It always surprises me how organisational leaders expect a simple answer to these two very complex questions.
I wish there was a straightforward answer to both questions, but there’s just not.
What is straightforward is that structure follows strategy and that you should never outsource your competitive advantage. That seems simple enough, right?
Well, it’s actually not that simple.
Taking the first question at face value (what structure should we use for our business?) if we use the methodology offered by Management Kits in their Organisational Structure kit, your organisational structure should embody and enable your strategic objectives.
But what does that mean? That means you actually have to have a business strategy developed, defined and articulated as your starting point. (You’ll be surprised at how many organisations don’t have a strategy and are just winging it!!)
If your business is looking to expand into new territory, then this should be an underpinning objective and help to define the required structure or business units.
The same if you are trying to build a low cost business, your structure objective has to be about ease of process flow and operational efficiency. The strategic objectives are your guide posts for your immediate and future org structures.
There is no single answer to the question of which organisational structure you should use. The best structure will depend on your business strategy, your purpose, your organisational culture. Matrix structures also depend on the appropriate balance of power between horizontal and vertical managers, communication styles, capability of your leaders and other organisational considerations.
The best structure will be the one that will help your organisation optimise resources, deliver higher quality outputs, engage your employees, reduce silos and help your business grow sustainably.
We utilise the framework from the Management Kits Organisational Kit to answer these questions and to set the objectives – it is a really straightforward way of looking at the differing requirements of your organisation from an activity and strategy perspective, and is a really practical way of tying it all together.
Which also leads us to look at defining what to outsource (our second most common question!). Using the Operating Model Canvas framework – POLISM – where P is for process and O is for organisation, we start to dig into the processes required to deliver the business strategy to the customer.
Tools such as these (Operating Model Canvas and Organisational Kits from Management Kits) are a practical way to decide the structures required and to define the activities your teams and business units need to undertake to deliver the products or services you sell.
Through both of these activities, you will gain an idea of what your competitive advantage is and also what activities can be standardised, simplified and “packaged” for outsourcing.
My book “Offshoring or Shitshoring” has further detail on how to ensure you are setting your business up for success when reviewing outsourcing options. Making an incorrect decision can be an expensive mistake to make – doing the work in detail up front will help you to understand the risks, benefits and costs involved in outsourcing (tangible or intangible) and will help you to fail fast or sustain the structure and operating model you define and implement.
There is no simple or single answer to these questions.
Your business is unique – treat it that way to develop and define the answers that suit your business and yours alone.