In our previous blog post, Measuring your future: what does success look like?, we looked at how measures can be combined to create dashboards to focus leadership team discussions, giving direction for improvements in a timely manner to minimize risk, and used in individual performance agreements to help align employees with a company’s vision. This week we ask you to consider effective restructuring within your organization and what you should consider when doing so.
An organization’s structure establishes reporting relationships, areas of accountability, and levels of decision-making authority (often referred to as decision rights) that allow people to work together to achieve a set of shared goals.
Organizational structure can serve as a catalyst for releasing a company’s potential or as a constraint that limits its ability to achieve its vision. There are several types of organizational structure and no one form is a suitable design choice for all companies.
In a centralized structure, the top layer of management has most of the decision-making authority and keeps tight control over departments and divisions. In a decentralized structure, the decision-making authority is distributed within departments or divisions that may have varying degrees of independence.
There are more reasons to consider restructuring than just business functions
There are a variety of factors that influence how a company should consider structuring itself, including its business functions, products and services, customer base, geographical footprint and growth strategies.
The daily operations of an organization are carried out through various functions such as Sales, Marketing, Finance, Human Resources, Manufacturing, Engineering, Product Development, et al. A key objective for assessing structure is determining how to coordinate the interplay between business functions and their activities to efficiently realize the larger goals of the organization.
Organizations with a product or service mix that varies by customer may need to consider a divisional structure with business units that focus on producing specific products/services by customer or market segments. When an organization has a very narrow product or service offering a functional structure that focuses on operational efficiency and economies of scale may be the better design choice.
For some organizations, delivery of products and post sale support requires having a physical presence within a certain geographical proximity to customers. In other cases, it’s important that an organization is viewed as being part of the local community. This may necessitate the need for a divisional structure that is based on geography rather than products or customers.
It could be a case of pace and complexity.
Additionally, when considering how to organize, leadership teams should assess the pace and complexity of its operating environment and the company’s core competencies. Operating environments that are fluid and require reacting to changes quickly require a nimble structure that deemphasizes hierarchy. A more stable and predictable operating environment typically requires a structure that fosters tighter controls over decision-making authority and monitoring workflow. When there is a lack of deep functional expertise in an organization, the use of formal networks to have critical functions performed on an outsourced basis is often incorporated into a design choice.
Restructuring may not be the answer.
Most organization designs are a hybrid of more than one structure. It’s important to keep in mind that no structure is perfect and each has its advantages and disadvantages. Before re-structuring, we encourage our clients to consider other alternatives and avoid the temptation to move around the “boxes” on an organization chart rather than addressing the root causes of their organization’s issues. What may have the greatest impact, is not re-structuring, but focusing on clarifying roles, improving communication, current processes and workflow.
Pinnacle has established and proven processes that will assist you and your team to determine what organizational structure may be most effective in aligning your organization with your vision and strategy. To learn more, contact a Pinnacle representative anytime at 513-578-6500.