Organizational Design Issues Details

 Henry, the CEO of a technology company, lamented his team's inability to maintain focus on and carry out priorities during our initial conversation. We establish priorities at the start of each quarter, but when it comes time to review them, I'm informed that pressing crises have impeded our ability to move forward. We never accomplish anything.

When I questioned Henry about strategies he'd tried to refocus his team, he cited a long list of initiatives, including weekly check-ins, rules against excessive email, and online dashboards that show progress—or lack thereof—against important goals. Henry defined their issue as one of accountability (regular progress meetings and accessible dashboards), as evidenced by these solutions (attempts to curtail email traffic).



But my diagnosis showed that I was wrong.



After working there for a while, I understood that Henry's issues were really being caused by a bad governance system. The "urgent crises" impeding his team's progress were the result of ineffective communication between two crucial areas of his company. There was no platform for leaders to constructively negotiate difficult tradeoffs as a result.



Henry had incorrectly identified the issue. However, he is not the first capable leader to err in doing so. After 35 years of consulting, I've come to realise just how simple it is to do, largely due to the fact that persistent performance issues are more complex than they first appear to be. Most frequently, they are signs of a more serious issue with the way organisations are set up. However, when leaders misdiagnose symptoms, they waste a lot of time looking for superficial fixes that don't work.



Competing priorities, unwelcome turnover, inaccessible bosses, and cross-functional rivalry are four of the most frequent annoyances I've observed to develop as a result of ineffective organisational design. If you experience difficulty with any of these problems, think about whether the design issues I discuss below might be the root of your difficulties. By doing this, you might be able to identify and fix the true issue.



Conflicting priorities are a sign.

Common Design Obstacle: Ineffective governance



The matrix organisation design structure of Henry's business meant that most employees had two supervisors. They were set up according to the functions of marketing, sales, and engineering in this instance. Additionally, they were divided into three groups of clients: small businesses, individuals using software, and users of enterprise platforms. A functional head and a division vice president in charge of the team's designated customer segment led each team.



The issue was that Henry was the functional head while the division VPs reported to the COO. The division VPs were not present when Henry's team convened to establish priorities within each function so they could provide input on how those priorities fit into the company's overall strategy.



In other words, Henry's business was not intended to oversee a matrix. His business was created to oversee a functional organisation with a vertical structure. Decision-making systems must be established to handle the inevitable conflicts that arise over priorities and resources in a complex organisational structure like a matrix. Otherwise, as was the case with Henry, those unresolved conflicts will cause dysfunction. There was no quick fix to the problem of conflicting priorities until he addressed this deeper issue. After realising this, he expanded his leadership team to include the vice presidents of the customer segment and started giving the three customer segment teams more autonomy to manage operational tradeoffs by allowing them to establish short-term priorities for both segments and functions.