Organizational Design for the Real World

  |  November 21, 2017

Organizational Design

Precision in language and clarity of thought go hand in hand. A few months back I was speaking with a leader about some work we were planning for his organization, and he said, “what I really see when we’re done is some kind of hybrid design.” While this appears to be a perfectly reasonable statement, it reflects a certain popular rigidity of thought around organization design.

While leaders should be aware of different approaches to organizational design and how they are reflected within the organization itself, it’s important to keep in mind that theoretical structures rarely if ever align completely with practical reality.

A practical approach to organizational design

In the real world, every organization is a hybrid of some sort. Every organization I have ever seen or worked with has implemented a combination of several ways of organizing, to accommodate the complex and constantly changing physical, social, and economic environment in which it must exist and function.

For example, even if an organization is organized primarily geographically, it’s probably not the case that every single part of the organization is organized geographically. The customer-facing parts are likely to be organized that way; a geographically-organized company that does work in multiple countries will almost certainly put sales and marketing into those geographic areas, and perhaps manufacturing and/or product development because one geographic market is different from the next. But things change when you look at a function like finance.

Finance may or may not fall into that same geographic alignment. Accounting practices should maintain some level of consistency across regions and countries, thus begging the question, “should Finance, for example, be organized geographically too or should it be organized functionally?”  The answer to this question is what leads nearly every organization to be a hybrid of some type.

Why is it important to be aware of the necessity of hybrid organization design?

The reason this point is important is that every organization should be designed to drive a unique strategy. There are inherent problems with just having a singular design; to perfectly design an organization towards pursuing a strategy the tendency to try to rigidly organize by geography or by the customer or in any other way will inevitably limit options, constrain efforts to allocate resources strategically and ultimately hinder success. Therefore, every organization must employ hybrid design to some degree. There will always be some mix of organizing parts of the business by geography, or by customer, or by product, or by function, or in whatever way best suits the particular situation.

Because every organization design is or should be a hybrid design, to say “I want a hybrid design” simply states the obvious. The real question is: How do you want your hybrid design to look? What are the variables that need to come together in this hybrid design to best deliver on strategy?

Ask yourself:

  1. What aspects of strategy do you want your organization design to emphasize?
  2. What different types of organizational methods, (e.g. customer, geography, process, product, etc.) would best help reinforce your strategy?
  3. How can you effectively balance both effectiveness and efficiency in your organization?

The thoughtful answer to these three questions will inevitably be a hybrid design of some sort. Being conscious of this in advance will help avoid rigid thinking during the design process, and help you create an effective design for your organization.

Organizational Design