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Enabling company growth through correct management structure

Posted by Oliver Corrigan on May 30, 2014 10:20:00 AM
Oliver Corrigan
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How is growth enabled and nurtured through different business structures? Is one model more effective than another? 

Or does productivity inevitably depend  on more prevailing factors, such as the size of the company or what type of industry a business is in?

In Part One of our exploration of contemporary management structures and practices we explored what alternative management structures were. We looked at several leading companies which have implemented alternative organisational systems and how the changes have affected the organisations and their employees.

Organisational growth through alternative structures

As the global management consulting firm McKinsey & Company highlights, most senior managers pay close attention to the strategic side of their company's growth. The organisational processes and structures go comparatively overlooked. According to McKinsey & Company, this oversight can “dampen a company's growth plans.”

A centralised organisational structure

What's important to remember that no single organisational structure suits every business. The appropriateness of an organisational structure is significantly determined by the size of the business. For example, many SMEs have a centralised organisational structure in place, in which the owner typically makes all the decisions. If there are only a handful of employees, this decision-making system generally works well.

However, once the business experiences growth and begins to take on more employees, a new management system may be required. Choosing the right system can be crucial to company success and maximum profitability afforded.

The matrix structure: the ladder to success?

Matrix-Organization-Chart-1-549x335

 

Image via http://www.global-integration.com/

 

Advancements in telecommunications, mobile technology and the arrival of Wi-Fi has led to a growing number of companies operating with multiple business units in multiple countries. These cross-geographical boundaries and multiple flexible business ventures are known as the matrix structure.

As the Harvard Business Review points out, the Matrix structure has gained considerable popularity in recent years.

The number of major companies implementing the matrix model is growing. The increasing volume of some of the world's biggest corporations adapting this model of management is surely testament of how the structure is enabling company growth.


 

Case study: General Electric

Let's take General Electric (GE) is an example. For years this multiple business organisation executed one basic business model throughout its organisation – five managers reporting to one general manager. According to the Harvard Business Review, armed with the logic that a business must organise in order to meet its needs, many GE divisions and departments, which found the hierarchical managerial system inept, adopted the matrix structure as a fundamental alternative.

Referring to the matrix system as being “a bellwether of things to come”, GE management stated in its Organisation Planning Bulletin:

“Successful experience in operating under a matrix constitutes better preparation for an individual to run a huge diversified institution like General Electric—where so many complex, conflicting interests must be balanced—than the product and functional modes which have been our hallmark over the past twenty years.”

Many other high performing companies are steering clear of management pyramids and adopting alternative flexible business structures, including Nokia, Proctor & Gamble, Cisco and IBM. For example at Cisco 20% of the management left and at Proctor and Gamble, 50% of the management team left the company. As Businessweek is quick to point out these departures represented “positive changes”, and a “victory of collaborators over the command and controllers.”


 

Holacracy: No more job titles, no more managers

 

Holacracy - management structures

 

Image via holacracy.org

 

Holacracy? You may ask in uncertainty. Holacracy is a new management system that is gaining a foothold in the corporate world. Taking its name from the Greek word 'holos' – which means an autonomous, self-sufficient, single unit that is simultaneously dependant on a larger unit – holacracy refers to a system without job titles, managers and hierarchical decisions. 


 

Case Study: Zappos and holacracy

So far, Zappos, the online shoe and clothing company based in Nevada, has been the biggest adapter of holacracy. Talking to the employment professionals organisation known as Fast Company, Zappos says by the end of 2014 it plans to have discarded its old corporate structure and replaced it with the holcracy system. Without managers or job titles, by 2015 Zappos' 1,500 employees will be working within a holacracy model.


 

So how exactly will such a 'liberating' system result in company growth?

Brian Robertson is the founder of HolacracyOne. Robertson advises Zappos and other companies on why and how to adopt the holacracy system. Robertson describes traditional working as inefficient. With workers having to take their ideas to a boss, who then goes to their boss, and so on, can lead to information that could prove critical to a company's growth, “slipping through the cracks.”

Robertson put together a 20-page Holacracy Constitution, which underlines the structure, processes and rules of this organisational system. The crux of the model is similar to the 'no management' we highlighted in Part One, which is centred on the radical restructuring of a company in which authority and decision-making is evenly distributed amongst every employee. With every worker making decisions, according to Robertson, more effective problem solving is achieved, “ultimately advancing a company's goals.”

The wrong model can kill a company

In adapting different models and moving away from less stratified systems, the likes of GE, Cisco, Proctor and Gamble and possibly Zappo, are enjoying continued success and growth. By the same token, choosing the wrong structure can create employee tension, breed inefficient working practices and reduce company profits. In the worse case, adapting the wrong structure, can lead to the closure of a company. As two authors from the Hong Kong Institute of Accredited Accounting Technicians (HKIAAT) wrote in their paper on Management Structures, a topical example of inappropriate management models leading to company demise is that of automobile manufacturers in the United States.

“A combination of out-dated management structures, inefficient business processes, poor work-place relationships, and vague communications between head office and operating divisions have almost caused the collapse of these global giants,” writes the HKIAAT authors.

Work place relationships

Evolving management models where company hierarchies are giving way to more evenly-distributed authority. These developing trends include new work place relationships. More and more employees are working remotely and exploring more flexible work options such as co-working. From start-ups to SMEs, large companies to international corporations, the corporate world is increasingly adapting sustainable working practices, such as being without managers, giving employees flexible workspace and enabling employees to work where they want and want they want. So far, the consequences of taking such bold and innovative moves seem to be paying off.

What are your thoughts on the points we've highlighted? Perhaps you work at a company that has implemented such changes and is yielding positive results? Or maybe you are an employer of an 'old school' system and are reluctant adapt? Either way, we'd love to know your thoughts on such topical issues. 

 

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Topics: management, Co-working and Flexible Working

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