Organizational Design Issues That Most Leaders Misdiagnose

 During our initial discussion, Henry, the CEO of a technology company, expressed frustration over his organization's inability to maintain focus and prioritise tasks. "We agree on quarterly priorities," he said, "but when it's time to review them, I'm informed that urgent crises have prevented us from making progress. We never accomplish anything."

When I asked Henry what he had done to refocus his team, he recited a laundry list of activities: weekly check-ins, protocols limiting excessive email, and online dashboards displaying progress — or lack thereof — against key initiatives. Henry defined their problem as one of accountability (frequent progress meetings and public dashboards) and capacity, as evidenced by these solutions (attempts to curtail email traffic).



My diagnosis, however, revealed something distinct.



After spending some time at the company, I realised that Henry's issues stemmed from a flawed governance structure. The "urgent crises" that prevented his team from advancing were a result of a lack of effective coordination between two key aspects of his business. As a result, there was no forum for productively resolving difficult tradeoffs among leaders.



Henry had incorrectly diagnosed the issue. However, he is not the first capable leader to make this error. After 35 years of consulting, I've realised how simple it is, mainly because recurring performance issues are more complex than they appear. More often than not, they are symptoms of a larger organisational design-based problem. When leaders incorrectly identify symptoms, they waste a great deal of time pursuing superficial solutions that ultimately fail.



As a result of ineffective organisation design, I've witnessed four of the most common irritants: competing priorities, unwanted turnover, inaccessible managers, and cross-functional rivalry. If you're struggling with one or more of these problems, consider whether the design challenges I discuss below may be the root cause. This may help you identify and resolve the true issue.



Priorities competing with one another

Common Design Challenge: Poor administration



Henry's company was structured as a matrix organisation, which meant that the majority of employees had two superiors. In this instance, they were organised according to functions like marketing, sales, and engineering. In addition, they were divided into three customer segments: enterprise platform users, small businesses, and individual software users. Each team was led by a functional head and a vice president of the division responsible for their assigned customer segment.



The issue was that the division vice presidents reported to the chief operating officer, while the functional heads reported to Henry. When Henry's team met to establish priorities for each function, the division vice presidents were not present to discuss how their priorities fit into the company's overall strategy.



In short, Henry's organisation was not intended to administer a matrix. His business was designed to administer a vertically structured, functional organisation. In a complex organisation structure, such as a matrix, it is necessary to establish decision-making systems to manage the resource and priority conflicts that arise naturally. These unresolved conflicts will become dysfunctional, as was the case with Henry, if they are not resolved. Priorities in conflict could not be resolved with a simple solution until he addressed this underlying issue. As soon as he realised this, he added the vice presidents of customer segment to his leadership team and began empowering the three customer segment teams to manage operational tradeoffs by allowing them to set near-term priorities for both segments and functions.