When did you look at your organization structure the last time?

“Will you look at our current organization structure and suggest changes?” Two of our new clients asked me the same question with-in a day of each other.

organization reporting structure
I believe that these requests were not coincidental.

In many cases, organizations lose business because of multiple issues arising out of faulty organization structures. Growth is definitely impacted. So, sooner than later, business owners start feeling the ‘pain’ if they haven’t been regularly refining their organization structures.

In my today’s article, I wish to digress more on this topic by writing about 4 problems in organisation structures that I frequently observe.

1) Structure is not in sync with changing business scenario

I will use an example to establish this point.

One of our clients was structured like typical manufacturing company i.e. built for repeat orders & low-costing. The company is in existence since last 25 years & was handed over from father to son. The owner(son) told me that company was increasingly getting majority of their orders because of their ability to satisfy specific customer needs (& not because of pricing). This was happening because of the initiatives of the owner to gain in-dept understanding of customer requirements.

However, he felt that his people were disconnected with what was expected from them. In a nutshell, the organization was built to deliver something that was not in sync with what the customers appreciated.

This problem was solved when we changed the structure to give more emphasis on the teams focused on studying customer needs & customizing products.

2) Functions responsible for long term growth are seeking direction from functions that are responsible for short term results

Many organization focus completely on feeding today’s demand over creating long term growth.

In such organizations, the functions such as Branding, R&D and People Development which are responsible for creating the long term growth are reporting to functions such as Sales or Operations which are responsible for near-term performance. As a result, the long term growth succumbs to the short term priorities and leads to death of future business funnel. In 80’s, many textile mills suffered this fate.

3) Not having the proper balance between Autonomy and Control

Normally, the functions such as Marketing, Sales and Product Development require autonomy. At the same time, functions such as Accounts, Personnel and Legal bring in control. The key is establishing harmony between autonomy & control so that organization can innovate but at the same time not get caught in legal or financial problems.

At one of our clients (in construction industry), the legal department exercised such a tight grip on Sales group that even project progress notifications sent to the customers were written in legal language. This increased company’s customer support efforts because many customers called in (often irritated) as they had difficulty understanding the letters they had received. While this example might seem extreme, I have seen many organization work in a sub-optimal way because of internal structures.

4) Wrong people are holding important positions in the organization

The problem arises mainly because of the mismatch of the capabilities required by the position with the competencies of the person in that position.

Typically, the person (with mismatched competencies) is entrusted with a position because of their success in some other role, closeness/relationship with the business owner or because the position (e.g. front line sales) cannot remain vacant. In all cases, the organization suffers.

 

Having looked at the common flaws & their business impact, I believe that the days when business could function with the same organization structure for years are long gone. As with rest of the management styles, the organization structure also needs to be agile & in tune with business realities.

So, it’s no surprise that ”Will you look at our current organization structure?” is the most frequent request I receive when I meet enterprising business owners.

In the same vein, I have a question for you. When did you look at your organization structure the last time?

Please use this link to write to me about any questions or comments about this topic.

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