After reading Gary Hamel's book The Future of Management, I thought a bit about the challenges and benefits that organizational structure provides. Clearly, organizational structure provides a method to help break down work into smaller components, and build critical skills and deep understanding. It also helps to define the management structure. However, I think increasingly the old hierarchical org chart is getting in the way of change necessary to make firms more responsive and more nimble.
Let's look quickly at the evolution of the organization and its structure. In the US, prior to the Civil War, most people worked on farms on in very small companies. There was very little need for organizational structure, and most of what eventually became our model for org structure was taken from two sources - the military and the railroad. During the Gilded Age and into the growth of Taylorism, the organizational structure became cemented as a fact of life. At that point in time, thousands of people were immigrating or leaving the farm to go to work in rapidly growing cities with large industrial bases. Few people had much education, so work was broken down into very small, manageable bits with lots of supervision. Fast forward to the 70s and 80s. All we've changed in those 50 years is the fact that we've automated a lot of tasks and added a lot of computer technology. However, one sneaky little item that many people failed to notice about the computer systems they installed was that many of the systems, especially ERP, failed to acknowledge organizational structure - in fact the systems often cut right across organizational structures like business functions and product lines. This sets the stage for the next potential evolution.
Now, most people entering the workforce are educated and don't need a lot of supervision. Additionally, the market has changed dramatically in the last 20 years, to the extent that the vast majority of Americans are employed in services industries - farming accounts for approximately 2% of employment in the US, and manufacturing accounts for perhaps another 20%. So, close to 80% of our employment and economy is based on services, which require different types of people with different skills, and much more customer interaction for each employee that previously required.
What the future will require is almost a return to the past - small, dynamically formed teams that contain a broad skill set in which each person has a broad base of knowledge and the ability to interact with a client. Once a new product or service is generated from the team, the corporation will seek the best method to bring the new product or service to scale as quickly as possible. These teams should require very little management and will have incredible computing power and a wealth of information at their fingertips. The teams will be drawn from what we used to think of as "business functions" - legal, sales, marketing, finance - but what really represent core capabilities or perhaps even outsourced capabilities as firms move to defend the things they think make them unique and outsource even the business functions that are commodities.
What does an organization chart look like where there is really little need for vertical hierarchies and teams can assemble very quickly from a wide range of capability teams or even business partners and consultants? What barriers are in place in your organization if this vision of the future is true (and it's happening faster than you might want to admit).
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