No organizational structure is perfect, but many of them across business today could be a lot better. The challenge is that many structures out there breed unintentional conflict. Does yours?
Creating unintentional conflict was not the intent of organizational designers. They were not taught in Business School, nor as part of their Organizational Development curriculum, the concept of unintentional conflict and how to avoid it when designing an organizational structure. In this article, I will give you, in broad brush strokes, a way to approach that.
I recently introduced a phenomenon at work in our businesses today that I have labeled “Unintentional Conflict.” Unintentional conflict in business occurs when opposing forces are inadvertently activated against one another, causing unfortunate circumstances that interfere with a business interaction, operation, or outcome. I gave an example of how this manifests from organizational structure, and promised to provide a solution in this article.
So while I’m making good on that promise, please remember this about organizational structures: The key is to design a structure that will help create an environment of “shared space”, as opposed to destructive, dysfunctional, and inefficient conflict. I’ll restate the problem below and then discuss the solution.
The Story of an Organizational Structure that Promotes Unintentional Conflict
A healthcare IT company, Excellent Healthcare Systems (EHS), has dozens of long-term projects to customize and implement its software at client hospitals. The resulting systems provide medical record tracking and automation across major service areas in hospitals (e.g., radiology, pharmacy, ambulatory, etc.) Therefore, the project implementation teams must include an array of people with all of the needed knowledge and skillsets.
The EHS organizational structure is a traditional functional structure divided into functional departments. The people with the skills needed by the projects are hired into ten departments that mirror the major service areas in hospitals. Once hired, these people generally take their direction from, and get paid out of, the departments.
Project managers assigned to lead new implementation projects must ask the departments to assign resources to their projects. Sometimes they get the talent they need when they need it, but often they don’t. All of the Project Managers are fighting over the same limited resources.
The EHS Department Managers are doing the best they can to satisfy the needs of all the projects. Their best people are in high demand and assigned to more projects than they can handle effectively. Nevertheless, project teams are far from satisfied. They suffer when departments move staff in and out of projects without consulting them or providing sufficient lead time to recover. Without adequate team resources, Project Managers unsuccessfully fight to prevent schedule slips, and find themselves trying to explain these problems to angry clients while powerless to resolve the real issues.
To make matters worse, the EHS Project Managers have little control over the people on their teams, who “belong to” and take their direction from their departments, even, at times, on matters related to the projects. Conflict is everywhere.
As a result of the unintentional conflict and other consequences caused by a functional company structure that is poorly aligned to a project environment, project performance is poor, clients are moving to other competitors, and EHS is losing revenue and profit.
Realigning the Organizational Structure to Create Shared Space
While the challenges with EHS are formidable, they most certainly can be addressed. In my experience working with companies in similar situations, I learned a very important lesson. The job of designing an organizational structure is not done just because you finished drawing an org chart. More is required.
Below are five major steps for addressing the significant challenges described above and designing an organizational structure that promotes shared space and an effective and harmonious working environment. Notice that only the first two steps are required to draw an org chart. The rest are some of the things required to make it work.
- Start With Your Mission: It is amazing how often structures run counter to the organization’s mission. For example, the EHS mission is to serve hospitals, and ultimately patients, by providing customized systems and solutions that assist medical care operations in providing excellent healthcare. To accomplish that, EHS would need its biggest client touch point, the implementation projects, to execute very well. Clearly the structure is not supporting the mission. In this case, the single largest goal of the structure should be to provide the implementation projects what they need to successfully execute. These teams are at the head of the company’s value chain – on the ground providing the EHS products and services.
If your structure is not doing a good job of supporting your mission, it will drive employee attention inward toward the organization and its fragmentation, instead of on things that ultimately bring value to customers. Create shared space by ensuring that the mission is the primary driver.
- Formulate Structure and Allocate Major Responsibilities: I will focus here on the Professional Services part of the organization for brevity. We know from step 1 that we need a well-oiled professional services group to staff and run implementation programs. That means we need the ability to plan and run projects, as well as ongoing access to qualified professionals from a number of medical specialty areas to staff the projects. That means you have a matrix organization.
The point is, recognize what you’ve got as an organizing principle, and make it work well. Don’t pretend you don’t have a matrix or treat it like a functional hierarchy, as our example company did.
Once the matrix is recognized, one can allocate major responsibilities to each side of the matrix. Within Professional Services there are almost always two major responsibility areas: Project Execution [the implementation projects], and Capability and Capacity Development [functional processes and tools, functional training (for capability) and staffing (for proper capacity)]. The assignment is natural: the Project side gets project implementation, and the Functional Departments get functional capability and capacity.
Notice in our EHS story that many of the problems with implementation projects originated with insufficient capability and capacity (e.g., not enough qualified staff when needed). This now becomes an issue for the Functional Departments to solve, so that the Project side can be fully accountable for Project Execution. Without this clarity, the lines of responsibility are blurred.
Unintentional conflict runs rampant when people disagree on how things should be done or who is in charge of, and responsible for, what work. Clearly define what each element of your organization controls and is accountable for.
- Define Internal and External Relationships: Many companies stop here (with an org chart) and expect their people to work out relationships with others. Big mistake! While we can help people learn how to develop and define their business relationships, which is a good thing, the basic parameters of these relationships need to be defined consistently across the organization.There are essentially two kinds of relationships that we need to focus on here – direct reporting relationships, and clientrelationships (internal and external). These relationships must be clearly defined and understood among the staff. In our example, the organization must now recognize that most people will have more than one direct reporting relationship – the nature of a matrix organization. It must also be recognized that they report to different people for different things. A Pharmacy professional reports to the project manager of the team he is assigned to, and to his department manager for activities associated with general administration and capability and capacity development (e.g., functional training).At EHS, functional experts assigned to projects did not “report” to their Project Managers while working on the projects. This is one of the biggest mistakes I see “out there.” These should be direct reporting relationships, no less important than the direct reporting relationship to the Functional Department Manager. We need Project Managers, who are responsible for projects, to have direct control over the resources that make up their project teams.External client relationships are relatively obvious, but most client relationships are internal. They exist within the parts of the value chain generally not seen by clients. Where activities are visible to the ultimate clients, we tend to have external client relationships. For the entire value chain to work it is imperative that both types of client relationships be recognized, rewarded, and enforced.Few things create more unintentional conflict than poorly defined and unrecognized relationships. It seems nobody is happy. Create shared space by defining relationships that link individual activities to the organizational mission and the ultimate clients.
- Define the Flow of Money: At EHS the Project Managers only owned a small portion of their project budgets. That is because functional staff assigned to the projects drew their salaries from their functional departments regardless of the projects they served. The problem with this is that many functional staff don’t take their reporting relationship to the Project Manager seriously. After all, they know where their bread is buttered! This reinforces dysfunctional behavior and generates unintentional conflict.
To create shared space, define the flow of money to support and reinforce responsibility. For example, Project Managers should control the total project budgets, and should “buy” staffing resources from the functional departments. In this way, the departments are recognizing that the Project Managers are their internal clients – which they are!Avoid unintentional conflict and create shared space by defining the flow of money to be consistent with, and reinforce, defined responsibilities and relationships.
- Define Applicable Rules of Engagement: In the EHS story I mentioned that one of the problems was that the Functional Department Managers sometimes move their people from one project to another with little or no prior notice to the Project Managers. This is quite disruptive to project operations. Key people, who are up to speed on the project and clients, are suddenly not available. Even if another qualified resource is assigned, she will have a learning curve on the project before she reaches full productivity. This fuels unintentional conflict between Project and Department Managers, and is a good example of why we need to define rules of engagement.In this example, the rule should be that project staffing decisions are made jointly between Project and Department Managers. That is, they should be an agreement and, essentially, a contract between the two parties. For example, Project ABC has contracted for Joe, a Pharmacy specialist, for six months starting tomorrow, at full time. If either the PM or Department Manager desire to modify that agreement along the way, they must contact the other to discuss, negotiate if necessary, and reach an agreement. If they can’t reach an agreement, escalation protocols are included in the rules of engagement.Create shared space by defining rules of engagement that systematize key activities and decision making, while recognizing the realities of the business environment, so that people have a way to get to agreement and avoid conflict.
This article is by no means a textbook or cookbook for how to organize a company. However, it does offer a different perspective on how to approach the job. Consider how much unintentional conflict is being created every day by businesses with organizational structures designed without consideration for how they may create ongoing conflict. Also consider the real examples in this article for how we can, company by company, create an environment of shared space where work is much more productive, harmonious, and financially successful.
re-posted form http://advanceconsulting.com