The Right Organizational Structure

Recently, I completed two organizational development studies. The first was for a nonprofit; the second, for a well-known sports management enterprise.
Both required competitive set benchmarking. The sports management company also wanted to understand the effectiveness of its current structure and the changes needed to position it for future growth.
I’ve learned, after completing many OD projects, especially with small and midsize companies, that organization structures can be made to work by leadership and people.
Organizational analysis is therefore a combination of assessing people along with structure.
Structures that work at one point in time can become obstacles to effectiveness and growth later on as market conditions change.
Individuals who are effective leaders and managers in early stages of growth may not have the vision, strategic thinking, and management skills to fulfill their roles at the next stage of a company’s development.
The leader sets the vision, pace, and direction for the organization, and fundamentally affects its culture and emotional climate.
It’s not unusual to find leaders who run the show with informal or “invisible” structures.
These are often built on long-standing relationships with certain members of their team who have gained the leader’s trust and confidence and are known for getting things done.
Unfortunately, these structures also develop when leaders are disinclined to address their people management issues because it’s too difficult or unpleasant, or when there’s no immediate successor or quick fix.
In short, arriving at the “right” structure is complex, and there’s never an ideal or single solution. Trade-offs abound.
However, there are five principles that are critical for an organization to function effectively and efficiently:

1. Alignment around the organization’s mission and goals
2. Clear and logical lines of accountability and communication
3. Manageable spans of control (typically five to seven direct reports depending on the nature of responsibilities)
4. Departments sensibly grouped around internal and external customer needs
5. Leadership and management positions filled by competent, qualified people

The first four principles focus on the specific structure (boxes on an organization chart); the fifth focuses on talent management (the people in the boxes).
All are inextricably linked to the company’s strategic plan (i.e., where do we want to be in the next three to five years?).
The right structure must be scalable without the need for major reorganizations or management reshuffling. The right talent must fulfill the company’s human capital requirements, both short- and long-term.
How can we ensure the right people are consistently placed in the right jobs? The answer lies in succession planning.
Too often, companies focus on the short term and make the wrong decisions. People who are not ready for the job are promoted. The scope and complexity of the job are neither recognized nor understood or simply overlooked. Insufficient time is taken to craft the ideal candidate profile.
As a result, selection becomes a pragmatic choice between availability, familiarity with the department’s work, loyalty to the organization, a promised though unjustified promotion—the list goes on.
A robust succession planning process mandates that an organization:

• Start with a complete inventory of skills, identifying the gaps
• Review available talent and bench strength, including HiPos (high potentials)
• Develop the succession plan
• Pull together a menu of potential development programs and training activities
• Prepare IDPs (Individual Development Plans) using performance evaluations and the inventory of skills
• Obtain budget approval
• Communicate and execute

It’s an investment that requires the full backing and participation of the leadership team, as well as the funding to make it work.
It also requires a commitment to recognize and deal with weak or failing job performance.
Doing nothing and hoping things will improve or, alternatively, “juggling the boxes” to move someone out of one job into another seldom works. More important, it sends a negative message to employees that poor performance is acceptable.
The more constructive course of action is to coach and train, provided the expectation for a positive outcome is realistic. The alternative is to address the issue with termination or demotion to a more appropriate position, sometimes a welcome relief but which generally doesn’t work.
What’s the bottom line in all of this?
It’s the absolute importance of integrating succession planning with the strategic planning process and recognizing the vital role each plays in determining the “right” organization structure.
—Wil Brewer
About the author:
Wil Brewer is President and Founder of Performance-Solutions-Group, Inc. (PSG), management consultants based in Stamford, Conn. PSG operates both domestically and internationally and provides consulting services in organizational development, strategic planning, performance management, pay-for-performance compensation, leadership and management training, and executive coaching. Clients range from small, privately-owned companies to Fortune 500s. Wil has been a guest speaker at CBIA meetings.