"The hole and the patch should be commensurate" - Thomas Jefferson
You've formed your business, you're thinking about all of the people you need to hire, and you're not thinking about the unknown unknowns waiting around the corner to surprise you.
The good news is that you probably don't need to hire as many people as you first thought, and your saved budget dollars can help address those unknown unknowns when they pop up. This section is meant to review concepts in organizational strategy and to introduce the concept of an Org Stack.
What is organizational structure and design?
Organizational structure is a visual representation of how a company arranges its various roles, responsibilities, and relationships. It outlines who does what, who reports to whom, and how functions interconnect within the company. Every business has an organizational structure, whether it's deliberately designed or naturally developed over time. Typical structures include functional (vertical/hierarchical), flat, divisional, or matrixed.
Organizational design is the strategic process of shaping this structure to align it with the company's business strategies, goals, and environment. It involves the creation, reshuffling, or alteration of departments, hierarchies, and reporting lines. Effective organizational design ensures that all parts of the company are working together cohesively towards common objectives, allowing for seamless communication, efficient workflow, and a clear path to strategic execution.
Why it matters:
Organizational structure and design are far from administrative formalities. They hold the potential to influence almost every aspect of a company’s performance and are often the underappreciated infrastructure behind successful business strategies.
They provide clarity to both internal and external parties: clearly defined roles, responsibilities, and reporting lines prevent confusion and facilitate efficient operations. Who has decision authority and how much do they have? Who should employees reach out to about errors on their paystubs or for information on locating critical product information? Who should customers reach out to if they have a problem?
An effective organizational structure supports the execution of a firm's strategic goals. Aligning the structure with the company's mission and strategy ensures that all resources - human, financial, and technological – are organized in a way that maximizes their contribution towards these goals.
Organizational structure and design influence the company culture, which is vital for employee engagement and retention. A well-designed structure fosters collaboration, innovation, and employee satisfaction, which leads to improved productivity and business outcomes.
It's not just about the 'who does what'— it's about creating an environment where strategy, culture, and operations intersect to drive growth, productivity, and success.
Traditional Org Structures
Functional (Vertical or Hierarchical): A functional organization structure is a hierarchical arrangement where employees are grouped based on their specialized functions or skills. Each department focuses on specific tasks or activities, such as finance, marketing, or human resources. This structure promotes efficiency, expertise development, and clear reporting lines within the organization. Large corporations often favor this model due to its clearly defined roles and responsibilities. However, this can stifle innovation and slow decision-making.
Flat Organizations: A flat organization structure is a decentralized approach where there are few or no layers of middle management between employees and top-level executives. Decision-making authority and responsibilities are distributed across the organization, fostering a collaborative and agile environment. This structure promotes open communication and quick decision-making, empowering employees to take ownership of their work. Startups favor this model for its agility. Yet, a lack of structure can pose scaling challenges.
Matrixed Organizations: A matrixed organization structure is a hybrid framework where employees are assigned to both functional departments and cross-functional project teams. This structure allows for collaboration across different functions, such as marketing, engineering, and finance, to achieve project objectives while maintaining functional expertise. It promotes flexibility, knowledge sharing, and the efficient utilization of resources across the organization.
Divisional Organizations: A divisional organization structure is a framework that groups employees based on specific products, services, or geographical locations. Each division operates as a separate entity with its own functional departments, such as marketing, finance, and operations, allowing for greater autonomy and focus on specific markets or regions. This structure facilitates adaptability, customer-centricity, and efficient resource allocation within each division.
The Org Stack
Organizational Design Stack (Org Stack): An Org Stack represents a supplemental framework for structuring and managing your business, which incorporates traditional principles of organizational design and integrates them with modern technological advancements, flexible labor arrangements, and strategic vendor relationships. The concept of an Org Stack allows you to abstract away jobs-to-be-done (JTBD) from traditional titles and functional roles, eliminating the JTBD that you do not need.
Traditional organizational design focuses primarily on the internal structure of full-time employees and departments. The Org Stack concept embraces a more holistic and flexible approach. It acknowledges the ability to delegate or outsource specific tasks or functions to freelancers, independent contractors, vendors, or even AI and automation, thereby allowing organizations to operate more leanly and efficiently.
This framework combines the following elements:
Traditional Employee Roles: The roles filled by full-time or part-time employees who form the core of the organization. The subpages for this section will describe and detail typical business functions and roles.
Freelance and Gig Economy Workers: Specific tasks or projects can be assigned to independent contractors or freelancers, offering a pool of diverse talents and skills, and contributing to a more flexible workforce.
Vendor Partnerships: Strategic partnerships with vendors or third-party service providers to handle specific functions, such as manufacturing, logistics, marketing services, etc.
Digital and Technological Resources: If there isn't a cutting-edge technology, automation trick, or digital tool for a task then there will be soon. That doesn't mean that this will always be the cheapest and best way to fill a JTBD, but it does mean you should seriously consider what you can outsource to technology.
Process Automation: The use of AI and machine learning to automate repetitive and manual tasks, increasing efficiency and allowing employees to focus on high-value activities.
By integrating these elements, an Organizational Design Stack allows a business to remain agile and adaptable, while effectively managing its resources in a composable and scalable way.