Multidimensional organization
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The Multidimensional Organization An organization is multidimensional if its objectives are pursued simultaneously through multiple dimensions (product, region, account, market segment), in which:
1. the overall performance of the firm is reported simultaneously on multiple dimensions and on multiple levels, and
2. each of these dimensions has a manager who is held accountable for the contribution of his dimension to the overall performance, and
3. these managers depend on each other for required resources, and
4. these managers collectively are accountable for the overall performance.
The multidimensional organization is a new organization form, compared to the U-form, the M-form and the H-form. It transcends the restrictions with the M-form or multiunit organization as well as the problems with the matrix-organization. Examples of firms with a multidimensional organization are IBM, Microsoft, ASML (Strikwerda, 2007).
The defining characteristics of the multidimensional organization are:
• The profit center in its accounting system is the customer, that is not a product or a region, as is common in the unit organization.
• Transaction data is owned by corporate, not by units or regions.
• Information on the performance of the firm, respectively its position with customers is available to all managers on the different dimensions, that is absence of information asymmetry.
• Contrary to the unit organization, market opportunities and resources are organized under separate responsibilities to avoid risk averse behavior with respect to market opportunities
The reason for the emergence of the multidimensional organization can be explained in multiple ways. Most basic is that due to the fall in costs of information customers start to behave in multidimensional ways in terms of sets of preferences, the way they select and buy goods and services, make use of distribution channels, etc. To answer this increasing variety in customer behavior, both private consumers and B2B, firms need to increase their internal variety, according to Ashby’s Law of Requisite Variety (Ashby, 1956).
In addition to this the multidimensional organization also answers the emergence of multidimensional strategies (Bartlett & Ghoshal, 1989), in which firms not only pursue market dominance, superior efficiency, but also need to exploit economies of scale.
The differences between the multidimensional organization and the matrix organization can be summarized as below:
| Matrix organization | Multidimensional organization |
|---|---|
| One person, two bosses having their own objectives | Limited number of managers work n-D, most workers within modules in hierarchy; managers having one common challenge, the performance of the firm with customer C |
| Products and regions are profit center | Customer = profit center |
| Transaction data is owned by region | Transaction data is owned by corporate |
| No shared information on performance | Shared information from trusted source on performance, no information asymmetry |
| Transfer prices between dimensions | No transfer pricing between dimensions |
| No proper management process for planning & control | Clear management process, giving priority to most critical dimension |
| Based on economic model of unit organization | Based on economic model of exploiting intangible assets in integrated firm |
The multidimensional organization implies specific requirements how transactions are recorded in ERP systems, implicating a shift away with the traditional paradigm in IT-governance of business IT-alignment. Now transactions need to be recorded, not only multidimensional, to allow multiple consolidations simultaneously, especially the recording needs to be neutral with respect to business models. ERP systems tend to have a technical life time of 10-15 years, whereas business models last for 3-5 years.
Multidimensional organizations are an answer to the new generation workers. Especially the hacker generation (Himanen, 2001) and the gamer generation (Beck & Wade, 2006) expect to work the multidimensional organization caters for, but the older generation workers, especially those trained and selected to work in the multiunit organization may experience severe difficulties with this new organization form.
The multidimensional organization was discussed as early as in the seventies and presaged by (R.L. Ackoff, 1977; Russell L. Ackoff, 1994; Prahalad, 1980; Prahalad & Doz, 1979). It required the combination of the fall of costs of information, the development of dynamic multidimensional markets and a new generation of workers and managers, to create this paradigm shift in organization forms.
By: Prof. Dr. J. Strikwerda, Universiteit van Amsterdam – department of business studies; Nolan Norton Institute – Zeist, Netherlands, author of: Strikwerda, J. (2008). Van unitmanagement naar multidimensionale organisaties. Assen - Den Haag: Van Gorcum - Stichting Management Studies.
References
Ackoff, R. L. (1977). Towards Flexible Organizations: A Multidimensional Design. Omega, 5(6), 649-662.
Ackoff, R. L. (1994). The Democratic Corporation: A Radical Prescription for Recreating Corporate America and Rediscovering Success. New York: Oxford University Press.
Ashby, W. R. (1956). An Introduction to Cybernetics, 1999, from http://pcp.vub.ac.be/books/IntroCyb.pdf
Bartlett, C. A., & Ghoshal, S. (1989). Managing Across Borders: The Transnational Solution. Boston, Mass.: Harvard Business School Press.
Beck, J. C., & Wade, M. (2006). The Kids are Alright: How the Gamer Generation is Changing the Workplace. Boston, Mass.: Harvard Business School Press.
Himanen, P. (2001). De hacker ethiek en de geest van het informatietijdperk. Amsterdam: Nieuwezijds. Prahalad, C. K. (1980). The Concept and Potential of Multidimensional Organizations. In F. Stevens (Ed.), Managing Managers. Eindhoven: N.V. Philips' Gloeilampenfabrieken.
Prahalad, C. K., & Doz, Y. L. (1979). Strategic Reorientation in the multidimensional organization (Working Paper No. 195): Graduate School of Business Administration - The University of Michigan.
Strikwerda, J. (2007). The Emergence of the Multidimensional Organization: [www.ssrn.com].
Strikwerda, J. (2008). Van unitmanagement naar multidimensionale organisaties. Assen - Den Haag: Van Gorcum - Stichting Management Studies.
