The Top 10 Signs It’s Time To Change Your Organizational Structure
Lex conducting an Organizational Structure & Design Workshop in Capetown, South Africa. Photo Credit: Gregor Röhrig
Changing your organizational structure sucks.
There. I said it.
Helping companies change their structure is the work I do every day. If I didn’t know what I know now, I’d wonder, “Why would anyone want to do it?”
Changing your company’s structure can be a massive initiative. If you don’t do it correctly, it’s a recipe for disruption and disaster. People’s careers are on the line. Job titles can change. Existing reporting lines can get disrupted. One leader’s turf can expand and another’s shrink. The political fallout can be a huge cost in itself.
Even worse, if the new structure is done wrong, you’ll have the classic case of the cure killing the patient. You can set your company back even further in its development.
The corollary is also true. Structure done right can be the breakthrough you’ve been looking for. It’s like activating the booster stage of a rocket. It’s the catalyst to the next level of performance. I know because I’ve seen it happen over and over. It’s the reason why I do the work I do. It’s also one of the most misunderstood aspects of organizational design.
Let me explain all this by starting with a recent example at Microsoft.
In the early 2000s, a few years after taking over as CEO from co-founder Bill Gates, Steve Ballmer decided to double down on the existing divisional structure at Microsoft. A divisional structure typically has strong divisional heads but poor or limited cross-functional coordination across the divisions. Ballmer’s approach led to this infamous visual about working at Microsoft in the 2000s (I’m not sure who the source is but I still find it funny):
If your business has the wrong structure for its business model, strategy, or lifecycle stage, it’s not going to scale up. It’s going to trip up.
What was the problem with this approach? It was the wrong structure for a changed reality. The existing divisional structure worked well for Microsoft in the 80s and 90s during the desktop/data-center era. But the structure itself also made Microsoft incapable of adjusting to a radically changing, Internet-first era. Ballmer tried to rectify this problem by changing strategies several times but he never changed structures until 2013 (and then only haphazardly or half-heartedly). It was too little, too late. Under his tenure, Microsoft lost half of its enterprise value. Not a good score.
Within a short time after […]