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Ron Ashkenas

Ron Ashkenas

Posted: March 17, 2011 11:06 AM

Solving the Rubik's Cube of Organizational Structure


A recent post by fellow HBR blogger Gill Corkindale illustrates how dysfunctional or outdated organizational designs can make it difficult for managers to operate effectively. Judging by the spirited responses, her examples resonated with many readers.

As today's executives struggle with the fallout of a globalized economy, they are likely to make their organizational structures even more complex. It's like trying to solve a constantly moving Rubik's Cube. The colors will never line up, no matter how many times you spin it. What results are multi-dimensional matrix structures where decision-making is torturous and unclear; siloed functions that underleverage people's efforts; or serial reorganizations that create constant uncertainty.

Despite this whitewater environment, there are still steps that managers can take towards simplifying their own structure -- which may influence senior executives to adjust the broader design. Here are a few approaches that you can try:

Work with the current structure: Managers love to reorganize when results are not what they need to be. After all, it's a convenient way to create the appearance of taking decisive action to reduce costs, refocus priorities, etc. But often this just creates more complexity. Most organizations can be made to work if leaders set the right goals, hold people accountable, streamline end-to-end processes, and put in place appropriate disciplines. In the absence of these (and other leadership actions) any structure can appear to be dysfunctional. A few years ago, the consumer division of a packaged goods company went through five different redesigns in an eighteen-month period, with little change in performance. Only after a stronger consumer business leader was put in place did results get better -- without any further reorganization.

Make sure that structure is aligned with strategy: It seems obvious that organizations should be designed to advance business strategies. But many times strategies evolve and change while seasoned managers clutch tightly to their old ways of structuring their units and organizing their teams. In a certain copier company, sales branches traditionally had been responsible for re-selling equipment that had gone off lease. However as lease times were shortened and new models were introduced more frequently, the backlog of used equipment grew dramatically. To reduce the backlog, the head of sales proposed setting up a centralized unit that would focus exclusively on re-selling the old machines. However, his branch managers opposed doing this, wanting to keep these extra "sales" for their teams. Not wanting to fight his branch people, the sales manager shelved his strategic idea -- and the backlog continued to grow until the company president was forced to intervene.

Structure around purpose instead of personalities: While organizational structures are usually portrayed as sets of interconnected boxes, the reality is that the boxes contain human beings with strengths, weaknesses, and personalities that often don't fit with the logic of the organizational design. But instead of directly dealing with those "misfits," most managers make accommodations to the design of the organization. This leads to structures that don't quite work as they should. In one major teaching hospital, for example, a very skilled physician was selected to direct several small outpatient clinics. As these clinics expanded and multiplied, her lack of managerial discipline created severe operating issues, unnecessary cost overruns, and frustration among the clinics' staff. To avoid offending the doctor by shifting her to a more appropriate role, the hospital president added a Chief Operating Officer for the clinics, who subsequently added other operating managers. Soon the overall structure grew more complex, with added layers and fuzzy accountability. Two years later the hospital president realized his mistake and brought in a new director (one with managerial experience) for the outpatient clinics, who quickly streamlined the structure and brought the operation under control.

It may not be possible to fully solve the dysfunctional design puzzle in your organization. But a good way to start is to ask yourself these three questions: (1) Is the problem the structure, or the way we are managing it? (2) Does the structure match our strategy? (3) Has our organization design been compromised by accommodating to personalities? You can tackle these tough questions with your team or with more senior managers. Starting a dialogue like this may not solve everything, but it might help you start shifting those organizational pieces into their correct place.

What is your experience with trying to change organizational structure?

Cross-posted from Harvard Business Review

 

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