% of my working population that has gone back to university, at night,

on BIC (Bankers Institute of Canada) programs or whatever, in order to increase their

knowledge of certain products, because they want to get ahead in personal banking here.

All this is created because theyve been successful- my employees have been successful -

in directing customers to the machines. (Regional V.-P., Bank A, Montreal) The new

information flows that are generated by IT allow units and individuals to create new

knowledge, making a kind of knowledge spiral [NT1995], once organizations are in place

to utilize all the IT technology.

Conclusion

We have presented three organizational patterns characterizing each of the three steps

of the transaction process: transaction preparation, transaction completion and transaction

support (see Figure 5). How do these patterns connect with the dynamic capabilities

story? Following Schreygg and Kliesch (2007): Capabilities are developed in the

context of organizational resource allocation which is embedded in idiosyncratic social

structures. On this basis capabilities are conceived as distinct behavioral patterns, which

are complex in nature involving both formal and informal processes[SK2007]. Let us

revisit the first pattern Improving Corporate Image. In the Bank A, the Bank with the

best corporate image, a gentleman - who also initiated the ATMs massive deployment -

put forward the idea of interlinking all the bank's machines through a shared network.That innovation could not have happen elsewhere. Bank A is well known for its IT-

business integration enabling product and process innovation. So the reconfiguration of

its Bank-Environment information flow is idiosyncratic and involves both formal and

informal processes. Those processes can be located within the Hierarchical Layered

Approach to Organizational Design. Using the Process View (c) in Figure 2, we see

them between Strategy and Structure. In fact, the decision rights about the ATMs

investments, and locations were pushed down in the structure within the hands of the

regional directors (responsible for 3 or 4 branches) as they became also responsible for

choosing one of four generic strategies. As Teece, Pisano and Shuen wrote: Change is

costly and firms must develop processes to minimize low pay-off change.//Decentralization and local autonomy assist these processes. Firms that have honed these

capabilities are sometimes referred to as high-flex[TPS1997]. That configuration of

resources allocation, planning activity, and decisions making processes can only happen

in a culture of innovation, discipline, and mutual trust.


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Our approach offers new insights on the representation and modeling of organizational

design and strategic capabilities. The Hierarchical Layered Approach to Organizational

Design gives managers and researchers powerful tools to detect and decompose

observable patterns. The discipline of strategic management helps us to understand the

consequences of key idiosyncratic patterns on performance and competitive advantage.

Dynamic capabilities are characterized by problem-solving and complexity, practicing

and success, reliability, and time [SK2007]; they are used to describe new production

models (like the Toyota Way) and are in fact at the heart of some new concepts, like lean

construction [KV2000] where the soft contracts are key. In that sense, the Hierarchical

Layered Approach to Organizational Design contributes more to a (yet missing)

production theory than to a social theory of the organization [KV2000]. It captures the

configuration changes towards highflex organizations without making (information)

technology the ultimate focus.

In the end, any advances in IT technology, whether it is something as mundane as anATM or as pathbreaking as internet banking, can only be of strategic value if

firms are able to create distinct behavioral patterns, which are complex in nature

involving both formal and informal processes [SK2007].

1A hard contract is a self-contained logical construct in the form of a set of explicit assertions that

precisely specify or describe a given behavior. Specifically, it is made up of four categories of assertions:

invariant,precondition,post-condition and trigger. For definitions of the preceding terms and further detail

see [K2003].2

According to Yolles, hardness of an entity (i.e., element, situation, domain, organizational setting,

etc.) is related to the viewpoint of the manager. Entities that are classified as hard are frequently tangible;

i.e., they can be objectively defined and measured or assessed without direct reference to personal values orhuman dispositions. On the other hand, softness of an entity is relative to the subjective mentality and

emotional disposition of people. Such properties as personal values, emotions, weltanshauung (i.e.,

subjective world view) cannot be measured in an objective fashion. We may postulate a hard-soft

continuum to judge the degree of hardness or softness of a design element [MSSB2008].3

Complexity of an element, situation, etc. is largely dependent on three orthogonal properties:

degree of hardness, degree of structure, and degree of certainty [Y1999].4

As pointed out in [MSB1999, BC2004 and MSSB2008] managers are increasingly assuming the

important role of designer (or architect) as well as there more traditional roles of problem solver and

decision-maker. In this role we refer to the manager as a manager-designer or manager-architect.5

For more complete treatment of organizational molecules (hard and soft) refer to [MSSB2008] and

[MSB1999].6

The notions of specification and implementation characterize every system ever built. A concept

specification may assume the form of a simple goal, a complex set of criteria, a hard contract, or an implicitunderstanding (soft contract). Knowledge bindingrefers to the degree of separation between a

specification and its implementation. It refers to the creation and application of knowledge in a

development process. A specification is typically followed by some corresponding behavior. There may be

occasions where it is advantageous, even necessary, to maintain a long lead-time between specification and

implementation (early knowledge binding). At other times, it may be the reverse (late knowledge binding).

The dynamicity of the twenty-first century business environment necessitates that organizational designers

increasingly employ late knowledge binding in the design process. To do so they must give considerable

attention to soft domains and soft contracts.adapted from [MSB1999, p. 236].7

See endnote 6.


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8Topresentiate: to make or render present in place or time; to cause to be perceived or realized as

present. 8 OED 1306 (1933). Whereas hard contracts have a time sense of presentiating the future, soft

contracts futurize the present; i.e., to the extent past, present, and future are viewed as separate, the present

is viewed in terms of planning and preparation for a future not yet arrived. Reference: [MG2001].9

The terms emic and etic are due to noted cultural anthropologist Clifford Geertz [G1973]. Emic

(a.k.a. thick) models are complex and multidimensional; they address the cognitive architecture of aculture and try to frame; i.e., represent the point of view of a member of that culture. Thus, they are

suitable to be modeled by soft contracts that are relational or psychological. Etic models (a.k.a. thin)

describe and define specific human relations within a culture that define; they describe specific

relationships from the point of view of an external observer external to that society. Thus, they are suitable

to be modeled by hard contracts[MSSB2008].10

See endnote 9.11

A norm may be thought of as a soft analog for a (hard) invariant.12

Interimistic refers to a relational exchange that is defined as a close, collaborative, fast-

developing, short-lived exchange relationship in which companies pool their skills and/or resources toaddress a transient, albeit important, business opportunity and/or threat[LSH2000].


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References

[BC2004] R. Boland, F. Collopy,Managing as Designing, Sanford University Press, 2004.[BG1994] C.A. Bartlett, S. Ghoshal, Changing the Role of Top Management: Beyond Strategy to

Purpose, Harvard Business Review, November, 1994.

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