An organization is defined as a group of people working towards a common goal. An effective organization is one that delivers on its common goal consistently within the resources available. Clarity, competency, consistency, and efficiency are hallmarks of an effective organization. While simple in theory, this is something that all organizations grapple with. One key component of this is the organizational structure. The structure is put in place to provide formal authority for decision-making and drive accountability. The structure enables an organization to perform five critical functions of management - planning, organizing, staffing, directing and controlling. Building an effective organization structure is a leadership competency. A leader that I admire a lot once shared that “No structure is permanent and no structure is perfect. You need to keep adjusting it to build an effective organization.” So, how do we know if our structure has a problem?
Here are five simple tests to find out:
1. You need to reach out to three or more people for a single decision
The evolution of matrix structure, fueled by Global Operating Models have created a complex operating environment of function and business units. Multiple parts of the organization are focused on multiple priorities and some of them may be at odds with each other. The matrix structure distributes the ‘power’ to make decisions and aims to drive a ‘healthy tension’. However, when you have an operating environment where decisions need to be signed off by three or more people, you have an ineffective structure. This is reflected in the ‘time to decide’ metric. Decision delays and multiple reviews where the same information is shared are great examples of ineffective structure.
2. You have more than eights levels or layers of hierarchy
I have done a ‘blank sheet approach’ with a number of senior leaders. I start by asking them to pen down their ideal levels or layers of hierarchy starting from the top. Each level has to have a distinct responsibility. The typical 7 levels for the large multinational organization that they come up with are CXO - Business/Functional Global Leader - Product/Department Leader - Senior Manager - Manager - Supervisor - Execution Level. This is then compared with actual levels/layers in the hierarchy and we are typically off by 2 or more levels. The typical rationale provided include - talent pipeline, development roles, and career opportunities. All valid reasons, however, what started as a short-term focus become a permanent fixture and creates a tall hierarchical structure. What these additional layers create is an overlap or dilution of responsibilities and accountabilities. A simple way to measure this is to look at the number of layers/levels that are present in a meeting. If you look around and find two or more levels in the same review meeting, you know you have a problem.
3. “When was that decided, nobody, told me”
Anytime you hear this, you know your structure has inefficiency. The power of management is in its ability to coordinate efforts. The key is effective communication. When you have multiple stakeholders focusing on multiple priorities at differentiated speed, there are bound to be ‘misses’. Your processes and structure should be able to ensure the effectiveness of communication. While there is a ‘want’ to be ‘informed about everything that goes on’, what people ‘need’ is ‘information that impacts their achievement of goal’. If you are spending time in this communication tsunami and seem to be going around in circles with it, you know you have an ineffective structure.
4. “I need to check with my boss for this decision, let me get back to you”
This statement is like a slow spreading cancer for an effective organization. The managers and leaders are expected to make decisions to further the organization. That’s their primary duty. So any forum, meeting or review where critical decisions need to be taken, leaders in the room should have the courage and competence to make the decision. If they are not, something is wrong. It could be a person dependency or structural redundancy. Either way, it is not a healthy sign.
5. “Let me introduce myself and explain what I do” or “We need a new position”
A common mistake Leaders make is to confuse new work (job) with a dedicated role (position). Each new type of work does not mean a dedicated new role. It should be explored whether this work can be done with existing resources. While dedicated role has its advantages - like focus, clear accountability - it also comes with its baggage. People are not certain about what the new role will accomplish and how it will change current interactions. It takes precious time away from priorities to settling in the new role. This is typical in a global operating model or a matrix organization where functional areas create their own set up rather than leveraging existing structure.
Anytime you find yourself in a situation described above, it’s time to pause and reflect. Building an effective organization is a Leadership competency, one that is becoming highly valuable in today’s complex business environment.