Organization Structure Change Doesn't Solve Leadership Issues

By Kevin Meyer

So how many of you are in the middle of an org change?  I'm guessing about everyone, as it seems to be the common knee-jerk response to organizational issues.  The topic came up last night as I was having a conversation with a couple friends of mine that I have a lot of respect for - and it hit a nerve.

First off, I do want to say that there are many valid reasons for changing an organizational structure.  My organization happens to be embarking on one now, with the purpose to eliminate arbitrary site- and silo-based structures to align around cross-site value creation processes.  Keep that in mind as it will become one of my main points.

A typical overly-simplified corporate organization looks something like the following:

Of course would usually include functions like HR and such.  But a CEO would typically have five or six reports.  Yes, plus a bevy of admin assistants with questionable roles.  Usually in such traditional organizations considerable friction exists between various functions, such as Sales and Development, or Operations and Development. The knee-jerk reaction is to then bridge the functions by adding a new layer, such as a COO.

Voila!  Problem solved, right?  Of course not.  Yes Ops and Dev are now aligned (if the COO has any leadership juice at all), but new problems are created.

First off, what about the conflict between Ops or Dev and Sales?  Or the frequent conflict that exists between Ops and the CFO/Finance?  Still there.  And probably heightened as concerns from the Dev group have to go through another layer before being addressed between the COO and CFO.

But also think about this from a "respect for people" perspective.  The heads of Ops and Dev no longer receive the mentoring of the CEO, they have been diminished in stature, and their voices and concerns have to go through another layer to be heard.  If I was the head of Ops I'd be demotivated and my performance would suffer.  I've become another cog in the wheel instead of a key member of the CEO's staff.  If I was an engineer in the Dev group I'd feel similarly.  Should I?  Perhaps not, but I bet I would.

It's time to take a look at the root cause of the underlying situation.  Groups, and their chiefs, aren't communicating effectively.  They aren't leading, and they aren't aligned.  Changing the organizational structure will not change that one iota - it will just shift the problem around and probably create new problems.

Years ago I was having similar issues in my company.  Leaders weren't leading, they weren't talking, and they weren't aligned.  So one very powerful thing we did was drag the entire extended executive leadership team through Patrick Lencioni's 5 Dysfunctions of a Team book and accompanying workbooks.  It took a year, but we addressed absence of trust, misalignment, communication, and the like.  Sometimes it was very difficult, like the exercise where each member of the leadership team stood up and listened while the others openly and candidly discussed their "areas for improvement."  We nearly lost a couple team members that day.  But in the end our leadership team learned how to openly and honestly communicate, and be aligned.  We have recently found we need to work hard to sustain this improvement, otherwise we lapse into traditional silo politics.

The second thing we did was by accident.  We had to demolish one of our new buildings to make room for a new facility.  During the two year construction period I moved most my leadership team into a triple-wide trailer.  Uncomfortable, and the walls were paper thin.  We had to learn to live together, and deal with the conversations we heard on the other side of the walls.  But again, it helped us improve.  The daily executive leadership team standup meeting, where we also videoconferenced in the leadership of our other sites, also helped.

One side note on that last point: as we were designing our new facility we had a lot of debate about where the senior leadership team members should reside.  Initially I favored an approach that is common in lean environments: the leadership team member is with his or her team.  We've all heard the stories of company presidents that use a mobile office, sometimes even on the factory floor.  And I once visited a company in Japan where the entire team sat at a single conference table in the middle of a huge room with 1,000 employees - and no walls.

We decided to go against lean convention and locate the senior leadership team together, on the second floor.  Horrors?  Nope.  One big reason is that we noticed that when a senior leadership team member spent too much time with his team, the supervisory and decision-making capability of junior leaders suffered.  As much as we tried, it was just too easy to revert to the senior guy making the decisions.  But more importantly we found that it was easier to focus the senior leadership team on forward, future strategy rather than the day-to-day mayhem.  This does not mean that those senior team members don't spend a lot of time mentoring, teaching, and helping their teams.  But the small change in physical location, and thereby focus and perspective, has been important.  And our junior leaders have stepped up and added a lot of leadership bench strength to our company.

So where did we end up?  A flatter organization, similar to the following:

In fact, this doesn't begin to describe it.  In addition to key functions and value stream managers, I also have QA, Supply Chain, Facilities, Customer Care, and Marketing managers.  A total of 14, believe it or not.  And it works just fine and I do not feel overworked.  And it really is a lot of fun - that's what happens when great leaders work together to do great things.

There are some caveats.  For an executive staff of 10 or even 14 to work, the team must be comprised of very capable leaders.  Creating that competency takes a lot of work and a lot of training - not to mention the right kind of people.  There must be a very high level of organizational focus and alignment.  Daily, open, trusting communication is key.  And it also requires an experienced CEO or President that is comfortable delegating, has a broad knowledge to enable that span of control, and can be a good mentor.  Obviously as you flatten organizations you reach a point where the span of control and responsibility may be too wide to be effective.  14 works for me, 10 might be optimal for another, perhaps 20 for some CEO lucky enough to have an incredible leadership team.

Simply changing the structure of an organization doesn't create excellence and effectiveness.  You have to dig deep to improve the underlying leadership competence.  As you do that the organizational structure takes on less and less meaning.

One last note.  As we embarked on our current change to improve our alignment to value creation processes, I came across a great article by Pete Abilla on "customer journey maps."  Looking at the parts of your organization - and processes - from the perspective of the customer is interesting, and we're using the concept as an input to our changes.  I recommend you take a look at it.

My bottom line points:

1.  Align organizations around customer value creation processes.

2.  Respect the managers by providing training, mentoring, and feedback to improve their leadership skills.

3. Respect the managers by allowing them to interact across a wide span, and be mentored by senior leaders.

4.  Respect others in the organization by reducing layers and barriers to communication.

5.  First look to solve conflict issues by improving leadership capability - not adding a new layer.  In fact flattening might actually improve communication and lessen the issue.

 

Comments

[Jon]

Kevin, Your thoughts on how respect for people play a role in org structures is intriguing. I haven't heard that described before but it feels powerful. I would also suggest that how a leadership team or just the CEO creates a structure is a reflection on how much he or she values functions, leaders, and the people that work in those functions. If a new layer is created in one specific area, rather than deeming it important, I'd argue it diminishes both the leadership reflection and the potential of leadership, and is thereby a distinct lack of respect. Doing what you did by focusing on improving leadership skills shows a respect for the leaders and the people they lead. Nice job!

[George Pruegs]

On a similar note, isn't adding a layer to mitigate a problem disrespectful to the other suborganizations? If I'm busting my butt being a good leader, and a couple my peers get a new boss because they aren't performing, that would tick me off. They need to either improve or leave. The company shouldn't have to pay for a high-priced intermediary just because they don't want to deal with a lack of leadership. Honestly confronting and dealing with issues shows respect for the others in the organization.

[MJ Kopeckne]

Brings to mind the innumerable czars, Supreme Director of National Intelligence (or whatever), etc that recent administrations have created instead of improving processes, reducing redundancies, and improving leadership. But that's politics...

[John Buzolic]

"Simply changing the structure of an organisation doesn't create excellence and effectiveness. You have to dig deep to improve the underlying leadership competence. As you do that the organisational structure takes on less and less meaning."

This has been a basic tenet of mine for decades. Rarely understood.

[Diane Carmelo]

Agree with John above. The impact of org structure declines dramatically as leadership competence increases. Great post Kevin - lots to think about.

[Marty]

Sometimes I think the org structure needs to change with the competence level of the senior managers. If you have a weak leader in one department such as IT, it may make sense to fold into another. Of course it would be great to have strong leaders everywhere, but I have found that everyone is at a different point in there journey. . .

[Bill Waddell]

The importance of the structure to an organization is in inverse proportion to the strength of the culture.

In companies in which people have respect for each other, communicate openly and foster relationships across functions and levels as needed to address issues and solve problems, no one cares much about the org chart.

In companies in which top down, command and control is the way things get done, they obsess over the org chart.

[Gemma Tomkinson]

Org change is often a knee jerk reaction to business change and not given enough thought and time. It should never be about adding a layer to resolve a problem. Less layers allows easier comms cascade and faster decision making but need to ensure all managers have enough access to senior leaders. Interesting article that highlights some key mistakes many businesses make

[Nomia Chung]

Bill's comment on the inverse relationship of the importance of structure to culture strength is spot on. What's really fascinating is looking at organizational structure from the respect for people perspective. I haven't thought of that before and it potentially adds a lot of power to flat and "hyper flat" organizations. First the leadership competence needs to be created and ineffective leaders removed. Definitely something to strive for.

[David Hallsted]

Just bought Patrick Lencioni's 5 Dysfunctions of a Team book.
Thanks for the recommendation.

[Paul Todd]

I can recommend two additional books: an oldie but goodie, Drucker's "Practice of Management" covers many of Kevin's points from 1954. "American Icon" is a modern case study in cultural change at Ford, and is an illustration of Bill's team structure comment.

[Mark Welch]

Simply changing org structure gets you nothing more than the same monkeys in a different tree - that's all.

[david foster]

Kevin, what are VS-1, VS-2, and VS-3?

[Kevin Meyer]

"VS" = value streams