This post is dedicated to analyzing the “skeleton” of companies - organizational structures.
Content
The organizational structure is the basis for creating a management system. Org. the structure ensures the achievement of the company's goals by providing the necessary people with resources and dividing areas of responsibility.
And when you have new technologies, your goals change, you “grow up” and move to a new level of organizational structure, then the organizational structure and business processes must change.
It is now customary to distinguish several types of organizational structures:
Now let's briefly look at each of them.
The simplest model: a simple and strict hierarchy. Key decisions are made from the top and go down, without highlighting individual functions: sales, marketing, production. Suitable for small companies with simple production technology and minimal need for additional functions.
Pros:
simplicity and speed of making management decisions;
quick response to instructions and orders;
clear distribution of duties and responsibilities;
discipline.
Minuses:
overload of managers
concentration of a large amount of non-core work on managers
weak relationships between performers
As an organization grows, the number of management levels increases rapidly, which reduces the company's flexibility and speed of response to changes.
Distribution of responsibilities according to functions performed: production, sales, marketing, accounting and tax accounting, financial management. As a result, everyone is engaged in their own direction. It is also optimal for small companies that work with one product, but require a more complex production organization.
Pros:
narrow specialization of areas - increasing productivity and quality;
clear distribution of responsibilities;
release of line managers from functions beyond their competence;
no duplication of functions (if business processes are built).
Disadvantage - the larger the company and the more extensive the structure, the more difficult it is to organize separation and communication between departments. Bureaucracy begins to flourish.
A combination of distribution of linear and “functional” tasks. In line management, a production unit where the manager is “responsible for everything”, auxiliary functions are performed by functional managers.
Example - you have a production workshop, there is a technical director there. He is ultimately responsible for everything: the work and discipline of personnel, the state of equipment, productivity, and so on. At the same time, there is a certain management apparatus, a headquarters, where all support functions are carried out: procurement, search for contractors, processing of travel allowances, and so on.
It is the most common basis for medium and large organizations, where there are from several hundred to a couple of thousand people. Optimal in a stable environment: standard production processes, stable demand and external environment, without the need to implement a large number of projects and create new products.
Pros:
narrow specialization of areas - increasing productivity and quality;
simplicity and speed of making management decisions;
quick response to instructions and orders;
minimizing duplication of work.
Flaws:
high, sometimes unjustified, costs of maintaining administrative personnel;
the growth of bureaucracy, when functional managers are more interested in their own safety rather than overall success.
It is similar to a linear structure, but divisions are built according to the principles of division of products or markets. Optimal for companies with a large number of markets and heterogeneous products. For such enterprises, it is necessary to create individual core business processes for each product/region: supply, production, marketing, sales.
Pros:
flexibility – it is possible to develop individual strategies and business processes for each product/region;
ease of coordination and approval of management decisions;
high speed of response to emerging problems;
high productivity and quality of management thanks to specialization.
Minuses:
as in previous models, there may be no common goal, every man for himself;
unhealthy competition between structures and direction, growing political differences;
different productivity;
low efficiency of budget use.
This is a complex model, primarily for the implementation of projects. An employee may have several managers, and project and resource management is entrusted to the project/unit manager. Sometimes they try to create hybrids of a linear-functional model and a matrix model, where the implementation of projects is entrusted to functional managers. For example, a system for industrial safety is being implemented, and the head of the industrial safety department becomes the manager.
Pros:
a manager with high professional competence is responsible for implementation;
The project manager can influence the situation at his own discretion, without excessive control (but this is rare).
Flaws:
difficulty in implementing projects and distributing responsibilities, conflicts of interest, a high level of managerial competencies is required;
low productivity;
duplication of functions.
I will give an example of the implementation of this approach.
An integrated corporation, with a central office in Moscow and a large number of regional divisions. The divisions have a linear-functional structure.
The central office initiates the implementation of a complex IT system, which covers a large number of business processes and requires the inclusion of technical, financial, and HR units. In each regional division, a responsible manager is appointed and the fun begins... The manager is responsible for the entire project, but there are no resources and authority to manage other people’s (financial, HR) blocks, and even more so, others have the desire to change at their own request. The curator in the central office is also not omnipotent; he is located within a functional unit. In general, implementing such a project is still a quest.
Matrix structures can also be divided into weak, strong and balanced.
Weak matrix structures
Weak matrix structures are used in cases where there are many projects, but they are small and not routine, and are not critical for the company.
In a weak matrix, project team members are managed by functional managers (head of industrial safety, repair planning department, head of procurement department), whose powers are limited: each is responsible for their own direction.
There must be a project manager who reports to management, or in our case to the central office, and receives tasks from him. Then the tasks are decomposed into smaller ones and assigned to employees of functional departments. This is fertile ground for conflicts to arise.
It is also possible to have “shippers”. These are employees of functional areas who “distribute” information, but do not have any authority. These should be informal opinion leaders.
As we see, this approach is not applicable for our large-scale project. Well, unless we have very charismatic and strong project managers on site.
Strong structures
It differs in that within the framework of the implementation of such a project there may be not one, but several managers, or a manager and a team, and they have much more authority. They can now not only be transmitters of tasks, but can also give orders, demand the execution of tasks and the preparation of project reports for functional managers. In addition, this project team may not be permanent employees of functional departments, that is, it is possible that they will only deal with the project, plus they can look for contractors or order raw materials.
For our hypothetical project to implement an IT system, it may be redundant. Although, perhaps this is what will increase the chances of success, such an implementation is very expensive.
Balanced Structures
In this case, the project manager is appointed from among the employees, or better yet, managers, of functional departments. Here he can set tasks and monitor their implementation. However, he is most likely not relieved of his operational tasks and cannot manage the resources himself.
It is worth noting that this is the most difficult option to implement, since it involves the largest number of allocated roles; moreover, issues with subordination and, as a result, matrix conflicts may also arise here.
As we see, the systematic approach is fully revealed here, there is a close interweaving of work with organizational. structures and project management, they become inseparable.
We have discussed the main types of org. structures. And it would seem - choose the right one that suits your company, and everything will be wonderful. Alas, this is not true. In addition, it is important to correctly distribute functionality and authority, determine the key product of the activity, assign people to positions for whom this work is psychologically suitable, and at the same time ensure that communication is built between them. This is why I always talk about a systematic approach; it is impossible to implement just one tool and everything will fly, integration is needed.
In addition, as we see, clearly already at the org level. structures there is a connection with the number and scale of projects being implemented, that is, there is a close interweaving of work with organizational. structures and project management , they become inseparable.
Well, to consolidate everything with practice, we suggest looking at one real example, where there are 2 structures of the same type, but with completely different essence: the distribution of responsibilities and powers.
What do you think, where is the “as is” scheme, and where is it as it should be? In which scheme of the structure are there “plugs” or fragmentation? Which one will ensure development, minimize the number of conflicts, less conflicts of interest, and allow you to earn money?
Moreover, we must remember that with the development and org. the structure must change, and the distribution of functionality.
The second important question is what is more important, the organizational structure or the described business processes? Where to start? This is an age-old debate. Our opinion is that while the company is small, its formation is underway and the selection of the algorithm that will produce results can be done without business processes. If you have an organizational structure, clearly defined functions, a key product and, preferably, written metrics (we do not make this a prerequisite because we have seen isolated cases of a well-developed system of key indicators ), then you will not drown in chaos. People will be able to communicate and agree with each other, and this is a key element. In fact, this is even a useful exercise - first teach people to work together, dividing powers, responsibilities and resources between them, and then introduce process management.
For all companies, especially young ones, proper organization is important. structure, correct distribution of powers, resources, responsibilities and people, taking into account their psychology , balance of the system and personalities. And, if you listen to the classic of management science Peter Drucker, then you need to initially describe who you need, and only then select a person for these tasks. This is the key message of his work “The Effective Leader.” But I have a slightly different opinion here. This approach in its pure form is viable only in cases where you are already a mature company and your requirements for a candidate are justified and balanced, and your entire structure is balanced. In addition, you are attractive in the market: you have decent pay, you have a reputation. If you are still young, you do not have a balanced system and/or there is no queue of people waiting for you, then you need a certain flexibility. Yes, you need to basically adhere to the principle of Peter Drucker, but you need to adapt the organizational structure more to the available resources and people, their psychological qualities and soft skills, competencies. That is, as usual - remember how it should be, but look for a balance with what is. This is, in principle, the main rule of life and there is no ideal solution or methodology: for organizational structures, for describing business processes, approaches to project management, and so on. It is impossible to get rid of human psychology and solve all problems with technology or tools, but we need to strive for an effective and autonomous system. If you decide to approach the search for a new employee systematically: describe the functionality, requirements, KPIs, what characteristics it should have, then this does not mean that you will find the ideal, but it does mean that you are more likely to find someone who will be useful to the company, suitable her culture, although in some details it will differ from the image of the ideal candidate.
To make the organizational structure a working tool, we recommend the following algorithm
Define company goals
Evaluate the company: what industry, what product, what technology, how often projects will have to be implemented, what markets
Evaluate available technologies, including digital ones
Describe it as it is, with a description:
Functions performed
Product of activity
Available resources and technologies
Select an appropriate structure and describe the target model, including for each department and position:
4-6 key functions
target product
necessary competencies (professional (hard), personal (soft, profile according to Adizes )
available resources (optional)
Describe key business processes using the VAD method
Assess: Are all these people really creating value? Where are the losses , and what can be abandoned using digital technologies?
Stick to no more than 4 levels of management and 4-5 people directly subordinate to each manager (in some cases 8-9)
Well, make it a rule to review the structure every time the company’s goals are achieved and/or changed, new resources and technologies appear, or just once a year.
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