Why are new organization models emerging?
Business agility is crucial for companies success. To survive and thrive in the ever-growing complex business world, there are three areas organizations need to focus on. The efficiency and robustness of decision making, the ability of people at the company peripheral to make decisions and the agility of their organization structure. This post will discuss several organization structures with a focus on each one of those areas.
In the last one hundred years, business complexity (the number of elements in the business system and the unexpected behavior of the system as a result) grew exponentially. The move from people being part of the assembly line to robots doing the work. The increasing number of people at work depends on collaboration to push the business forward. The move from local to global markets. The appearance of virtual commodities (data and currency as examples), and their ability to run or virtual infrastructures. The Internet revolution and new generations with expectation for immediate results. All of those changed required organizations to change their organization structure and management theories.
The business environment introduces growing pressure on business in the shape of new technologies, new competitors, new business models, new regulations, new generations, and many others. To survive and thrive, organizations need to:
- Find an organization structure that supports decision making that has a direct impact on people, instead of decision making that depends on informal organization networks to “approve” and execute the decisions.
- Enable associates that are dealing with all external entities (customers, vendors, government, analysts, etc.)to make their own decisions. Instead of the current need to get approval for each request from external.
- adopt and organization structure that is agile and won’t break into pieces when a certain pressure on the company will reach unusual stress. Instead of a rigid structure that will break apart when the pressure exceeds a certain level.
Different organization structures
On top of the hierarchical, matrix and flat organization (that are more common), there are other organization structures available and used by organizations today. There is not a perfect structure and companies need to find what is working for them from all available solutions.
The below organization structures described visually and verbally to the three areas we mentioned above. We will start with the most known structure and end up with the most esoteric one (yet applicable for at least one organization)
Hierarchical structure
Decision making and robustness: On the paper, the decision making of a hierarchical organization is the most effective one. One guy can decide. It’s also clear that after the decision made, the decision-maker is connecting the right people in the company’s informal network to get things done. It’s common that decision made, but not implemented in practice. So, bottom line this structure can decide fast, but depend on many people to make it a reality.
The hierarchical structure also got challenges from a robustness point of view. If any manager will leave or removed, it will shake the system for a while. The benefit of fast decision making due to one decision-maker balanced with the need to get support from the informal structure and the shook to the system when a manager is no longer there.
The ability of people in peripheral to decide: None. Even in a model of empowerment, most of the key decisions need a manager’s decision. That’s the core of the system. You’ll rarely ask an employee a question and you’ll get an immediate reply, especially if it’s related to money.
The Agility of the structure: As depicted in the diagram, hierarchical organizations are like a ball with a lot of strong lines between the elements that create the organization. This structure is rigid. It will survive a lot of pressure, but when the pressure exceeds a certain level, the organization will break into several pieces. That’s the price of a rigid structure.
The current disadvantages of the hierarchical organization used to be its major advantages in the past when the business world wasn’t complex as it is today.
Matrix structure
Decision making and robustness: In the matrix’s top organization, there is still one guy that decides, but in lower-level people have two managers. One is a technical manager and one is usually a project manager or a local manager. This duality improves the robustness of decision making but makes the decision making more complex, and many time conflict-prone. Any human-made structure has a natural informal structure that has a lot of influence on the organization.
The ability of people in peripheral to decide: Not different from a hierarchical structure. Sometimes can be more time consuming when two people need to decide, especially when there are conflicts between the two decision-makers.
The agility of the structure: If clear lines of reporting define the rigidity of a structure, this is the most rigid structure that exists. This structure can survive more pressure from the outside, especially if it is used to support big companies. The disadvantage is that when the pressure will break it, it will turn the organization into dust. There won’t be even pieces that can be used to reassemble the organization.
Flatt structure
Decision making and robustness: Flatt organization disable all the middle management. This is just one manager that everyone reports to. This structure is the worst for robustness, but it’s better from the efficiency point of view. In a flat organization, one decides, but this individual depends on the informal structure to run the organization. Therefore, the single decision-maker will consult the informal structure before making the final decision. This consultation increases the adoption of his decisions.
The ability of people in peripheral to decide: because one person can’t make all the decision and no middle management available to decide; associates are making many decisions. This structure enables associates (dealing with externals) to make their own decisions. A big win for customer support groups.
The agility of the structure: Think about this structure as a wheel with spokes. When this structure needs to deal with a lot of pressure, it breaks nothing. The area that will be subject to pressure will bend as the spike will fail under the pressure, but the wheel or the ball will keep on rolling.
Hierarchy of groups structure
Hierarchy of groups
Decision making and robustness: the hierarchy of groups is an interesting model based on the hierarchy of groups, but not of people. Usually, this structure will have a light hierarchy in groups with a leader that has reduced authority than a manager. It defines a strict hierarchy between groups. This structure creates more robustness of decision making, but decisions might take more time. Most of the organizations that are using this model define clear responsibilities for people and make them the ultimate decision making in their roles. The leader is more for conflict resolution, prioritization, assigning tasks, and removing roadblocks. In some organization conflict, the group will perform conflict resolution.
As long as there are no conflicts, the ability of each person to make his own decision makes the process more effective. It is messy when there are conflicts.
The ability of people in peripheral to decide: Clear definition of responsibilities and authority are given to people to make their own decisions. This authority has a significant impact on the ability of associates dealing with externals to decide. When a conflict raised because of one decision, the efficiency of conflict resolution plays a key role. An inefficient process could end up with slower decision making than hierarchy.
The agility of the structure: The agility of this structure is very similar to the flat organization structure. This solution makes it firmer as there are few people at the end of the spike. But, when the pressure is too strong, one spike will pay the price.
Decentralized group structure
Decision making and robustness: This structure is very similar to the hierarchy of groups structure with one main difference. There aren’t any hierarchies of relations between the groups. Each group acts like a micro company and is self-organized. Usually, the groups will have some internal hierarchy. A flat type of hierarchy is common for the groups.
This structure has the same robustness of the hierarchy of groups, but when there are conflicts between the group, there is a bigger dependency on who resolve conflicts, and how conflicts are resolved. This structure is also based on clear definitions of responsibilities and autonomy for people.
The ability of people in peripheral to decide: decentralized group provides the same ability to people dealing with externals to make their own decisions.
The agility of the structure: Think about the dotted line between groups as springs. If there is pressure from the outside that the shell can’t handle. The structure will bend and adjust to the pressure. This bend can be returned to the previous condition once the pressure is reduced. This structure is hard to manage, but provide more agility than the previous structures.
Decentralized self-managed structure
Decision making and robustness: This structure is based on the natural network that exists in any company. This structure is based on the assumption that people are self-managed and teams are self-organized. People can fill one or more roles in multiple groups. In each group, they will have a clear role that they have the autonomy to manage. Teams are organizing themselves.
Teams in this structure are fluid; they can change all the time depending on business needs and people. in this structure, the tension between decision making and resolving conflicts reaching the peak. As long as there is no conflict, decisions are taken by the people who are doing the work. But conflicts will take time to resolve and will slow the process.
This structure can create a challenge to the robustness of decision making, especially when there is just one person who fills one role. Also, coordination between groups can also be a challenge.
The ability of people in peripheral to decide: Same as a decentralized group. People, by definition, have the authority to make their own decisions. This autonomy is granted to any member of the organization. As strange as this structure sound, some companies are using it.
The agility of the structure: This is the harder structure to manage and the most agile one. It is like a body of water that can adjust to any condition. On the other hand, it has a very week shell and can be influenced by any external pressure.
Summary
As I mentioned at the beginning of this post, none of those structures is right or wrong and many companies that are using them are implementing hybrid structure. They are selecting from each relevant structure what fit their organization.
As a manager/leader, know those alternatives and find out if elements from those structures might be a better fit for your organization future.