In organization design, we often spend a lot of time designing the formal structure: box-and-line organization charts, chains of command, and so forth. This is certainly very important; a large organization would quickly dissolve into chaos without having some kind of formal structure in place. It is to an organization like the skeletal structure is to the body. However, organizations also have something akin to “connective tissue,” which is less often acknowledged or discussed when designing organizations, but is at least as important as formal structure.
This connective tissue is something we refer to as linkages, and they have a significant impact on business model implementation. Linkages reflect how an organization works outside of the formal structure. For instance, Bob might formally report to Jane, but often he will end up working with a peer or colleague to accomplish things that need to get done. One could argue that the relationship between Bob and his co-workers is at least as influential to the way the organization functions and delivers value to its customers as the formal hierarchy, if not more.
Planning Your Company’s Informal Structure
Formal structures tend to take precedence in people’s minds because they are so clearly spelled out. The tendency is to assume that everything else will simply fall into place around them once defined. However, this is often not the case. In a dynamic business environment it’s not always easy or obvious how to get things done.
A key step in the organization design process is to consider how you’re going to facilitate linkages across the organization to ensure that the most critical things will indeed get done in ways that deliver value. This should be done in a conscious or planned way to address and manage the informal structure so that it works to your organization’s advantage rather than hindering its progress.
How can you facilitate work in an organic fashion across an organization? A good place to start is to ask the following three questions:
- What’s working? What does the formal structure easily enable us to do that’s important to the customer?
- What’s not working? And once this is identified, can we determine the right people or parties to work together to deliver value to the customer?
- How do we enable productive relationships to occur across the formal boundaries of the organization in a way that’s not chaotic or disorganized but is planned, repeatable, and coordinated?
There are many different types of linkages. Some of these include:
- Shared goals and objectives
- Projects teams
- Liaison roles
- Matrix reporting (dual reporting)
- And many more
We at AlignOrg Solutions are strong proponents of taking the time to think through and thoughtfully design an organization’s cross boundary linkages, and we have tools to help companies do that.
Leveraging Linkages for Successful Business Model Implementation
Linkages are especially important to consider when an organization undergoes a significant restructure. We worked with a client who had historically been aligned according to function: HR, marketing, finance, etc. As their market changed and became more competitive and complex, they realized their organization needed to change. When they redesigned their company, they ended up organizing around customer segments: one segment dealt with retail customers, one with do-it-yourself customers, and so forth.
This worked very well for them in most regards. However, they ran into problems when it came to pricing. Because they no longer had a company-wide marketing function, each customer segment started taking it upon themselves to set prices. One segment was highly motivated to price at a discounted rate. Another was selling to customers who were very discerning and concerned about quality, and wanted to charge a higher price for the same product. This created conflict that impacted customer experience and performance.
They could have changed the formal structure again to address this problem, but this would have been disruptive and would have destroyed the positive effects of the new structure they had just implemented. Instead, they started to ask what linkage could be put in place to help the customer segments collaborate on pricing decisions. In the end, they created a pricing committee to set parameters their customer segment teams could follow when they were working on pricing decisions. This resulted in successful resolution of the problem.
How Linkages Can Foster a Nimble Approach
Many younger, smaller entrepreneurial companies get a lot of press and kudos because they’re nimble. They get touted as being a great place to work, where it is easy to get things done and people are highly committed. On the flip side, people complain about the bureaucracy of big companies, and how hard it is to get things done. To a large extent, the difference boils down to linkages.
In a smaller, less complex organization, linkages are easier to facilitate, and it often happens organically. In a big company with huge departments and multinational offices, people often don’t know who in the company has specific expertise on various things or where to go for information or decisions. Linkages thus become a very important consideration in the organization design. By taking the time to plan the linkages, you can avoid wasting a lot of resources trying to adjust your formal structure to deal with what could easily be addressed in your company’s informal structure.