Value Creation is Shaping Organisation Design

Over the years in sparring with leaders on operational excellence, the question of how to structure the organisation is coming up regularly. And as so often, the unsatisfactory answer pops up: "It depends...". Are we creating a global structure that supports the different teams? Are we focusing on a region and integrate all functions in one structure? Shall we go down the path of a matrix organisation? All options seem to have major drawbacks.

While the answer is not simple, I like to think along a few principles that guide the design of the organisation. All of us are engaged in two categories of work. One is focusing on daily operations and is directly impacting the value creation within the company. The other is more strategic thinking and reflects on the way we operate and improves and innovates the operation. So, how does that impact organisational design? Let's look at some examples.

In one global manufacturing organisation, the environment, health & safety (EHS) team was looking the best way to serve the different organisational units. On the one hand, the company is divided into different business units and regions. On the other hand, the EHS team is organised in different functions like product safety, process safety, etc. Are we creating global, functional teams that are serving the regional operations, e.g. packaging, manufacturing, import facilitation, etc.? As a result, the specific, local nuances are often neglected and the functions within the region are not well aligned. Shall we design the organisation along the regions? Then, a result is that within a function, the global alignment receives less attention.

In a service organisation, a technical delivery department was looking how to organise themselves more effectively. The company is organised according to business units (customer segments) and regions. Plus the delivery team has different subject matters like data warehouse, software platforms, user journeys, etc. Currently, the company is organised according to the subject matters. And, as a result the collaboration between these units is very poor and the speed of delivery is limited. Shall we change the organisation to a business unit and regional structure? How can we ensure alignment within the subject matter units?

Let's go back to the principles above of daily operations and strategic thinking. All of us are engaged in contributing to the value creation within our company as part of our daily work. At the same time, we also reflecting on our way of working and preparing the organisation of the future success. In my eyes, we should focus first on value creation. And the organisational structure should reflect this by creating departments and teams along the value chain. In the EHS team, this means that we are establishing regional, cross-functional teams that focus on the value creation of the customers. And for the service organisation, we establish teams along the business units and regions - incorporating the different subject matters.

Ok, great! And how can we align the different subject matter experts globally? In my experience, formal global communities of practice allows to bring these experts together and share experiences and define new standards - building the platform for future success. This is much better than engaging in complicated matrix organisations with double reporting lines.

In which area do you want to try out this organisational design?