The 5 Organizing Principles of Successful Companies

1024 576 David DeWolf

In my last post, I shared the Fatal Flaw of Organizational Design, along with an approach to organizational design you can use to build a rock-solid foundation for your business. The quick recap: focus first on Strategy, then Structure, and, finally, People. Once you’ve done that, you’ll be ready to move on to the 5 Key Organizing Principles covered in this post. These principles, in a nutshell, cover how you can go from Strategy to Structure.

Organize Around What’s Important and What’s Hard

Organizing around what’s important is all about looking critically at the trade-off decisions you’ve made in defining your strategy and ensuring that you organize around and support these decisions as you chart your organization. If an integrated supply chain is critical to your strategy, wouldn’t you want to make sure that your organizational structure is optimized for that integration? If you have chosen to target a certain industry, you may want to consider organizing your go-to-market teams around that industry.

Actively solicit input from your team about what they’re finding most challenging to do their jobs successfully. (Word of warning here: as a leader, it’s incumbent on you to separate the signal from the noise). Listen attentively, and if you hear aspects of your business that are difficult to solve, don’t be afraid to organize around them.

One of the most strategic and challenging areas of our business at 3Pillar is what we call “Teaming Operations.” Teaming Operations is all about putting the puzzle pieces of individual team members together into cohesive, high-performing product teams for our clients. Fully managed, multi-disciplinary teams are part of our core value proposition — and building these teams is not only strategic but hard. Over time, by paying attention to what’s important and listening to what was hard, we came to the conclusion that combining the various functions that are required for Teaming Operations (recruiting, resource management, etc.) into a single department helped us start “finishing the puzzles” even faster than we’d been able to in the past.  

Balance Influence and Authority to Ensure Effective Partnership

The best leaders motivate and inspire their teams to reach new heights. They also know when it’s time to make a hard decision, tap into their authority and take decisive action in order to kickstart progress. (Michael Abrashoff wrote a great book called It’s Your Ship that has a number of invaluable nuggets on balancing influence and authority in the name of effective leadership. I learned so much from it that it has become one of the books that we include in our leadership development program at 3Pillar).

Likewise, healthy organizational design shares power and influence appropriately throughout the organization in order to both empower individuals and promote collaboration. Resist the temptation to aggregate authority in a single department. This creates a dynamic wherein a single leader has near-total control and little motivation to work in collaboration with others. Instead, balance clear responsibility and authority with a healthy, mutual reliance on other departments. 

Design Reasonable and Consistent Spans of Control

One of the biggest leadership issues I’ve both experienced myself and have seen in others is not knowing when we’re being stretched beyond our limits. At no time is this more apparent than when your number of direct reports balloons to somewhere north of 6 or 7. Any number beyond that makes it very difficult to provide the kind of timely, informed, thoughtful feedback necessary for your direct reports to do their jobs effectively. A strong manager can sometimes deal with 8, or even 9 for a temporary period of time, but, when I see a permanent organization designed wherein a senior leader has 12 direct reports, there’s likely a problem (and, typically, it’s designing for People, not Strategy).

We can talk about empowering people all day long — and I’m a huge proponent of hiring people who are smarter than you are and giving them enough leeway to do their jobs — but the reality of the modern workforce is that nobody can do their job in a vacuum. Even the most capable and independent leaders in your organization will need sounding boards, collaboration, and validation that they’re heading down a path that will lead to helping meet the company’s objectives. With too many direct reports, a manager is likely not giving them all enough support. With too few, the manager is likely too involved and not creating real scale appropriate for their level of the organization.

Create Clean Lines of Responsibility, Authority, and Accountability

Nothing will slow an organization down more than uncertainty around who’s responsible for driving an initiative forward or that initiative’s success. For all the talk of the benefits of matrixed organizations, or Zappos’ well-documented experiment with Holocracy, my experience has been that the organizational structure that works best for most companies is one where there are clean lines of reporting and accountability.

This is absolutely not to say that workplaces should be command-and-control environments where team members are routinely looking for marching orders. Far from it, in fact. It is to say that there needs to be clarity on who’s responsible for decisions and what the expectations are for everyone on the team, including the leader(s). I tell my senior executive team all the time (tongue in cheek), that we make decisions by consensus, except for when consensus can’t be reached in a timely manner, at which point it becomes a dictatorship.

Maintain Consistent Design Principles Across Organizations 

Consistency provides clarity and scale. Take the time to abstract your organizational decisions into principles that can be applied consistently. Do you organize primarily by P&L, function, or geography? What is the direct reporting relationship and what is matrixed? Consistently applying these answers across the organization will create consistency, clarity, and a more efficient operating model. 

If you have three office locations, it will undermine performance for each one to have its own operating model. Assuming you put considerable effort into Strategy, Structure, and People, it also just makes good business sense to propagate the approach across all your business locations and units. This will lead to consistency in how you deliver to customers, how you handle internal processes like reviews and feedback, and how you approach adding new team members, the lifeblood of your organization, no matter where in the world they are.       

Wrapping It Up: Why Organizational Design Matters

These 5 key organizing principles can help you build a scalable business that’s populated with empowered employees. Those empowered employees can and will help your customers solve some of their most pressing problems, which are oftentimes problems that others have struggled to help them solve. At best, this will keep your customers coming back for more. At worst, your customers will become promoters of your brand that refer you to anyone who asks.

In my next post, I’ll cover 5 organizing considerations that can be applied at the team level to ensure your teams remain innovative, collaborative, and deeply engaged.