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Who Do You Think You Are? August 13, 2009

Posted by Jason in Insider's View Relapses.
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Think back to a time when you had a significant decision to make.  Maybe it was a choice of college or major, perhaps it was a new job.  In each case, you may have considered a range of possibilities, weighed pros and cons, or consulted with friends to determine the best course of action.  There were also likely many intangible factors that led to the final decision.  It is no surprise then that organizations, being collections of individuals, follow similar reasoning when tasked with important decisions.  Every decision will reflect the unique identity of the “decider”.

Any motivational speaker or personal coach worth his salt will invariably advise their clients that important decisions need to be founded on personal goals and aspirations.  Or, to paraphrase Lewis Carroll, “If you don’t care where you go, it doesn’t matter which way you walk.”  Such introspective soul-searching is good advice for the corporate environment as well.  In the latter case, however, it is then important to understand the organizational structure within which such decisions will be made — and how they will affect that structure once implemented.  This is the key difference when speaking of organizations rather than individuals.

You may have heard of organizations being “tall” or “flat”, or other terms referring to the depth and breadth of the management and staff.  What do these terms really mean, and how do each affect the decisions at the top?  As implied by the descriptions, tall and flat refer to the number of levels between the top and bottom of the organizational chart.  But there is a deeper implication as well.  Taller organizations also create an environment in which individual managers may have a more limited role than their counterparts in flat firms.  If we take an average 50-person engineering firm as an example, there may be two or three layers of management between the CEO and the technical staff, with middle managers responsible for maybe six or seven staff.  Compare this with a flatter organization that favors greater responsibility for management and has eliminated the middle managers.  Now, upper managers are in more direct contact with staff, and are responsible for maybe 15 or 20 individuals.

While neither structure is right or wrong, each has its advantages and disadvantages.  Each also will require different considerations when contemplating corporate strategy.  A taller organization is more likely to have “profit centers”, or departments that can be individually monitored and measured against each other.  This may require managers that are familiar enough with financial management that they are able to effectively allocate resources and monitor their own efficiency.  One disadvantage is that the firm as a whole may be more divided and may not be able to react quickly to changing external conditions.  Alternatively, flatter organizations may be better positioned — especially in today’s economy — to shift focus or pursue new markets.  The trade-off is that the managers must be more adept at organizing a larger number of subordinates, utilizing “people skills”, and acting as leaders rather than task-masters.

Even in this over-simplified example, the real world still holds a few more surprises, and even straightforward procedures may not be what they seem.  This can happen even (or especially) if the organization has expended the effort to carefully craft a chain of command and spells out clear lines of communication.  Unfortunately, the real communication usually exists outside of the organizational chart and it is up to the firm’s leaders to understand the actual methods that are used to achieve results.  It also means that your structure may not be what you think it is, and your decisions must be evaluated accordingly.

Faced with the need to make big changes in their corporate structure, managers should pay attention to the informal communication that makes the firm work.  It may not be sufficient to simply observe departmental cash flow, chargeability, or other similar metric.  It will likely be necessary to delve deeper into the human side of the firm to evaluate individuals’ influence, motivations, and the personal attributes that allow big ideas to become reality.

–from Insider’s View, November 2008



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