At some time or another, you have almost certainly looked around your workplace and wondered why it doesn’t seem to operate as well as you think it should.
It could be processes that don’t seem to work, too many meetings that don’t seem to result in anything happening or confusion about who is supposed to do what. The longer we stay in one organisation, the more likely we are to become complacent about its failings – especially when the failings of one organisation tend to be very similar to another.
In a functional organisation, each department works independently and follows its procedures and processes. The functional organisational structure is one of the most traditional and common types of organisational design, and it’s popular primarily because it arranges a business according to the specific expertise and roles of its workforce.
This traditional approach allows for clear hierarchies and seemingly straightforward reporting lines. The emphasis on specialisation makes achieving a high skill-level within specific job roles easier. For example, marketing experts can be grouped together, focusing solely on marketing activities, allowing for deeper expertise within that domain. The same logic applies to other functions like finance, human resources, and operations.
However, while this may increase expertise within individual functions, it also creates silos that hinder cross-functional collaboration. Despite its limitations, the simplicity and clear structure make it attractive to many organisations, especially those that are larger or more traditionally minded.
It’s such a popular model that when Microsoft PowerPoint helps you start making a new organogram, it looks more or less like every company in the world – with one or two name changes. If we designed our marketing materials the same way we designed our organisations, the File > New menu combination in Microsoft Word would do 98% of the work for us.
The functional model has held for many years, but its time has come to an end. It’s groaning under the pressure of new technology capabilities, and nowhere in our organisations is that more true than precisely where technology is supposed to be done – the corporate technology department.
For years, inside the technology department, we’ve referred to “the business”, meaning everything other than IT, and for its part, “the business” has spent years trying to isolate IT as a mere cost centre.
But nearly a quarter of the way through the 21st century, the need to integrate digital tools into every part of business means this splendid isolation no longer really works. Even in the most performant IT departments, centralised decision-making around tooling and technology choices falls behind the galloping pace of the market, and it’s difficult to imagine how it could ever be otherwise in a department of finite resources.
In the 21st century, the idea that the IT department deals with everything to do with computers makes its remit boundless, and the inevitable burden this places on CIOs and IT managers has led to a constant chorus of how the rest of the organisation doesn’t understand the challenges of technology.
Still, by refusing to allow the curation of information technology outside of that provided by the technology function, it becomes a self-fulfilling prophecy – the only people expected to understand the challenges of technology are those hired into the IT department.
The only way to break that vicious cycle is to discard the model of the central IT department. Once you start questioning the existence of the IT department, it’s only a short journey to rejecting the concept of functional structures entirely.
Fortunately, there are alternate models of organisation that are more appropriate for a world defined by change.
An alternative to the traditional, functional organisation is a structure of many small services composed of multi-disciplinary teams responsible for designing, building, running, maintaining, supporting, redesigning, rebuilding and eventually decommissioning the service.
This model was famously adopted by Amazon, at first with its famous two pizza teams – the team size is limited to the number of people that it’s possible to feed with two large pizzas, and similar, decentralised models have been implemented in organisations such as Nestlé.
Rather than having departments responsible for arbitrarily complex and long lists of responsibilities, small teams own and have full accountability for, and agency over, delivering a manageable set of user needs – for internal or external users – that are aggregated into a service.
There are many organisations that try dipping their toes into service-based design. However, they often try to retain their overall functional structure, grouping people by professions and having a dotted-line matrix-management structure between individuals and the services they operate in.
Matrix management, though, blurs accountability by design. Is an individual more accountable through their solid or dotted line? What if the instruction from one line undermines the other? Which line wins? Hint: it’s almost certainly the functionally aligned line.
When this type of organisation is established, it’s done with the best intentions. Sooner or later, though, the functional structure butts up against the service-aligned structure, and when that happens, the functional line-managed structure tends to win – the hybridisation actively undermines the benefit of a service-based structure. It is far better to embrace a service model and adopt a more effective set of tools for managing it.
But what are those tools?
Fortunately, researcher Simon Wardley has done much of the research for us and captured it in his doctrine. From “using a common language” to “designing for constant evolution”, the 40 behaviours of his doctrine that successful organisations seem to display are backed by research and have been consistently useful, Adopting structures and processes that enable rather than inhibit these behaviours is the key to making service-based organisations work.
For the last eight years, we’ve been using those behaviours to refine and adapt organisational structures on the basis of that doctrine, and we’ve been able to capture what we’ve learned in the Organised Services Operating Model (OSOM) guide.
It’s not complete – it never will be. Because what is most true about the best organisations in the 21st century is that their structures are not fixed, functional, or hierarchical. They’re complex, networked and designed to constantly change and adapt to the needs of the users.
James Duncan is co-founder and principal at consultancy Stance. Previously he was the chief technology officer of the Public Services Network and held senior technology positions at Joyent, Home Office, HSBC, Canon Europe, and Fotango.