Friday, July 24, 2015

There is No Optimal Organizational Structure

Many senior executives seem to obsess over organizational structure.   They love to move the boxes and arrows around on organization charts.  Today we are a functional organization; tomorrow we will organize ourselves by product line.  That will solve our problems!  It will make us more customer-focused!  We will improve speed to market!  One year later, they shift to a geographically-focused organization chart.  That will solve our problems!  We need to think globally, but act locally!  We will adapt more effectively to local customs and cultures!   Executives should stop obsessing over the boxes and arrows on those organizational charts.  No "optimal" structure exists.  Each type has its strengths AND its flaws. 

Executives should recall the old adage coined by Rufus Miles, Jr. - a senior government official in the administrations of Presidents Truman, Eisenhower, and Kennedy. Miles coined the phrase, "Where you stand depends on where you sit." In other words, your stance on key issues depends not simply on your own judgments, values, and beliefs.  It also depends on your position within an organization.  Your views will represent the interests and goals of your unit. 

What is the implication of Miles' perspective?  It means that leaders should focus on getting their team members to understand how the structure of an organization often drives its strategy.   They should challenge the executives to consider this important question:  How might we look at this strategic decision differently if we were organized differently?  In other words, are we allowing structure to drive strategy (rather than the other way around)?   Leaders need to encourage team members to stand in each others' shoes.  They need to be able to understand why people in other units, regions, or lines of business have different beliefs, positions, and perspectives.  They need to understand how current structures might be leading to certain biases in decision making.  In the end, no optimal organizational structure exists.  However, the best firms understand the limitations of their particular structure.   The best companies do not allow the organization chart to drive decision making. 

2 comments:

Daria Ivantsova said...

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Shadhin Kangal said...

There are six basic building blocks that managers can use in constructing an organization which also known as elements of organizing or organizational structure.