Organization Architecture: Structure Follows Strategy

Architect Louis Sullivan once famously observed that in architecture form follows function, meaning that the purpose of a building should be the starting point for its design. Sullivan’s more famous student, Frank Lloyd Wright, clarified the point even more by noting, “Form follows function—that has been misunderstood. Form and function should be one, joined in a spiritual union.”

So if an architect’s vision is to create an office building that is environmentally green (function), then their design will include heat-exchanging ventilation, passive solar, highly efficient windows, and other energy saving systems that combine form and function.

That understanding of how form and function are inextricably interconnected and symbiotic goes beyond architecture. You find it throughout nature—a cat’s paw and a human hand may have similar bones, but each is designed to function much differently—and you find it in optimally-run organizations too; the structure of any company is integral to fulfilling its strategy.

Build Your Strategy and the Structure Should Follow

Today’s organizations are extraordinarily complex entities comprised of processes, systems, practices, and metrics, which in turn are impacted by company culture, employee morale, and C-suite vision. Ensuring an organization achieves optimal results requires its leaders to align these various elements; misalignment in any one area can adversely affect results across the entire organization. At the center of alignment is strategy.

The design of an organization connects to our Rubik’s cube model where, by imagining your organization as a cube, with each side representing a particular system within your organization—work processes, structure and governance, information and metrics, people and rewards, continuous improvement, and culture. At the center of each system is strategy; it’s the anchor that guides and ties all of the other organizational elements together.

Diving a bit deeper, there’s a cascading effect of strategy that has to be considered. At the C-level, corporate strategy may be clear. For example: Develop the best relationships and deliver the most innovative financial products to our customers sounds great. But the problem is as you move down into the individual units or departments within the company, it can be less clear what exactly that means because those units are a couple of steps removed from the overall strategy. But that doesn’t excuse the head of a sub-unit (e.g., the finance department or the Latin American region) from needing to create a bridge from their function or region to the company strategy.

The solution is one of perspective. While the finance department might not directly advance that strategy, the finance leader needs to identify how to better enable others within the organization to deliver it. So instead of a laborious or complicated budgeting process that takes time and attention away from other processes focusing on customer delivery, streamline the process so it’s painless and seamless. For that green office building, it would be the simple move of eliminating paper forms and moving to an online-only system.

Even though this may seem obvious, we run into situations where leaders or practitioners inside companies tend to view strategy and structure as independent issues. They think: I just need to get the right structure and everything will work great, which leads to misalignment that creates system inefficiencies, lower employee engagement, and decreased overall productivity because they’ve missed a really important connect point: structure only works great when it’s connected to the company’s strategy.

If you develop a strong, well-designed strategy first, then structure your organization accordingly, you will have a productive, efficient, aligned company that benefits employees and clients alike.  

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