While we are very familiar with organizations structures, very rarely do we understand the true power of a structure.
Organization structures are primarily designed for “control.” With an organization structure it is easy to allocate accountabilities and responsibilities through the creation of jobs. The organization chart is the visual representation of the organization structure However a keen understanding of structure can transform it from a control tool to an enabling too.
The real power of organizational structure is in driving:
- Business efficiency
- Process integrity
- Cost & resource optimization
Organizations are made up of 5 unique value adding components, each in support of the whole. An understanding and leveraging these 5 components can easily translate into a huge gains in performance:
The 5 Unique Value Adding Components of a Structure:
- Operating Core
- Strategic Apex
- Middle Line
Operating Core: The operating core is where the business meets the customer. This is where the real exchange of service for money happens. Sitting in the operating core are all the jobs that enable this transaction to occur or to support the jobs that enable this transaction to occur. (sales person, cashier, stock keeper, sales manger, …)
Strategic Apex: This is the very small part of the organization that is thinking of the future. Where will we have to be in the next 3 years and what will that look like. Typically a portion of the CEO’s role is in the strategic apex.
Middle Line: The middle line is what connects the strategic apex to the operating core, bringing the future into the present. Here are jobs are focusses on driving continuos change into the operating core.
Support: This what I call the necessary evil, jobs that are needed to support the functioning of the organization but dont give rise to competitive advantage. For example if you run a large factory you may need an in house clinic, cafeteria, gymnasium, to minimize work downtime, but you don’t need to be running the facilities.
Technostructure: This is the exact opposite of support, here all the jobs that are focused on creating and sustaining competitive advantage are located. These are the jobs that continuously improve the way work gets done in the operating core.
Leveraging your structure:
Here are some simple things you can do to analyze your structure:
- Try to slot the existing roles in your organization into the 5 categories
- Look at the number of roles in each category and compare to the other. (very common is a high number of support roles and insufficient technostructure roles.)
- Add up all the salaries in each category and it will show you how your money is being used.
When doing the above, don’t be guided by job titles. Instead you need to see what role actually does.
Organizations often find themselves in either one of these 2 situation:
If you find your organization to be heavy in support you probably have too much bureaucracy going on which can be bad.
If you find your organization to be light in technostructure you probably have too little innovation going on which can be bad.
Understanding organization design is a critical managerial competency. A poor understanding gives rise to poor utilization of resources and a strong understanding gives rise to high productivity.
As part of our Business Performance Coaching Program we do offer a 2.5 day Developing an Accountable and Effective Organization module to help leaders and managers leverage the power of their organizations.