Organizational structure is reviewed when a company’s business strategy is reviewed. These reviews are essential to keep a company on a sustained growth path. Organizations are living entities. They respond, react, and evolve with the external and internal environment. Any organization that fails to evolve with changing market conditions sees a depletion of growth and loss of market share. Fast-growing enterprises exhibiting sustained growth often adapt to changing market conditions. Periods of turmoil in the organization’s growth path also impact the organization.
According to Greiner’s organizational growth model, an organization goes through five phases. These five phases are creativity, direction, delegation, coordination, and collaboration. Each of these phases ends with a degree of turmoil. As it transits from one phase to another, it goes through the chaos and organizational change. Greiner claims that each phase ends with a period of turmoil followed by evolution as it moves on to the following phase.
All organizations, public and private, require teams to perform individual, often specialized, tasks with expertise and efficiency. Organizations are therefore divided into units. Each unit has a hierarchy with a leader responsible for oversight. Hierarchies exist even in flat organizations.
Members of individual units get used to the internal ecosystem in which they operate. Collectively, they protect their turf and prevent others from creeping into their domain. Each unit is a silo, comfortable with itself and resentful of outside influence. Silos retard the cross-fertilization of ideas from the outside. They impede innovation.
Management practices claim that organization development and growth require periodic breaking down of silos. It is often assumed that silos retard business growth. The problem lies in the silos and the lack of collaboration mechanisms between silos.
Let us take a look at Apple. The company is known for producing great customer-centric innovative products. It, therefore, has a strong Product design division staffed with A-plus people led by an A-plus leader. The design team works independently. It is a hub for innovation and produces great products. The Apple organizational structure leverages the Product design division silo giving it all the financial support required. The Product design head reports directly to the Apple board. The Board offers prompt feedback, recommends changes to new products, and mentors the product team.
The collaboration mechanism is lying here at the level of the Board. Traditional organization re-design experts may find the retention and hard walling of the Product Design team inappropriate. But we all know that the hard-coded Product Design silo works well for Apple.
The Airbnb organization facilitates the rapid flow of information across the company. Decision-making powers are now available to operational managers. Power has been distributed throughout the organization, giving individuals and teams more freedom to self-manage while staying aligned with the organization’s purpose. It has a matrix structure that enables the exchange of information and deployment of skills between teams. The organizational structure design has been quite successful in preventing the formation of silos.
Glassdoor records anonymous ratings by employees. Airbnb was rated as the number 1 organization in 2016. Ninety percent of employees stated that they would recommend Airbnb to others. Airbnb has succeeded in developing a culture of belonging for its employees. People find it a place where they can thrive, grow, and produce results.
Organizational designs and organizational structures play a critical role in keeping a company on a sustained growth path. It is, therefore, imperative to keep reviewing these periodically also that the company components are fully aligned with its strategy and can deliver delight to its customers.