Why must Facebook change the organizational structure?

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Breaking news – Facebook has changed its name to Meta. The first question we all asked ourselves when we heard was – what is Meta? The second – why?

The term “metaverse” comes from science fiction and refers to a 3D virtual world inhabited by avatars of real people. Facebook defines it as a set of virtual spaces in which you can create and explore with other people who aren't in the same physical space as you. It is a concept that is broader than any one application, and it can be used anywhere – an excellent focal point for R&D efforts, with the potential for a bright future.

Is “meta” the new overall direction? Maybe. “The name Facebook doesn't fully encompass everything the company does now and is still closely linked to one product. But over time, I hope we are seen as a metaverse company,” Zuckerberg said. Facebook is trying to solve a problem: the company is bigger than the single product it has, than the product that gave the company its name.

Is the declaration of its rebranding enough to positively impact the company’s performance? I would suggest it needs more – it needs to change the structure of the company in order to implement the strategy. But that’s not happening. In a company press release they wrote, “Our corporate structure is not changing, however, how we report on our financials will.” They will have two operating segments: Family of Apps and Reality Labs. This means there will be no higher entity to coordinate its efforts, just a new brand.

Organizational structure is a vehicle for implementing a new mission or strategy. Today, with all the modern ERP systems we have, you can report from any angle you want, but it will not change the organization’s behavior, and management will not know who is accountable.

Why change a company's organizational structure?  It should be done if the company has problems that require structural change, or if the organization has changed its mission, or both. And Facebook has an identity problem: in the same way you cannot call an arm a finger you cannot call a part of the organization and the whole organization by the same name.  At Facebook, the business unit name, the product name, and the name of the entire holding company is the same, and this problem has proved significant enough to warrant changing the name.

However it seems that Facebook wants a new direction but without changing the structure. As Dr. Adizes says, you cannot change the direction of the powerboat by shouting, “Left, left!” You need to increase power to the engines on the right and decrease power to the engines on the left, and then the boat will turn. You need to change the power structure, which is not happening at Facebook – they are only changing the name and not the structure.

This phenomenon is not unknown in growing companies; they develop new units themselves or acquire some and face the problem of a new structure of responsibilities: whom do you report to? A simple example: imagine you have become an international company and are opening up in some new countries. Now the question is, do you report to the domicile country or to the top of the network? What if there is no top unit? In many cases, these satellites report to the country in which the company started, whereas really the original country should become just one among many. In a case like that a group or holding company needs to be established, and the same attention given to each “child” – Google did something with Alphabet, but that was more than just a rebranding.

In the case of Meta, it will probably have Instagram, WhatsApp, and Oculus as subunits, and some additional products or apps will be grouped or put inside these subunits, which will most likely comprise the Family of Apps. But do they have coordination at a higher level, or is this just an artificial group for reporting purposes? It seems that there will be no coordination. These units are businesses in their own right and should have their own separate life cycles whilst reporting to the mother company. Reality Labs will probably be R&D “metaverse” units in which new approaches and products are developed and will serve as an incubator for new “meta” things. But where is the holding company? Meta is a brand, not a top-level organizational unit.

Answering a question along those lines, Zuckerberg said, “There's the financial reporting and segment reporting. There is the brand. There will be the account system. We're not making organizational changes today as part of that. That might be something that I'll consider in the future, but I don't think that's something that's a near term on the horizon.”

If there is no structure but only a brand at the top, the real question is, where does Mr. Zuckerberg sit? What is his title? CEO of Facebook? He cannot be CEO of Meta because there is no Meta. So, Meta will be managed by the CEO of Facebook, or...? Whom will the head of Instagram report to? To the CEO of Facebook? If so, why is the group not called Facebook? But then who is the head of Facebook? Is it the same person with a single title for two positions? This is confusing, and system theory says it cannot work. I know, somebody will say that in life you can do anything. But that does not mean you should.

“When I am working on a problem, I never think about beauty, but when I have finished, if the solution is not beautiful, I know it is wrong.” R. Buckminster Fuller

The solution is not beautiful, which leads us to conclude that Facebook does not want to solve the real managerial growth problem or implement any new strategies. Probably what we are seeing is an attempt to resolve Facebook’s significant PR problems but in the "metaverse" alone.  

Written by
Zvezdan Horvat
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