Does Your Current Organizational Structure Make Sense

8/9/2019 Does Your Current Organizational Structure Make Sense

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Does Your Current Organizational Structure Still Make Sense

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During the last several years of my career, I've become increasingly interested inorganizational structure.By definition an organizational structure is mainlya hierarchical group of entities that collaborate and contribute to serve one commonaim. An organizational structure organizes priorities hierarchically by means ofidentifying tasks critical to a group realizing an end goal. During the last several yearsI've noticed a growing trend amongst leaders, they believe it's important for them to getas close as they can to the customer. They realize that they are in a street fight formarket share, and if you want to win a street fight, you have to be in the street, watchingthe fight from a distance, gives you a distorted perspective. This desire appears to be indirect conflict with organizational structure, how you can be in a street fight if youreseveral layers removed. For example, the gap between an employee and the leader that

delivers strategy could be as many as 4 or 5 layers.

What's driving this contradiction? The need to increase compensation by titleendowment, the ability to reward individuals by assigning titles, or have we just alwaysaccepted this paradigm as a way of doing business.

It is not my intent to oversimplifying the complexity of organizational design, I'dmerely like to take a closer at how the hierarchical structure compares to the flatstructure.

Hierarchical Organizational StructureOrganizational structures are created to support a common idea or goal and supporteveryone involved in completing their jobs regarding that common idea. What is theperfect organizational structure, well that all depends on your culture andorganizational goals, however, one stands out for its centuries of use. The hierarchical


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organizational structure is a traditional organizational system. Its top-down structure isrecognizable and used by most companies.

SHAPE

This structure tends to look like a pyramid. The person in charge of the department sitsat the top of the pyramid. Each department sits below the top in descending order ofsubordination. The flat bottom of the pyramid is filled with the bulk of the population ofthe organization, employees.

COMMUNICATION

Communication typically takes place on a daily basis between the supervisor and theirsubordinates. The immediate supervisor is directly responsible for the results deliveredby her subordinates. Initiatives or directives that effect the entire organization are

delivered from the top down. The directives are sent specifically to the head of eachdepartment and the department head communicates the initiative to his subordinates.

POWEROFHEIRARCHY

Hierarchy protects subordinates by clearly outlining chains of command. What asuperior can and cannot do and where their authority has power is defined in thehierarchical structure. An advantage for subordinates within the hierarchical structureknows clearly who their boss is. This reduces any conflict they may be faced with whenanother superior attempts to direct them without authority.

TYPES

A pyramid structure can be based on several different organizational designs. Thehierarchy can be based on function, geography or a combination of both. Functionalhierarchy offers a wide choice of ideas because each business has a different way oflooking at function. Some of the functions to construct with are product or service,process or equipment, customer type and specialization. Once grouped into functionalareas, the relationships between the groups will dictate where they sit within thehierarchical organizational structure.

Flat Organizational StructureIn a flat organization structure, there are few levels of command that exist

between the employee and the top management. This structure is bestsuited to small organization

SHAPE


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This structure is used by organizations where employees are vested with decision-making powers. The employees are required to use their judgment to either customizethe product as per the customer's specifications, or deliver the experience that thecustomer desires.

This organization typically has very few layers.

COMMUNICATION

Communication also takes place on a daily basis; however there tends to be onesignificant difference. The communication is less filtered than in a hierarchicalorganization, leaving for less interpretation of what was meant when the original

message was delivered

POWEROFAFLATSTRUCTURE

This structure completely does away with bureaucracy and middle men. Themanagement entrusts work directly to the employees. The employees in turn carry outwork as per their discretion or turn directly to the top management for advice whendoubts occur. Empowerment is embraced, the goals is to be able to make decisions forcustomers without having to involve other levels of management.

Advantages and Disadvantages of Each Structure

HIERARCHICAL

Advantages


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Employees recognize defined levels of leadership within the organization; authorityand levels of responsibility are obvious.

Opportunities for promotion can motivate employees to perform better. Hierarchical structures promote developing employees as specialists. Employees can

narrow their field of focus and become experts in certain functions.

Employees become loyal to their departments and look out for the best interest oftheir area.

Disadvantages

Communication across different departments tends to be less effective Departments can create silos and makes decisions that benefit their own interests

rather than the organization's as a whole. Increased bureaucracy often hinders an organization's speed to change or make

decisions that are in the best interest of their customers Salaries for multiple layers of management increase an organization's costs.FLAT

Advantages

It elevates the employees' level of responsibility in the organization. It removes excess layers of managements improves the coordination and speed of

communication between employees. Fewer levels of management encourage an easier decision-making process among

employees. Eliminating the salaries of middle management reduces an organization's budget

costs.

Disadvantages

Employees often lack a specific boss to report to, which creates confusion and possiblepower struggles among management.

Flat organizations tend to produce a lot of generalists but no specialists. The specificjob function of employees may not be clear.

Flat structure may limit long-term growth of an organization; management maydecide against new opportunities in an effort to maintain the structure.

Larger organizations struggle to adapt the flat structure, unless the company dividesinto smaller, more manageable units

Summary

Ive spent my entire life working in a hierarchical structure and found it to be ineffective,for all the reasons that are mentioned under the disadvantages section. But I dont


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believe the structure is the issue. People are assigned work and responsibilities basedon their job titles and not their areas of expertise or strength. For example, Iveobserved a VP and a Director meeting with a new client, by default, the VP was expectedto carry the conversation and be the relationship partner, but the Director was theindividual that had an affinity for building relationships, they should have led the

discussion.

Organizational structure isnt really the issue, its culture and systems, lets take Toyotafor example. Toyota observed the American Automotive Industry of the 40"s andapplied what they saw and improved on it. They provided production support functionsin engineering and production management to build structures that made the cultureand production improvement function one. They did this by putting in place automaticsystems that became self sustaining in the culture change, floor improvementphilosophy and employee empowerment. After this was attained, because these systemswere designed to be self sustaining, the personnel setting them up were removed andmoved to other such projects creating further business returns.

We often observe certain high performing managers that seem to be able to manage anumber of functions that others can't. What is being witnessed is someone that over thelong term has built a self sustaining organization that "runs and monitors itself".

Weve seen the advantages and disadvantages of flat structures. This type of structureworks best in smaller organizations, simply because of span of control. When you havemore than 7-8 subordinates reporting to an individual, they will have difficultymanaging or coaching the group.

The effectiveness of any structure is contingent on the culture, systems, and values ofthat organization. The competence of the individuals in that structure will play asignificant role in its effectiveness. Is it possible to develop a hybrid of the two, I believeso, at least this is my opinion. One level of management that seems to add very littlevalue, at least in my estimation, is the Vice President level. This is a position that isoverused and unnecessary in many organizations.

If we are going to create another level or position in any organization, lets be clear onthe need and how it will add value to aligning people and work with the organizationalgoals.

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Does Your Current Organizational Structure Make Sense