The CEO of this Member Company had been getting increasingly frustrated with the business (of about 150 people). It felt like change wasn’t happening quickly enough, the leadership team were too far from the customer, and the customer experience was not keeping up with smaller, nimbler competitors.
The reason for this, he concluded, came down to their organisational structure. It turns out that the model he had has a label – ‘Command’:
He had teams divided into departments, each with a specific function, such as specific products (e.g. furniture), project management, design, and project specification. Each department had it’s own leader, who all converged onto him at the top.
How did he go about resolving the issues? He thought back to a time when these problems hadn’t existed, what it had been like when they were a small agency, just a dozen or so people, one team working together to serve their clients. He remembered how fun and effective it had been, how responsive they were to client needs, and how they could easily innovate and experiment with new ideas.
Based on this reflection, he made a bold decision. He dismantled the existing structure, and re-allocated individuals into small, cross-functional ‘packs’, each including the key functional roles that made up the business, so each pack got at least one designer, PM, product specialist, and so forth. Each team was appointed to focus on one target customer group, and allocated leads accordingly. He did still retain certain central functions, such finance, HR, and elements of lead generation.
He created a structure that looks like this:
At this point, let me mention these images – where are they coming from? They’re from a book called ‘Team of Teams’ by General Stanley McCrystal, who ran the special forces divisions of the US military in the Iraq war. He faced the same issues as our Member CEO, he ran an organization that, whilst efficient and effective, their centralized, functional-department structure meant that they were losing to an enemy – Al Qaeda in Iraq – that was highly decentralised and adaptible.
But General McCrystal’s model goes further than we’ve seen so far, here is the full image:
It takes the possibility of such a reorganization further still – that the opportunity of such cross-functional team models does not just lie in how effectively they can be managed, but the degree to which they can interconnect and share with one another.
This is probably the single image I have shared the most this year. To understand why requires looking at the impact these changes have had on our Member company described above.
What has changed in their business as a result of this structural shift? There have been 3 main benefits:
A key limitation of the Command model is how change must be handled. In that world, change initiatives become complicated. Significant change must be delivered in the form of complicated projects, designed to work around the whole organization. Think KPI systems, customer feedback projects, process improvement, or training programs. As a result, these types of project get bogged down, and left uncompleted. No-one had the bandwidth to drive them through to completion.
In the new context, the approach to innovation is different. The packs can be encouraged to try out new ideas, and share what works with other. For example, one pack that works on a process to get projects to site faster shares it with the others, and so innovation and ideas spread, and those that don’t get canned.
The whole outlook and approach to growth is now different. It has become a model of ‘cut and paste’, and the key question becomes – how to set up and nurture the growth of more packs? This changes the investment model of the business, as the focus becomes on the investment and cashflow model for getting new packs profitable. Similarly, it provides a clear career progression path for team members, as there are opportunities for leading new packs.
The outstanding noticeable cultural impact of the shift is that it has dragged everyone closer to the customer. With each pack focused on a specific customer segment, they adapt their service model to that market, develop relevant relationships and partnerships to that segment.
It has also created better customer service, because clients now don’t get moved between departments. One team is able to take them through the entire project experience.
Like any big change, there are trade-offs – the change has brought challenges too. The transition itself took courage and effort. It resulted in the exit of some key leaders from the business, and took the full commitment of the company CEO. It would never have happened of its own accord, and was a disruptive few months.
The new packs are in some ways more fragile than previous departments, because if they lose a specialist in one area, then that whole function is lost to them. This has required the development of reserve pools of talent, such as graduate training schemes, and qualified sub-contractors to fill such gaps.
The biggest challenge has been the development of the pack leaders, it’s a big chasm to ask them to cross, to rapidly develop to become cross-functional manager-leaders. It has at times stretched the training and development abilities of the organization to get them all to that point.
Nevertheless, it is certain that they will never go back, that the benefits have outweighed the challenges, and in fact the real benefits are only just starting to accrue.
So what does it mean for you? If you run an organisation, then there are 2 books on the topic of organizational structure and design that I suggest are vital reading for you: ‘Team of Teams’ by Gen. Stanley McCrystal, and ‘Reinventing Organisations’, by Frederic Laloux. Take a week or two to read them both, then have a deep reflection on how the ideas in there could apply to your organisation. There is a revolution happening in organisational design around the world at the moment, a genuine shift. The right model will be different for each organisation, based on industry and culture. It is transformational what getting the organisational structure right can do for growth.