Optimizing Organizational Structure

Happy Friday,

In one sentence, here’s how to think about your organization's structure from first principles:

Organizational structure exists to serve the mission. Period. That's it.

Your mission is why your organization exists. It should be structured to maximally support the mission. Every element, its reporting lines, departments, roles, decision rights, layers, and committees, should be ruthlessly judged by this one question: Does this make us better at executing our mission?

In every organization, there's a group of people (probably at the bottom of your current org chart) who physically execute your organization's mission every day. They're the front line of your org. In consulting, it's the people who win, do, and communicate consulting work. So the optimal structure orients every other part of the organization to support those at the front line. That's worth reading twice and dwelling on for a moment because, logical as it sounds, most organizations don't do that fundamental thing, and they suffer in multiple ways as a consequence.

When the mission isn't explicit in the structure, people naturally optimize for their own or their group's self-interest. But when there's clarity and unity of purpose (i.e., everyone supports those physically executing the mission), there's simply no room for self-interest, silos, or turf wars. Everyone knows exactly why they were hired. End of story.

The mission defines every job, department, and employee in the organization. Even the unionized. The mission is why every job exists.

The Organization Chart: The Org Chart visually communicates all of the above, i.e., how the organization is aligned to support the mission. Chances are, your current org chart is really a reporting structure, i.e., a phone directory. Just call it that. A true org chart explicitly conveys how every person/department supports the people at the front line who are physically executing the organization's mission. With that made crystal clear, everyone can see their own role in the correct context, i.e., the context of the mission. Voila'!

Punchline: If you want to know how to tune and optimize your current structure, have a conversation with the people physically executing the mission. They'll tell you what they need and what they don't.

The best firms ruthlessly optimize their organization to support those people because that's why the org exists, and there is no organization without them. They treat their structure as a tool, not a tradition or a phone directory, and revisit it regularly, making adjustments to optimize support as the mission demands. Bluntly put, if your organization still portrays itself as a top-down pyramid with the CEO on top, God help you, you've got a plethora of other issues.

To the winners, onward!

Dave

Feedback and blowback are always welcome: dave@goodnewsfriday.com

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