Sequence as a Strategic Differentiator in Organization Design
Ken Thompson | March 27, 2019
In a recent blog, my colleague Reed Deshler pointed out that organization design is more than structure. Looked at as a system of choices, organization design is a means towards making choices that best enable an organization’s desired results. Approaching organization design in this way can sometimes lead us to consider innovative or unusual solutions when it does come time to nail down an organization’s structure.
In the macro design stage of organization design work, there always comes a point where we ask ourselves, “How can we best departmentalize the structure of this organization to capitalize on its critical capabilities, strategies, and core competencies?” Typically, in any given organization, a blend of rationales will be used. Companies will use different ones at different levels to emphasize or de-emphasize different capabilities, and they each have their risks and benefits.
Many companies are primarily designed around functions—HR, finance, IT, etc. Some larger organizations find it helpful to departmentalize by geography—for instance, North America, Europe, Asia Pacific. Other common approaches include structuring an organization around product, customer, process, or channel. However, an additional solution that can be highly beneficial in certain situations is organization rationale by sequence.
What Does it Mean to Structure an Organization Around Sequence?
In this particular organization rationale, each segment of a company or division takes responsibility for a particular period of time. For example, you might have a segment that handles everything from now through the next 30, 60, or 90 days. So, everything that’s ongoing and current within that company will be managed by this particular part of the organization.
Another segment may focus exclusively on managing everything that will be happening from, say, 90 days to a year out. And yet another part of the organization may focus on the long term, from one to perhaps 3-5 years out.
Typically, the farther out the time frame, the smaller the team. For instance, in a fictional company a 0-90 day team might make up the lion’s share—say, 75%—of the portion of the organization that is structured in this way. Their 90-days-to-one-year team may comprise another small to medium part of it, perhaps 15-20%. And their long term strategy team handling things 5 years or more out might be just a small handful of people.
Benefits of a Time-Based Organization Rationale
Organizing around sequence can be particularly useful in customer service/customer focus markets, dynamic markets, and highly competitive environments. Potential benefits of using this approach include:
- Quick response times
- Crisis reaction capability
- Facilitates time-based strategy
- Reduced distractions from priorities of work
- Enhances a long-term strategy building capability
- Fast adaptation to customer/market needs
Clearly separating an organization on the basis of time thus enables a constant and consistent strategic focus. Often in organizations when some kind of crisis or contingency arises and people gather teams and groups in response, managing priorities of work can be very distracting. Segmenting into periods of time makes it a lot easier to manage those priorities of work because those types of teams are already built inside of those windows of time.
Allowing people to concentrate inside specific windows of time allows them to truly focus on the objectives of that particular time frame. It allows the people on the short-term team to focus on crises and putting out fires—for example, making sure every customer’s immediate needs are met in a timely and efficient manner. A person on that team never has to think about strategy, long term plans and goals, missing the boat, or what the competition is doing. This allows for a much more nimble, customer- or market-focused response.
Furthermore, under this model, the longer-term actions are not compromised at the behest of a short-term crisis. The longer-term teams are able to focus exclusively on thinking about long term issues without having the distraction of getting pulled off assignments to deal with the daily crises.
Risks of Structuring an Organization Around Sequence
Potential risks associated with a sequence-based organization rationale include:
- Challenging hand-offs – Sequence-based departmentalization can result in reduced product focus. As the product goes through its life cycle and moves through time periods, handing items off from one segment to another can be problematic.
- Organizational short-sightedness – Categorizing priorities of work by sequence can sometimes result in lack of long-term focus when the larger part of the team is focused on short term operations. A customer service agent putting out a fire may be choosing the best answer for the immediate need, but it may not be the best long-term answer for the customer or the company.
- Higher cost – Organizing by sequence is not the most efficient way to run an organization. However, it can provide a strong competitive edge by enabling differentiation in certain areas.
- Routine functions tend to get overlooked – Supporting functions must be very well integrated within the organization to support this kind of process. If financial operations, the measurement and integration of data, HR, and all the other supporting functions of an organization are not well established, a sequence-based rationale is unlikely to succeed.
While not suitable for every company, a sequence-based organization design structure can be a strong differentiator in certain situations. When well-executed, with structures and processes in place to help mitigate the inherent risks of this approach, organizing around sequence can result in significant competitive advantage for some organizations.