Organizational structure isn’t something most leaders lay awake at night thinking about, but without the right structure to support your OC (Organizational Culture) and your business strategy, you leave profits on the table.
So, what does it mean to organize? (No, it’s not what you’re thinking!)
Organizing is a process whereby leaders structure working relationships to encourage and enhance employees’ ability to effectively and efficiently achieve organizational goals and objectives – and ultimately – the business strategy. In other words, it’s a formal system of tasks and reporting relationships that determine how employees leverage resources to accomplish their work assignments.
When designing an organizational structure, leaders must make specific decisions about the reporting relationships and tasks expected. It’s these decisions that ultimately create the organization’s structure.
On the surface this may sound easy – after all how hard is it to decide who is going to report to whom. But within the bowels of those decisions lies the challenge – designing a structure and OC that:
- Engages employees at all levels – reinforcing hard work and mutually beneficial work behaviors and attitudes
- Builds cohesiveness – coordinating activities of individuals, groups, functions and divisions to ensure both efficiency and effectiveness
Don’t Forget the Organizational Environment.
Today’s world is smaller than ever and the spirit of entrepreneurship has never been greater – especially for millennials who expect to be taken seriously right out of the gate. This ever changing environment is causing uncertainty and unpredictability which must be tempered with critical communication, agility, flexibility and quick, decisive action.
Given the state of today’s business environment, leaders need to develop an organizational structure with the agility and flexibility to speed up decision making while managing unnecessary risk. This is often accomplished by decentralizing authority and empowering employees to make decisions that directly affect them thus encouraging change and innovation.
But what about the Strategy?
Different strategies demand different cultures and different structures. For example, an organization embarking on a differentiation strategy aimed at increasing quality often best succeeds in a structure that promotes flexibility and a culture that hires, rewards and fires for innovation. Apple lives and dies by their differentiation strategy.
Contrast that with an organization’s low cost strategy aimed at driving down costs (Wal-Mart). This often calls for a more formal structure and conservative culture where managers maintain much of the decision making and control.
On the other hand, in organizations supported by a vertical integration or diversification strategy (Starbucks), flexibility is needed to provide sufficient coordination among business divisions.
Linking and Coordinating
The more complex your organizational structure is, the more problems you’ll face in linking and coordinating functions, departments and people. Coordination often becomes a problem because each function or department may fragment from the overall organization developing a unique orientation toward other groups.
Organizations striving to ensure this fragmentation is adequately managed empower leaders to develop clear lines of authority – the power to make decisions, allocate resources and use resources to achieve the organizational strategy, goals and objectives. This is often accomplished by implementing a chain of command.
Big or Small; Flat or Tall.
It’s no surprise that the larger an organization becomes, the more likely it is to implement numerous levels of authority – resulting in a complex (tall) hierarchy where decisions take time and multiple levels must bless the decision and direction before actions can be implemented. As these tall organizations emerge, communications often break down, agility is lost and flexibility becomes almost non-existent.
Contrast that with flat organizations where decision making is pushed to the lowest possible level and employees are empowered to make decisions and drive results with minimal input and oversight. In other words, these organizations rely on decentralized authority. Decentralization tends to improve communications because fewer managers are needed and employees are empowered to recognize and respond to customer needs.
Edward Demming, the father of the modern quality movement, viewed management as vital to an organization’s OC and success, or lack thereof. His primal message to Japan and this country was “that they (management), not employees, were the problem, and that nothing would get better until they took personal responsibility for change.”
Hire, Reward and Fire for OC.
Your OC and organizational structure can’t be maintained unless a conscious decision is made to protect it through who you hire, the behaviors you reward and the non-negotiables you fire for violating. This is where so many organizations go astray in attempting to establish or maintain their OC because they tend to emphasize knowledge, skills and abilities over values in the hiring, employment and termination process.
For example, if your organization values employee involvement and empowerment and creates a flat organizational structure to support those values, but hires a high level manager who values command and control, it won’t take long before your flat, flexible structure is replaced with a complex chain of command and hierarchy.
Organizational Structure, OC and Monkey See – Monkey Do
An effective organizational structure supports and maintains your intentional OC – that set of shared values, beliefs, expectations and norms used to achieve desired business results. Your OC is embodied in The OC Equation(TM):
Values + Philosophies x Actions = OC
Different structures reinforce different OCs. For example, tall, hierarchical structures promote little personal autonomy giving rise to OCs where caution, obedience, tradition and authority are emphasized. In contrast, flat structures that emphasize decentralization encourage and reinforce cultures that reward creativity, risk taking and personal responsibility.
The power of your OC is beautifully depicted in the story of the Five Monkeys and the Bananas. Your OC shouldn’t be left to chance, there’s simply too much at stake. If you don’t have the culture you want or need, it can be changed, but beware – it’s not easy to change an OC and often requires a near complete restructuring.
Join the conversation: What OC does your structure support? Is it the OC you want and need to achieve your business strategy?