From the Ask Tom mailbag –

Question:
I have been told that my org structure is misguided, that I need to flatten my organization out, that my various teams should be able to make their own decisions. What gives?

Response:
What seems like an off-the-cuff remark about the way you run things, turns out to be a bit more complicated. The organizational structure is not something dictated by a friend, or a consultant, based on some ideology about modern companies and the new look of the corporation.

Organizational structure is simply the way we define the working relationships between people. If we draw it on a piece of paper, it looks like an org chart. If you give me your org chart, it tells me how you think about those working relationships with respect to these two questions –
Who has the accountability for output?
Who has the authority to make what decisions?

Your org structure defines those two questions according to your business model. Your business model will guide you to the structure you need based on the complexity of the decisions you make and the problems you solve. Easy decisions and easy problems don’t need much structure. But no one builds a growing business based on easy decisions and easy problems, things become more complex. The complexity of the work provides clues to the structure you need.

How complex is your business? If your company replaces residential roofs, one project at a time, with no overlap between projects, things are pretty simple. Add a second story to that residential roof and suddenly you have more safety issues. Simultaneous contracts add more complexity with scheduling, crew capacity, material receiving and staging. Shift to commercial roofing and things stack up faster. Professional buyers enter the picture. OSHA oversight and compliance. Insurance and risk management. Code compliance and risk retention. Cash flow and credit facilities. Operational and quality assurance systems. Warranty and maintenance contracts. There are multiple levels of complexity, all part of the business model which dictates the structure required.

You can remove the management layers in your company, but the complexity remains. You should have no more layers in your company than is required by your business model. But removing layers will leave some decisions to be made by people who do not have the capability to make those decisions. Removing layers will leave some problems to be solved by people without the capability to solve those problems.

Organizational structure is not an ideological discussion.