Back to the Functionalist View

To determine the correct structure, then, we must start at the very beginning: What is the function of this organization and of its employees?

We know that management's function is to ensure the organization can achieve its goals effectively and efficiently in the short and the long run. But how does that break down in terms of individual responsibilities?

To return to the boat analogy, above, we would ask, “What do these engines do? What is the responsibility of each engine?” And we would discover that one engine’s task is to move us to the left; another’s job is to move us to the right.

As soon as we know the purpose of each engine, we can determine what percentage of the final product it is responsible for; and thus how much power it should have. This is why we always start with responsibilities: The power structure should be driven by the responsibility structure. Until you know what a manager’s responsibilities are, how can you know how much power and authority are appropriate? And the reward structure – in other words, what achievements do you choose to reward, and in what manner? – should come last.

In fact, the authority and reward structures should fall into place naturally as soon as you understand the structure of responsibilities. But they don’t, and the reason they don’t is because very often, responsibilities are divided incorrectly.

That’s why this chapter is so important. Dividing responsibilities appropriately is the key to making an organization function at its optimum level. Essentially, structure is a tool I use to achieve that goal.

Classic Examples of Poor Structure

Classic Examples of Poor Structure We have discussed the dangers of creating a CFO position encompassing accounting and finance. It is one of numerous popular and traditional structures that lead corporations into disaster.

Here is another: When an organization has one vice president for both sales and marketing, I know immediately that this company’s marketing efforts will be dysfunctional.

Why? Here’s a hint: It is a fact that you rarely find a “vice president for marketing and sales.” It is invariably the other way around: “Vice president for sales and marketing.” This is not happenstance.

As a second hint, let us codify marketing in (PAEI) terms: First, it must analyze what changes are likely to occur in the market over the long run. That is the (E) role. Then, it has to recommend a course for action for the company in response to those changes – the (P) role. The marketing department must also have some (a) and (i) abilities in order to work well with other departments, but those roles can be met at the threshold level only. So the (PAEI) code for marketing is (PaEi).

Now, how about sales? Above all, the sales department must see to it that sales happen, that revenues come in, that clients are satisfied. That is (P).

Second, these sales efforts had better be efficient; we want maximum bucks for minimum bang. This requires training and allocation of sales territories, which is the (A) role.

The sales department’s code, then, is (PAei): Results-oriented and efficient.

In marketing, the most important role is (E), which is focused on the long run; for sales it is (P), which has a short-run perspective.

Now, we know, because Herbert Simon and James March pointed it out forty years ago in their book Organizations, 3 that the short-term orientation always squeezes out the long-term orientation. It’s human nature, after all, that the expedient will squeeze out the significant.

Thus, when you have a VP for sales and marketing, he is very likely to be sales-focused, and the marketing staff will be consigned to doing sales support activities, such as analyzing which products were sold and measuring how many more were sold compared to previous years. Instead of making innovations as it was designed to, the marketing department just follows along, measuring the effectiveness and efficiency of the techniques already in use.

The same applies when you have R&D lumped with production/manufacturing under the same vice president. R&D should be (E)-oriented, of course; while production/manufacturing is focused on (P). But very soon, R&D’s priorities will be crushed by the urgencies of (P).

Similarly, if engineering and production are combined, the engineering department will end up doing maintenance work for production. (E) will be sacrificed for the benefit of the short-term (P).

What about the (I) subsystem? The most common function of the modern-day human resources department – a fancy and misleading name for what used to be called personnel – is (A): Staffing the organization, organizing salary scales, (A)dministering benefits and performance reviews; coordinating downsizing; as well as some training and a lot of filing. If there is any actual human resources development activity, it is weak and probably discouraged.

Why? Because there is an innate conflict between (A)d­ministration and (I) development. To develop an organization and its human resources as an organic entity that responds well to change, both (E)ntrepreneurship and (I)ntegration are essential. But (A)dministration, which exists to serve the organization’s (P)roducing role, is the natural enemy of any activity that takes up valuable time and/or promotes change (E).

In a heavy (A) environment, those who try to adapt or develop human resources are going to threaten the order that (A)dministrators wish to maintain. Before long, they will find that their plans are being obstructed and their opinions ignored, and gradually their jobs will morph into something far more (A)dministrative than (E)ntrepreneurial of the (I) role, which is what the Human Resources Development activities should be all about.