Week 15, 2022—Issue #199
Organizational (Re)structuring: Complexity, Activities, and Dimensions
Each week: three ideas to help us build better organizations. This week: three ideas on organizational (re)structuring.
In The Fractal Organization, author Patrick Hoverstadt provides a simple framework with which to structure organizations.
Let’s dig in.
Restructuring should help the organization better manage complexity.
Restructuring is difficult, time-consuming, and prone to failure. It follows that we should have a very good reason to attempt it. Ask 10 change-makers and you’ll get 11 different rationales. But at the end of the day it all boils down to complexity; environmental variety has increased beyond that which the organization can readily absorb and it needs to restructure itself in order to reestablish Organizational-Market Fit
Restructuring should support the organization’s primary activities.
Restructuring is a process that starts with the organization’s so-called “primary activities”. This is a concept borrowed from the Viable Systems Model (VSM, see #190) used to identify the activities that should dictate our restructuring efforts. Primary activities are those most closely associated with the organization’s purpose (i.e., teaching in schools and health care in hospitals as opposed to health care in schools).
Restructuring involves arranging the organization across four dimensions.
What is the best way to arrange our primary activities? That’s the central question that our restructuring efforts must contend with. There are four dimensions to consider — technology, geography, customers, and time — that can be layered atop one another for a seemingly endless list of options and permutations. Which dimensions we choose (one or all four) will depend on the organization and the situation at hand.
Consider the following:
- Technology is about doing different things. Developing new software is different from maintaining old software. A technology firm might consequently choose to create separate business units for each: one that develops news software and another that maintains it.
- Geography is about doing things in different locations. Business operations in London are different from business operations in Bangkok. A technology firm might choose to create separate business units for each: one that runs the London office and another that runs Bangkok.
- Customers is about doing things for different needs. Customers in education might need different things compared to those in healthcare. A technology firm might consequently choose to create separate business units for each: one specializing in Edtech and another in Medtech.
- Time is about doing things at different… well, times. Casually updating a website now and again is different from providing 24/7 support for business-critical applications. A technology company might consequently choose to create separate business units for each and… you get the idea.
In a nutshell:
Organizations choose to restructure themselves in order to better manage complexity. This is a process that starts with the organization’s primary activities and involves arranging and layering the organization along four possible dimensions in an effort to achieve Organization-Market Fit.
That’s all for this week.
Until next time: Make it matter.
Did you know? WorkMatters is a weekly newsletter that explores new and better ways of working. New issues drop Fridays at 10 AM ICT and subscription is free. Back-issues are published to Medium after three months.