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The 5 Classic Mistakes in Organizational Structure: Or, How to Design Your Organization the Right Way

Is your organization designed to be a rocket or a parachute? If I were to ask you a random and seemingly strange question, “Why does a rocket behave the way it does and how is it different from a parachute that behaves the way it does?” You’d probably say something like, “Well, duh, they’re designed differently. One is designed to go fast and far and the other is designed to cause drag and slow an objection in motion. Because they’re designed differently, they behave differently.” And you’d be correct. How something is designed controls how it behaves. (If you doubt this, just try attaching an engine directly to a parachute and see what happens).

But if I were to ask you a similar question about your business, “Why does your business behave the way it does and how can you make it behave differently?” would you answer “design?” Very few people — even management experts — would. But the fact is that how your organization is designed determines how it performs. If you want to improve organizational performance, you’ll need to change the organizational design. And the heart of organizational design is its structure.

Form Follows Function — The 3 Elements of Organizational Structure & Design

A good design supports its purpose. There’s a saying in architecture and design that “form follows function.” Put another way, the design of something should support its purpose. For example, take a minute and observe the environment you’re sitting in (the room, building, vehicle, etc.) as well as the objects in it (the computer, phone, chair, books, coffee mug, and so on). Notice how everything serves a particular purpose. The purpose of a chair is to support a sitting human being, which is why it’s designed the way it is. Great design means that something is structured in such a way that it allows it to serve its purpose very well. All of its parts are of the right type and placed exactly where they should be for their intended purpose. Poor design is just the opposite. Like a chair with an uncomfortable seat or an oddly measured leg, a poorly designed object just doesn’t perform like you want it to.

Even though your organization is a complex adaptive system and not static object, the same principles hold true. If the organization has a flawed design, it simply won’t perform well. It must be structured (or restructured) to create an design that supports its function or business strategy. Just like a chair, all of its parts or functions must be of the right type and placed in the right location so that the entire system works well together. What actually gives an organization its “shape” and controls how it performs are three […]

By |2021-05-18T05:25:49-07:00January 9th, 2012|Articles|16 Comments

Navigating Phase Shifts in Business

In nature, phase shifts are dramatic. Think of water: ice is solid and rigid, water is fluid and adaptable, steam is expansive and high-energy. You can’t manage ice like water or steam. Each phase has very different characteristics which require different management models, insights, and skill sets.

The same applies to your business. As it grows, it too goes through predictable phase shifts, and the management models, insights, and skill sets that brought you to the current stage aren’t applicable to the next.

So how can you use this insight to your advantage?

The most important thing is to be able to recognize the shift between one phase and another.
The Organizational Physics Strategy Map is my favorite tool for doing this. It lays out where your business, markets, and products are at in their development now. In addition, it indicates if you are in step with your current phase or not.

Here’s the map. Can you use it to identify your business’ current stage and next phase shift?

Phase shifts are like the transformation of water. Each stage—Pilot It, Nail It, Scale It, Milk It—requires a different mindset, skill set, and approach. Recognize these shifts and adapt. Remember, you can’t manage water like you manage steam or ice. Each phase demands its own strategy.

To learn more about navigating business phase shifts, here are two good places to start:

  1. Read the Mastering Lifecycle Strategy white paper
  2. Complete a Top-Level OKRs Strategy Survey with your leadership team
By |2024-06-13T10:29:23-07:00June 13th, 2024|Articles|Comments Off on Navigating Phase Shifts in Business

Ten Rules for Highly Effective Meetings

One of my biggest pet peeves is unproductive meetings. In fact, I dislike unproductive meetings so much that I began to study what it takes to facilitate great meetings—and meetings that matter.

Thinking through meeting design and facilitation has been my way of trying to lessen the burden and suffering that I and others experience when we’re stuck in a bad and unproductive meeting.

This list of Ten Rules for Highly Effective Meetings is born from experience and the principles of Organizational Physics. You can apply them to your own meetings and improve them by 30% or more.

Think about that figure for a moment. How much time and energy do you personally spend/waste in meetings each week? And how much does your entire company spend/waste each week? It’s likely a big and costly number.

A change in approach to how you organize and run meetings can have a dramatic impact on your bottom line. Meetings will take less time, consume less energy, and result in better decisions and faster organizational velocity.

Why Have Meetings at All

There’s a lot of noise on the internet right now telling you that the best solution to bad meetings is to get rid of meetings altogether. Slamming meetings isn’t a new trend. Here are two of history’s most prominent management gurus on meetings:

“Meetings are indispensable when you don’t want to do anything.” – John Kenneth Galbraith

“Either you meet or you work. You cannot do both at the same time.” – Peter F. Drucker

I used to be in this “get rid of meetings so we can work camp” too. But I came to a realization. Trying to get rid of meetings, or attempting to automate them away through the use of AI, is like trying to get rid of the nuclear family. Both families and meetings exist for a reason. Being part of a good family is one of the most valuable and satisfying things we can experience in life. On the other hand, a bad family experience can suck the very life force out of you and everyone involved.

Meetings are similar. You’re going to need to have them no matter what. You want good ones that serve a purpose, not bad ones that suck out your soul.

The Evolutionary Purpose of Meetings

If you want to truly improve something, you need to understand its evolutionary purpose. I’d like you to reflect for a moment about why we humans meet at all.

If you were to ask an anthropologist about why humans have engaged in meetings throughout history, from the cave to the boardroom, they’ll tell you that we meet to exchange information, to strengthen our social bonds, and to make collective decisions.

From a systems perspective, there is yet another important reason behind why we meet. We meet in an attempt to better manage the complexities […]

By |2024-03-09T04:07:11-08:00March 6th, 2024|Articles|Comments Off on Ten Rules for Highly Effective Meetings

How to Structure Your Business Around AI

Two past coaching clients just reached out to ask me about structuring AI into their companies this week. This tells me it’s time to write an article, so here we go.

One of the principles behind Organizational Physics is that you always want to manage appropriately for the lifecycle stage of the project, product, business, or business unit. First you pilot it, then you nail it, then you scale it. AI adoption is no different.

The Pilot It Stage of AI Adoption: Using GPTs

Most companies are already in the Pilot It stage of AI adoption. Employees, especially innovators and early adopters, are using AI tools to be more productive, but the work itself has not fundamentally changed. This means that your social media marketing manager uses a GPT plug-in to create more social media posts, but their job remains fundamentally the same. It’s the same for software engineers, salespeople, and really any knowledge worker using a GPT. Discovering what different AI tools are capable of is fascinating and a bit unnerving. On their own initiative, the leading edge is researching and deploying their own AI tools and often bringing their findings back to the company.

Of course these discoveries raise plenty of questions and concerns. “Wait… what about data security?” “Wait… what about privacy?” “Wait… does this mean won’t have jobs?” These concerns are valid, yet every thinking person can see that the world has changed. If your company is going to survive and thrive, then it must quickly figure out how to nail AI adoption.

The Nail It Stage of AI Adoption: Building an AI Brain

My coaching clients on the leading edge of AI adoption are all on the same mission right now: to create and leverage their own internal, centralized AI brain. There will be many ways in which this “AI brain” will take shape, but its fundamentally about having a secure, internal chatGPT that has all proprietary corporate data and market information available to it in real time. There are multiple LLMs (large language models) integrated into the AI brain too. This allows employees to ask the system questions, and the centralized AI brain selects the right LLM based on the prompt, which results in improved decision-making and productivity for the company as a whole.

That’s the vision. It’s still a tall order due to issues such as permissions management, privacy, and worker retraining. However, those companies that can build and leverage robust vertical AI brains for their industry and company first will likely be the ones dominating this decade.

The Scale It Stage of AI Adoption: Deploying AI Agents

It is conceivable that AI becomes so powerful that your company no longer needs to employ as many humans. Fundamentally, each business function like sales, marketing, or engineering may still have a human “leading” it but the […]

By |2024-01-15T14:03:32-08:00January 15th, 2024|Articles|Comments Off on How to Structure Your Business Around AI

The Strategic Alignment Guide for Modern MBA

The Strategic Alignment Guide for Modern MBA

Welcome Modern MBA viewers.

Strategic alignment is the act of identifying and aligning a company’s unique and valuable capabilities with growing market opportunities. With the help of this guide and its associated SWOT analysis tools, your company can accomplish the equivalent of two to three months’ worth of strategic planning and alignment in just two days.

How to Achieve Strategic Alignment

To achieve strategic alignment, the CEO and Leadership Team work together to identify the right three-year Top-Level Strategic Imperatives and short-term key results needed to achieve them. This top-level strategy must then be cascaded into the rest of the organization so that it can be implemented rapidly.

For superior strategic alignment, this process should be conducted during an offsite strategic planning session, which lasts up to two days. Before this workshop, a new form of SWOT analysis is performed via team surveys, and participants become familiar with a framework and language for discussing strategy.

During the workshop, the results of the team surveys are used to generate shared insights and alignment on: (1) areas of improvement in the company; (2) the company’s lifecycle stage; (3) the company’s strategic execution risks; and (4) the go-forward strategic priorities.

At the end of this strategic alignment process, you will have generated a clear, concrete, and actionable roadmap for strategic execution that can be communicated to the entire company.

How to Conduct an Improved SWOT Analysis

A key part of an effective strategic alignment process is to build shared consciousness around the company’s current strengths, weaknesses, opportunities, and threats (SWOT Analysis). However, if you have run a SWOT analysis before, you may have found that the outputs were not as useful as you would have liked. The “data” ends up being bullet points. The “insights” don’t reveal the root cause. The process itself generates a lot of opinions but it can feel harder than it should be to align the team on concrete action steps based on a traditional SWOT analysis alone.

Organizational Physics has solved these shortcommings of a traditional SWOT analysis with a new, two-step SWOT analysis. The Entropy Survey is the first step which provides a root cause analysis of a company’s internal strengths and weaknesses. A company’s external opportunities and threats are then determined using the Top-level OKRs Strategy Survey.

By combining these two tools, you can produce an extremely useful SWOT analysis in a fraction of the time and with far greater insights than a traditional SWOT analysis. Some additional advantages of this new form of SWOT analysis include:

  1.  It allows for better and faster data gathering.
  2.  It provides powerful mental models for your team to visualize its strengths, weaknesses, opportunities, and threats.
  3.  It identifies the root cause of problems so that you and your team […]
By |2023-09-28T08:07:14-07:00September 27th, 2023|Comments Off on The Strategic Alignment Guide for Modern MBA

Designed to Scale Resources: How to Structure Your Company for Exponential Growth

What Structure Do We Need for Our Chosen Strategy?

A paradigm-shifting book was published in 2022 by Organizational Physics founder and head coach Lex Sisney titled Designed to Scale: How to Structure Your Company for Exponential Growth.

This book explains how to design and change structures in a completely new and yet proven way, using the adaptive systems methodology of Organizational Physics.

The resources on this page support the book and will help you design and change structures to achieve breakthrough business results. Coaching with Lex directly will also benefit expansion-stage company leaders.

Benefits of this Approach to Changing Organizational Structures

You should dive into the resources on this page if you are looking for insightful and proven ways to:

  • Design your business for the next stage of growth.
  • Create vivid role clarity and accountability across your organization
  • Make smarter senior-level hires that stick around and thrive.
  • Improve cross-functional coordination and teamwork.
  • Drive better metrics-based decision-making.
  • Free yourself to work significantly more on the business than in it.
  • Launch and grow new business units while sustaining the core.
  • Drive strategic execution at scale.

What Other CEOs Are Saying About this Approach to Changing Organizational Structures

“One of the best business books I have ever read.”
– Gareth Dickens, CEO, ConvenientMD

“Simple, logical, profound.”
– Stan Smith, President, Silver Hills

“Management genius.”
– Michael Cassau, Founder & CEO, Grover

“Master when and how to change structures.”
– Ozzie Goldschmied, former CTO, Ceridian

“Accomplish in 5 days what used to take 3 months.”
– Kristian Gjerding, CEO, CellPoint Digital

“The rarest bird of all—a useful management book.”
– Daniel Needham, President & Chief Investment Officer,
Morningstar Investment Management

Introduction to Designed to Scale


What is Structure?

Structure is how your business is organized. If you want to get your business to do something new, then at key points in its development, you’ll need to look at and change its structure.


The 3 Building Blocks of Organizational Structure

The three design elements of organizational structure are: Functions, Location, and Authority. Use these three building blocks to avoid some common pitfalls and design the right new structure for your business stage and strategy.


The 6 Rules of Organizational Structure

There are 6 Rules of Structure to follow when designing a scalable business structure. They are:

1. If the strategy or lifecycle stage changes, change the structure.
2. Don’t allow short-range functions to control long-range ones.
3. Don’t allow efficiency functions to control effectiveness ones.
4. Don’t allow centralized control to overpower decentralized autonomy.
5. Put people into roles where they can focus and thrive.
6. Process brings structure alive.


Design Controls Behavior

By |2023-12-22T08:13:14-08:00September 25th, 2023|Comments Off on Designed to Scale Resources: How to Structure Your Company for Exponential Growth

New SWOT Analysis & Strategic Alignment Workshop Guide

New SWOT Analysis & Strategic Alignment Workshop Guide

Strategic alignment is the act of identifying and aligning a company’s unique and valuable capabilities with growing market opportunities. With the help of this guide and its associated SWOT analysis tools, your company can accomplish the equivalent of two to three months’ worth of strategic planning and alignment in just two days.

How to Achieve Strategic Alignment

To achieve strategic alignment, the CEO and Leadership Team work together to identify the right three-year Top-Level Strategic Imperatives and short-term key results needed to achieve them. This top-level strategy must then be cascaded into the rest of the organization so that it can be implemented rapidly.

For superior strategic alignment, this process should be conducted during an offsite strategic planning session, which lasts up to two days. Before this workshop, a new form of SWOT analysis is performed via team surveys, and participants become familiar with a framework and language for discussing strategy.

During the workshop, the results of the team surveys are used to generate shared insights and alignment on: (1) areas of improvement in the company; (2) the company’s lifecycle stage; (3) the company’s strategic execution risks; and (4) the go-forward strategic priorities.

At the end of this strategic alignment process, you will have generated a clear, concrete, and actionable roadmap for strategic execution that can be communicated to the entire company.

How to Conduct an Improved SWOT Analysis

A key part of an effective strategic alignment process is to build shared consciousness around the company’s current strengths, weaknesses, opportunities, and threats (SWOT Analysis). However, if you have run a SWOT analysis before, you may have found that the outputs were not as useful as you would have liked. The “data” ends up being bullet points. The “insights” don’t reveal the root cause. The process itself generates a lot of opinions but it can feel harder than it should be to align the team on concrete action steps based on a traditional SWOT analysis alone.

Organizational Physics has solved these shortcommings of a traditional SWOT analysis with a new, two-step SWOT analysis. The Entropy Survey is the first step which provides a root cause analysis of a company’s internal strengths and weaknesses. A company’s external opportunities and threats are then determined using the Top-level OKRs Strategy Survey.

By combining these two tools, you can produce an extremely useful SWOT analysis in a fraction of the time and with far greater insights than a traditional SWOT analysis. Some additional advantages of this new form of SWOT analysis include:

  1.  It allows for better and faster data gathering.
  2.  It provides powerful mental models for your team to visualize its strengths, weaknesses, opportunities, and threats.
  3.  It identifies the root cause of problems so that you and your team can drive continuous […]
By |2024-01-23T05:15:27-08:00September 21st, 2023|Comments Off on New SWOT Analysis & Strategic Alignment Workshop Guide

Structure Design

Structure Design:
How to Design Your Company to Scale

A key element of the Designed to Scale Coaching Program is actually designing the right new structure to support your evolving business strategy. In this part of the program, your coach designs your new structure, and then you refine and implement it together.

“Structure” is a loaded term, and my approach to designing and changing structures is unique. Watch these videos to see if this approach resonates with you. If it does, continue reading to find out more.

What is Structure?

Structure is how your business is organized. If you want to get your business to do something new, then at key points in its development, you’ll need to look at and change its structure.


The 3 Building Blocks of Structure

The three design elements of organizational structure are: Functions, Location, and Authority. Use these three building blocks to avoid some common pitfalls and design the right new structure for your business stage and strategy.


The 6 Rules of Structure

There are 6 Rules of Structure to follow when designing a scalable business structure. They are:

1. If the strategy or lifecycle stage changes, change the structure.
2. Don’t allow short-range functions to control long-range ones.
3. Don’t allow efficiency functions to control effectiveness ones.
4. Don’t allow centralized control to overpower decentralized autonomy.
5. Put people into roles where they can focus and thrive.
6. Process brings structure alive.


Design Controls Behavior

Design controls behavior. If you want new business behaviors, change the the organizational structure The 6 Rules of Structure provide visibility into key underlying polarities at work within every business. A key idea is to not treat polarities as problems to be solved. Polarities (e.g., short-range vs. long-range, efficiency vs. effectiveness, control vs. autonomy) must be harnessed to create the right amount of tension in the business for sustained strategic execution.


The Right Structure for the Business Stage

What is the right organizational structure for the current and emerging lifecycle stage of your core business and any business units? Using the Organizational Physics Strategy Map as a guide, this video shows that:

  • A Pilot It stage initiative requires very limited structure.
  • A Nail It stage initiative benefits from a functional structure.
  • A Scale It stage initiative requires an evolving structure (based on the functions defined in the Nail It stage).
  • A Milk It stage structure requires making a break or escape from the legacy structure.

Introduction to the 4-Quadrant Structure Map

The Structure Map is a powerful thinking tool to identify any current structural breakdowns occurring in your […]

By |2024-06-24T01:51:41-07:00May 24th, 2023|Comments Off on Structure Design

The Second Business Unit: How to Manage It

The purpose of this article is to talk about the launch and growth of your second business unit, which could be a new product line or a new geographic market that complements the core or original product line or market.

The main point I want you to take away from this article is this: If your company is having trouble launching and growing its second business unit, then you likely need to address a design flaw in the original or core business unit first.

My own experience as a CEO was that I struggled to lead the launch of the second business unit against the incessant demands of the core business because I didn’t understand this concept well enough.

A majority of my coaching clients are looking for help with launching their second unit, whether it’s a new product or new market, while thinking that things are going pretty well in their core unit. They just need some guidance on launching the second. But after diving into the situation, the client CEO quickly realizes that for the second unit to thrive, the core unit must first evolve.

Since this issue is not well understood, I hope to shed some light on it in this article and share my approach to solving it.

The Health of the Mother Determines the Growth of the Child

Fundamentally, what you’re trying to achieve with the launch of a second business unit is to have the “mass” of the core business executing swiftly and profitably against changing external and internal conditions and with enough capacity and wherewithal to simultaneously pilot, nail, and scale the second unit.

What I didn’t appreciate fully until I had been through it as a CEO myself is that despite all our attempts to free up the second unit to be autonomous from the mothership, it is the health and capacity of the mothership that still controls the destiny of the child.

The irony is that most of us don’t realize that we actually have a design flaw in the mothership until we attempt to launch the child.

Let me give you an analogy. If there’s a crack in the foundation of a building, is it a problem? If it’s a small one or two story building, it’s probably not a big deal. Patch it up. But if it’s a large multi-story building, a crack in the foundation can be a very big problem indeed. The whole thing risks collapsing.

Similarly, the design flaw in the main business has probably been present for years. But until the second unit was added to its foundation, it wasn’t known or if it was, it wasn’t seen as a big problem. However, this hidden design flaw is now causing problems for both units and the whole thing is at risk of collapsing, or […]

By |2023-02-28T17:05:21-08:00February 28th, 2023|Articles|Comments Off on The Second Business Unit: How to Manage It

Designed to Scale CEO Coaching Program

Designed to Scale CEO Coaching Program: Accelerating Leadership and Business Growth

Being the CEO of fast growing company can be exhilarating one week and frustrating the next. I know because I’ve been there. That’s why I created the Designed to Scale Coaching Program, a proven method for building and managing high-growth companies that delivers breakthrough results.

Our clients are expansion-stage businesses (typically $30M+ in annual sales with a leadership team of 7+) that have an opportunity to grow significantly. Our guarantee is that when you deploy this program, your organization will not only scale — it will also have improved coordination, execution speed, and a more aligned culture. What’s more, you’ll experience greater time freedom, clarity, and confidence in your role as CEO.

If you’re thinking about how to take your organization to the next level and wondering if our approach is right for you, start with this 5-minute video or read on to learn more below. When ready, you can apply schedule a consultation.

The Quickest Way to Scale Your Business

In a picture, this coaching program guides you, step by step, to play to your strengths and passions while simultaneously leading your company from the mid to late Nail It stage of business development into the early to full Scale It stage of business development, as shown in the picture below.

The Designed to Scale Coaching Program guides you, step by step, to play to your strengths and passions while simultaneously leading your company from the Nail It stage of business development to the Scale It stage of business development and beyond. The Designed to Scale Coaching Program guides you, step by step, to play to your strengths and passions while simultaneously leading your company from the Nail It stage of business development to the Scale It stage of business development and beyond.

Here’s another picture and an alternative way to look at it. Our job is to help you to drive your business up the lifecycle stages into a zone of growing revenues and profits (the dotted oval below). Then, from this position of strength, structure and prioritize the launch and development of new business units that will in turn go through their own lifecycle stages for sustained, profitable performance over time, like this:

How to create sustained, profitable performance. How to create sustained profitable performance.

Is the Designed to Scale Coaching Program Right for You?

You’re an ideal client for this coaching program if you’re the CEO of an expansion-stage company that already has established product-market fit on your core product. It is also common that you are experiencing friction with A) launching and growing a new product or business line; B) […]

By |2024-03-21T04:19:53-07:00December 14th, 2022|Comments Off on Designed to Scale CEO Coaching Program
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