FAQs on Organizational Structures

This week a consultant sent me an email with some questions on organizational structures (aka what you see on as an organization chart). And a line manager from another organization sent different questions but on the same topic. This sparked in me the idea of answering the 10 common FAQs I get about structures – so here they are with some answers. Feel free to challenge, add, comment on.

1 What are the emerging organizational structures?
Various structures are emerging both in theoretical literature and in application. These include network structures, formal versus informal organizing structures, state capitalist structures , open source structures, (see The Rise of State Capitalism), and co-operatives (not new but gaining ground).

2 What are the models, theories and concepts that underpin these emerging structures from a technical/operational perspective?
These tend to come out of organization theory, social science, social psychology, behavioural science and economics. Theorists in the field include:

Siobhan O'Mahony from Boston University and Fabrizio Ferraro from IESE Business School (University of Navarra) have individually and together investigated, as Ferraro explains, "the emergence of novel institutions, such as Open Source Software, Sustainability Reporting and Responsible Investing, the evolution of global corporate networks and architectural changes in industries."

O'Mahony is interested in how people create organizations that promote innovation, creativity and growth without replicating the bureaucratic structures they strive to avoid. She has done a delightful study of Burning Man and Open Source communities,finding that:

"Both communities sought to differentiate their organizations from reference groups … We found that the ability to pursue a differentiated strategy was moderated by environmental conditions. By exploring the organizing decisions that each community made at two critical boundaries: one defining individuals' relationship with the organization; the second defining the organization's relationship with the market, we show how organizing practices were recombined from the for-profit and nonprofit sectors in unexpected, novel ways. This comparative research contributes a grounded theoretical explanation of organizational innovation that adjudicates between differentiation and environmental conditions."

Carliss Baldwin at the Harvard Business School. She studies the process of design and its impact on firm strategy and the structure of business ecosystems. See a recent article of hers in The Journal for Organization Design (Vol. 1, No 1, 2012) Organization Design for Business Ecosystems.

Jay Galbraith an Affiliated Research Scientist at the Center for Effective Organizations at the University of Southern California and Professor Emeritus at the International Institute for Management Development (IMD) in Lausanne, Switzerland. has an article in Vol. 1. No 2 of the same journal The Evolution of Enterprise Organization Designs predicting organization designs of the future. In his words

"International expansion leads to organizations of three dimensions: functions, business units, and countries. Customer-focused strategies lead to four-dimensional organizations currently found in global firms such as IBM, Nike, and Procter & Gamble. I argue that the next major dimension along which organizations will evolve is emerging in firms which are experimenting with the use of "Big Data.""

3 Are the models and new structures appropriate for all environments?
No any organization should think about the appropriate structure in relation to its environment, the uncertainty it faces, its legacy and history (some government organizations, for example, have a legislated structure), how it wants to specialize/differentiate, how it wants to integrate (i.e. the linking mechanisms).

Having said that structure choices involve tradeoffs and there is no one best way for a specific organization to structure. Generally speaking, people can work in any structure. I came across a structure manifesto on a wall in a nightclub in Newcastle on Tyne once. I wrote it down immediately. It read:

  • One can work within any structure
  • While one can work within any structure some structures are more efficient than others
  • There is no one structure that is universally appropriate
  • Commitment to an aim within an inappropriate structure will give rise to the creation of an appropriate structure
  • Apathy, i.e. passive commitment within an appropriate structure will effect its collapse
  • Dogmatic attachment to the supposed merits of a particular structure hinders the search for an appropriate structure
  • There will be difficulty in defining the appropriate structure because it will always be mobile, i.e. in process
  • Within any structure it is always essential to act with responsibility and consider the impact of the structure on people, their minds, and other living things.

I thought these were valid points. I wonder if the manifesto is still there?

4 Should we be thinking about roles, posts or individuals as we develop the structure?
When I work with organizations I look at the work that has to be done and develop the structure in line with estimated work volume, work flow, handoff and interdependencies, and then the benefits of one type of structure over another. See Chapter 3 in my book Guide to Organisation Design: Creating high-performing and adaptable enterprises (Economist Books), for a discussion on the characteristics, advantages and disadvantages of different types of structure.

In reality individuals start to intrude when the structure with roles has been developed and it is evident that there is no place for, say, Jim who then has to be slotted in somehow. That's when I find the political jockeying begins.

5 What is the relationship between business process maps and organizational structure? (And do we need to do current business process maps?)

I have found that detailed current process maps are rather a waste of time and effort when doing a restructure. However identifying the business purpose of the organization (or part of it that you are working with), agreeing the core business processes that deliver the purpose and then mapping at a high level the ideal process flow (not the current) with handoffs and interdependencies, is the way to go. I then encourage people to 'bundle' the work across the core processes in different ways and then develop the structure from these bundled options. As I said in last week's blog I am re-writing my first book on organization design and am going into much more detail in the second edition on the methods and testing of these 'bundled' options that lead to proposed structures.

6 Who are the various players in developing an organization structure?
Usually it is a leader either of the whole organization or the part of the organization that is being restructured who initiates the work. I advocate for representatives of different levels of the organization to be involved in re-structure work to get full insight into the work that is done. In the Hoshin Kanri program I attended last week we were reminded that Taiichi Ohno (father of Toyota's lean manufacturing system) refused to read more than the first page of written reports. Instead he'd say "let's go and see" and make people "get the facts" at the workplace.

7 What are their roles?
Generally I set up a restructure as a project with a steering group, design team members, and a different transition team. The tool for October on my website is a design team member profile. I also work with specialists usually from HR, IT, Corporate Real Estate, who can provide expert information on the consequences of the structure options generated. Transition team members are different from design team members and are responsible for project implementation.

8 How do you audit/review a structure to see if it is contributing to efficiently and effectively achieving the business purpose and simultaneously providing a good customer/employee experience?
Ideally, you will have in the original project charter (there is a template on my website) or business case the measures of success. Use this as a start point for review.

9 How can we strike a balance between helping managers to conceptualise a complex process, and making it look so simple that they dive into the actual structure design stage too quickly?
My tack on this is to ask managers what the risks and consequences are of diving into the structural design too quickly. The risks are numerous – you need to have a good series of questions that will surface these. Once they recognize risks and consequences then they are usually happy to spend a bit of time thinking things through using a systems model that shows the relationship between structure and other organizational elements.

10 I have worked in and around this area successfully for a few years now but mainly on a small scale department basis. The thought of taking on a whole organisation feels somewhat scary. Is it the same process?
Briefly, yes it is the same process. You are just scaling it up and there will be more to keep an eye on. Very good programme and project management helps on this. I invariably have a qualified project manager working alongside me in the work that I do.

As I said, feel free to challenge, add, amend, comment and/or submit other questions.

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