Organisation - Structured for Success?

Tucked away in a dark corner of the #buss3 syllabus is a topic entitled ‘Competitive Organisational Structures’. It is my experience that there is a temptation for students to be fooled into thinking that this is simply a re-hash of the content they considered during #buss2. For most it probably is, but for those wishing to buy a ticket to ‘Success Ville’ and ride the A-train all the way to June 2014 the topic is, in fact, completely different.

The focus at AS Level is very much on the type of any given organisational structure and the notion that the structure in place is a direct product of the management’s choice or preference. The suggestion, which is, to an extent, accurate is that organisational structure is the internal choice of those responsible for managing the business. The concept of competitive organisational structures is much more concerned with the concept of alignment and the need for an organisation’s internal structure to reflect their external environment – there’s a cracking quote for a class essay or exam answer!

A case in point is the recent announcement by Barclays (here come the application marks!). They are planning to cut 1,700 jobs across their UK branch network (http://www.bbc.co.uk/news/business-24947774). Intuition tells us that this is a financially motivated measure and is perhaps simply a cost-minimising reaction to the ongoing economic darkness that largely still prevails in the UK. But at a time when the housing market is apparently beginning to gain some traction, perhaps in part due to the governments ‘Help to Buys Scheme’ (http://www.bbc.co.uk/news/business-24897013), and unemployment is falling you may expect banks like Barclays to be expanding their workforce as they gear up for the economic recovery (http://www.bbc.co.uk/news/business-24932771) on the horizon. The truth is that they may well expand their workforce in the future, so why slash 1700 jobs and mothball?

The important point is not how many jobs are being cut, but where they are being cut. A closer assessment of the upheaval at Barclays reveals a growth in workers on digital and remote services coupled with the reduction of branch employees. The reason is of course that way in which consumers access banking services has changed rapidly with an emphasis on smartphones. Thus a reconfiguration of the Barclays structure is required in order to maintain customer services levels and effectively meet evolving demand. The truth is the external market has provoked the internal change at Barclays. History also teaches us that it pays to be pro-active, regularly refine structure, and attempt to anticipate the changes coming down the track rather than wait for the significant change to force a wholesale structural change. Evolution rather than revolution is the name of the game where structures are concerned!

Structure goes hand in hand with corporate strategy and it is the operationalisation of it. Recent history is littered with examples of firms whose inability to configure their structure in a way that effectively delivers their strategic ambitions have come unstuck.

For example, Comet’s failure to recognise the growth in online sales meant that their organisation was incorrectly structured with a heavy focus on tradition consumption via retail parks. This was a poor choice and resulted in an uncompetitive organisation characterised by falling sales and less than mediocre performance.

Likewise, Sony’s inability to adopt a more flexible matrix structure, where expertise was more widely diffused across the firm, produced a situation where internal Silos based on business function made their structure inflexible, outdated and simply not fit for purpose. Sony did eventually realise their mistake and restructure (http://www.bbc.co.uk/news/business-22460957) – a good move, even if a little late. Expect almost constant re-structuring from Sony in the coming years as they play catch up. Common sense tells us that a rapidly changing market like technology will probably need a constant review of structure to make sure it is aligned to what is happening.

To crystallise my argument, when recently asked why Flybe were cutting 500 jobs, despite their return to profit, CEO Mr Hammad replied “these are changing times”. I guess changing times demand a changing structure if organisations are to remain competitive. My conclusion is that structural change is a natural feature of organisational existence and is a necessary evil. The problem with structural change is that certainly in the short-term it usually brings confusion, inertia and inefficiencies as well as operational costs even if it does deliver financial savings. Why isn’t anything ever straight forward?