If you were designing an organization today, how would you do it?

Interesting video update from Gartner’s David McCoy on the key challenges for Business Process Management. He indicates that he thinks the greatest challenge to business process improvement is the organizational change aspect and states that political resistance within organizations can make or break a BPM effort.

Anyway this got me thinking. If you were designing an organization from scratch today how would you do it? Would you use the standard vertical department structure of Finance, Sales, HR, Marketing, R&D that we see in the vast majority of organizations today or would you build the organization horizontally along individual product or service lines?

In organizations many processes are horizontal rather than vertical. Processes, for example warranty repair, cut across multiple departments rather than residing within a single department. Process improvement activities thus require buy in from multiple parts of the organisation creating opportunities for conflict and variability in levels of engagement with the project. The vertical organization structure thus inhibits adoption of BPM outside departmental silos.

In an organisation constructed along product or service lines many of the issues of conflict and commitment are reduced. Single decision making authority for the product or service reduces the opportunity for conflict during process improvement. Ownership of the process improvement activity with a single product or service line eliminates the issue of variability in commitment between departments. Finally project risk is reduced as an organisational firebreak exists between the project and the remainder of the organization’s product or service lines.

2 thoughts on “If you were designing an organization today, how would you do it?

  1. If you organized that way, and like most companies you had multiple services/products, you would have multiple groups of HR, Legal, Finance, IT – each of which are just larger containers having groups within them.

    So, you would have multiple groups of IT engineers, actually, multiple IT Network engineers, multiple IT storage engineers….the functions would not have consistency because they would each report to a “service/product” manager and not a “functional” manager.

    I believe organizing first by function is the best way to leverage ‘economy of scale’ as well as drive in ‘functional best practice.’ You then should (must?) have a “Service/Product Manager” and perhaps a small team responsible for the service “end to end” across the functions. But they really only “buy” service from each of the Functional areas – they do not “dictate” how IT Storage should be handled because they think it is a good idea (meanwhile, it may be a “bad” idea for the other 39 services/products).

    Process improvement needs to cut both vertically (functionally) as well as horizontally (service/product). You need people responsible – and accountable! – for both.

    Service Managers can work together with Functional Managers to improve the horizontal processes and the Service Managers must understand sometimes their particular service may not run at peak efficiency due to some balancing the Functional Manager must do to provide the best service she/he can for all 40 services – not just the one.

    All this should be transparent and those decisions should be clearly understood by all – not just the staff but to executive leadership. If Execs decide that they would rather pander to one or two “key” services at the expense of the other 30+ then they can do that if they know what the upside/downside of that decision is (maybe profit margin, or growth…or some other ‘good’ reason to do this).

    Too often it seems these decisions are not made with the full understanding of either the service implications or functional implications.

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