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More than hierarchy, organizational structures reflect corporate values... and hidden problems.

What’s Behind Org Charts?

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Org charts are fascinating (living, breathing, pulsating) organism. I didn’t always see things this way. I remember being a number in an org chart and hating it. I was one of 100,000 employees working for corporation X many years ago, and whenever I looked at an org chart, all I saw was hierarchy. Who reported to whom? Who moved to the side? Who moved up? And why didn’t anyone ever move down? Some people sucked at what they did, and they kept getting “demoted up” – a promotion to get them out of the way.

It took me a few years to understand the true meaning conveyed by org charts: power plays, strengths, and management mistakes. I’ve now seen more org charts than I can count, and I routinely review them as a visual representation of the company’s strengths and weaknesses, and misplaced focus.

A few on my laundry list.

Ownership. I look for “ownership” of every important function on the org chart. If no one “owns” a specific function, who is in charge of it? For example, if everyone thinks they’re involved in strategy but there’s no person/group assigned to it, trust me, it ain’t happening. Wondering why the company has no direction? Look for “strategy” ownership on the org chart.

Marketing. One of the most misunderstood functions in most companies. I personally view it as a more strategic function, but it does span a wide range of strategic and tactical activities. How a company treats marketing says much about their focus. Having a “sales and marketing” department forces the marketing function to become more tactical. “Marketing and advertising” suites brand conscious companies and is also tactical. For high tech companies I prefer to see marketing as a stand-alone function and much more strategy focused (“marketing and strategy” organization?). For non-manufacturing SMBs, I’d like to see a minimum of one marketing staff for every 15-20 employees. Anything less than that and your sales will suffer.

Sales. It’s amazing how many companies have the wrong sales functions to match their product or service offering. A vertical market focus in the sales department is suitable for sophisticated product lines, and a geographical focus is more suitable for commoditized products. Mixing the two will create havoc. The titles alone portray much about the company’s focus. Is the title called sales, business development, or account management? Does this match the product line? Is channel sales separated from the rest? If not, the channel partnerships will suffer.

R&D. For high-tech companies, I’d like to see a stand-alone R&D organization. Mixing R&D with Engineering dilutes the strategic focus of the company. The engineering team takes the product to launch which is tactical by default. R&D needs to focus on future product lines and shouldn’t get bogged down by day-to-day tactics.

Quality & Assurance (QA). Again, for high tech companies, QA should be separated from engineering, otherwise, product quality is compromised. You need the negotiation between the two groups, and having one function report to the other doesn’t work well.

Human Resources. I’d like to see this as a straight line to the top management (president, COO, or CEO). Most companies organically leave the human resources function under the CFO or VP of Finance. This shows cost consciousness and lack of focus on human resource development.

Operations. Another area that routinely falls under finance to keep the costs down. This should also be a straight line to the top (or in smaller companies, handled by the top position in the company), as it spans the entire company. Operations and finance should be in position of negotiating together and one reporting to the other compromises operational efficiency.

Legal. For mid sized companies and up, it makes sense to have an in-house council group. Small companies with high transactional activities (licensing, for example) or high focus on IP development (patents) can also use at least one in-house council.

I’d love to hear your stories. What do you see on your company’s org chart? Does it match your company’s mission and corporate values? If not, it might be time for change management (let’s talk!).

And let’s hope “demoting up” is eliminated for good. Please tell me it is.

About Kat Shoa

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For two decades, Kat Shoa has been involved with various aspects of businesses and products with projected revenues of hundreds of millions of dollars, and has had a track record of saving millions of dollars in product and administrative costs for her clients. With a unique “left brain”-“right brain” balance and an innate strategic outlook, Kat analyzes business problems, and creates solutions that best fit her clients’ business conditions by nudging, pushing, or completely reshuffling the deck if necessary. More at: www.katshoa.com.

4 comments

  1. avatar

    Anonymous, the problem is, a lot of outside consultants and attorneys don’t want to be obligated to one client since they risk losing their practice. It’s a matter of personal choice for them, and if they know the gig will be over soon, they have no incentive to go in house. You can always agree to a lower fee for higher hours though. I always say, “it’s just a contract”.

  2. avatar

    @Kat: I know of a company who typically always hired outside counsel but over the past year they’ve seen a huge rise in allegations of wrongful termination and discrimination. At $250 an hour it’s getting to the point where they might as well hire this guy on full time… but then what do they do once the storm is over? Any suggestions on this? Are there contract based attorneys who can work just for them but for a finite period of time? (Any lawyers out there that can help answer this?)

  3. avatar

    Well put Kat. Thanks for the great read.

    Jono

  4. avatar

    Our companys org chart doesn’t make much sense to me. We have lower level employees reporting directly to the top and then middle management executives with little-to-no visibility (could be the “demoting up” pheno. – but then, why not just fire the person? loaded question, i know). I’m not opposed to younger generations having high visibility… if they bring a strong work ethic and good ideas… but that’s not always the case.

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