What Is The Right Organizational Structure?

Today, there is a fad: the structure is not important! We need network organizations...communications! Not true because you have to know who is accountable—what you expect and from whom. Otherwise, things are happening in a way that is unpredictable, and the unpredictable result could be something you don't like.

Yes, we need a network. We need communication. We need teamwork. But we still need to know who is on the left, who is on the right, who is in the front, and who is in the back. Otherwise, how are we going to manage companies with multiple roles and responsibilities?

So, what is the right structure? What you want is an organization that is going to achieve short-term results (because it needs to survive), and at the same time prepare itself for the future (because the future will be different from today). That's called, by the way, planning—but be careful. Planning is not about deciding what to do tomorrow (that's called dreaming). Planning is what to do today in light of what we believe tomorrow is going to be. We need to prepare ourselves today, for tomorrow. So, we need an organizational structure today that is short-term oriented, efficiency and effectively oriented, and at the same time prepares itself for the future. And we should not mix the two, because (and I’m sure you know this principle in your own personal life) if you put together long-term and short-term assignments what are you going to pay attention to first? The short term. The long-term assignment we'll do it when we have time. And very often you never get to do the long-term assignment. For the short term, we squeeze the long-term orientation out of the picture. So, you need to separate the two tasks in the structure. Those responsible for the long term should not be assigned short-term assignments and vice versa.  And what do we mean by long-term? Marketing, research and development, new product development, industrial engineering (what you design is a production line), human resources development, and finance (finance should look at the long run).

You should separate those from the short run, which means separating marketing from sales. If you put marketing and sales together, marketing turns into sales support. It's not doing marketing. It's not looking at the long run. And separate production, new product development, and engineering (or research and development) from production. Otherwise, engineering will end up doing maintenance, supporting the short-term. Don't put finance and accounting together because you will have “creative accounting“ where the numbers are not as accurate as they should be, serving the needs of finance to look right for the investors. And the same thing is true for human resources. Human resources administration is not the same as human resources development. You need to separate them. Now, if you cannot separate these responsibilities because you are too small of a company—too many vice presidents—then the CEO should take on the long-run responsibilities: the responsibility for marketing, finance, product development, and for research and development; and the COO should take care of the short-term. A complimentary team is needed. Some look at the long run, some look at the short run, and they work together. That is one of the principles in designing the right organizational structure.

‍