Organizational Forms

Garbage can

Partnership

Partnerships are a common form for an early company to take when two or more founders are involved. This pattern can be fraught with problems as some partners work harder or are more successful in their actions, and consequently think they should be proportionately rewarded.

Partnerships are common in established professions such as law, accountancy and consultancy, and becoming a partner, where you get a share of the profits, is an aspiration for all employees.

Conventional hierarchy

The basic principle of the hierarchy is a 'scalar chain of command' as described by the early management theorist Henri Fayol. In this structure, each person reports to one manager and each manager has one or more subordinates.

Hierarchies are often divided by professional skill, such as software development, marketing and accounting. This can cause a problem when operational processes cross departments which where people have greater allegiance to their department and its manager that to the organization and its larger goals. This can also be exacerbated when managers seek to build empires with the maximum number of people reporting to them.

Flattened hierarchy

A large company can have many layers of management, such that those near the top have very little idea about what those lower down are actually doing. In the opposite direction, corporate strategy and direction can get diverted and subverted along the way.

A common response to this is to increase the 'span of control' with many more people reporting to individual managers. This makes the bottom easier to reach from the top (and vice versa) but can make managing individuals difficult. When you have more than around six people reporting to you, you start to spend more and more time with them and less on deciding, meeting and so on.

Matrix

Flattened hierarchies may still not address the problem of people from different teams working well with one another and so a matrix form may be used. In this, there are rows and columns, with individuals at the cross-points.

Columns correspond to professional departments such as accounting, marketing and so on. Rows correspond to projects or processes. A person thus belongs both to a professional group and also to a cross-functional delivery team.

The idea of the matrix is sensible, but is very difficult to make work in practice as tensions arise between project managers of rows and functional / department columns, each of whom may have different goals, such as the marketing manager who wants to use sophisticated analysis tools whilst the delivery project manager just wants a quick-and-dirty answer so the project will 'deliver' on time. Where the individuals report to the functional managers, there may also be competition between project/process managers for the more skilled people.

Divisionalized

Divisionalization is the separation of a larger company into a set of smaller semi-autonomous units which are given clear goals and then largely left to get on with things. They do, however, have to accept corporate strategic direction and comply with company rules and culture.

A full division will have much of its own infrastructure, including HR, accounting, marketing and so on. Smaller forms will have the infrastructure elements delivered from the corporate core. IT in particular is likely to be centralized.

A variant of the divisional form in a global company is to have separate product divisions and local country sales, marketing and service organizations. This can work in a form of a large matrix, with countries in rows and divisions in rows.

A risk in divisions is that managers can go 'native' and act as if they own the division. Whilst ownership is good for motivation, it can cause problems if this takes the division off and on a collision course with the head office or other divisions.

The 'Spider Plant' is a divisional form described by Gareth Morgan as an organic system where outgrowths are connected by 'umbilical cords'.

Networked

The networked organization is a looser form where individuals have a a certain amount of autonomy in how they connect with others. They may have allocated time in which to work on their own exploratory projects and the means to attend conferences where they can make contacts and share problems and ideas.

This form requires trust of and by individuals, that they will keep the company's interests at heart and work together for the greater good. Culture is therefore an important factor, as is selection of people who have the attitudes that lead to effective action.

In its purest form, the networked organization is quite fluid, with people moving easily between teams and to where they can add the greatest value. 

The 'Fishnet' has been described by the Institute for the Future as a team-based organization where, if you pick up a 'knot' (a person), the links to other people will drag up a team behind him or her.

See also

Workplace design, Leadership, Culture