When organizations are born, usually as startups or a new growth initiative, there is little structure, everyone is doing multiple roles to get the job done. Getting the job done means achieving the end outcome, the mission of the new organization.
Before long a decision is made to create more structure. Structure is a good thing, if aligned the right way. It is necessary for people at the coal face to know what is expected of them and provides guidance on a day to day basis. For managers it provides guidance to make decisions and help employees implement continuous improvement ideas.
However, almost always the new structure is based around internal functions such as;
· finance and
· human resources.
The three drivers of this thinking are;
· career development and
· the efficiency myth.
For example, if we are the Executive Vice President of Sales we want all the sales people reporting up to our role. That way we can make decisions such as, how many people we need, what are their targets and which sales compensation plan (which we over-complicate) to put in place. The logic is, “if we are responsible for global sales then we must have control over the resources”.
This thinking is repeated for all of the functions. What happens next is that the mission statements, job descriptions, objectives, measurements, reports are written based on the vertical internal function. Everyone in each vertical group is now focused on their internally aligned job responsibility.
The second reason is for career development and opportunity. By having people doing the same role in the same group we can provide development programs for those people and offer career paths either as senior individual contributors or in the management ranks.
The final reason is for efficiency. We believe that people doing the same function, but in different teams, leads to duplication of effort and underutilization of resources. If we pull all these people together into the one vertical team we can achieve the same amount of work with less people. Also, we can make sure everyone is doing their role the same way.
We now have control over what people are doing, offering them career development and opportunity with the most efficient operation in place. Everything is great, right?
Or maybe you agree with business author Patrick Lencioni who writes;
“Silos – and the turf wars they enable – devastate organizations. They waste resources, kill productivity, and jeopardize the achievement of goals.
But beyond that, they extract a considerable human toll too. They cause frustration, stress, and disillusionment by forcing employees to fight bloody, unwinnable battles with people who should be their teammates. There is perhaps no greater cause for professional anxiety and exasperation – not to mention turnover – than employees having to fight with people in their own organization. Understandably and inevitably, this bleeds over into personal lives, affecting family and friends in profound ways.”
As explained in “Why have an organization?” we need structure to make sure that 1 + 1 = 3. We at least want it to be greater than 2! However without understanding the need for Horizontal Flow and Vertical Leverage we end up with the world described by Patrick Lencioni.
All of this leads to the Fundamental Flaw in Organizations.
So instead of vertical silos like this;
We need horizontal flow alignment with a cell like structure that looks like this;
Which when viewed in a 3D perspective shows us the necessary vertical layers like this;