This blog is the first of three that discuss the fundamentals of designing a useful organisation structure. The focus this week is Strategy and how it influences design.
Organisation structure design is more-than plotting an organisation structure. If design were a simple mental exercise, organisations would not trip like they do on an aspect so vital to an organisation’s bionic balance. For institutions to attain optimal OD architecture, a state of bionic-balance is required. Optimal OD architecture at firms is the result of successfully integrating Strategy, People, and good Leadership in design dynamics.
Organisational design can’t be looked at in absolute terms. It’s also not your back-of-the-envelope activity.
Many organisations frequently invest time in either completely changing or tweaking their structure. It’s almost customary for a new CEO to want to change the structure in their first 100 days. Boards should ask how a new CEO, in such a short window, can get to master the three fundamental OV’s: Strategy, Leadership, and People and be able to suggest viable change. More often than not, organisational structure changes are ‘cut and paste’ activities and do not bring any significant impact to the organisation’s bottom line.
Sadly, there are so many OD architecture blueprints for new CEO’s to copy. Many modern structures mimic the conventional, textbook architecture: the functional, geographical, product, customer/market, or matrix structure.
Organisational design methods have not changed much over the last half-century. Design has been left behind by other OV’s like Leadership, Strategy, and People. No wonder organisations are hiring high-quality staff and place them in boxes on the so-called organisation chart, only for these staffers to forever suffer misery in their jobs. Organisation design is not talking to the other variables on the bionic OV continuum
Traditionally, OD theorists have focused most of their attention on two organisation design drivers – Strategy and Process. Last week, we presented a case for People becoming the third factor in matters organisation design. Indeed, People is not only the third factor but increasingly, a determining factor in successful organisation structure design
In countries like the UK, 70% of the firms employ up to 10 people or less and are classified as small-scale enterprises. On the other hand, national economies also have medium-scale and conglomerate firms that employ people in their hundreds and thousands respectively. Whatever the size of a company, it can’t be structureless. Even a one-person entity, needs some semblance of structure through which to process and create value.
The role of Strategy in Structure design
Organizational structure is the framework companies use to outline their authority and communication processes. The framework usually includes policies, rules and responsibilities for each individual in the organisation
According to the Effectiveness lab….strategy can be any of: a plan, a unique and valuable position that others cannot match, or a journey that moves a company or individual from point A to B. The common thread is: ‘a unique milestone, that is some distance away from the current bearing, and that has to be reached via some kind of OD. locomotion.’
Strategy is a positioning game that involves defining current and future positions. A future position for which others lack the wherewithal to attain.
Strategy-gaming involves putting an OD. jig-saw in place. Applying all sorts of OD. skills and tools – leadership, design, and people – the jigsaw is manipulated to get to a desirable and unique endpoint. When firms get to their planned endpoint – they claim success. Success can be a much improved bottom line in the case of for-profits or positive impact for the not-for-profit agencies.
What connects structure to strategy and vice versa?
As soon as company leaders or founders define its purpose and subsequently strategy, the next logical thing is to design the firm’s structure. Structure is in effect the house that hosts strategy and its peer OV’s.
Various strategy manifestations impact the design of the organisation’s structure in different ways. For example, if a firm’s strategy is to innovate and sell products beyond its national borders, traditionally, the company may consider a geographical or product organisational structure.
On the other hand, if the firm is a start-up focused primarily on innovation and disrupting existing markets and product life cycles, it may need a miniature and extremely specialised organisational structure. Such an organisation may hire highly skilled product-design and market-research individuals, and leave the other functional aspects of a firm’s structure to the more conventional entities that take the inventor’s products to scale
Another good example is the International Non-Government Organisation (INGO). Forced to hand over its direct service delivery role to local organisations, many INGO’s have had to downsize. As INGO strategy changed to a more focused approach, its humungous organisation structure has accordingly been cut to size.
So, among the many other factors to consider, structure designers have to make it their priority to design structures that meet the strategic ambitions of companies. With some caution, we write at this stage of the series that strategy determines the organisation’s structure.
Strategy determines the organisation’s structure? Caveat:
- Organisational strategy is increasingly loose and changes at very short intervals. Therefore for the structure to serve strategy well, it should be resilient and Amoeba-like. Structure should adapt itself to the continually changing strategy
- Accordingly, the loose nature of strategy means that sustainable structure is that which aligns to the new normal of strategy – i.e. loose in nature. Increasingly, organisations are no longer talking about boxed structures, but cross-wired, intricate and shifting OD architecture, that is created to seamlessly deliver to the constantly moving strategy configurations.
- Yes, structure can follow strategy, but designers have to come up with short shelf-life OD configurations for the company
- Because strategy that has traditionally driven structure, is now loose, structure is becoming the master of strategy. Structure has become the strategy. With strategy becoming a short-term and unpredictable phenomenon, what creates sustainable value in business is the ability to seamlessly tweak structure to drive a particularly unique, likely one time, strategy. It, therefore, follows from the latter that a loose structure is considered an enabler of agility and resilience at the business, and increasingly, a critical ingredient at the bionic entity
What else influences the design of organisational structure? See you next week