Interesting thoughts on org. structure
This is a work in progress
According to Robert Simons on his Levers of Organization Design, designing your company’s organizational structure (how information, power, and accountability all flow through the organization) is the act of balancing four tensions:
- Strategy x structure
- Accountability x adaptability
- Ladders x rings
- Self-interest x mission success
Strategy x structure
Strategy and structure need to be balanced constantly. The structure needs to be designed so as to support and reinforce the company’s strategy.
The structure of an organization determines how information from the market is processed and acted upon. The design of an organization determines who receives information, to whom it is forwarded, and what actions are ultimately taken. In other words, not only does strategy determine structure, but structure also determines strategy. This two-way flow must be incorporated into any successful [organization’s] design.
Accountability x adaptability
Let’s imagine something: an employee sets up a goal in the first weeks of January, when most companies (well, at least those not practicing agile performance management) are “contracting” goals for the year. But in March, it becomes obvious that the goal has become obsolete, because the market has changed, and the company’s plans are no longer valid.
In past eras, accountability for results was reserved for top-level managers, who assigned specific tasks to workers and ensured compliance with standard operating procedures. Now, rather than specify how subordinates should do their jobs and monitor compliance, managers at all levels place much more emphasis on accountability for results - leaving the actual decisions about how to achieve these results to the initiative of the workers involved. Quality circles, self-organizing production teams, and performance evaluation systems based on customer satisfaction all reflect increased accountability for outcomes at all levels in the organization.
A tension arises…because organizations mus also, in addition to achieving results, retain their ability to experiment and adapt. Employees must be encouraged to test new ideas. Businesses must continually devote scarce resources to innovation.
So a tension inevitably exists between accountability for today’s goals and adaptability for the future: on the one hand, managers must achieve short-term results; on the other hand, they must also ensure that the organization retains the ability to innovate and adapt. Both objectives must be incorporated into effective [organization’s] designs.
Ladders x rings
Simple: ladders are the vertical structure of a company - “the chain of command.” Rings are how people interact - influence and help each other - laterally throughout the organization. It’s pretty self-explaining.
Self-interest x mission success
Again, companies must balance how they motivate individuals on an individual basis with incentive’s effects on collaboration. If people are extremely incentivized for personal results through goals and bonuses - like sales teams, for example - it may be very hard to engender or foster collaboration between peers.
The four tools of organization design
- Org. chart
- Communication systems
- Metrics and KPIs