Organizational Design Issuesorganisation design

During our first conversation, Henry, the CEO of a technology firm, expressed frustration with his company's inability to focus on and execute priorities. "At the start of each quarter, we agree on priorities," he explained, "but when it comes time to review them, I'm told that urgent crises have prevented us from making progress." We never seem to get anything done."

When I asked Henry what solutions he'd tried to refocus his team, he rattled off a laundry list of activities, including weekly check-ins, protocols for limiting excessive email, and online dashboards that show progress — or lack thereof — against key initiatives. Henry defined their problem as one of accountability (frequent progress meetings and public dashboards) and capacity, as revealed by these solutions (attempts to curtail email traffic).



My diagnosis, however, revealed something different.



After some time at the company, I realised that Henry's issues were caused by a poor governance system. The "urgent crises" impeding his team's progress were caused by a lack of effective coordination between two critical parts of his business. As a result, there was no forum for leaders to resolve difficult tradeoffs in a productive manner.



Henry had made an incorrect diagnosis. However, he is not the first capable leader to make this error. After 35 years of consulting, I've learned how simple it is, owing to recurring performance issues that are deeper than they appear. More often than not, they are manifestations of a larger issue rooted in organisational design. When leaders misdiagnose symptoms, they waste a lot of time looking for quick fixes that ultimately fail.



Competing priorities, unwanted turnover, inaccessible bosses, and cross-functional rivalry are four of the most common irritants I've seen arise as a result of ineffective organisational design. If you are experiencing one or more of these issues, consider whether the design challenges I discuss below are the root cause. This may assist you in identifying and resolving the real issue.



Conflicting priorities are a symptom.

Poor governance is a common design challenge.



Henry's company was structured as a matrix organisation, which meant that most employees had two bosses. They were organised in this case around functions such as marketing, sales, and engineering. They were also split into three customer groups: enterprise platform users, small businesses, and individual software users. Each team was led by a functional head as well as a division VP in charge of the customer segment to which they were assigned.



The issue was that the division VPs reported to the COO, while the functional heads reported directly to Henry. When Henry's team met to set priorities within each function, the division VPs were not present to provide input on how their priorities fit into the overall plan of the company.



In short, Henry's firm was not intended to govern a matrix. His company was created to govern a functional organisation that was vertically structured. Decision-making systems must be set up in a complex organisation design, such as a matrix, to govern the natural conflicts that arise around priorities and resources. Otherwise, those unresolved conflicts will become dysfunctional, as Henry did. No simple solution would solve the problem of competing priorities until he addressed the underlying issue. He added the customer segment VPs to his leadership team after realising this and began empowering the three customer segment teams to manage operational tradeoffs by allowing them to set near-term priorities for both segments and functions.