Designed to Fail – The Impact of Organizational Design

As an engineer, I learned how to study process diagrams and identify potential problems.  It turns out that we can often do the same thing simply by looking at an organizational chart.  

Most organizations evolve over time as they grow without much consideration over whether or not the design still makes sense.  People are added to teams, new departments are spun off from existing departments, and middle managers are given more and more responsibility.  This creates issues for organizations as they often scale around communication, engagement, alignment and accountability.

Here are some common organizational issues we see.

ISSUE #1: TOO MANY DIRECT REPORTS 

It is always possible to add one more person to a department without creating an extra layer of management.  However, if this is done too many times, managers can quickly find themselves with an unreasonable number of direct reports.  The problem is that the negative impact of having too many direct reports isn’t always obvious to upper management who are trying to control costs by not promoting another manager.  Yet the impact is significant. 

First, let’s be clear about what we mean by “direct reports”.  A direct report is someone who reports directly to a person.  If a manager has 40 people under them on the organization chart reporting to 5 different supervisors, then the manager has 5 direct reports (the 5 supervisors).  

Hospitals and manufacturing are industries that push the direct report ceiling to crazy limits.  I’ve seen supervisors who are asked to manage as many as 100 or more people directly.  There is no way that anyone can effectively manage that many people.  One hospital we worked with had a nursing supervisor who oversaw 65 employees.  The supervisor was hard working and talented, but she was completely overwhelmed.  At the same time, the department became known internally as a “good place to hide” if you weren’t a good worker.  Accountability was low and communication suffered.  We worked with the hospital to divide up this group under 3 additional supervisors.  Morale in the department immediately improved as did performance and engagement.  The director over the area called it a “night and day” difference.

ISSUE #2:  MANAGERS WITH NO AUTHORITY

Sometimes we find people in management positions without management authority.  This is especially common with front line supervisors and leads.  The lead is told they are responsible for the process, but that the people they work with during the day will actually report to someone higher up.  This often creates lots of issues. 

Think about the lead who has the responsibility but no authority.  This is one of the worst experiences to put onto someone who is probably one of your better workers.  

It also tends to insulate the “actual” manager from the employees creating disengagement and poor accountability.  When the lead has an issue, they have to bring it back to the manager to decide what to do.  The manager often errs on the side of the employee, waiting until they hear that there is a problem multiple times before taking action.  This is frustrating to everyone involved.

Management jobs are hard enough.  Don’t create “semi-management” positions.  

ISSUE #3:  DOTTED LINES

In the 1990’s, there was a deliberate search for a better organizational chart than the traditional “tree” design.  Some organizations experimented with matrix structures where managers owned areas of responsibility and workers might report to multiple people depending on where they are working.  The “dotted line” became very common in organizational charts showing additional lines of authority.  

It turns out that the best management structure is one where each employee has one boss and they are absolutely sure who that is.  Dotted lines and matrix structures are nice in theory, but don’t work in practice because it allows managers to hide from employee issues.  Have you ever heard the saying, “if somebody will take care of it, nobody will”?  

ISSUE #4:  SILOING

Siloing occurs when different departments start acting in their own interest rather than collaborating well with other departments.  It is a consequence of organizational design that can’t really be avoided in the organizational chart, but can be managed through a good communication cadence.

When siloing is observed between departments, we can often address by creating a “place” where the two departments can interact with each other.  This place is often a regular meeting with the simple goal of finding ways to work better together.  When I was at 3M, our engineering department was very siloed from the property accounting department.  This created many issues that cost the company a lot of money and frustration.  It was finally addressed when representatives from both groups started meeting on a monthly basis.  This simple collaboration brought the two departments more closely together over time resulting in improved performance for both teams.  

USING ORGANIZATIONAL DESIGN

While it is often not very obvious or exciting, improving organizational design can be one of the most powerful ways to boost culture and improve engagement.   There is no perfect design.  Every design choice you make in your organization will have real consequences.  By being aware of those consequences, you can figure out the best design for your organization.