Why Is Organizational Structure so Sexy and what to Do about it?

Organizational leaders are proud of being able to structure organizations right. After all, moving boxes around is easy and textbooks are full of relevant hints. This is why restructuring companies is considered by executives to be the solution to any kind of problems, even the most trivial ones. And opportunities for restructuring are found anywhere. A manager left the company… what a nice opportunity for restructuring it. The figures do not seem right, another nice opportunity! And quite often restructuring is almost always a synonym to downsizing… another nice opportunity for cost reduction! But there is a trap…

 

Organizational structure is like the drive train of a car. It represents the architecture of the organization. It is the way that the energy of the organization is channeled so that results be produced. This probably explains why touching the structure makes organizational leaders feel strong. By doing so they feel in control. And it seems to be easy! Management textbooks are full of organizational structure paradigms. And they explain all the advantages and the disadvantages of various paradigms in detail. This is however a quite a simplistic assumption and as such most of the times it is wrong.

 

Textbook structural paradigms are exactly that. They are only models. Real life is much more complicated. For example, depending on which stage in its corporate lifecycle an organization is at, different structures may be relevant, even no structure at all. During the early stages organizations may build structures around people and that could be absolutely right. However, such a design would be wrong at later stages. An organizational structure that places R&D at the corporate level may look just right and in fact it may even be so for mature business units with an established market and large market shares. It would however dry every drop of flexibility out of infant ones therefore, sometimes, dooming them to inexistence. Infant business units need to be able to see changes in the market and respond to them swiftly. Such business units simply cannot wait in the line in order for a small improvement in the product to be developed. However, most of the managers would tend to centralize R&D. Besides this is what most textbooks teach!

 

Organizational structures are not only lines and boxes in an organizational charts. They represent the structure of authority, the structure of responsibility and the structure of rewards. Structuring an organization right therefore means much more than sorting out how lines and boxes appear on the organizational chart. It is about setting the drive train right. It is about putting the right components in place correctly. It is about careful and precise engineering. But every engineer knows that for a design to be appropriate, it should serve its purpose and it should operate inside certain specifications. And it is exactly the same with organizational structure. Organizational structures should serve the purpose of the organization and in this context they should serve the strategy for achieving it by fully aligning the power structure of the organization. Not only organizational structures should be aligned but they need to be aligned behind a purpose and a relevant strategy too!

 

When a car breaks down, the response is to fix it. It is not to redesign the car. When a car gives a low mileage it does not necessarily need redesign. It may just ask for some tuning… It is exactly the same with organizational structure. Structure needs to be driven by strategy and at the same time it should enable it too. Strategy sets the design parameters for structure and structure sets limits to the set of strategies available. Strategy and structure should go hand by hand. Organizational leaders should therefore think twice before touching!

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