Everyone is looking for ways to squeeze out a little more productivity these days, and moving people around is a whole lot easier than trying to change management practices and core worker attitudes. And how the boxes on the organization chart are arranged can influence employee experiences and their work.
The burning questions about how are often expressed as “Should I centralize or decentralize?” and “Should we move everything to corporate, or make the divisions responsible for the function?” The rationale goes something like this: “We have too much duplication of effort in each division and not enough control to administer the function consistently. Centralizing would save us money, require fewer people, and give us better control to make sure things are done correctly.”
On the flipside is the argument for decentralizing. Those in the local operations complain that they don’t get the response they need from a centralized department, and waiting for a disconnected corporate staff person to make a decision is killing them. Local business unit leaders often end up having to staff up to get the job done anyway, so why not formalize the process and give them full authority to make and execute decisions?
Some clients have asked us to help them reorganize reporting relationships to address communication problems. Several times, we have been consulted about inserting an additional layer between two quarrelling people or groups. The thinking is that if the relationship is strained, inserting a less baggage-laden layer in the middle can moderate things.
Regardless of the issue, restructuring, by itself, is rarely an effective way to address complex organizational problems bringing to mind wisecracks about rearranging deck chairs on the Titanic. Instead, it’s usually far more effective to first directly address problems of how people work together, and then use the structure to support those decisions.
For example, many clients initially believe that when there is too much inconsistency the obvious solution is to create a new department, or centralize control, to make sure tasks are performed a certain way. When they looked into it, however, one client found that their problems were a result of employees not understanding the whole process. So instead of centralizing, they began a program to train core workers in the whole process, organized them to be responsible for a broader range of tasks, and gave them authority to change processes as circumstances changed. By addressing the real issue and organizing to support the changes, they not only solved the problem but saw remarkable increases in productivity as well.
Another client looking to resolve a major conflict between the executive committee and the rest of the board first thought they should insert a liaison in the middle to manage communications between the groups. After learning how the new structure would further isolate the two warring factions, decrease communications, and increase tensions between the two, they decided to leave the organization structure “as is” and work to bring the groups together in a conflict resolution exercise instead. The structural changes they made were in their communications systems rather than reporting relationships.
Whether it’s to save money, manage consistency, resolve communication problems, or some other reason, restructuring is not a panacea. It can, however, be an effective way to help work systems align with, and support, meaningful workplace initiatives and solutions to internal operating problems. Managed in the context of identified organizational needs, restructuring can be more than simply another game of musical chairs.
Trying it on for fit: Restructuring decisions are best made in the context of the desired marketplace results to be achieved, the corresponding tasks that must be performed to achieve desired marketplace results, and consideration of the best place for resources to reside, or best ways for them to be organized, in order to perform tasks essential to marketplace success. Furthermore, let strategy, people, and process needs provide the guidance for developing supporting organizational structures rather than the other way around.
Some simple structural considerations:
- Decentralization and distribution tend to support greater marketplace flexibility and quicker response times; centralization and consolidation tend to favor greater administrative control and consistency.
- More layers typically reduce communication and core worker accountability; fewer layers can support efforts to improve business literacy and greater personal accountability among core workers.
- Today’s high performing organizations rely more on effective internal processes and less on hierarchy and formal structures to create competitive advantage.
Send an email and let me know what you learn from your experiences. I would love to hear from you!