Which organizations have unusual organizational charts?

Shaping the future of work today -Display-

The increasing importance of automation and artificial intelligence in the workplace has prompted many studies and debates about which jobs will be created, upgraded or destroyed with it. But the effect of these technologies on people goes far beyond individual jobs and activities.

The new tools accelerate decision-making and relieve employees so that they can concentrate on more demanding tasks such as mentoring and strategic planning. The introduction of these tools is of course often a challenge. But the biggest obstacles have little to do with the technology itself.

Today's managers have to solve problems that their predecessors hadn't even suspected: How do I establish a highly flexible organizational structure in a time of accelerated technological change? How do I manage the balancing act between rapid innovations on the one hand and efficiency and profitability on the other? How do I develop organizational models that enable human-machine collaboration in order to make more intelligent decisions?

People tend to have hierarchical structures

Could it be that CEOs are limiting the usefulness of 21st century technologies by implementing them in organizations whose structures are largely shaped by 20th century management models? A number of studies, including a 2018 study by Gartner, suggest that 20th century management mechanisms such as hierarchical organizational charts and functional silos are the main obstacles to progress.

The principles of corporate governance may be considered one of the most important achievements of mankind, after all they contributed to the development of modern industry, but they now need a fundamental overhaul. Core business tasks such as workflow design, project management and budgeting were already formulated at the beginning of the 20th century.

Some companies have already done away with these older structures. Lean manufacturing methods, introduced by Japanese automakers in the 1980s, have been largely adopted by software developers. These lean manufacturing concepts experienced a revival under the name "agile" production. Cross-functional teams are formed to run projects in successive "sprints" to accelerate the delivery of results.

Teams are formed across departments

Thousands of software vendors and IT organizations are now staunch users of agile methods. Although these concepts and the newer, more modern DevOps approach have established themselves as industry standards for software development, they have been largely ignored by other business areas or types of companies.

With automation and other modern technologies taking off, more companies will soon adopt flexible, team-based production concepts, says Toby Walsh, professor of artificial intelligence at the University of New South Wales.

"The tasks of the employees are becoming much more flexible and variable," said Walsh. "All current challenges of a company will be solved spontaneously in the future." Employees become a kind of mercenary, who calls in a company when there is a fire and who then leave the company again, according to Walsh's thesis

McKinsey is not a suitable scapegoat

Management consultants are not the cause of these changes. Rather, it is the realization that customers expect better service from their preferred brands. This in turn not only requires a greater willingness to respond to their needs, but also more willingness to experiment within the company in order to meet this requirement.

At the online retailer Zappos from Nevada, whose brand is consistently geared towards customer service, CEO Tony Hsieh has thrown the traditional management hierarchies overboard and introduced a new "self-management" concept called Holacracy.

Zappos has replaced many specialist teams with more diversified groups called "circles," explains Jamie Naughton, who is responsible for the company's corporate culture. In addition, numerous managers were replaced by group representatives, so-called "lead links" (district leaders), who represent the interests of one district and report to other circles on behalf of everyone.

"When a task is better done by a team than an individual, then a multi-role circle is formed for that task," says Naughton. "The districts are responsible for their work results, which they achieve with the most appropriate means."

The paradox of this change? The team structures may be unusual, says Naughton, but many roles remain unchanged.

"The job descriptions in our company are no different from those of other companies," he comments. "The main difference is that we give employees the opportunity to bring their whole personality into play. Like most other companies, we also have managers and employees with customer contact. But we make sure that everyone, regardless of their position, looks after the customer same way. "

Fight bureaucracy

The agile method and the Zappos model dismantle the old silos. REA Group, an Australian digital media company operating in the online real estate market, recently applied the same principle to a reorganization.

Instead of restructuring the marketing, IT, legal and finance teams for the individual product groups, the REA Group has formed five new operational teams. Each of them is responsible for a specific type of customer and has all the specialist resources required internally. The Chief Inventor of the REA Group, Nigel Dalson, speaks of "full-stack management teams" in this context.

"Hierarchical bureaucracy as a way of organizing people is very old," says Dalton. "Specialist areas that are optimized for bureaucratic structures are less suitable for modern companies that provide services for customers."

For example, the 150-strong specialist team for apartment offers has all the specialist areas of a small company: sales, legal and HR. At the same time, the teams use common groups, so-called platform teams, for tasks that have to be coordinated across the board.

"We don't want five accounts and five CRMs and five help desks," explains Dalton. "That is why we have set up our customer-focused divisions, which work in a highly dynamic manner and are very keen to experiment. However, these do not run completely separately. The art of management consists in coordinating divisions across the board."

Fight resistance

Hierarchical thinking and resistance to change are human nature. And that makes them probably the biggest obstacles to implementing flatter and more flexible organizational models.

In a 2017 survey of more than 7,000 readers of the Harvard Business Review, almost two-thirds of those questioned stated that even in the years of great technological advances, the organizational structures of their companies have become more centralized, less innovative and more regulated .

"People will never develop as quickly as technology does today," states Lani Refiti, technology partner at Deloitte. "People have a natural social behavior: As soon as we come together in groups, hierarchies are formed. Instead of vertical structures, we need team-oriented dynamics in order to benefit from modern technologies."

That doesn't stop companies like Zappos and the REA Group from abolishing the traditional organizational chart. But like the technology that keeps creating new models, the evolutionary path could be endless.

In other words, there is no ideal form of organization because the best models are constantly evolving. "We are in the transition phase between caterpillar and butterfly," said Dalton. "We have to keep experimenting, trying and learning forever."