Rethinking the Organizational Architecture


Robert M. Tomasko


[This article was originally published in Arthur D. Little's Prism, Fourth Quarter 1993]


Getting the organization right is an issue likely to preoccupy executives throughout the new century.

This is a difficult time to work in, manage, or change a corporation. Downsizings and restructurings have become widespread, but their purpose has usually been short-term chipping away at old structures and practices. Too few have been guided by a clear vision of what kind of corporations needs to emerge from all this turmoil and chaos.

This is also a time when many quick-fix solutions, gimmicks and loosely thought-out recommendations abound.

Too often these are directed at trying to get the organization chart right. This is a difficult undertaking. What may be right for your competitor or per in another industry may be the exact wrong architecture for your business. One size seldom fits all.

When sorting among alternative organizational architectures it can help to keep in mind that the reality of an organization is not expressed in the charts, organograms and jobs descriptions that attempt to describe it. The true bottom line of any structure is visible only through the kinds of actions and interactions it encourages.


The Dirty Dozen

If the real measure of an organization structure is the attitudes and behaviors it promotes, it's a worthwhile exercise to take stock of these beliefs and actions from time to time. The results of this self-examination may be surprising - and possibly rather depressing. Whether done through a systematic program of confidential interviews, or an informal series of discussions-after-work- over-drinks, it is likely to indicate that many problems you have assumed rooted in the invisible hand of corporate culture are actually employees' rational responses to the organizational architecture surrounding them.

While the unwritten rules that emerge will be different for every company, our experience working with organizations in a variety of industries throughout the world suggests that twelve troublesome issues are common plagues in many corporations.

How many of these might be uncovered in yours?

1. The Straw Boss Syndrome. "We always need to go to our bosses' boss to get any kind of decision made. Our manager is really a straw boss, every issue - no matter how trivial - is referred to his boss for resolution."

Unintended consequences : Widespread beliefs like these about the managerial impotence of one's immediate boss can have a devastating effect on a company. Decision-making on matters both trivial and strategic is slow; top executives are often overwhelmed with detail. Morale is often low as employees lack confidence in their manager. Few are willing to take risks - always checking things out before acting is the corporate norm. And, to compound matters, companies with the "straw boss syndrome" usually have much higher than necessary expenses required to manage each dollar of worker payroll.

2. The Black Hole Phenomena. "Decisions never seem to get made around here. I keep making recommendations, but never hear what has been decided. Requests for help or additional resources are never turned down, they are just ignored. It's hard to get my job done when they just keep me waiting..."

Unintended consequences: Low morale, burnout, lack of clarity about what management really expects characterize "black hole" companies. Diminished confidence in company's ability to survive in turbulent times. Widespread unwillingness to "go the extra mile" when necessary.

3. One-way Career Development. "The only way to get ahead in this organization is to become a manager - and then try to get a job that allows you to manage more people. This doesn't make sense for me: I'm best at dealing with ideas and technologies, not people. But if I want any of my innovations to see the light of day I need to get in a position of power, i.e. join management."

Unintended consequences: Frustrated and misused employees; too many managers with weak skills and motivation to manage effectively. Eventually "one-way career development" will result in the creation of more levels of bureaucracy than are actually needed to run the business - and in many instances of "part-time managers" whose real value to the company is the individual contributor-work they perform instead of concentrating on getting things done through other people.

4. Nobody's Managing the White Space on the Organization Chart. "Everyone in middle and senior management is concerned only with protecting and growing their particular piece of turf. All their attention is going to managing today's businesses, selling today's product line, and serving today's customers. These are all important things we have to do - but our organization structure doesn't allow this orientation to be balanced with powerful positions that are not defined by the existing business turf."

Unintended consequences: Missed opportunities, especially in mature markets where the greatest enemy of future performance is today's success. The strategic blinders engendered by myopic attention to the lines and boxes on the organization chart - instead of on issues that fall between them - often encourages talented and creative professionals and managers to quit, taking their new ideas to broader-minded competitors or start-ups.

5. The Future Has Gotten Lost. "Our management structure seems to be the victim of some sort of 'thermal inversion' - all the long rang thinking is being done by people on the bottom half of the hierarchy. Top management, the people with the power to promote new ideas and businesses, are mired in short term operating decisions and day-to-day detail."

Unintended consequences: Limited attention by top management to the long term often leads to truncated corporate futures. Operating issues get resolved poorly because they are decided to far away from the action, middle managers constantly feel second-guessed, and those with the time to think about the future are those least able to do anything about it.

6. The Frozen Middle. " Top management has gone to war with those of us in the middle. We are blamed for everything that's wrong with the company; we are constantly accused of being 'resisters of change.' Nobody seems to understand the pressures we are under. We always give more than our fair share in each round of corporate downsizing."

Unintended consequences: Massive self-protective, hunkering-down, "circling the wagons"-like behaviors on the part of many middle managers. Unwillingness to take risks coupled with meticulous attention to procedural correctness. Superficial lip service given to new corporate initiatives, while undercover guerrilla warfare is being fought to resist them and achieve some degree of stability and control.

7. Teams as the Latest Form of Corporate Window Dressing. "Cross-functional teams are the official modius operandi around here. Unfortunately few are living to their promise, and some are actually making it harder and slower to get anything accomplished. We all acknowledge the value of teamwork and cross-departmental cooperation, but we also realize that - in the end - we get judged and promoted based on what we produce as individuals and how loyal we are to our homebase departments."

Unintended consequences: The matrix-effect created when teams are overlayed on a corporate structure built around individual jobs and functional departments breeds confusion, cost, and conflict. Widespread use of teams has put many managers and employees into a difficult double-bind. On one hand they want to support the company's new direction, but most of the businesses' unwritten rules tend to be anti-collective effort.

8. It's Not in My Job Description. "All the talk about employee involvement and empowerment here sounds nice, but means very little. When all the smoke clears I'm still responsible for doing what I'm supposed to be doing - it's not my fault if it's something that doesn't really need getting done, or if other people's jobs could benefit from my input. Don't mess with my job - it's my only source of security."

Unintended consequences: Narrowly defined jobs - and the myopic beliefs they reinforce - create very brittle, change-resistant organizations - one's that tend to break rather than adapt. It is difficult to build a strong structure from weak components. They also tend to destroy, over time, employees' self confidence and motivation to grow.

9. Nobody's Really Concerned About the Customer. "Relatively few employees here have direct customer contact. We try to be customer driven, but much of the information we have to go on is second hand, at best. My real customer is my boss -it's always very clear what he wants. In this company more time and priority goes to preparing for senior management meetings than visiting with real customers."

Unintended consequences: High overhead costs are a short term result of too many employees spending too much time doing business with each other, instead of with actual, external customers. In the long run, this distortion of focus will make it difficult to anticipate and meet changing market needs.

10. Only Subversives Get Anything Done; Nobody's Eye Is on the Ball. "Priorities here have gotten out-of-wack. We're spending all our time and money on parts of the business that don't really add anything special to our customers - all at the expense of underfeeding the competences that underlie our real competitive edge. Our elaborate product development process has produced few victories in the marketplace. All our successful new products were bootlegged by a band of corporate renegades who put them together on their own time, at their own risk."

Unintended consequences: Off-the-books new product efforts make for great reading in management best sellers, but tend, after a while, to demotivate many less adventurous employees. Successful guerrilla tactics should serve as indicators that the company is misallocating resources, a problem to be dealt with head on - not through ongoing bureaucratic short-circuiting.

11. Unending Turf Wars. "I guess every company has these, but they seem especially brutal here. Notwithstanding constant imploring from top management for us to work together as if we were all in the same company, departmental walls are almost insurmountable. We talk a lot about process redesign and reengineering, but decision making and control still largely rests with our large, functional departments."

Unintended consequences: Trying to manage a company through business processes while organizing around traditional departments is as dysfunctional as trying to use teams to get things done in a business oriented to individual's efforts. It's like trying to be half pregnant, a situation difficult to achieve and even harder to sustain.

12. Check-in Your Brain at the Plant Gate. "We'd never publicly admit it, but most of our factory jobs are designed around the lowest common denominator of workplace skills. We don't pay much, but we don't demand much either.

Unintended consequences: Narrow, fragmented, low skill jobs eventually become selffulfilling prophecies. When we don't mandate - and pay for - ongoing skill development, we end up with a poorly educated, low-flex workforce - one unable to cope with the challenges of our quality and productivity improvement programs.


Rethinking's Remedies

While conducting background research for my book Rethinking the Corporation , I found several companies that had achieved a special measure of success in their restructuring efforts. They worked hard to avoid the unintended consequences that result from these twelve unwritten rules. They provide lessons in creating an organizational architecture that provides more positive clues about how employees in 21st century companies will need to behave. These include global giants, such as ABB, Toyota and General Electric, as well as smaller firms headquartered throughout the world: Brazil's Brastemp and Semco; France's Carrefour and Club Med; Germany's Braun and Claas; Japan's Kao and Kyocera; Sweden's Astra and Saab; and the U.S.'s Microsoft and USAA.

Let's look at some of the changes these companies, and others like them, have put in place to avoid organization structures that breed dysfunctional behaviors. While no one company uses all these structural elements, they are increasingly being used together the way an architect might design a building from several complimentary materials.

Minimize Levels, Make the Remaining Managers Load-bearing. Many companies are flattening their hierarchies by eliminating one or more levels of management. But relatively few have followed the steps of GE, Federal Express and Toyota in really rethinking how the role of the remaining managers needs to change. These companies are adopting what I call the "load-bearing" role for their middle managers: holding them responsible not just for their subordinate's results, but also for what they contribute to these results. They focus more on supporting than controlling, along the lines a Federal Express delivery clerk observed when asked how many clerks worked for each supervisor: "Sorry , you seem to have it backwards. My supervisor works for the twelve of us to make sure we succeed in our jobs." Structuring jobs like this minimizes the "straw boss syndrome" and the "black hole phenomena."

Provide Two Paths to the Top. The problems of "one way career development" and "unmanaged white space on the organization chart" can be mitigated by establishing a path for professionals, or knowledge workers, to advance in pay, title and responsibility without forcing them to become managers. Some corporations do this now for their technical professionals, but it is too good of an idea to limit to the techies - it should be available for all corporate professionals. Companies like 3M and Ford are moving in this direction; some, like Braun and Microsoft make sure that their executive groups include senior individual contributors as well as line and staff managers.

Map Time on to the Hierarchy. Well crafted organization structures can minimize the chances the "future will get lost" and that " middle management will freeze" by explicitly taking time into account when jobs are structured. Assign each level of the hierarchy a time horizon around which 75-80% of its occupant's attention is to be oriented: one or two years out for managers of critical business processes, 5-10 years for group executives and top managers. Along with creating a time-based superstructure, consider giving each manager a fixed-in-advance time period he or she will occupy that position. Set a multi-year mission for each job when someone is appointed to it. Let this mission give a shape and focus to the person's tenure - something missing in many management job's today whose incumbents act as though they will go on forever. Don't keep managers in place long after the reason they were selected becomes irrelevant.

Use the Right-sized Building Blocks. Most corporate structures use inappropriately-sized building blocks: jobs. Most work is either too small or too big for most jobs. Jobs are also very static entities; dangerous in the long run to the health of both their incumbents and the companies they work for. In many companies they need to be eliminated completely - while still retaining the workers. In cases where the work is too big for any one individual, organize around teams instead. Don't designate individual positions also - it will just pollute the team concept - and make sure team (not individual) performance is evaluated are rewarded. For teams to reach their full potential, and not just be "window dressing," they can't be add-ons or over-lays. They must be the basic unit of organization, as practiced throughout Kyocera and in Chrysler's highly successful new car development unit. However, when the nature of a company's business is such that most work comes in units smaller than the traditional job, replace employees' jobs with portfolios of assignments. Jobs get taken for granted, go on forever, and tend to come in 8 hour workday packages. Assignments have more a sense of fluidity, with a clear beginning, middle,deadline and observable output. They can more easily accommodate flex-time and tele-commuting. Sometimes the best way to eliminate the "it's not in my job description" lament is by eliminating the idea of the job.

Give the Structure a Focus. Too few corporate structures focus the majority of their resources on the aspects of the business that add real value to their current and future customers. Instead most budgets and jobs tend to relate to how the company was successful in the past and what it needs to do to take care of itself (its overhead and administration). Correcting this imbalance requires a combined top-down and bottom-up reevaluation of all activities taking place in the business. Adding focus usually means simultaneously cutting and building, and selectively outsourcing to maximize the number of employees with "direct lines to sight" to the customer. Siemens, General Electric, Bankers Trust and many of Germany's Mittlestand companies have blazed this trail with great success.

Turn the Pyramid on its Side. In the final analysis, the only way to eliminate "turf wars" is to eliminate turf. Don't expect a 19th century-oriented functional structure to accommodate the needs of 21st century business process redesign. Organize, as Astra-Merck does, around the 5-6 business processes that add real value to customers. Don't organize around or on top of functional departments - eliminate them. Find other ways to maintain functional expertise. And - to make all this work - reinforce all jobs that remain with healthy doses of skill depth, cross-training and high socialized-in expectations for employee self control. Never allow your employees to "check in their brains at the plant gate."

Making changes along these lines broadens the number of enablers a company provides. It also modifies their roles in ways that reduce the gap between the businesses' unwritten rules and its requirements for ongoing high performance.

None of these modifications to organizational architecture is a panacea in itself. But together they represent the kind of rethinking vital if corporate structures are to be tools that accelerate change, rather than obstacles that only seem to resist and stall it.


Creating Change that Lasts

Keeping an organization updated and fully functional requires the same effort that goes into painting a long bridge. By the time a crew has gone from one end to the other, it is usually time to start over on the original side. USAA, the San Antonio insurance company, uses the same principle to keep its organization improvement unit perpetually busy. A year or two after working with one of its internal clients, the group is back to evaluate what has worked, what has not, and to help invent remedies for unwanted second-order effects of otherwise good recommendations. Not only must this be an ongoing practice, but it needs to be done with full awareness that the organizational problems being experienced today mostly likely had their seeds planted years ago when they were the solutions to the pressing problems of that time.

Architecture is big picture work. Seasoned designers and rebuilders know how difficult is is to change just one thing. Moving just one wall may involve a dozen other structural and infrastructural changes. A key skill of the architect is to think through all these interconnections before the first change is made. Capable organizational architects have the same requirement. They do not attempt to restructure jobs before unnecessary work is outplaced; they know that until reinforced jobs and load-bearing managers are in place it is fruitless to eliminate functional departments and build the organization around business processes.

Organization - its structure and the processes it accommodates - is important in itself. It is not just a tool to serve other ends. While it is a key means of generating economic wealth, it is also a place where many people live out much of their lives. This other dimension implies that organization planners have a special responsibility, to create something that is not only productive, but humane. This is something the best business leaders seem to know almost intuitively, but at times is most eloquently expressed by statesmen and philosophers.

Winston Churchill once observed "We make our buildings, then our buildings make us." A building's work is not completed when it is erected, nor an organization chart's when issued. They both have to be lived in, and the way they are structured can have a considerable impact on the quality of life and work possible within each. Excessive structure is uneconomical; it is also confining. Structure creates walls, internal borders. It creates dysfunctional unwritten rules. The self-protective behaviors they engender, and the armies of staff police needed guard them, all slow a company, dilute its focus and add unnecessary rigidity.

Unfortunately, more is required to release the behaviors businesses needed to succeed than simply demolishing every wall in sight. Some walls do bear necessary loads, some demarcate separations that should not blur, and some provide protection from hostile elements. The remedy for bureaucracy is not anarchy and chaos. That merely serves as the breeding ground for the next autocratic leader, or massive business failure.

Think about the rapidly changing situation in Europe. Do you remember that this was the year we were all to celebrate the coming together of a United Europe? While the falling of the Berlin Wall may symbolize the end of the old , the chaos and slaughter in what we awkwardly call "the former Yugoslavia" is making a mockery of its new beginning.

Remember what Erich Fromm wrote at the outset of the Second World War: "...true freedom is not the absence of structure - letting the employees go off and do whatever they want - but rather a clear structure that enables people to work within established boundaries in an autonomous and creative way." These are boundaries that are not too close, but not too far away.

This article has outlined some of these structures, ones that can serve as positive jumping-off points, not imprisoning barriers. It urges that organization structures be planned with careful attention to the unintended consequences they create, otherwise they are destined to be obstacles rather than accelerators of change.

The global economy has accepted the need to make change its standard operating procedure.

What is still missing in too many companies, though, is the right architecture, the right corporate structures that can provide a strong platform for this change.

Getting these right is a critical challenge facing us all.


© Robert M. Tomasko 1993, 2002



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