Using Organizational Structure to Build Collective Corporate Culture
When thinking of ways to inspire and enlist your workforce, some focus first on the flashy perks like higher salaries, work from home policies and generous PTO benefits. Others weigh into the corporate perks arms race of amenities like free food and massages. As important as compensation and workplace amenities can be, organizational structure also can play a role in engendering loyalty and commitment to the organization. Structure provides a foundation for teams to achieve results, helps reflect the company’s culture and furnishes an opportunity to communicate and inspire teams around a common purpose.
No one structure works for every type of organization. Although hierarchical structures are sometimes dismissed as old school, they play an essential role in organizations where a clear chain of command must exist to make tough, sometimes life-saving decisions. Other organizations use a flatter organizational structure to nurture new ideas and innovations that can arise from anywhere.
To attract and retain employees who are not only talented but are also a good fit for your organization, a clearly-defined and a well-articulated organizational structure and concrete organizational philosophy allows prospects to self-select whether they will thrive or chafe within a given organizational structure. The most effective organizational structures promote individual strengths to achieve common objectives and help attract new talent excited to fill positions best suited to their skills and dispositions, while also encouraging existing employees to understand and support companywide goals.
Making the Most of Your Structural Framework
New organizations typically approach company structure in two ways. Some companies begin with a strong organizing principle that helps them discover a structure before they begin to grow, while others respond to conditions of growth by creating an ad hoc structure on the fly.
Both of these approaches have their strengths and limitations, but here’s the key: whatever structure your company has opted for, it’s important to articulate the reasoning behind the choice. The process of articulation galvanizes the organization around common pursuits.
To help launch your journey, here are some of the most common organizational principles used by successful organizations. We’ll examine the rationale behind each model, weigh the advantages and weaknesses and discuss the best ways to make each organizational principal structure most efficient.
The most traditional and still most widely used model of structural organization is hierarchically structured groups of employees under a shared supervisor. These hierarchical groups may be banded together by various organizing principles, but their shared trait is their pyramidal structure, with supervision flowing from the top down.
Princess Cruises rely on a hierarchical structure to emphasize the importance of safety when it comes to their ships. The specific accountability not only ensures safety for crew members and guests but helps advance organizational goals and deliver the best employee and guest experience possible when operating in an unforgiving marine environment.
This hierarchical structure works efficiently at clearly defining roles, responsibilities and establishing authority, hierarchical organizations can also fall prey to top heavy bureaucracy that may unintentionally limit collaboration and innovation. If your organization is hierarchical, consider creating opportunities for employees to connect on an individual level or provide back channel opportunities for feedback outside the formal hierarchy to address these potential gaps.
Functional Organizational Structure
Just like in a hierarchical structure, a functional structure organizes workers into groups. However, supervisory roles are more complex and may encompass matrixed reporting relationships, multiple departments and a broader ambit of responsibilities. Functional organizational structures can enable individual groups to work with more independence.
However, independence can be a double-edged sword. While employees are empowered to be creative within their realms, silos between company functions can make communication between departments difficult, limiting the exchange of knowledge. Instituting structures designed to promote the freer flowing of information can help smooth and facilitate these connections.
Starbucks is a business that uses a functional organizational structure with tremendous success. Starbucks’ headquarters in Seattle controls most of the strategic business decisions, while stores fall under regional jurisdictions with individual store managers for each store. While the company promotes inclusivity and creativity with the different branches, all significant policy changes and business decisions come from the top and apply to every Starbucks, eliminating inconsistencies in the employee and customer experience and avoiding lapses in information or communication.
Startups and small companies typically use horizontal structures to recognize the importance of individual creativity and independence at this stage of their organizational evolution. Horizontal structures help smaller organizations stay nimble and expedite decision making without involving a complex bureaucracy of overseers. In this structure, employees communicate directly with upper management and enjoy the freedom – and consequences – of considerable responsibility.
Horizontal structures help incubate creativity and free exchange, but the atomized nature of this organizational principle makes a true horizontal organization difficult to maintain as your company grows. One of the most extreme examples of a horizontal structure took place at Zappos. At one point the company eliminated all managers – a process they called “holocracy” – only to bring them back based on employee demand. To keep a horizontal structure functional, it’s critical to have a shared decision making map so employees understand who has the final say on issues as they arise.
Groundbreaking video game development company Valve is a great example of the potential upsides and perils of a horizontal structure. With an extreme “flat” structure, there are no job titles or assigned duties at Valve. Any employee is able to see the projects in process and work on anything that interests them, with the option to create their own product if they’re able to secure funding and build their team. While this slows their output, it encourages extreme creativity and openness to new ideas which has resulted in the production of numerous award winning and culturally significant projects.
Team Based Organization
Nearly as flexible as a horizontal structure, but with the added element of stability, team based organizations function by grouping employees around specific tasks that contribute to a shared common goal.
Uber utilizes a team based management structure. C-suite executives and the board of directors lead Uber collectively to enable streamlined lines of communication between departments and within departments and their respective leaders. But recently Uber decided to eliminate the roles of COO and CMO, and allow Eats and Rides teams to report directly to the CEO. “It can be argued that breaking down the internal hierarchy at Uber and turning it into more of a ‘flat’ organization will make the company more flexible in its response to the marketplace and external factors in the long-term.” (Organimi) Companies must be open to change and flexible in implementing new structures and business ideas for the betterment of the company and its employees.
Team based organizations benefit from streamlined problem solving by breaking down silos and can enjoy faster decision making throughout the organization. However, unless goals and expectations have been clearly articulated and are collectively understood, the most important organizational objectives can splinter into the pursuit of lesser priorities. Employees need to have a shared understanding of what constitutes success to avoid these pitfalls.
Network Based Structures
Finally, networked structures where many essential company functions are performed by discrete entities have gained increasing prominence in the WFH era. Managers coordinate relationships with departments and external contractors. The difference is that they don’t typically control the process, only the end results.
A networked structure can increase organizational agility and lower costs, but it can also cause confusion as the company expands and the network grows ever more complex. Successful networked organizations stay ahead of this confusion by ensuring that each “node” on the network understands and can articulate the big picture goals of the overall organization and shares a vision of what meeting those goals looks like.
H&M has outsourced a lot of their production to Asia and South East Asia to reduce costs. “The organization’s reliance on efficient and integrated systems for retail inventory management in the major components of its supply chain has played a huge part in enabling success in its stock control management.”
Why Structure Matters for Retention and Attraction
Once you’ve articulated your organization’s structural principles, it’s important to ensure that employees feel connected to the meaning behind the choices your company has made.
Inculcating a shared structural knowledge and consistently working to optimize the structural functionality of your organization helps increase worker commitment to company-wide goals. Being able to work and be your true authentic self while doing it comes from the feeling that we’re part of something larger than ourselves, a feeling that knowing we are members of a well-organized company can provide.
A clearly articulated structure helps people understand their essential respective roles, and also feel like they’re an essential part of a meaningful community of work, reinforcing the essential understanding that they are critical to your organizational success. This feeling of meaning and purpose ensures that individuals feel connected to their teams and are able to work together with coherence, ambition and confidence.
Learn more about creating a culture of meaningful structure within your organization by exploring our work on Shared Purpose and discover how BrandCulture can help your organization find the optimal structure for success.
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