Organisational design type – the two choices

In the last four blogs of this Design-OV sub-series, we have discussed in reasonable detail the drivers of organizational design. The generational influence, strategy, process, and people all have to be considered in tandem when dealing with OD design matters. You don’t want to disregard any of these four factors.

We now shift our attention to the actual shape of the structures. Yes, it’s one thing discussing how organizations are designed and another looking at the end products of such design process. The end product is the specific organization structure archetype

Organisation structure archetypes:

There are various types of organizational structures. The choice of structure type has to fit the context of an organization. At the Effectiveness lab, we advise that no one design-factor should on its own, influence the design of organizational architecture. In line with the bionic-entity theory, multiple factors have to be considered in sync – i.e. generational matters, strategy, process, and people. Each of the four elements influences the final architecture of an organization uniquely.

We outline below the various organizational structure types broken into the traditional and contemporary:

Traditional organizational architecture:

  • The Functional architecture

This configuration reflects the various traditional functions of an organization. For example finance, marketing, human resources, ICT, etc. On top of the traditional functions is the CEO of the entity, who in turn reports to the Board of Directors

The main idea behind the functional architecture is to allow employees to apply their specialist skills to the most appropriate department or function. According to CIPD, this type of configuration suits self-contained units like small companies and autonomous units like a far-flung subsidiary company

The disadvantage of the functional model is that it encourages units to work in silos with very minimal horizontal collaboration. This doesn’t augur well for today’s 24/7, fast-moving business environment

  • The Geographical architecture

This setup is used when companies have operations spread across national and regional borders. It works best in instances where local decision-making is needed to meet the unique needs of a particular market. The leadership is deployed by country or regional geography – i.e., Regional CEO or Manager Product X

This set-up requires a robust oversight and control mechanism at the center. It normally brings about accusations of meddling and micro-management by the center and can be an ‘initiative/innovation-killer’

  • The Product architecture

This configuration is determined according to the products or services that the company offers. It works best when there is a need to encourage entrepreneurialism.

An obvious downside of encouraging entrepreneurial behaviors is the potential scramble for resources amongst product lines and acrimony between product/service structures

  • Customer/Market architecture

When organizations have few but critical customers that the businesses rely on, they are likely to configure their organizations around the service needs of these customers or markets. Vehicle and Airline manufacturing companies are the best examples of this. You may have come across the semi-independent Toyota dealerships across the world

The abundance of choice, a sort of ‘spoilt’ customer, has forced companies to keep customers warm at all cost. The customer is king/queen. Even governments known for their lackluster attitude towards customer service, now run decentralized government structures, to get closer to the client

  • Matrix architecture

This is the configuration that brings together the need for customer care excellence and control of some sorts at the organization. You can’t throw away control simply because the customer is king/queen. Project-based entities, working on stretch targets, are best suited for this kind of set up. Big engineering projects are an obvious example. Project teams tap into a pool of central services as and when required.

Because staff in a matrix setup report to multiple bosses, conflict, and tension are rife

Of course, organizations may operate multiple organizational types concurrently. For example, to maintain an appropriate level of control, required by any modern entity, you will find traces of the functional architecture in the other organizational configurations.

Contemporary organizational architecture:

  • The loose and networked organization

On the other hand is the networked entity, answering to the needs of a digital, global and fast-moving entity. Orthodox organizational architecture can no longer suffice in what is increasingly a complex (not complicated) world of business

Contemporarily designed firms have certain characteristics: boundary-less – emphasize collaboration – horizontally networked and value horizontal than vertical power and influence – rapidly innovate – and are mostly technology focused. Such firms are constantly pushing teams and individuals to achieve stretch goals. They have continuously shifting goals. They are ripe territory for the bionically balanced entity that balances multiple OV’s at any one time: strategy, leadership, design, and people.

The above type of firm is mostly about how to get the best out of people: empathy, listening, relationship building, understanding others, taking the team along with you willingly and not simply dragging them.

Of course, the modern and sexy architecture has its lovers and haters. The haters of this so-called architecture can’t imagine letting go of the logic and linearity of orthodox structures. While on the other hand, its lovers can’t deal with the static nature of what they deem archaic, unresponsive, and extremely frustrating ways to organize and run operations at a company.

One may indeed argue that the haters of the contemporary configuration have a point. After all, the majority of global firms, many of them blue chip, still operate some variant of the traditional organization type. So why change to something that is woolly and morphs by the hour?

Well, below are the top value-creating firms in the world.  The majority of these firms are what we call at the Effectiveness lab, ‘digital generation’ entities that are networked, loosely organized and are adding to their bottom-lines by the hour.

Seven out of ten of the world’s most valuable brands are technology firms. The first two, Apple and Google dwarf the other eight in value. These firms do not operate the conventional organizational structure. Do you still doubt the harbingers of contemporary organizational architecture? Well do it at your own peril

The choice of appropriate organizational structure is a matter that is best left to the Board and C-Suite. And when all is said and done – what organizational structure you choose to embrace as a company boils down to a combination of strategy, process, people, and generational perspectives

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  1. Organisational design and culture – silent partners – Gabazira's blog

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