Tag Archives: org structure

Not an Ideological Discussion

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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.

Inside the Function

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“Take your most important internal function,” Pablo instructed. “In the beginning, likely will be operations. What is the work most closely related to producing the product or delivering the service? Especially in the beginning, that is mostly short-term work, 1 day to 3 months. Most production roles have a supervisor, with longer term goals and objectives, 3 months to 12 months. The supervisory role is to make sure production gets done, completely, on time, within spec.”

“So, every production person knows they have a supervisor?” I added.

“And, every supervisor knows they have a manager,” Pablo smiled. “This is the beginning of structure, nested goals and objectives related to successive roles (context), a production role, to a supervisory role to a managerial role.”

“The roles are distinguished by longer timespan goals and objectives?” I suggested.

“Yes, the roles are different in that way, but also in the way they relate to each other. Organizational structure begins with nested timespan goals, but also includes the way we define two things associated with those role relationships.”

“Accountability and authority?” I chimed in.

Pablo nodded. “In this working relationship between the team member and the supervisor, what is the accountability? What is the authority?”

My turn to show off. “The accountability on the part of the team member is to apply their full capability in pursuit of the goals and objectives agreed to by their supervisor, in short, to do their best. It is the accountability of the supervisor to create the working environment that makes those goals and objectives possible (probable). It is the accountability of the supervisor for output.”

“And, the authority?” Pablo prompted.

“The authority to make decisions and solve problems appropriate to the level of work in the task.”

Goal Based Structure

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“If organizational structure is so important to the way things work,” I asked, “where do we start?”

“It always starts with the founder, entrepreneur, “Pablo replied. “Someone had an idea for a company, so they start it. It starts with that idea.”

“Vision, mission?”

“Yes, but immediately think about timespan,” Pablo inserted. “I know the founder thinks about where that first customer will come from, but successful thinking starts with what that organization will look like in the future. What will things look like in five years? And, that’s the start of structure.”

“How so?” I said, looking for something more specific.

“Don’t overthink this,” Pablo admonished. “Structure starts with a series of contexts, the first context exists in the imagination of the founder, long term. This is what the organization will look like in its market, including customers, competitors, vendors, supply chain, delivery chain. This is a complex context, passed along, inside the company.”

“And?”

“The next layer of context is shorter, goals and objectives 2-5 years in length. This is a cascade, a nesting inside the vision and mission.”

“And?”

The cascade continues,” Pablo explained. “The next context shorter, 1-2 years. With the next context 3-12 months, followed by the next context 1 day to 3 months. Organizational structure is simply a cascade of nested contexts within which people work.
———-
S-V – 5-10 years
S-IV – 2-5 years
S-III – 1-2 years
S-II – 3-12 months
S-I – 1 day-3 months
———-
“Layers inside the company, levels of work, all based on the timespan of their related goals and objectives.”

The Rare Grasp on Structure

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“I get it,” I said. “Timespan helps us sort out the complexity of problems at hand with the selection of the right person to solve that problem. You say that timespan touches everything a manager does?”

“Let’s start at the top with the CEO,” Pablo replied. “I rarely meet a CEO who has a firm grasp on the structure of their organization. And, by structure, I mean, the way we define the working relationships between people. Not only is it important to define the accountability inside a single role, it is also critical to define the way those roles work together.”

“I’m listening.”

“There are two types of working relationships, vertical and horizontal,” Pablo continued. “Vertical relationships, we understand more easily. Those are (vertical) managerial relationships. Every technician understands they have a supervisor, every supervisor understands they have a manager. If the organization is large enough, every manager understands they have an executive manager. Somewhere, hovering at the top is the CEO.”

“This is the CEO who rarely has a firm grasp on the structure?” I asked.

“Precisely,” Pablo smiled. “Most people get promoted in an organization because someone left the company, leaving a hole in the org chart. Or someone appears qualified for a promotion, requests a promotion, but there is no hole on the org chart, so we create a new role, with a new title. Or someone needs (deserves) a raise, but we cannot justify the increase in compensation without assigning a new title with a new role. Or someone needs leadership experience, so we make them a manager and assign a single person for them to manage. There are all kinds of wonky reasons that org charts get bloodied up.”

“We were talking about timespan?” I reminded.

“And, those bloodied org charts make no sense, they are bloated, accountability is vague, performance excuses abound. So we have communication seminars and do personality testing, AND nothing changes. That’s because we don’t have a communication problem, we have a structural problem. Timespan creates the only framework where we can accurately define two things, accountability and authority.”

“Accountability and authority for what?”

“To make decisions and solve problems. Work is making decisions and solving problems. It’s all about the work. When we can measure the decision (with timespan) and measure the problem (with timespan), we can now structure the organization around something that makes sense. Supervisors have a larger (longer timespan) context than technicians. Managers have a larger (longer timespan) context than supervisors. Executive managers have a larger (longer timespan) context than managers. It’s all about the work, all based on goals and objectives.”

“And, CEOs rarely have a firm grasp on their structure?” I repeated.

“Understanding timespan, the CEO can overlay levels of work onto the org chart, and discrepancies leap off the page. The burning platforms inside the org chart now reveal themselves, not as communication breakdowns or personality conflicts, but as structural problems, where we have not accurately identified the complexity of problems at that level of work, or mismatched a team member to make those decisions or solve those problems.”