At a time when change, agility and adaptability are seen as the key ingredients for survival, let alone success, it may seem as though structure is a term that has become irrelevant, potentially ambitious, and at best refers to the mundane matter of formalities and bureaucracy rather than the action end of your business. The term ‘organisation structure’ conjures up organogram images that rarely reflect the reality of our working world and seem to satisfy very few people beyond the administrators. So why do we bother, why are organisation structures important and how do we make them relevant?
In the wider context of organisation design, structure provides tangible and identifiable relationships between different teams and parts of your organisation, and the people within it. It is some form of structure that gives employees clear guidelines for how to operate and sets parameters for maintaining order, making decisions or resolving differences. Structure can be divisive but it can also be the basis for binding people together and provides identity for those in the group and those who subsequently join the group. It can facilitate habit forming (let’s hope they are good habits!) and a well-designed team structure can be the catalyst for improved work processes, facilitating behaviour change and much sharper execution of business priorities.
It’s in the latter context that we argue for businesses to organise people based around two core principles: organise on the basis of what’s most critical for your business and embed adaptability into your structure so that your organisation can change when your priorities change. Well-designed organisations typically exhibit better worker safety, greater employee productivity and individual performance gains that result in short-term business performance improvements. Organisations that are designed for adaptability and agility develop organisational health through greater resilience, preparedness and contingency for future external challenges.
Now, ask yourself these questions:
Does your business operate effectively?
Are outcomes facilitated by team structure?
Do people see their work effort translated into overall business outcomes?
Has the structure of your organisation adapted with your growth or change in business priorities?
If the answer is ‘yes, definitely’ then you might not need to read any further, but if you’re interested in how effective organisation structures can help you achieve better business performance then let’s carry on, starting with looking at different types of organisation structures.
Types of organisation structure … the bad and the ugly
In a previous article, we summarised the nature of hierarchies, matrix organisations and contrasting ‘flatter’, simpler organisation structures. Rather than these being distinct and separate categories, what we have seen is that many medium–sized businesses have a need for characteristics from each of these types and are trying to integrate the ‘best bits’ from each, resulting in something of a hybrid complexity that proves equally challenging to manage and navigate.
Small businesses put more emphasis on open and direct communication in the spirit of cooperation and by their nature allow individuals greater levels of autonomy and accountability. This approach makes sense for businesses with few employees but is only effective if the goals are clear, shared and the means for achieving them are understood. This approach also allows those businesses the flexibility to adapt as they grow but also leaves them open to ongoing ambiguity. What often follows is a combination of hierarchy and matrices typically designed around location, function, market and/or product, depending on the nature of the business:
- Location-based: Quite simply, teams are formed subject to where people are based rather than what they do or who they do it for. Local retail businesses with multiple branches usually deploy a branch-based team structure, but equally multinational corporates typically deploy a geographic-based hierarchy as the primary dimension of team structure. I would argue that the premise for this is that traditional management and supervisory tasks are more effective (possibly just easier) to conduct in person, or at least in close proximity. This obviously gets called into question after a year in which we have all experienced working in virtual teams.
- Function-based: Even with a geographic or market overlay, we almost always see the gravitation towards teaming people together based on what they do. Finance, Technology, Marketing, HR – functional capabilities pooled organisationally for the purposes of sharing and utilising domain expertise. This has major merit otherwise we would have stopped doing it years ago, however it is a significant source of … silo-isation … and fuels the worst forms of in-group, out-group division based on respect, appreciation, value (or otherwise) of what each group is ‘capable of’.
- Market-based: If your business is lucky enough to form around geographic markets then this may well mirror the above, however, if your market is made up of pre-defined sectors or self-determined client segments that don’t conform to geographic boundaries then you’ve got an additional complexity. By incorporating a market–based axis into your structure in addition to any other, you’ve potentially made communication more ambiguous and decision making more time consuming, making the job of the people who exist within the structure more difficult.
- Product/service based: As an extension of the functional or capability model, you may have a primary lens of organising teams around the things you offer to the market. That may be similar to a function-based model if what you do is the same as what you offer. Or it may be that you have complimentary capabilities, in many different markets, in support of a variety of client groups, teamed together to focus on making your product or service the best it can be.
There may be other axes, but these are just the primary ones that we find evolving in business by default. One thing they all have in common is that they provoke divisiveness and competition within and between parts of your organisation that get in the way of you achieving outstanding levels of performance. It is the over-design of rigid structures that stifles people’s performance, not simply the presence of structure.
Approaches to organisation design
Organisation design seeks to ensure the effective integration of the social, procedural, technical and operational aspects on an organisation. This includes improving structures and systems to deliver the employee and customer experiences you intend. Undertaking organisation design includes a step-by-step and comprehensive methodology to develop a structure that incorporates goal alignment, addresses linkages and interdependencies, clarifies roles and responsibilities, and facilitates effective communication, decision making and action. More recently, human-centred approaches to organisation (re)design put the employee at the centre to facilitate employee experiences that exceed expectations and serve customers. They seek to understand the impact of the design on large groups of people through a lens of care, compassion and moral/ ethical intent.
In redesigning an organisation, it’s helpful to use an agreed set of guiding principles to facilitate good and robust design. It is equally helpful to avoid chasing fad or popular solutions that may not be best fit for your purpose. Design with an objective understanding of your organisation’s current state and cultural DNA but detach from the past and allow employees to participate in design freely without over–reliance on what has come before. Delay drawing out your organisation structure until you have finished designing and draw out models that can be adapted to scenarios rather than as a fixed chart. Fundamentally, the outcome should demonstrate clear alignment with strategic priorities.
In addition, if you decide to embark on an organisational redesign it is also likely a change initiative that may encounter employee resistance because of ’loss aversion’, whether that be pride, control, familiarity or competence. There is consequently a need to prepare and overcome resistance to change and/or change through a clear case and vision for change, including the emotional journey to come, enabling quick wins and share control across the process.
What does effective organisation design look like – a process not an end state
Effective organisational design ensures business performance targets are achieved, through:
- clear direction and strategic alignment, reducing time and effort wastage;
- coordination and collaboration, avoiding organisational fragmentation;
- clearer ownership and accountability, empowering employees to contribute to their fullest;
- problem solving and decision making being timely and targeted;
It is good practice for organisations to continually review their organisation design so that it is fit for purpose and sufficiently adaptable to move and meet the challenges posed by business realities in the form of market changes or new client needs and demands. That is not to say that you are constantly changing relationships but it should be expected that teams are formed, disbanded and re-formed around changing business priorities. An effectively designed organisation is best structured and aligned to achieve its unique goals, as outlined by the organisation’s strategy. Consequently, there is no ‘best practice’ design but only that which best supports the goals and strategies of the specific organisation and is subsequently able to mirror adaptations to those goals and strategies.
A current challenge facing organisations is that while technology can scale exponentially, humans cannot and never during history have we been required to coordinate or collaborate at the scale or speed required now. Consequently, how the organisation is designed is particularly important to enable and support technology. A well-designed organisation, like any well-designed product, has many benefits that serve to support the business goals, enable and align employees so that their contribution and performance can be leveraged optimally, and match the structure well to the context that it operates within to serve its customers and have the edge on competitors.
More often than not, organisation redesign tends to be a reactive rather than a proactive process. It is often triggered because of an internal recognition that the current design is not generating optimal business results or that (new) senior management implement a new strategy (and goals). Alternatively, change is driven externally by market, industry or regulatory drivers. In large organisations, the experience of reorganisation can feel like a perpetual process where changes are often made when senior management shift the strategy of the organisation to be product-driven or customer-centric. Or the structure is simply altered to change how people make decisions, adopt new behaviours, reward performance or manage information and communication.
Principles of effective organisations
You need to start somewhere and we would always advocate starting with the organisation’s stated goals in mind; what are the outcomes the business is looking to achieve and how do you organise people in deliberate, overt, transparent support of those priorities? Beyond that, here are some suggestions for agreeing principles before drawing organisation charts.
1) The nature of business priorities and whether they are relatively fixed or subject to change
We have discussed the need for adaptability and it’s likely that amidst ongoing uncertainty this will be top of the agenda, but very few businesses organise their people with the intent of frequent redesign. The key here is to assess the likely magnitude, speed and frequency of strategic change and identify the critical organisational change required in support.
2) The degree to which line management is required
We expect all people in business to have a clear reporting line – it’s part of the fabric of modern— day organisations – but the extent to which that management role is responsible for leading, managing and supervising people can be radically different. As we move to focus on output and outcome, enabled by improved use of technology, rather than input and process compliance, people need access to information and resources unrestrained by management barriers. This will likely impact the trend in ‘spans of control’ data, meaning we need fewer managers per employee rather than more.
3) The degree to which you demand standardisation
We typically look for increased uniformity – product, process and behaviour – as a business grows in the belief that scaling works best with increased standardisation. That serves a traditional model of scale but does not take into account the shift in consumer and employee behaviour that continues to call for increased levels of customisation. The degree to which you can and want to standardise will have a significant impact on how best to organise people.
People need to understand the tangible and identifiable relationships between different teams, different parts of your organisation and the people within it in order to satisfy a sense of belonging, understand where they fit in, make meaning of their work and contribute effectively. Historically, the axis for organising people and teams has prioritised management responsibility and assumed a ‘one best way’ approach in what have been relatively static market and operating conditions. Now more than ever before, the ways in which work is conducted, the demand for continuous and collaborative adaptation and the need to be creative in making best use of the available resources requires a bold, innovative rethink; a rethink of how best to organise the most valuable asset in your business – your people.
Blackmore Four offer specialist advice and tailored solutions to businesses looking to sustain or improve the effectiveness of their organisation. Our approach is based on a deep understanding of human behaviour at work and an ability to identify and address the specific leadership and organisational development needs of your business. Contact us to find out more about our workshops on leadership needs analysis and assessment or to discuss how best to apply this to your business.