Shaping organisations: a range of organisational forms

Here’s some food for thought.

The term hierarchy was first used in the late 1880s to describe a system of organisation in the Church where priests were divided into ranks. It was also adopted up by the military and the state. The approach spread during the Industrial revolution as a result of a growing focus on efficiency and profit. The basic structure of many organisations still in use in the 21^st century was founded in the 19^th century based on linear, segmented, hierarchical design principles.

The Matrix organisation which is a mix of hierarchy and cross functional working and is often regarded as the ‘new’ way of working, was first documented in the 1950s in the aerospace industry. It was developed in response to large scale project needs and generally involves team members having two managers. It was created to help manage complex projects with limited resources. It is a complex organisational form and, in our experience, has varying levels of success, often the hierarchy wins out and people generally don’t like answering in to two people.

This means we are mostly using organisational structures that were created for a different era and needs, which may no longer fit our current context. But they have been tenacious in their staying power! There are, however, other options, and given the technology we now have it may be that more hybrids will emerge. Some of the options include:

• Flat/horizontal
• Network
• Autonomous Teams
• Virtual
• Boundaryless
• Holocracy

 

Flat/horizontal

The flat or horizontal organisational structure does what it says, layers are limited and most people have personal autonomy to manage their own work. This structure is often adopted by start-ups and small organisations. Decision making tends to be more transparent and faster because it doesn’t have lots of layers to pass through.

Team

The autonomous  teams structure is based on multi-disciplinary groups with high levels of delegated authority. It differs from a matrix because the team is less likely to be temporary and it is not about working across functions so much as having them all within specific teams. It is a more democratic and flexible way of working.

Network

Network organisations are a way to visualise both internal and external relationships, based on social networks. This is an interesting structure because it works across organisational boundaries, which relies on strong external relationships and reliable partners.

Virtual

The virtual organisation first appeared in the 1990s and is effectively a loose collection of individuals brought together through the use of technology. Individuals may be dispersed in terms of space, place and time. Virtual organisations thrive when there is a clear common purpose and goals are well formed. It is also not uncommon for there still to be face to face connections but this is usually in the form of particular quarterly or annual events, awaydays or conferences. The virtual organisation it can also consist of a number of different organisations coming together to form a larger virtual entity.

Boundaryless

The boundaryless structure combines both virtual and networked approaches. Like the virtual organisation it relies heavily on tech and there may be little face to face communication. People can work flexibly and are often project based. Individuals are responsible for their own areas of work and have high levels of autonomy.

Holocracy

This approach involves decentralised authority and decision making. It is based on self-managed, overlapping groups. In its true form it involves no job descriptions, no managers and no hierarchy. Accountability and responsibility are equally distributed across the organisation. People work to their strengths and can move across teams to work on different tasks.

See below for summary advantages and disadvantages of each.

We’re not saying that any of these are better or worse than the founding forms, it may be that hierarchy is right for your organisation. What we are encouraging is awareness of the structure you are using and how, in organisational design terms, that is influencing your culture, processes and systems.

Following the major changes brought about by Covid-19 many organisations are now rethinking their approach going forward – Square and Twitter have decided to go virtual for the foreseeable future.

As of today, Shopify is a digital by default company. We will keep our offices closed until 2021 so that we can rework them for this new reality. And after that, most will permanently work remotely. Office centricity is over. Chief Executive, Tobi Lutke

These are obviously big commercial entities and this option is not available to everyone but it does pose the question of what the best organisational forms might be going forward. It’s worth considering:

• How much does being building centric drive the way we organise ourselves?
• Why is your organisation, or the organisations you work with structured in the way they are?
• If you could start with a blank sheet of paper what would your design criteria be?
• What would your ideal design be?
• What might help you achieve it?
• What might get in your way?

 

Advantages and disadvantages of different organisational structures

Structure	Advantages	Disadvantages
Hierarchy	Clear reporting lines Maintains the status quo Best for linear work Linear decision making Promotes specialisations Progression routes Development of common processes	Communication flows top to bottom Maintains the status quo Limited individual autonomy Decision making can be slow Emphasises routine tasks Focus can be short-term Obscures accountability
Matrix	Improves access to skills, expertise and resources across the organisation Improves cooperation and communication across functions Faster decision making across multiple stakeholders Builds capabilities and personal development	Accountabilities and authority are less clear Meetings and bureaucracy can increase Increased ambiguity Slower decision making – horizontal as well as vertical involvement Power battles Drive back to centralisation Resource conflicts
Flat	Faster decision making Open and transparent Works well for new organisations Flexible and agile People can be committed Better retention rates Faster to gain buy-in or iron out differences All can have direct contact with customers, beneficiaries etc	Everyone needs to know a bit about everyone’s roles May feel limiting against aspirations High levels of accountability may be difficult for some Not easily scalable May be power struggles Managing work life balance Limited progression routes May limit retention
Autonomous teams	Shared expertise and resources Faster decision making Builds commitment Adaptable Responsive to the external environment Scope for personal and team development Encourages clear policies and processes	Disputes between teams Constant change Siloed by team May result in less consistency Lack of alignment Communication flows may be limited Can be chaotic Too fluid for some people
Network	Agile Flexible Responsive Shares skills and expertise Lower costs Open Works to strengths Builds partnerships Scalable	Complex Dependence on technology Too many supervisors Too much pressure on individuals in demand Can be chaotic Roles and responsibilities unclear
Virtual	Lower overhead costs Improved efficiency Scalable Improved satisfaction and retention Flexible and adaptable Larger pool of people to draw from Access to new opportunities	Security and compliance issues Less personable Harder to build team cohesion Communication challenges Reputational risks Building trust levels can be difficult
Boundaryless	Very flexible Responsive Draws on a wide range of skills and expertise Empowers individuals Provides lots of autonomy Can adapt quickly Open to strategic alliances	May feel chaotic People often prefer clear boundaries Needs high levels of self-management Lack of oversight and supervision Lack of clarity around processes
Holocracy	Increased transparency Adaptable Agile Flexible Empowered teams Scope for personal development	May be too big a culture change for some people May only suit smaller or fast growing entities May be challenging for non-profit governance models Team may not have capacity to self-regulate Sustainability