Structure follows strategy

Structure follows strategy

Over time, society has developed a rich variety of organizational models. It is tempting to view this as an evolutionary development, with some models being more enlightened or evolved than others. However, as many of these models continue to exist, it works to look at today’s myriad of different organizational models as part of an ecosystem where they coexist in both the mainstream and in niches that have evolved and specialized with time. Building on the adage by historian Alfred Chandler that structure follows strategy, we view different organizational models as fit for their specific strategy, or in other words, “horses for courses”.

Strategy for Enterprise

The Tribe is the most effective model for an enterprise in a startup phase or in an existential crisis that requires swift corrective action. It operates in a hostile, chaotic environment, with an opportunistic strategy and a focus on the here and now.

Its structure has an inspirational leader at the top leading a small number of employees, and a lack of formal structure. You can see this in the structure of a wolf pack: the tribe has a leader that takes responsibility for the group, is visionary and able to take advantage of opportunities and threats as they occur.

The Business Unit flourishes in an environment with a clear market opportunity and a growth strategy focused on superior product and capabilities. The Unit combine clear strategic direction with a process of continuous experimentation, learning and quick adaptation.

Its structure consists of a hands-on management unit with a division of operational tasks. Team decision-making is based on a shared sense of ownership and control. Scale-ups occur as independent enterprises and also as independent business units within a holding company.

The Institute dominates in stable environments, with latitude for moderate growth. The institute has a strategy of maintaining their strong position and engaging in long-term research & development programs, combined with incremental improvements based on deep functional excellence. Skills include technical depth, reliability and total quality.

This structure has an administrative body at the top and is organized in deep functional groups with some cross-links. Institutes occur in mature industries like Oil & Gas, Energy, Utilities, Financial services and Pharmaceuticals.

Pack of Wolves
The Tribe is the most effective model for an enterprise in a startup phase or in an existential crisis that requires swift corrective action. Click To Tweet

Structure With Servant Leaders

The Collective pursue a noble purpose that gives meaning and relevance to stakeholders through awareness building, service provision, skill building, education and systemic change. Collectives prosper in connected, complex ecosystems with little disruption.

They have a structure with servant leaders at the top under strong governance – the pressure comes from the front, below and above. These organizations are driven by strong values and ethical code and typically organized in teams of relatively independent self-directed professionals with little supervision. Collectives occur in professional firms, social enterprises, foundations or NGOs.

A thriving example of the Collective model at work is Buurtzorg Nederland, a neighborhood home-care organization founded in 2006. During the 1990s, the Dutch government merged autonomous home-care organizations into large institutions, to allow for more specialization and efficiency. This led to dissatisfaction among nurses who became less autonomous in their allocation of patients, scheduling and work routines. A centralized call center dispatched the closest nurse and service times were standardized to 15 minutes for bathing, 10 for an injection and 2.5 for altering a compression stocking.

The situation became stressful for the nurses and patients, and many elderly patients found it difficult to get used to a new face for each visit, reducing emotional connections. When nurses verbalized their dissatisfaction, Buurtzorg ideated a gap in the market: full autonomy for nurses within small teams to serve local groups of patients, with team responsibility for scheduling and work routines. Nurses work in a specific neighborhood in a team of around 10 to 12, assisting approximately 50 patients. They organize leadership based on tasks that are distributed evenly within teams of nurses, including local community assimilation and coordination with local hospitals, pharmacies and doctors.

Buurtzorg grew from 4 to 9000 nurses in the first eight years, almost all experienced nurses who left the existing home care organizations drawn to the organizational model of Buurtzorg. Note that the Buurtzorg model of the Collective will be vulnerable if the company ever experiences an existential threat, or needs to embark on a completely new course, for instance in case of embracing digital health care. In this case the Tribe or Business Unit will prove to be effective.

Architectural Acoustics in Building Design
Organizations that are truly collective are driven by strong values and ethical codes. They are typically organized in teams of independent, self-directed professionals. Click To Tweet

The cycle of life

Society faces major challenges, which need innovative solutions. These innovative solutions are typically realized through innovative young companies that start as a Tribe, and once they find their model of success morph into a Business Unit. Note that creativity and innovation hold risk-taking and bold moves. It requires a revolutionary energy, not yet a peaceful one.

At full scale, they mature into an Institute or Collective. At this stage the culture changes from jumping forward to stepping back, from competitive drive to cooperative behavior, from action to response, from followership of inspirational leadership to self-governance, and from intuitive passionate pursuits to shared ratio and compassion.

Perhaps this cycle of life or organizations–being born, grow, mature, decline, die–coincides with its purposefulness. Young enterprises are often single-purpose driven, whereas mature enterprises become driven by multiple stakeholders. Declining enterprises are often defensive, calculating and mostly shareholder value driven or in case of collectives very self-protective.

To find the organizational model that best fits your company’s strategy, join the THNK Executive Leadership Program.