A search for the earliest published formal organization structure goes back to 1855. Yes, more than a hundred and fifty years ago! Millions of things have changed from the pre-industrial era to now. Technology has disrupted everything – how we hire, retain, produce-buy-sell goods and services (and sometimes what). The only aspect that has remained unchanged through more than a century is organization structures – how we organize businesses.
It is interesting to see how this structure came about in the first place. To quote from the article published by state.com – “Daniel McCallum, general superintendent of the New York and Erie Railroad, defined an organizational structure that would allow the management of a business that was becoming unwieldy in its size.” It may appear surprising, but that is how it happens even today. Most companies do not start with any fixed structure. But as they grow beyond a threshold size, everyone feels compelled to “organize” themselves smartly around structures. They create departments, draw reporting lines, and add layers.
** Image sourced from state.com
Daniel McCallum used a tree metaphor to depict the relationship between management and front-line workers to represent the organizational structure. By 1917, as seen in the organizational structure of CTR, the orientation was turned top-down. It looked more like a pyramid than a tree. Maybe this was a result of the growing influence of the military in that era. In hindsight, though unintended, it did more harm than good. At least in the tree metaphor, though there is a notion of hierarchy, with leadership at the roots and trunk – it directly holds them responsible for providing a solid base and foundation that the rest of the organization needs to grow. With the pyramid, people at the top began to assume their role as giving orders and issuing commands more than providing support.
Fast forward a century and organizational structures still looked the same – like pyramids. Over the years, OD emerged as a core skill, but most work in this space, at best, appeared like minor tweaks around the core hierarchical construct. They oscillated between centralized and decentralized systems, experimented with reducing the number of layers to flatten the pyramid, or tried out a matrix form. But in the majority of cases, nothing radical happened that delivered a lasting impact.
Organizations like Spotify are exceptions. Very few have been able to emulate their bold experiment with a traditional matrix design. It remains aspirational for many organizations. Models like circular organizations can potentially disrupt “how work works,” but it is too early to say for sure.
To survive in modern times, a company must have an organizational structure that accepts change as its basic premise, lets tribal customs thrive, and fosters a power that is derived from respect, not rules. In other words, the successful companies will be the ones that put quality of life first. Do this and the rest – quality of product, productivity of workers, profits for all – will follow.
Indeed, OD is up for disruption. There is a consensus amongst leadership on how people work together to create a value that has little to no resemblance to whom they report and whom they share the box on the organizational chart. Everyone is on-board on the organizational structure’s role in building agile, nimble, and resilient organizations. Factors like multigenerational workforce, a growing percentage of Gen Z in the mix, and the rapidly changing ecosystem in which businesses are operating today add to the urgency.
There is also consensus that Organization re-design is not anymore about moving people into new boxes or drawing new reporting lines. It’s not just another independent change-management challenge. To make the lasting change, the OD professionals will need to increase their appetite for experimentation and broaden their perspectives of organizational design. They need to focus on changing the organization’s operating system – the culture. They need to drive this effort with systems and processes that help people succeed in a flatter, non-hierarchical and nimble structures.
OD professionals will play a critical role in holistically shaping the future of work for their organizations. And it will pay off for them to be ready.