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Principles of Organizational Design

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All the finest processes in the world won't help if the organization is not structured to support any technology, so the IT group must structure for success. The only way you can take full advantage of technology is by resolving people and process issues.
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In the United States, modern business enterprises started to develop after the Civil War. Since then, two major milestones transpired in organizational design. The distinguishing of management from ownership between 1895 and 1905 was the first major shift in power and knowledge. Approximately 20 years later, the second major evolution took place. It's what we have grown to expect as the typical organization structure. This shift occurred when Pierre S. du Pont restructured the family business in the early 1920s. It continued with Alfred P. Sloane's introduction of command-and-control procedures that allowed for a decentralized organizational structure with centralized staff functions.

In the first two decades of the 20th century, Frederick W. Taylor's scientific management established a framework that advanced the total system of management. He introduced a new and influential technology, which focused on the subdivision of tasks into manageable and controllable units. This led the way to the division of labor, as exemplified by Ford Motor Company's assembly line manufacture of automobiles.

Following World War II, a second management method, participative management, introduced the human side of management. Participative management greatly lessened the dominance that scientific management had exerted up to that point. The concept that motivational factors—and not the division of functions—drove performance partially displaced scientific management.

Alfred P. Sloane, chief executive officer of General Motors, followed Pierre S. du Pont a few years later by taking Taylor's work one step further. He created the divisional corporation. du Pont, as well as Henry Ford and others of that time, had created large organizations that had grown beyond the capabilities of general management. Sloane segmented General Motors into divisions to allow his management group to control and organize business activities. This defined how large multinational corporations were structured for several decades.

Why is the history of organizational design important? The "glass house" (the name most associated with a mainframe data center) is designed using Taylor and Sloane's definition of best practices for organization design. I often refer to this organizational design as a stovepipe. IT groups are structured into divisions, department, groups, and so on, with a clear division of labor and resources.

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