Chapter 7 Structure Horizontally Structure is important Dysfunctional structures Structures bear loads Structures define space Structures look good New structures for new strategies
Excerpt from Rethinking the Corporation
By Robert M. Tomasko
Let's take stock of where we are. Quick fix downsizings and fad-driven reorganizations were rejected. Over time they seldom achieve their objectives, often do more harm than good, and are difficult to sustain. Designing a new corporation requires a top down refocusing around the capabilities most critical to future success, and a - closely linked - bottom-up reconsideration of the activities and process vital to this focus. Then, keyed to the results of this grass root effort to build speed, simplicity and balance into the company, comes a careful selection of the type of jobs, teams and oversight needed by the new corporation.
The shape of a structure depends on what it's made from
As Christianity spread, this barrel-like style of building,
called Romanesque, became the accepted mode for cathedral design.
It worked well in Southern Europe where the sunlight was bright
enough to penetrate the tiny window openings permitted by this
massive structural style. But in Northern Europe, shorter summers
and bleaker weather, resulted in Romanesque-style buildings being
fairly dark places. Big windows were indicated, but cutting them
into a vault-shaped building led to dangerous structural weaknesses.
As beautiful as buildings such as the cathedrals at Chartes and Cologne are inside, improvements in the massive appearance of their exterior had to await the development in the 19th Century of new structural materials: mass produced iron and steel. Their usage made possible buildings full of light - such as London's Crystal Palace - and height without bulk - Paris' Eiffel Tower.
Just as architectural design has developed through this interplay of structure and material, organization design has evolved from simple, family-based forms, through functional and divisional configurations, to global matrices and other hybrids - each emerging, as did architectural styles, to solve a problem created by its predecessor. New, creative structures, both organizational and architectural, have had to await the development of new building materials. They have also needed the stimulation of challenging new objectives, such as the vision of a church full of light held by Abbot Sugar in 12th century France which drove his invention of the flying buttress. Contemporary organization builders are equally stimulated by concerns about speed, flexibility and focus. Many have begun to refashion the building blocks of their corporations, but progress in inventing new ways to configure these raw materials has lagged.
Structure is important
Structure, among other things, serves to designate turf lines, accountability boundaries. It provides channels for directing the use of a businesses' capabilities. This is something many savvy operating executives easily appreciate, and use effectively as a management tool, though some overemphasize structure as a cost containment mechanism, and miss its possibilities as a weapon of competitive advantage. Unfortunately, too many of their internal advisors, organization development and human resource professionals, have become caught up in the "structure is an evil force" school-of-thought, and as a result have been of limited value as guides to making the most useful choices about structural forms.
Structure provides a key context for shaping behaviors. How employees are grouped, and how these groups are ordered in relation to each other, can do a great deal, for example, to accelerate new product development - or let it languish. Consumer product giant Procter & Gamble has been criticized for letting Olestra, a cholesterol and calorie-free fat substitute, remain in its research labs for over two decades, years more than usually required for a new food ingredient to receive regulatory approval. Why the delay? One former P&G engineer blames the company's rigid organization structure, dominated by the marketing function. The structure reflected P&G's strategy of selling consumer products. Olestra was an ingredient that could be used in many products, but the structure did not easily provide a home - and essential power base - for components, only for final products.
Inappropriate groupings of key employees is another problem plaguing many businesses. At General Motors the corporate structure at one point had the heads of research and car design reporting to a head of R&D, who in turn reported to the executive in charge of GM's data processing and aerospace subsidiaries, both far away from the automobile-making side of the company. This placement made it difficult for car designers to work closely with car engineers - who were based in the various auto divisions - to develop a new vehicle model, adding to the time and costs required for this key process. Scientists, and their ideas about relevant new technologies, were also kept away from the people most able to apply their discoveries by this series of reporting relationships. Each managerial interface on an organization chart represents an obstacle to be surmounted, with wall height increasing with the seniority of the manager's title.
Many structures are dysfunctional
Paul Jacques Grillo, a talented French architect, has observed the same problems in the ways many building are designed. Even though horizontal openings best accommodate the movement of the eye as it looks outward, homes and offices are continually designed with tall, vertical windows. Why? Because, he says, in the Middle Ages narrow, vertical windows were mandatory. They are an ideal shape from which to aim a bow and arrow, or pour boiling oil down on hostile visitors. Though these original defensive needs no longer exist, the design persists. Grillo has also puzzled over the appearance of the typical Midwestern U.S. farmhouse, usually rising three stories from a vast, flat prairie. While at one time its height might have helped early settlers resist Indian attacks, now its main function now seems to be to serve as a clear target for lightening and tornadoes.
Functionality can easily become outdated. This is a problem common to many organization structures. A need may go away, a problem get solved, or a constraint disappear, but the past often lives on in many organization charts. The GM situation, concentrating technologists in a separate organization could have made good sense at a time when there talent was scarce and in high demand. But its logic disappears when the industry has a surplus of this kind of talent and a competitive situation requiring its inputs to be widely available throughout the company.
In recent years there has been a paucity of good, creative thinking about organization structure. The field has been in a rut partially because of the tendency, mentioned earlier, to discount structure's significance. It has also suffered by being surrounded by a smokescreen of non-issues and poor, or incomplete, new alternatives.
Also misleading are some of the traditional, tired choices frequently offered when alternative organizational configurations are considered: functional, divisional or a blend of each (a.k. a. matrix)? When complete organization charts - ones that show all management positions in a company - are examined they almost always indicate the company is built up from functionally-oriented work groupings (sales, manufacturing, finance, human resources, etc.). Superimposed on this functional foundation may be some type of divisional structure, most commonly grouping the functions relating to individual products, strategic business units, or geography. In some cases, usually in small, single product or excessively centralized firms, the functional grouping of activities will persist all the way to the top of the hierarchy. This near-inevitable functional dominance in most organizations often makes the choice between functional and divisional structures either meaningless or of limited value. And the choice of a matrix hybrid configuration too frequently covers-up the fact that no real choice was made at all - instead a structural compromise was chosen that builds-in chronic conflict (instead of conflict resolution) and high coordination costs.
Too often structures, and structural improvements, fail because they are only half-steps in the right direction, or are based on the management fad of the moment. Teams are often very useful, but they are building blocks of the structure, not the structure itself. Dotted-lines on an organization chart and dual reporting relationships usually, like matrices, are substitutes for making choices, rather than indicators of a strong structure.
Some "models" of the corporation of the future are good thought stimulants, but weak structural forms. Peter Drucker's vision of the company as a symphony orchestra vividly characterizes the nature of control and coordination that will be required, but leaves little room for work not done by well-trained professionals. Charles Handy's 10 creative conceptualization of the "shamrock organization" (he is, after all, the son of a Church of Ireland archdeacon) represents the fresh thinking so needed about breaking a monolithic work force into core employees, part-time workers and subcontractors. But this green, clover-like plant is probably a better national emblem than instrument for focusing on competitive capabilities.
Harvard Business School's D.Quinn Mills has taken the team idea several steps further than most of its popularizers. He advocates forming companies from clusters, groups of people from different disciplines who semi permanently work together. Some of these will run businesses that deal directly with customers, some provide them with support services, others work on change projects and others form alliances with outsiders. His ideas, not too dissimilar from the model some consulting and other professional service firms follow to organize themselves, have been applied at companies such as British Petroleum, DuPont and General Electric's Canadian operations. But the application generally has been in overhead or staff functions, not throughout the business, probably because the free-flowing nature of the semi-autonomous clusters does not allow for the kind of integration required by the revenue-generating parts of these companies.
Other anti-hierarchiests have put their faith in computer systems and communications networks to provide the structural backbone for tomorrow's enterprises. One such view sees the new organization chart looking like "a flat web of departments with direct ties crisscrossing to groups throughout the organization. Management will float above these groups, directing them without cushions of middle managers."
Nice work if you can get it. Intriguing vision too, but one probably not worth holding one's breathe while waiting for it to materialize. This view, like many held by believers in fluid structures pulled together by information technology, tends to ignore the psychological usefulness of hierarchy and managers. At times they serve as great anxiety and uncertainty buffers, something less easily provided by electronic databases and computer screens. It is also unclear how this non-structure will focus resources and direct attention to issues beyond the scope of the hot wired network.
Notwithstanding these criticisms, there are useful aspects to each of these ideas. The trick is to sift them out, combine where possible, and compare with what seems to be working in the real world. In architectural design the idea of structure has fewer negative connotations than in the world of organization design. Let's consider what part structure plays in the design of buildings and see if there might be analogous functions it can provide to organizations.
What structure does
1. Structures bear loads
Each of these forces, for the building to remain static, must be resisted by an equal, but opposite, reactive force. This principle, first articulated by Isaac Newton, mandates that the load-bearing elements in a structure must provide a bridge between the acting and reacting pressures, between, for example, the weight of the roof and the upward pressure exerted by the building's foundation to resist it. The net result is the achievement of a state of dynamic equilibrium, masquerading as a still, erect building.
Corporations also must be able to achieve a dynamic equilibrium. Their structures have to facilitate the balancing of many internally and externally-induced forces and counter pressures that arise because of them. At the enterprise level a dynamic balance must be achieved among the wants of the businesses' owners, its employees and it customers. It must achieve a measure of workable adaptation to the demands of its regulators as well as to the needs of its supplier-partners. Within the company the attractiveness of long product runs to factory managers must be countered with the hope of the sales force for an offering that can be customized to each buyer's requirements. And the reluctance of the sales people to ask for prompt payment, balanced with the sleepless nights experienced by the accounting manager as past-due receivables age.
These, and many other pressures, create priorities for the organization structure. Tremendous time and energy is often required to cope with these, although in the end this may go unnoticed because - like the "motionless building" - nothing seems to have changed, and pure survival usually occurs without a lot of fanfare.
2. Structures define space
The kind of space of most concern to organization designers is interaction space. Who needs to see or talk to whom most often? What perspectives should most frequently intermingle? What aspects of the company's operations work best when left alone? Changing organization structure alone seldom is sufficient to solve all communication problems, but structure that is planned without regard to the barriers it raises can quickly be self defeating. Just think about all the organizational walls that had to be surmounted to bring together car designers and car engineers in General Motors' old structure. Compare this with Chrysler's Team Viper, all working together in one organization unit, housed in a large room. Contrast the barriers that separate most manufacturers from direct contact with their customers with the "interaction space" created when the German farm equipment maker Claas added a small retail component to its organization structure.
Claas uses the interactions that occur between its customers and employees in these stores as a window into the customers' minds, one that provides unfiltered feedback about product quality and an early alert to changing buyer needs. Architects use the same technique to create dynamic space; they put windows inside buildings to reduce feelings of confinement and facilitate informal communication.
While there are almost countless structural variations and architectural styles (Classical, Romanesque, Gothic, Renaissance, Baroque, Bauhaus, Modern, Post-modern, etc.), several contemporary American architects found they could simplify matters by classifying most structures into one of three types: skeletal, planar and plastic. Each type occurs throughout architectural history; each has a strikingly different form.
Skeletal buildings are easy to spot. As these architects note: "their bones show." Paris' Notre Dame Cathedral and Athen's Parthenon illustrate this effect. So do the buildings that Mies van der Rohe designed at the Illinois Institute of Technology. Their steel beams and columns are the most visually striking things about them.
Some corporate structures reflect aspects of this skeletal
orientation. In the early 20th century the tightly compartmentalized
organizations created by Theodore Vail for A.T. & T. and
Alfred Sloan's for General Motors gave military-style importance
to structural level and the rank it designated. Over time structures
like these grew by excessive fragmentation and became more like
government bureaucracies than private enterprises. The space
created by these structures tends to be very static.
This structure's organizational counterparts are those companies with tightly integrated configurations. Companies that are able to say that everything we sell, we make. Everything we make, we design. And every raw material we use, we mine, refine, or find. This was once the model for success in a number of industries. Railroads once made much of their rolling stock, the telephone company made all the telephones, Ford made the steel used in its cars, some supermarket giants processed much of the food they sold, and the U.S. military produced most of its armaments in government-owned arsenals. It is a good organizational strategy in time of monopoly or scarcity - what better way to have access to supply than to produce it. But its less relevant in a time of intense competition among suppliers and the emergence of global markets for so many raw materials and components.
Planar structures provide for a more dynamic space than do skeletal ones. But their integrated nature usually channels the flow in one direction. It is hard to listen to an oil industry veteran talk about the business for longer than a minute or two without the words "upstream" or "downstream" entering the conversation.
The third generic structural form, plastic, is the architect's equivalent of sculpture. Plastic buildings use a variety of geometric shapes - cubes, pyramids, domes, spheres, cylinders - and the geometry is what is most noticed, not the load bearing skeleton or the horizontal or vertical dimensions. For architectural examples go to Istanbul to see the Hagia Sophia, once a cathedral, then a mosque, now a museum. Visit I.M. Pei's pyramidal entrance at the Louvre. Or when attending a management development program at Harvard Business School, walk across the Charles River and look at the distinctive, "unbuilding-like" appearance of Larsen Hall on the Harvard Graduate School of Education's campus.
Plasticity, as a form, is becoming increasingly popular among corporations. It is a way to combine free-form space with an element of structural rigor. Johnson & Johnson and Minnesota Mining & Manufacturing have had many decade of experience organizing with this flexible form. Kyocera Corporation, a $3 billion a year maverick Japanese manufacturer based in Kyoto, structures itself similarly. This configuration is not limited to high tech businesses, though. A maker of products as mundane as nails, screws and bolts - the Illinois Tool Works - favors this form to keep its arms around its 90 small divisions.
Plastic structures are the most conducive to dynamic space. Their lack of boxiness, or linearity, can provide many paths for movement and communication. Too many, in some cases, if the structure grows too large.
Three type of structures; three types of space enclosed. One fragmented, one tightly integrated, the other fluid and flexible. What the new corporation needs most is an ample measure of the fluid and flexible.
3. Structures also look good
Though not always freely admitted, corporate structures also can serve a "higher purpose," beyond their functional, economic utility. Some philosophers look to a people's art and buildings to find an expression of their morality. They can also look to the kinds of organization structures that have been created. Just as a building designed only for its immediate usefulness might be considered merely another machine, so might an organization solely planned to be economically efficient. To the extent a company's economic performance is a result of, not in spite of, its attention to some higher aspirations, it has a greater chance of being in sync with the overall society upon which it depends. And of growing in harmony with that society.
These "higher aspirations" are many and varied. In companies like Mexico's Grupo Industrial Alfa, Brazil's Brastemp S.A. and many struggling start-ups in Eastern Europe, the hope is to contribute to and share in the rewards of a rapidly modernizing economy. Raymond Ackerman has built the organization of Pick 'n Pay Stores Ltd. into more than just Africa's largest food retailer. Its structure is one that has for many years accelerated the development of a non-racial management team, charting a path a number of other South African-based world class enterprises are following. The intense drive behind many of Japans and Germany's post-World War II businesses was fueled by a motivation to rebuild their nations and demonstrate the positive role they could play in the world's economy. Gilbert Trigano's Club Med, a French post-war start-up, was structured as more than an all inclusive, sport-oriented vacation-provider. Its organization chart includes a place for customers as well as staff, with only minimal walls between each, reinforcing a cultural aspiration for a more egalitarian world.
In addition to reflecting some important higher mission, good structures must also meet more person-sized criteria. At the least, they should not place obstacles in the way of their employees' good physical and psychological health. Their methods of advancement and recognition-providing should not make disappointment and demotivation reasonable expectations for most employees. Their concerns for efficiency and lack of toleration of waste should include be broad enough to include awareness of misused talents and under performing human potential.
As companies that address these issues show, "looking good" can be important to sustained business success, and it needs to be more than skin deep. It has to be reflected throughout the structure, not just added-on as a community affairs or organization development departmental appendage.
New structures for new strategies
Today's organizational architects face a situation not unlike Sullivan's. Over a decade of financial restructuring and downsizing have gutted the original logic behind many corporate structures. That is the bad news. The good news is that a powerful combination of new building blocks (reinforced jobs, composite teams and load-bearing managers) and enabling technologies (the new techniques for information and control highlighted in the "Rethink" portion of this book) are making possible new forms of organization. Adoption of new ideas is seldom easy and straightforward. Necessity is usually more powerful than trendiness, and the necessity to accommodate strategies of focus, flexibility and speed is fueling a reexamination of traditional organization structures. Several of their attributes seem most important to consider.
Pointedness. How focused is the structure on what it takes to succeed in its particular industry? Are at least two-thirds of the activities it provides support for ones that can be classified as critical or cutting-edge capabilities. While many companies feel this is something that can be taken for granted, audits of how resources are allocated to capabilities usually discover that three quarters or more are devoted to either core or complimentary skills, ones that neither directly serve the customer nor are the basis for today's competitive advantage. Resource concentrations are usually good clues about the direction a business is taking. Having them match the competitive dynamics of the industry is one of the greatest sources of strength the organization structure can provide.
Scale. How big is the organization? This is something measured not just by counting heads, but by measuring fragmentation. An organization of 1000 employees with only 50 individual jobs is "smaller" than one with the same number of workers, but 500 different ways responsibilities are divided.
Regardless of how measured, overall organization size is a critical concern. Many Japanese companies are given excessive praise for their ability to coordinate diverse function, create new knowledge, and quickly turn it into on-the-shelf products. But what is sometimes forgotten as their management practices are imitated is that many of these companies are much smaller than their Western counterparts. NEC's Japan-based work force only numbers 37,000; Kao, the company in businesses ranging from cosmetics to computer discs, has less than 7,000. As size increases the number of possible interactions also increases, at a faster rate than does the size, adding to the load on the structure.
This is usually coped with by increased subdivision, which again creates new problems of coordination and information transfer.
Instead, more attention is needed to create what Peter Drucker has called an organization with the clout of a giant and the nimbleness of an elf. The trick is to keep the organization small, and focused, enough that a minute division of labor is unnecessary. Design the structure so users and providers are as close together as possible, so that sequential transfers of responsibility between organization units are minimized or eliminated all together. Companies like Johnson & Johnson and Microsoft are good followers of these principles. Microsoft keeps business units to a 200-person maximum, the limit it founder - Bill Gates - feels allows most people to know each other by name, and not have their individual contributions lost in an overly fragmented accountability structure.
Drucker's visionary slight-of-hand is possible if accompanied by work resizing, both top-down and bottom-up. The smaller scale of operations this permits, in turn, makes it possible to create a structure that minimizes the distance from any job in it to the company's outside environment. A greater percentage of every employee's time is spent interacting with customers, suppliers or others with information about events outside the firm, rather than focusing attention on intra-company gossip and internal policies. Visualizing a resized company as a geometric figure would show a structure that has maximized its external surface area in relation to its volume. Organizationally speaking, the white space on its chart has been minimized.
Permeability. Having a lot of surface area is one thing, but ensuring that information and ideas flow across it is something else. A good organization boundary is one that is porous, or at least semi-permeable. At the company's external boundary, there needs to be an easy blending with the outside environment.
This idea can be appreciated if you visualize a building or house that seems to fit almost seamlessly with its environment. Fallingwater is one that frequently comes to mind. The strong horizontal lines of its exterior structure and the cascading affect of its multiple levels as they seem to float above each other is the stone and concrete equivalent of the stream and waterfall it is built above. Its designer and Louis Sullivan's apprentice, Frank Lloyd Wright, believed that if a house is to be built a top a hill, it should appear to be of the hill, not just placed on it. 23 In Germany's Swabian Alps, the Hohenzollern castle was so well sited on a mountain peak that its multi-towered shape appears to complete the mountain's silhouette, rather than what it actually does, which is to dominate the valley below.
The same impression is apparent throughout the countryside of Japan where many Buddhist temples seem to be an integral part of the natural environment, rather than set out to dominate it.
Instead of imposing themselves on the environment, these pagoda's have a structure consisting of a central post with a series of roofs piled up around it. This form is not unlike the stem and branches of a tree, and is as effective as a tree in surviving the earthquakes common in Japan. This, and other wood framed structures, may appear weak, but are able to ride out many movements of the earth that would collapse stronger-appearing stone buildings.
Just as nature and architecture meet each other in these noted buildings, organization and environment must in the new corporation. The company's form must allow for easy, complimentary connections with the outside world, as well as with the internal functionality that has traditionally governed it. This is the best way to insure the business survives the hard-to-schedule shocks and tremors that are accompanying the globalization of many industries.
Flowing space. When alternative organization structures are being considered, the best choice is frequently the one that most allows for space that flows, dynamic space. These tend to be the more planar or plastic-looking structures. These, especially the plastic ones, are best at minimizing the distance between any two points - or people - who need to be linked. Many elaborate mechanisms are available to facilitate communications - global telecommunications, computer-facilitated meetings, electronic and voice mail, video-conferencing. But, before investing in these intriguing but costly technologies, doesn't it first make sense to look for ways to minimize the need for them?
The shortest distance between two points is not necessarily a straight line. When thinking about organizational communication the idea of shortest is not so much a geographic concept as one related to speed and effort. Short paths are those that can be transversed the quickest, with the least expenditure of effort. In organization hierarchies the most difficult paths are frequently those that go up or down the hierarchy, the chain of command. These paths are already too congested with concerns about authority, accountability, dependencies, evaluation, leadership and status to also serve as especially effective communication conduits.
Instead in most corporations information - and rumors - tends to flow fastest across the hierarchy, from peer to peer. These are the natural channels of "least effort." Instead of starting out by resisting them, with technological fixes, it can make sense to let nature take its course and design structures that maximize the ratio of peers to managers.
In the realm of building architecture the key flows to be managed are the movements of the structure's inhabitants, light, air circulation and - for aesthetic reasons - the movements of the eye as it scans the building. At Fallingwater, Wright influenced these by accentuating the house's vertical dimension, and by locating large windows in places that allow those inside to see the outdoors at the same time they glance across a room. In much of his architecture he also minimized the use of right angles and used building materials native to the site, all techniques that enable an inhabitant to move freely by minimizing obstacles and creating the feeling that the occupant is part of some larger space than that the structure defines.
Of these design tactics probably the most powerful is the use of the horizontal. Less energy and effort is required to move in the horizontal dimension than the vertical. The equivalent energy required to walk up a 15 foot flight of steps would provide for many more feet of distance covered if the travel was limited to one level. The lesson here for organization structure is to minimize the levels, or better put, minimize the vertical height of the structure in favor of its horizontal expanse.
Easy flow is also that which happens rapidly. In Japanese gardens the best views are often obtained by staying on the path defined by the stone steps that meander through them. Some gardens will deliberately vary the spacing between the steps to either speed up or slow down the visitor, depending on how interesting the garden is from a particular vantage point on the path. Closely spaced stone require short, slow steps, while a broader spacing encourages more rapid movement.
The same principle also holds for what goes on within horizontal organizational turf. The more it is subdivided - by departments, narrowly defined jobs, or teams floating free from the rest of the organization - the longer it will take for important interactions to occur, and the less information and fewer ideas will circulate.
© Robert M. Tomasko 2002