OrganizatiOn Design fOr Dynamic fit a review anD PrOjectiOn

The concept of fit is central to organization design. In the organizational literature, fit historically has been portrayed as a static concept. Both organizations and their environments, however, are continually changing, so a valid concept of fit needs to reflect organizational dynamics. In this article, I analyze various theoretical perspectives and studies that relate to organizational fit, differentiating those that employ an equilibrating or a fluxing approach. Four substantive themes emerge from this analysis: design orientation, design tension, designer/manager roles, and measurement and validation. Implications of each of these themes for dynamic fit are derived, and promising future research directions are discussed. keywords: Organization design, organizational fit, dynamic fit, organizational alignment, misfit Fit has long been an important concept in the organization design literature. When an organization and its environment are aligned, organizational performance is strong. Today’s organizations and environments seem to be changing more and faster than ever, but the concept of fit – its definition and measurement – has not kept pace. This article seeks to develop a concept of dynamic fit by reviewing major theoretical perspectives in the organizational literature and deriving their implications for continuous organization design and redesign. THe CUrreNT FiT FraMeWOrk The concept of fit is central to the field of organization design (Venkatraman, 1989). Fit exists when organizational performance is positively affected by the alignment of key organizational and environmental contingencies (Donaldson, 2001). Internal fit refers to the alignment of organizational strategy, structure, and process while external fit refers to the alignment of the organization with its environment (Miles & Snow, 1984). When a misfit occurs, either internally or externally, organizational performance is negatively affected (Donaldson, 1987). Historically, the concept of fit has been portrayed as static, suggesting that it is an end-state for the organization to achieve rather than an ongoing process to be continually managed (Burton, Lauridsen, & Obel, 2002; Zajac, Kraatz, & Bresser, 2000). The static view of fit, however, is incommensurate with the fundamentally dynamic nature of organizations, their environments, and other contingencies (Sinha & Van de Ven, 2005). Early research utilizing the fit concept was conducted using a contingency approach. Structural contingency theory, for example, was originally based on a fit between organizational structure and production technology (Woodward, 1965). Later, organizational performance was shown to be associated with a fit between structure and environmental uncertainty (Lawrence & Lorsch, 1967). More recently, Burton, DeSanctis, and Obel (2006) identified a set of 14 contingency factors (goals, strategies, environments, etc.) that an organization must address in an integrated manner, and they explain how the specific contingency set a given organization faces can be expected to change over time. Thus, the current theoretical framework utilizing the concept of fit is the multi-contingency perspective 30 Journal of Organization Design JOD, 3(2): 30-42 (2014) DOI: 10.7146/jod.8196 © 2014 by Organizational Design Community in which multiple internal and external contingencies must be aligned in order to achieve strong organizational performance. DYNaMiC OrGaNiZaTiON DesiGN aPPrOaCHes In order to develop fit as a dynamic concept, I analyze the theoretical perspectives and studies in the organizational literature that provide insight into dynamic organization design. Building in part upon my prior research (Alberts & Nissen, 2009; Nissen & Burton, 2011; Nissen & Leweling, 2008), I divide this literature into two broad orientations towards design: equilibrating and fluxing.1 An equilibrating orientation seeks to achieve and maintain fit through episodic sequences of static organization (re)designs, whereas a fluxing orientation allows designs to change continuously with changing contingencies. equilibrating Orientations Most approaches to organization design have an equilibrating orientation. As such, the organization is (re)designed to fit its multiple contingencies and then left in that configuration until enough misfits accumulate to warrant re-equilibration through subsequent redesign. The (re)design is accomplished as a nonroutine, sometimes disruptive activity (Boudreau, 2004; Burton et al., 1998), usually performed by high-level managers (Mintzberg, 1979). This orientation is pragmatic and focuses on the relative costs of misfit more than those associated with the (re)design activity – that is, content costs are emphasized over process costs (Håkonsson, Klaas, & Carroll, 2013). Hence the equilibrating orientation to dynamic organization design centers on a series of static adjustments over time. Population ecology (Hannan & Carroll, 1995; Hannan & Freeman, 1977) represents one extreme among equilibrating organization design approaches.2 (See Table 1 for a summary of the various equilibrating approaches.) Proponents argue that some organizational populations are inherently better suited for certain ecologies (environments) than others. Forces of adaptation – variation, selection, retention – work to preserve the populations exhibiting better fit and hence to alter the composition of ecologies over time (with some populations destined to survive and others destined to fail). According to the ecological view, the dynamics of fit are deemed to manifest themselves via interactions between populations and their ecologies, over long periods of time, and are largely insulated from management influence – that is, most managers in poor-fitting organizations are destined to see their organizations fail whereas managers in well-fitting organizations are destined to see theirs succeed. This passive perspective includes negligible opportunity for organizational redesign, even when misfits accumulate to the point of individual organizational failure. Alternatively, most proponents of contingency fit maintain a teleologic view (Burns & Stalker, 1961; Klaas, Lauridsen, & Håkonsson, 2006; Van de Ven & Poole, 1995). They see managers in pursuit of goals, taking action to adjust organizational structure in order to establish or re-establish fit. For instance, Burns and Stalker (1961) suggest that organizations in misfit are expected to modify their structures to move into fit with their environments or other contingencies. This is an argument for deliberate organizational change (i.e., via management intervention), which suggests equilibrating organization redesign in response to exogenous shifts that cause an organization to fall out of fit. Fit remains a static concept in the contingency perspective. Similarly, set largely within a technological context, the punctuated equilibrium approach (Eldredge & Gould, 1972; Gersick, 1991; Romanelli & Tushman, 1994; Sabherwal, Hirschheim, & Goles, 2001) indicates that most organizational transformations take place via discontinuous, management-induced change. Fit may persist over long periods of time 1 This division is a broad heuristic rather than a rigid classification system. Most organization design approaches reflect varying aspects of both equilibrating and fluxing orientations, but the distinction helps to organize the