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This article was published 10/8/2012 (1575 days ago), so information in it may no longer be current.
Have you ever experienced a time when you wondered why things weren't working in your organization? Were you being confronted with miscommunication, duplicate job duties, poor workflow, inefficient customer service and sometimes even different departments contradicting or conflicting with each other? Did you find that after some sort of a review, you were still puzzled by the lack of answers?
Then, you might be surprised to learn the answer to your questions might lie with how your organization is structured -- you know, those little boxes that tell people to whom they report, where their job lies within the structure, and how co-ordination and control occurs. That's right, organization structure affects efficiency and effectiveness to such an extent that it can make or break your financial success.
Yet, believe it or not, many organizations fail to consider changing their organization structure even in times of substantial information technology change, the addition or deletion of products/services or when the organization enters new markets and/or confronts new competitors. However, all of these changes serve to shift the formulas for success and therefore organization redesign is a must.
Redesigning an organization typically requires a good deal of thought, both from a "rear-view mirror" perspective as well as from a future viewpoint. This isn't something a leader should do alone, but rather involve employees who are knowledgeable about the business, are creative and innovative and are committed to your success.
From the rear-view mirror perspective, examine how your organization is structured and identify the strengths and weaknesses of this structure. Review and determine if your structure is effectively serving the needs of your customers. Determine whether your business processes are helped or hindered by the structure. Confirm the structural strengths and weaknesses and then draw up several alternatives for review. Examine each of these alternatives from the following points of view:
1. Mission, goals and success factors -- Have your mission and goals changed and if so, how will an alternative organizational design support them?
2. Business processes -- Carefully examine the current business processes and the level of employees that need to be involved. What about business processes? Could a new design offer an opportunity to change business processes to make them more effective? Could some processes be combined and streamlined to save time and resources?
3. Designing individual jobs -- Jobs are defined by scope and control. Scope refers to how many different tasks are included in the job and if it's too broad, then the employee will be hopping from one task to another. If it is too narrow, boredom might set in. Control over work is important, as it plays a significant role in creating personal accountability.
4. Dividing up the work units -- How tasks and responsibilities are clustered into work units such as departments, sections or divisions is also an important consideration. Pay attention to co-ordinating activities, speed of work completion, the nature of supervision required and costs. Examine the pros and cons of your preferred alternative structure. Will the benefits outweigh the challenge of change?
5. Supervisory/management structure -- Every organization has a chain of command that will have an impact on cost, decision making and communication. Hierarchies typically include direct supervisors, managers who plan and provide oversight of resources and a senior level of management responsible for final decisions and resource allocations. The higher one goes up the hierarchy, the less the work is repetitive and formalized.
Today's organizations attempt to have a "flat" hierarchy structure so that decisions can be made more quickly and communication is more effective. Be cautious of enlarging the span of control to such an extent that it is simply too large for one person to effectively oversee.
6. Co-ordination and control -- Organization structure must also deal with co-ordinating, controlling and measuring work. This is accomplished through standardization of systems and processes, the nature of supervision, team structures and employee commitment. Direct supervision works best when there is a good deal of interdependence among positions, when a supervisor has special knowledge, timing is critical and errors are costly or when work is unpredictable and complex. On the other hand, standardizing is best used when work is routine and demands are predictable.
Finally, organization structures can be used to communicate to employees an understanding of the business strategies, goals, objectives and business processes. This helps to get them onside and develops commitment because employees will know how they fit and what their role is in the organization.
Most organization designs remain stable for considerable periods of time; however, organizations must always be aware of their particular business situation and adjust their organization structure accordingly. Growth in particular demands a change in organization structure.
Organization structures also seem to follow along with the path of the traditional business cycle. For instance, it's suggested that the older an organization gets, the more formalized its behaviour becomes. In other words, over the years, work is repeated, systems become solidified and the organization becomes more predictable.
On the other hand, it's also said that structural design reflects the era in which an organization was founded. This phenomenon is then reflected in leadership style, employee skill sets and the use of professional managers vs. family members.
However, environmental conditions may have more of an impact on organization design than age, the founding era of the company and/or the business cycle. For instance, stable economies allow organizations to standardize the processes and systems and to confront change more slowly.
If an environment is more volatile and dynamic, the organization must decentralize decisions for speed and flexibility. On the other hand, if the market environment is extremely hostile, organizations will centralize their decision-making structure for a brief period.
Finally, as can be expected, organization design in today's marketplace is highly affected by technology that is fuelling the trend to establish larger regional management structures with broad spans of control. We are seeing this strategy being used in both private- and public-sector organizations.
Organization design is a fascinating area of study, and if you like to be a trend watcher, keeping an eye on this issue can actually be a fun sport.
Source: A Practical Guide to Organization Design, Margaret R. David, PH.D and David A. Weckler, Ph.D, Structure in Fives: Designing Effective Organizations, Henry Mintberg.
Barbara J. Bowes, FCHRP, CMC, CCP is president of Legacy Bowes Group. She can be reached at firstname.lastname@example.org