Dare to make a choice for your organizational structure! (no matrix, please)

There are many organizational shapes, forms and sizes. Some CEO’s spent a lot of time with their management teams thinking through how to organize their company. They painstakingly take into account what products or services they sell, what their production processes are, what their business model is, etc. They choose an organizational model that theoretically fits best. Other CEO’s go with their gut feel to design their organization. Some let their organization grow organically to see what works best at any given time.

Does it really matter what you choose as your type and form of organization? Yes, of course. Is there a perfect model? No.

What most don’t realize, is that the type and form of organization you choose, determines the type of problems the organization has. Did you choose your company to be run per country or region? Then people go for the optimal result in their country or region, and there is little cooperation between the same disciplines across countries or regions. Do you choose to run your company per discipline worldwide? Then you strengthen your disciplines and potentially build a strong brand name worldwide, at the same time introducing a lot of travel and little transparency in cost and profit on country level.

The point is, there is no perfect organizational model. You WILL have to accept the downsides your choice has. Embrace them! Don’t confuse the organization by trying to have the best of both worlds.

Be consistent, be clear.

You choose a certain type of organization, because it fits your organization best. And yes, that has downsides and negative consequences. However, they are unavoidable in order to have the benefits of the model. In psychology, it is well-known that people rather forego on a potential win, then accept a loss. So as soon as people notice their organizational choice has a downside, they devise ways to limit the downside to a minimum. But in that case, you are weakening the potential win you want your organizational structure to provide. When you decide to introduce any kind of matrix organization, you inevitably forego on the win, in order to minimize the loss.

Please, don’t think you can have the best of both worlds. As soon as you start to compromise and introduce patches to decrease the downsides of your choice, you confuse the organization, increase bureaucracy, increase cost and give conflicting messages to your employees on what the priorities are. Power fights break out because both regions and disciplines start to increase their influence where possible, claiming responsibility of the grey areas you introduced. Time is spent on coordination, on determining who gets the credit for results, on finding out who informally is the decision maker (instead of the formal appointed boss), on having to talk to several bosses before a decision can be taken. With a matrix, you introduce time-consuming and resource-wasting politics and complexity into your organization.

Choose what organizational structure fits best, whether it is regional or discipline driven. Embrace the imperfections that come with it, and don’t try to patch them by devising a compromise matrix structure. Those imperfections are proof you dare to choose firmly and deliberately.

4 easy-to-spot tell-tale signs you can save on headquarter costs (4)

In the previous post, the oversized headquarters as one of the biggest organizational wastes was addressed. Oversized corporate departments are a black hole attracting valuable resources, scarce cash-flow and lots of energy.

I’d like to urge you again to consult your local managers and local HR. They can point to the waste in the organization in fine detail. But as I said, these good people are kept away from you by your army. Discuss the four topics in these posts directly with your local management. If they experience (one of) these, you know where to improve your organizational efficiency.

The first was complexity in the hierarchy of the organization. Do not sustain organizational hierarchies that ask for more than two reporting lines. Simplify them, and put responsibility back where it belongs. You probably can cut a few expensive positions along the way.

The second was about corporate visits. Check with local management how much time they have to spent on corporate visits, and what they do to prepare (required by the visitor as well as on their own initiative). Reduce the visits as well as the requirements for preparation to a minimum.

The third post addressed additional data requests from corporate. Check with your local management what kind of data requests they receive, whether they serve any real purpose, and if so, whether the time spent on it (both locally and in corporate) justifies the benefits.

In this post I’ll address the fourth and last topic – specialized corporate departments. Check your full organizational chart, and look for the corporate departments. You know you have considerable waste in your organization when:

the org chart for corporate resembles a labyrinth.

You’ll be surprised how many organizations have corporate departments serving the same purpose. Especially if they are working independently from each other, they tend to triple the complexity around that topic. For example, some organizations have two or more internal audit structures. They will waste time on duplicating work, competing with their twin department (such as spending time on proving the other one wrong) and pulling at the same resources.

You will also often see specialized departments taken out of the department they originally belonged to. For example training and development sometimes is taken out of HR, and made into a separate department with its own VP and other high level managers. Again, time is wasted on duplicating work, competing with each other, and fighting for the same resources.

Another interesting approach is checking the number of pages of policies in the organization. In case the organization has more than 250+ pages of policies, you’ll find that many are unnecessary detailed intricate solutions for imaginary problems you never heard of.

These three problems almost always stem from only two root causes:

  1. internal conflicts between high level managers were not adequately solved, but patched by letting someone satisfy his or her own ego by establishing a separate department.
  2. a (part of a) department didn’t deliver, so an additional department was established to achieve the desired result.

In both cases, the underlying problem wasn’t addressed. Often out of good intentions: people didn’t want to hurt an underperformer too much, or didn’t want to blame someone specifically. However, these patches lead to inefficiency and corporate waste, and are therefore unnecessary expensive.

Solution

  • check which corporate departments serve the same purpose, and reduce them
  • check which corporate departments are responsible for a small part of what another department should be responsible for, and combine them
  • check which policies do not make sense or are over-complicated, and start cutting overhead in the department end-responsible for these policies
  • in the future, make sure underperformance or internal conflicts are properly solved, and do NOT result in adding a new corporate department

At the end of this series, let me emphasize once more: your local managers and local HR can point to the waste in the organization in fine detail. You won’t be able to get this information from your corporate army, who usually won’t do anything to jeopardize their own position. With these four posts, you know where to improve your organizational efficiency.

4 easy-to-spot tell-tale signs you can save on headquarter costs (1)

I’ll begin with a warning. This post (and the next three follow-up posts) is only for the brave. If, as a manager, you have a strong tendency to overcontrol, micro-manage or have a deep need to know everything that is going on, this won’t be useful for you.

One of the biggest organizational wastes is to have an oversized headquarters. This black hole vacuums away valuable resources, scarce cash-flow and lots of energy. Unfortunately, most big international organizations seem to default to eternally growing headquarters. Top management likes the feeling of having a whole army at their disposal, an army they need close by.

But realize: this army, and the false sense of security they provide you, costs an arm and a leg. Not just in direct costs. The indirect costs of the inefficiency created by corporate is huge! As your army likes their comfortable seat, they will completely take over your interaction with the local offices. And there starts the problem, as you will not be made aware on the immense efforts needed to sustain the insatiable appetite of your army. Even worse, paradoxically, your corporate army (who you designed to be able to control the executive parts better) ensures you are out of touch with that crucial execution part of your organization. But how to know what you can cut, and what not?

It’s actually not that difficult! Consult your local managers and local HR. They can point to the waste in the organization in fine detail. Unfortunately, these good people are kept away from you by your army.

In this and the next three posts, you’ll find tips where to cut overhead. Discuss directly with your local management whether they experience these. If they do, you know where to improve your organizational efficiency.

The first topic is complexity in the hierarchy of the organization. You know you have considerable waste in your organization when:

employees in your organization have more than 2 official reporting lines.

Yes, there can be very good reasons for people to have two reporting lines (instead of the usual one). For example when a content specialist works in a business unit. Like HR. A local HR manager often reports to both the local business manager, as well as a regional (or corporate) HR manager. The local HR manager needs to support the business, while at the same time s/he needs to follow the strategy the organization has for HR needs. Fine.

But three, or even more, official reporting lines? I have never seen a situation where this makes sense. Coming back to the example of HR: sure, an HR manager can serve several business managers. But they shouldn’t all be official reporting lines. Make the reporting line to either a business manager higher up in the organization, or just to the HR manager. The same in a matrix organization. A local manager can support several business line owners, but again, that’s not the same as an official reporting line.

What’s the problem, you might ask, with more than two reporting lines? Well, managers responsible for different area’s in an organization, consequently have different priorities. Sometimes, inevitably, even conflicting priorities. Now, with several reporting lines, in reality, where lies the responsibility of juggling these conflicting priorities?

Right, with the employee who has these different bosses to serve.

But that responsibility does not belong there. Primarily, the managers who encounter a conflicting priority should resolve it themselves. If absolutely needed, they need to escalate to their bosses. But NEVER should they pass the buck to someone who is not in the position to resolve these conflicts. Someone who neither has the responsibilities, nor the means to do so. That employee will waste at least a third of her time on resolving the priority conflicts, apart from the time her line managers waste in turf wars.

Solution

Check your organization for employees with more than two reporting lines. If you find these, simplify the organizational structure. Employees can go back to the work they were actually hired for. And you can probably cut a few management positions, saving even more money.

For other savings, keep your eyes peeled for the next three posts!