Organization structure: Beyond the boxes
Mark Goodale explains different kinds of organizational structures and what kinds of firms each might work for
A functional organization structure is vital for AE firms. Getting it right leads to benefits like streamlined operations, efficient resource allocation, collaboration, cooperation and accountability. Getting it wrong creates consequences like poor communication, silos, a lack of innovation and dismal morale.
Different setups have their pros and cons, and what works best depends on the size of the firm, the clients it serves and its purpose and vision. Picking the right structure means thinking about what the company really needs, what clients want and the kind of projects it tackels. A good setup usually means balancing specialization, getting things done efficiently, and being able to change as the markets do.
Which structure is right for your firm? Here are a few to consider, along with their pros and cons:
Matrix structure: In the matrix organization structure, project managers reside outside of the disciplines. When a new project comes into the firm, the project manager assembles a team in coordination with the heads of each of the disciplines that will be involved in the project. The role of the discipline head is generally to ensure the quality of the discipline’s work and to coordinate the schedules of the discipline staff. The role of the project manager is to make sure that the project is completed on or under budget, on schedule, and to the satisfaction of the client.
Pros: Combines functional and project-based structures, allowing expertise from different departments to work together on specific projects. This facilitates better communication and resource sharing. It is familiar to most industry firms, and it allows the discipline/department heads to have significant control over their departments.
Cons: First, it sets up potential conflict between the project manager and the discipline or department head as each often has a different agenda. Second, it blurs lines of accountability and responsibility, as staff within each discipline are essentially reporting to both their discipline heads and the various project managers with whom they are working. And third, depending on the quality and motivation of the discipline heads, it can lead the firm to focus on perpetuating a discipline or service that is no longer in demand by clients.
Hybrid structure: This structure is essentially a variation of the matrix structure. However, in the hybrid structure, project managers reside within each of the disciplines or departments, rather than outside, with the lead discipline generally yielding the project manager for any given multi-discipline project. The hybrid structure shares the same strengths and weaknesses with the matrix structure.
Pros: It can maintain a balance between specialization and flexibility, adapting to various project types and client demands. Like the matrix structure, communication and resource-sharing can be enhanced.
Cons: Requires careful management to prevent complexities and confusion in decision-making or conflicts among various decision makers and those overseeing specialized staff.
Market-based structure: In the market-based structure, the firm is organized primarily around client teams. Each team is composed of a team leader (or “super PM”) with a core of dedicated staff that has the requisite technical skills to perform the work to serve its client. The composition of any team varies, given the specific demands of the client or project type that it serves.
Pros: The staff in each team focus exclusively on serving clients in that market sector and thus become intimately familiar with the unique needs and issues of those clients. There is clarity and a clear structure of accountability in the organization. The firm can establish a defined marketing program geared to the specific issues of their target markets and can anticipate how much or how few marketing resources should be allocated to a certain sector. This is impossible to do for a discipline or service that crosses a multitude of client types. This structure adapts to client needs faster than the matrix or hybrid structures by being able to add and drop disciplines and services based on industry trends and issues. The tendency in matrix or hybrid structures is to protect disciplines and services even when they are not in demand. Or the discipline or service sees little in the way of evolution as client demands shift, resulting in a more expensive, less valuable, and ultimately less competitive offering.
Cons: First, the market-based structure requires a critical mass of work and staff in any given area to support the structure. Second, competition may arise between the groups (the way incentive compensation is tracked will have a significant impact on whether turf wars result). And third, the leader of a team must be a strong client manager, marketer, business leader, mentor, and operations manager—a true entrepreneur running a business unit within the organization. Professionals who fit this description are all too rare and in exceedingly high demand.
While it’s certainly no panacea, standing teams organized around client types typically provide a better structure for the firm to grow in its existing markets, penetrate new markets, and instill operational accountability. It reinforces the focus on the demands of the marketplace, and it acknowledges the differences between the various segments of the firm’s client base. These companies share resources across the organization as opposed to setting up fiefdoms based on discipline or geography. Most importantly, it puts clients at the center of your firm—precisely where they should be.
– Morrissey Goodale is a CFE Media and Technology content partner.
Original content can be found at Morrissey Goodale.