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The Organization Chart Diversion – Part 1
October 25, 2007

“We trained hard … but it seemed that every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency and demoralization.” - Petronius Arbiter, circa 210 BC

Sometimes I am asked about the ideal organization design for supply management – with the unspoken implication that there might be one right answer that we should all be aware of. The options are in fact fundamental (centralized, hybrid, decentralized). However, the selection and implementation requires careful thought – and requires that some important factors come first. Let’s pursue that thought. 

You may have experienced the following situation yourself. An organization is experiencing performance problems which just don’t dissipate. The senior management team decides that the organization structure is at fault, and that a “corporate reorganization” will give the necessary boost to performance. In come the consultants, and they happily re-draw the complete organization chart. New divisions are created on paper, new management councils are designed, reporting relationships are changed, new job descriptions are written. Much time and money are spent on “correcting” things. Management thinks it is about to fix its stubborn problem. 

But performance does not measurably improve. In fact, in many cases such as this, performance worsens. Employees lose their focus, and also become disenchanted with senior management for not dealing with the root causes of the performance shortfalls. 

Although a poor organization design can be an impediment to success, an organization design is rarely a driver of success. Furthermore, the temptation to apply the “org chart fix” to an enterprise ignores an important reality: the informal relationships and networks inside an organization are often more important than hierarchical org charts. And these informal ties are guided more by the organization’s purpose, values, and vision than they are by somebody’s recently-published org chart. 

Long story short: in such situations, it’s crucial for management to make sure that the underlying problem is properly diagnosed before concluding that a new organization design might be helpful. The root problem could be associated with one or more of the fundamental principles of corporate success and failure. 

Much of the foregoing was excerpted from my new book Beat the Odds: Avoid Corporate Death & Build a Resilient Enterprise. In the next posting, we’ll go the next step and relate this topic to the specific question of the optimal organization design for your company’s supply management function.

(note: portions of this column were excerpted from Beat the Odds: Avoid Corporate Death & Build a Resilient Enterprise. J. Ross Publishing, 2007. See www.BeatTheOddsBook.com )

Posted by Robert A. Rudzki on October 25, 2007 | Comments (0)