Emerging Trends in Organizational Structure

Emerging Trends in Organizational Structure Most of the organizational structures focus
on the vertical organization, that is, who reports to whom, who has responsibility and
authority for what parts of the organization, and so on. Such vertical integration is sometimes necessary,
but may be a hindrance in rapidly changing environments. A detailed organizational chart of a large
corporation structured on the traditional model would show many layers of managers,
decision-making flows vertically up and down the layers, but mostly downward. In general terms, this is an issue of interdependence. In any organization, the different people
and functions do not operate completely independently. To a greater or lesser degree, all parts of
the organization need each other. Important developments in organizational design
in the last few decades of the twentieth century and the early part of the twenty-first century
have been attempts to understand the nature of interdependence and improve the functioning
of organizations in respect to this factor. One approach is to flatten the organization,
to develop the horizontal connections and de-emphasize vertical reporting relationships. At times, this involves simply eliminating
layers of middle management. For example, some Japanese companies, even
very large manufacturing firms, have only four levels of management: top management,
plant management, department management, and section management. Some US companies also have drastically reduced
the number of managers as part of a downsizing strategy; not just to reduce salary expense,
but also to streamline the organization in order to improve communication and decision-making. In a virtual sense, technology is another
means of flattening the organization. The use of computer networks and software
designed to facilitate group work within an organization can speed communications and
decision-making. Even more effective is the use of intranets
to make company information readily accessible throughout the organization. The rapid rise of such technology has made
virtual organizations and boundaryless organizations possible, where managers, technicians, suppliers,
distributors, and customers connect digitally rather than physically. A different perspective on the issue of interdependence
can be seen by comparing the organic model of organization with the mechanistic model. The traditional, mechanistic structure is
characterized as highly complex because of its emphasis on job specialization, highly
formalized emphasis on definite procedures and protocols, and centralized authority and
accountability. Yet, despite the advantages of coordination
that these structures present, they may hinder tasks that are interdependent. In contrast, the organic model of organization
is relatively simple because it de-emphasizes job specialization, is relatively informal,
and decentralizes authority. Decision-making and goal-setting processes
are shared at all levels, and communication ideally flows more freely throughout the organization. Jacob Morgan, a best-selling author, speaker,
and futurist, argued that, throughout the history of business, employees had to adapt
to managers and managers had to adapt to organizations. In the future, this need to be reversed with
managers and organizations adapting to employees. This means that in order to succeed and thrive,
organizations must rethink and challenge everything they know about work. The demographics of employees are changing
and so are employee expectations, values, attitudes, and styles of working. Conventional management models must be replaced
with leadership approaches adapted to the future employee. Organizations must also rethink their traditional
structure, how they empower employees, and what they need to do to remain competitive
in a rapidly changing world. In his book titled “The Future of Work:
Attract New Talent, Build Better Leaders, and Create a Competitive Organization”,
he suggested five types of organizational structures of the modern days. The first use of the English word “hierarchy”
cited by the Oxford English Dictionary was in 1880. This model was quickly adopted by the military
as a way to show a chain of command and of course we have all seen and experienced this
within our organizations, and most still do). This type of a model makes sense for linear
work where no brain power is required and where the people who work there are treated
like expendable cogs. However, as the war for talent continues to
become more fierce, organizations around the world are quickly trying to figure out alternatives
to the hierarchy. There are many challenges with this model. Communication typically flows from the top
to the bottom which means innovation stagnates, engagement suffers, and collaboration is virtually
non-existent. This type of environment is riddled with bureaucracy
and is extremely sluggish. This is why the hierarchy is perhaps the biggest
vulnerability for any organization still employing it. It opens up the doors for competitors and
new incumbents to quickly take over. There is also no focus on the employee experience
in this type of a structure and as organizations around the world are exploring alternative
organizational models, those still stuck with the hierarchy are going to have a hard time
trying to attract and retain top talent. The hierarchy has permeated virtually every
company around the world regardless of size, industry, or location. The greatest strength of the hierarchy used
to be that it was so reliable at maintain the status quo, which was exactly what companies
wanted decades ago. However, what was once it’s strength is
now it’s greatest weakness. The hierarchy is a very resilient management
structure that has been so embedded in how we work that most organizations around the
world are having a tedious time getting rid of it. Unlike the traditional hierarchy which typically
sees one way communication and everyone at the top with all the information and power;
a “flatter” structure seeks to open up the lines of communication and collaboration
while removing layers within the organization. As you can see, there are fewer layers and
that arrows point both ways. For larger organizations this is the most
practical, scalable, and logical approach to deploy across an entire company. This is the model that most large and many
mid-size organizations around the world are moving towards. It’s true, some form of hierarchy still
does exist within this model but that isn’t necessarily a bad thing in this case. In flatter companies, there is still a strong
focus on communication and collaboration, improving the employee experience, and challenging
the status quo around traditional management models. But instead of completely reinventing the
entire company and introducing a radical new structure and approach to work, it achieves
similar results in far shorter term and with much less effort and resource allocation. It’s important to point that this type of
model cannot exist without a few crucial things. The first is a robust set of technologies
that act as the central nervous system of the company. These technologies help make sure that employees
can collaborate and access each other and information anywhere, anytime, and on any
device. The second thing this model requires is an
understanding by executives and managers that employees don’t need to work at your company,
they should want to work there and as a result everything should be designed around that
principle. The third thing that is required is an understanding
that managers exist to support the employees and not vice versa. This also means that senior leaders focus
on pushing the power of authority down to others instead of pushing down information
and communication messages. The fourth and final thing about this model
is that the organization must accept that the way we work is changing and must therefore
be comfortable with things like flexible work arrangements, getting rid of annual employee
reviews, and challenging other outdated ways of working. Companies like Cisco, Whirlpool, Pandora , and
many others are actively implementing this approach. At Cisco for example employees have complete
freedom and flexibility to work when, where, and how they want to work. At Whirlpool, they got rid of traditional
job titles and instead created four types of leadership roles that every single employee
fits in. Whirlpool also has a robust innovation program
that lets any employee contribute. Pandora has a whole team devoted to focusing
on the employee experience which takes into account the values of individuals, the ways
people work, and the physical environment that people actually work in. Unlike any other corporate structure that
exists, flat companies are exactly that. flat. Meaning there are usually no job titles, seniority,
managers, or executives. Everyone is seen as equal. Flat organizations are also often times called
or referred to as self-managed organizations. The most famous example of this comes from
Valve, the gaming company responsible for classics such as Half-Life, Counter-Strike,
Portal, and many others. At Valve, there are no job titles and nobody
tells you what to work on. Instead, all the employees at Valve can see
what projects are being worked on and can join whichever project they want. If an employee wants to start their own project
then they are responsible for securing funding and building their team. For some, this sounds like a dream. For others, their worst nightmare. There’s quite a lot that can be said about
this type of structure. While it does have benefits and is interesting
to consider, it is unclear whether it is practical or scalable for larger organizations. Smaller and some medium size companies might
be able to operate in this type of environment, but when you get to organizations with thousands
of employees, then it becomes challenging. Most of the companies that are known as being
“flat” started that way and then grew. Flat organizations like every other type of
structure, also have their own challenges. For example, informal hierarchies automatically
get created based on seniority. People who are at the company longer just
tend to be viewed as being more senior. The lack of structure can also make accountability
and reliability a bit of an issue as well. Finally, the company tends to develop cliques
where groups of people tend to support and work with each other but oftentimes prefer
to stay to themselves. This of course can cause challenges for communication
and collaboration. The big challenge with this type of an approach
is that if a larger organization decided to implement it, the process would take many
years and would require enormous amounts of capital and resources to execute. Imagine going into an organization with 60,000
employees around the world that is hierarchical in nature and quite literally doing everything
in the exact opposite way. So what type of a company can a flat structure
be suitable for? Small organizations, some medium size companies,
or companies that are created on the idea of being flat and then scale this approach
as the company grows. Perhaps, in the next few decades the idea
of having a flat company might catch on and become more mainstream, especially as we see
the freelancers economy start to grow, but at least for the foreseeable future, the idea
of having a completely flat company is challenging. Somewhere in between hierarchies and flat
organizations lie flatarchies. These types of companies are a little bit
of both structures. They can be more hierarchical and then have
ad-hoc teams for flat structures or they can have flat structures and form ad-hoc teams
that are more structured in nature. Organizations with this type of structure
are very dynamic in nature and can be thought of a bit more like an amoeba without a constant
structure. The most common type of example with this
structure is a company with an internal incubator or innovation program. In this type of environment, the company operates
within an existing structure but usually allows employees to suggest and then run with new
ideas. Ideas that company allows employees to move
forward with usually result in separate teams being formed. Lockheed Martin, the aerospace company, was
famous for launching their skunkworks project which was responsible for the design of the
SR71 spy plane. Google, 3M, Adobe, Linkedin, and many other
companies all have internal innovation incubators where employees can try to get their ideas
funded and then developed into new products or services. However, to do this, new teams must be formed
which oftentimes must operate with far more autonomy, more resources, and much less bureaucracy. This type of a structure can work within any
type of company, large or small. However, a flatarchy is to be thought of as
a more temporary structure which creates isolated pockets of new structures when needed, such
as in the case of developing a new product or service. This is starting to become more common as
organizations around the world invest more time and money into creating innovation programs
that look beyond a set R&D department. This model is quite powerful yet also more
disruptive than the other structures explored. The main benefit here is the focus on innovation
which is quite a strong competitive advantage in the future of work. Holacracy started gaining lots of traction
after Zappos announced that they would be shifting to this new model of working. The media has picked up on this as a “boss-less”
organization. There are actually quite a few organizations
that have been experimenting with this model but the most known are of course Zappos and
Medium. The basic goal with this structure is to allow
for distributed decision making while giving everyone the opportunity to work on what they
do best. There is still some form of structure and
hierarchy but it’s not based on people as much as it based on circles or what most people
would think of as departments. Information is openly accessible and issues
are processed within the organization during special and ongoing meetings. Although the idea sound of maximizing individual
talents sounds attractive, there are always ways to achieve some of the desired effects
without having to go through such a radical change. It’s sort of like trying to improve the
way your car runs by taking out the entire engine and rebuilding it instead of working
on some of the core areas that might really drive performance. Sometimes ripping out the engine and starting
from scratch isn’t always as an option, especially as the car is moving, like most
organizations always are. For example, decentralized decision making
is something that doesn’t necessarily require a whole new organizational structure to thrive
in. It can just as easily happen in a “flatter
structure” that can leverage some of its existing infrastructure. It’s not hard to imagine why applying holacracy
to an organization of say 10,000 or 50,000 employees around the world might be a bit
tricky. However, holacracy can be more viable for
smaller or medium size organizations or perhaps larger organizations that have started off
with holacracy as their base operating model. Nevertheless, it’s very hard for to imagine
a large organization with tens or hundreds of thousands of employees around the world
implementing something like this. Holacracy is still very much an emerging structure
with a lot of inserting concepts but we still need more case studies and examples over a
longer period of time. In summary, the demographics of employees
are changing and so are employee expectations, values, attitudes, and styles of working. Conventional management models must be replaced
with leadership approaches adapted to the future employee. Organizations must also rethink their traditional
structure, how they empower employees, and what they need to do to remain competitive
in a rapidly changing world. It is important to note that this post isn’t
designed to say which structure is the most superior. Instead it’s meant to give you perspective
around what is available and what other organizations are implementing. It doesn’t have to be an all or nothing
approach. Your company may decide to take bits and pieces
of all the different types of structures and create something that is unique to you.

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