Five reasons to change your organizational structure

You may not want to do it, you may be scared to do it, you may feel like curling up in the fetal position under your desk at the thought of it, but it may be time to change your organizational structure. It may be time to reshuffle that creaky, paternal, top down, command and control structure into something more flexible. There are many reasons to do this, and today we will explore five of them. Not necessarily the top five, but at least five good ones. Or, well, at least the five that came to my mind first. You decide if they’re good.

Five reasonably good (maybe) reasons to change your organizational structure:

1. The old man moved to Florida: Okay, this may be insensitive, but really, do you care? It’s a fictitious old man, by the way, and maybe he really wanted to move to Florida. Maybe he was tired and wanted to relax and spend time with his stamp collection. Fine, but the point is that he never wanted to change the organizational structure. He also never wanted to use software or re-tile the lobby. Anyway, he was averse to change, and he liked to organize by function because that’s the way his granpappy did it. He had his CFO, his COO, and his VP of sales. It didn’t matter to him that the business had changed and become more diverse—geographically and from a customer standpoint. He liked it how he liked it. However, when he retired, it was cause for the new leadership to examine some of the other factors listed below and maybe make some changes.

2. Go West: Geographical expansion could be a reason to change an organizational structure. Let’s say you are expanding into Scranton. The office will do sales and distribution. At first you just plant Joe from sales and Phyllis from operations out there and have Joe report to the sales manager at corporate and Phyllis report to the VP of operations at corporate. You are just keeping the structure organized by function and extending it to the new location. The upside is that it fits into your current structure. The downside is that you may have less entrepreneurial spirit without a single leader in the remote office. Also, if the local culture is different in Scranton than around corporate, then Joe, with his thousand dollar suits and slick hair, may not fit in. It may make more sense to have a person who understands the local culture be in charge. They may make different operational decisions because they understand the local needs. And you know, sometimes it’s okay to be different.

3. Going after new customers: Let’s say you normally sell to very large companies with Byzantine purchasing processes. Your entire sales team is geared towards handling the needs of these wooly mammoths. They are also used to landing the big commission checks that come with these big customers. But because you are hell-bent on conquering the world, you decide to move down-market and sell your same product to mid-market companies. Sounds brilliant until you try to adapt your big company practices to smaller companies. Many businesses think that because their product will work in smaller companies that they can just start selling there. No, sir, you are probably better off creating a division structured around the needs of that market segment, a division with the proper cost structure and appropriate practices to be successful. Clichés aside, one size does not fit all.

4. Launching a new product: You are feeling your oats and are deciding to launch a new product. This new product relies on a completely new technology or process. You may think your existing structure can handle this by taking 10 percent of 20 people’s time in an existing area and dedicating it to the new effort. However, you’re wrong. What 10 percent are you going to get? These people still have incentives to produce and sell the old stuff, so you’ll get the last 10 percent of their effort, when they are tired on Friday afternoon, right before happy hour. You are probably better off with the complete focused effort of two people who are driven to make the new area succeed. Also, if they don’t succeed, then you know who to “redeploy.”

5. Become more entrepreneurial: I know of at least one company with tens of thousands of employees that is made up of 20-person entrepreneurial units. This type of organization can be significantly more adaptable. New areas are constantly being started, and old areas are being sold off or discontinued. It fosters people taking initiative because there will be stories floating around like: “You know Kenneth—he started the under-commercial flow vent ball bearing division with just himself and Jeb, and they grew to 20 people in 3 years!” You should want that type of action at your company. Your organization should not stifle it by having long-standing fiefdoms ruled by petty dictators who don’t want to let other people into the club. I’m talking about establishing more of an autonomous collective meritocracy, technically speaking.

One thing to remember with all these changes is not to be overzealous about consistency. It is good to have some sort of generally consistent structure to your organization. However, you should always be willing to deviate from that consistency. It’s always better for it to work than for it to be consistent.

Lastly, once you decide to change, be prepared for it to take longer than you think as people try to adapt. But if the change is warranted, you should plow through, and “don’t look back!”