Modern Structures

Organization design seeks to optimize work environments. Historically, this was equated with efficiency, which resulted in common hierarchical models. Hierarchies tend to be built around relatively narrow areas of expertise with the goal of maximizing economies of scale. This structure continues to offer a number of advantages and tends to excel when applied to conditions of market stability and high work repetition. However, in today's business environment, optimization includes ideas such as speed, flexibility, adaptability, and resiliency. These are not features of hierarchies. So, high-performing organizations must look beyond the models of the past.

Fortunately, there are a number of modern design options to help eliminate costly managerial layers, increase organization responsiveness, and improve work coordination and overall performance. These range from innovative job designs, the use of communities (practice or expertise) and knowledge-sharing solutions, to dynamic central cores (an update to traditional leadership suites), matrix structures, and shared service centers. One interesting trend is the development of network models of organization. Internal network structures are organizations comprised primarily of a flexible array of teams connected directly to a management core (another team). Teams are aligned and re-aligned based on the best resources to complete the required work. External network structures also are based on a connection of nodes, but they take the idea farther and alter the traditional boundary of the firm. Their defining characteristic is the transfer or outsourcing of one or more business functions to partner organizations, creating a network based on multiple external organizations. Extreme examples of this model are organizations consisting only of a central core and numerous external partners.

There are two important points regarding structures. First, they should not be the sole focus of organization design. All structures require the use of coordinating mechanism (vertical and horizontal) to ensure the overall model functions as intended. The types of mechanisms can vary widely, but their use is essential for success. Second, structures typically are not deployed in their pure form. Generally, as organization size increases, structural hybrids become common and even necessary. A hybrid is a combination or blended structure. They merge features of multiple models with the goal of realizing the advantages of each (while mitigating their respective disadvantages). Hybrid structures allow tremendous freedom in the organization design process.