The First 90 Days: Critical Success Strategies for New Leaders at All Levels

Shaping Your Group s Structure

Once you have clarified what changes your group s strategy needs, you can address structural changes to support the desired strategy.

What is structure exactly? Most simply, your group s structure is the way it organizes people and technology to support its strategy. ^[3] Structure consists of the following elements:

• Units: How your direct reports are grouped, such as by function, product, or geographical area.

• Decision rights: Who is empowered to make what kinds of decisions and how.

• Performance measurement and reward systems: What performance-evaluation metrics and reward systems are in place.

• Reporting relationships and information-sharing mechanisms: How people observe and control the way work gets done, and how they share information and make high-level decisions.

Assessing Structure

Before you begin to generate ideas for reshaping your group s structure, look into how the four structural elements interact. Are the pieces out of tune or in harmony? Ask yourself:

• Does the way team members are grouped help us achieve our strategic goals? Are the right people in the right places to work toward our core objectives?

• Is our decision-making structure letting us make the best decisions efficiently ?

• Are we measuring and rewarding the kinds of achievements that matter most to our strategic aims?

• Do our reporting relationships promote sharing the right information at the right time and monitoring work in a way that supports our strategy?

If you are in a start-up situation ”and therefore forming a new group ”you will not have existing structures to evaluate. Instead, think about how you want the structural pieces to work in your group.

Grappling with the Trade-offs

There is no perfect organization; every one embodies tradeoffs. Thus, your challenge is to find the right balance for your situation. As you consider changes in your group s structure, keep in mind some all-too-common problems that can arise:

• The team s knowledge base is too narrow or broad. When you group people with similar experience and capabilities, they can accumulate deep wells of expertise. But if their knowledge base becomes too narrow and specialized, isolation and compartmentalization can result. Groups with a broad mix of skills may be able to integrate their knowledge more successfully, though at the cost of developing deeper expertise.

• Employees decision-making scope is too narrow or broad. A good general rule is that decisions should be made by the people who have the most relevant knowledge, so long as their incentives encourage them to do what is best for the organization. If your group s decision-making process is centralized, you (and perhaps several other individuals) can decide quickly. But you may be forgoing the benefit of the wisdom of others who are better equipped to make certain of those decisions. This structure can lead to ill-informed decisions and can tax those who make all the decisions. If, on the other hand, people are given decision-making scope but do not understand the larger implications of their choices, they may make unwise calls.

• Employees are inappropriately rewarded. Effective managers align the interests of each decision maker with the interests of the group as a whole. This is why teambased reward systems are effective in some organizations: They focus everyone s attention on the group s ability to work together. Problems arise when measurement and compensation schemes fail to reward employees for either their individual or their collective efforts. Problems also arise when rewards advance employees individual interests at the expense of the group s broader goals ”such as when multiple employees who could serve the same set of customers lack incentives to cooperate. This was the problem confronting Hannah Jaffey at the beginning of the chapter.

• Reporting relationships lead to compartmentalization or diffusion of accountability. Reporting relationships help you observe and control the workings of your group, clarify responsibility, and encourage accountability. Hierarchical reporting relationships make these tasks easier but can lead to compartmentalization and poor information sharing. More complex reporting arrangements, such as matrix structures, broaden information sharing and reduce compartmentalization but can dangerously diffuse accountability.

^[3] For an in-depth exploration of these issues, see Michael C. Jensen, Foundations of Organizational Strategy (Cambridge: Harvard University Press, 1998).