New Organizational Forms

Leave a comment
essays / orgdesign

In the 1960′s, the historian, Alfred Chandler, crystalized his vision of corporate organizational theory with the phrase, “structure follows strategy.” Times have changed, markets have changed, the inherent usefulness of the corporation has changed, and strategies have evolved – thus it’s time again to address the structure of organizations around the globe – ours and especially our client’s.

Chandler, the first true business historian, studied how the chemical company Du Pont, the automobile manufacturer General Motors, the energy company Standard Oil of New Jersey and the retailer Sears Roebuck all garnered explosive growth through the use of a multi-division organizational form. The M-form, as its known, is a federation of semi-independent product or geographic divisions governed by a central hub making strategic decisions and setting financial targets (I’m sure you’ve worked for a few M-form organizations).

As the need for internal communication sped up and markets demanded greater responsiveness (which is the founding need for organizations to begin with), some M-form organizations have mutated into what we call N-form: networked models where communication is central among business units. Dell, for example, was only able to achieve its just-in-time production because of greater communication abilities across its supply chain.

And as complexity studies grew popular, an understanding of the organization as an even more adaptive entity developed.

But even with the march of time and technological innovation, the same basic assumptions noted in Chandler’s work still seem to have been carried along all these years in organizational theory:

  • Chandler noted that one purpose of the corporate organization was to become the educator whereby a nation learns pertinent technology and develops managerial skills – I fear the role of educator is no longer the domain of the organization.
  • The corporation can no longer be seen as an entity wholly abstracted from the market or culture; its time we rid ourselves of silly dichotomies. We all play in the same cultures.
  • The most innovative companies don’t just have porous borders – they’re practically invisible. And if you think Zappos was an isolated incident, my prediction is that every industry will soon have to compete with their own Zappos (a company with communication and marketing baked-in to the organization).
  • R&D cannot remain an isolated department or silo when every corporate officer has the ability to connect 1:1 with past and potential customers. R&D is an activity for every role and it needs effective knowledge management more than ever. Market penetration is rarely the largest objective for most of my clients, and perhaps yours as well – instead they’re focused on retaining share, innovating existing products, or moving into new sectors. In the past, researchers have advocated that firms must possess an ability to process feedback – I’d argue that that ability is now more central to the role of the organization than ever before (and yet still encompassed by the original need for corporations to be responsive).
  • Peter Drucker once said, “accept the fact that we have to treat almost anybody as a volunteer.” There are far too many people within companies simply filling a seat for the paycheck. Large companies aren’t very interesting places to work because we’ve largely ignored what makes people happy at work. Conversely, there are more people lining up to volunteer a comment, or an idea, or effort on behalf of brands (threatening those only collecting paychecks).
  • Organizational theory is essentially information theory – and we’ve only just begun to prove how digital technologies can effectively retain, speed up, and improve the information in the pipes (though this is no easy feat). One of the big insights of early organizational theory was to put team members in the same building so that they could receive information at the same time – as an example, how about as a start we allow everyone to be on the same internet instead of administering Orwellian firewalls?

Above all, I suggest that we begin to share ideas for organizational structures between ourselves more often. Advertisers and marketers have an especially large responsibility as we’re feeder fish to organizations facing these challenges. We’re eager to reinvent ourselves, but perhaps we should first reinvent our clients. The successful organizations won’t be the first to recognize what I’ve laid out here, these problems are known well; the most successful organizations will be the first to implement a truly radical and effective solution.

Our strategies for our clients have certainly evolved and as Chandler dictated, its time to evolve their structures.

Leave a Reply