Hobart’s Blog – Restructuring is Insane! By Marc Townsend #3

Topic: The Problem with Vertical Restructuring

Marc: Let’s start today’s discussion on the topic of how organizations currently approach restructuring.

Hobart: I call it hierarchical or vertical restructuring.

Marc: Because it is focused in the vertical dimension?

Hobart: That’s right. It’s about moving boxes around within the hierarchy, which is the vertical dimension.

Marc: This expression, moving the boxes around – what does it mean exactly?

Hobart: Well, if you look on an organizational chart, what do you see? Literally?

Marc: I see rectangles and lines, literally.

Hobart: And what do they represent?

Marc: Departments, functions, business units.

Hobart: And the lines?

Marc: Those are lines of authority.

Hobart: Exactly. They represent the boss/direct report relationship, the only relationship that is recognized in the vertical dimension, as you can clearly see from looking at an org chart. So, these are the variables you have to work within the vertical dimension: positions or boxes and reporting lines. Each box represents a person because only one person can hold a single position. That’s one of the rules of the vertical operating system. Another rule is there can only be one solid line between a boss and a direct report – at least that used to be the rule. That’s another subject altogether – one called dual reporting.

Marc: We can talk about that sometime in the future.

Hobart: Whoever invented that system should be shot. Anyway, the vertical is one-dimensional and that dimension is hierarchical. It’s about who reports to whom, and so when you move the boxes around you are merely changing reporting relationships. Well, not merely, because it’s a big deal if that’s your primary relationship.

Marc: And the problem with that is?

Hobart: Oh, there are a whole string of problems. Let’s start with the most obvious question. When you look at the org chart, what’s missing?

Marc: Missing?

Hobart: Yes, what is important to the business? I use the term “business” generically to mean whatever you are in business to do, whether you’re a nonprofit, governmental, or profit organization. What is important to running a business that’s not shown on the org chart?

Marc: Well, customers/clients aren’t there.

Hobart: Do you suppose they are important?

Marc: Obviously. The business can’t exist without them. They are the reason you are in business in the first place.

Hobart: Exactly. Every business needs customers/clients, including public and nonprofit sector businesses. If there is no one to serve, there is no reason to exist.

Marc: I don’t see funders either.

Hobart: Nope, no funders, which are critically important if you’re a nonprofit or governmental organization. You have no source of revenue.

Marc: Oh, and there are no products or services.

Hobart: Who needs those anyway? They are only the means of satisfying customers/clients. And what about the business processes that produce products?

Marc: Yup, those seem to be missing as well.

Hobart: We also don’t see important management systems, like the innovation system or the financial system. So how important are boxes and lines relative to all these other factors that are missing?

Marc: I’d say not very important.

Hobart: Exactly!!! (Hobart was pounding his fist on the table for emphasis at this point.) What the hell are people thinking – spending so much time and money to move people from one boss to another, from one department to another? Why do they think that who you report to is of such monumental importance? Why is the org chart the only map that most people have of their organization?

Marc: Are you suggesting organizations should have other ways to depict their businesses?

Hobart: Absolutely. Every time I take a new consulting assignment I think, okay, this time, when I ask them what maps or diagrams they have of their organization, they are going to show me something besides an org chart. But not once has that been the case.

Marc: Why do you think that is?

Hobart: Because leaders are immersed in the vertical paradigm. It’s like a prism through which they view the world of the organization and it blinds them to anything that exists outside that paradigm. In the vertical paradigm, all you see are reporting relationships and functions or departments or business units. That is your lens for viewing the organization and so it makes sense that you would use an org chart to represent how your organization functions. The problem is that as we discussed, that view is missing all the important elements: customers, products, services, business processes, etc.

Marc: Right. And is that the same reason that leaders think reporting relationships are so important?

Hobart: Ah, well it’s part of the reason. The other part is that reporting relationships give one of the two parties power and power is very intoxicating. It satisfies the ego of those who have it and that ego not only doesn’t want to let go of it, it wants more and more of it. It’s like an addictive drug. Suggest a new paradigm that takes away some of their institutional power, and bam, there is resistance.

Hobart: I worked a few years ago with a leader who was the VP of Quality and the larger organization of which he was a part of had just gone through a centralization restructure in which he lost control over some of the resources that he had before the restructure. After a day of walking through the new paradigm of working as a matrix, he said to me, “Hobart, I worked my whole life to climb the ladder and get where I am today and I’ve listened to everything you’ve talked about – about letting go of control and of not using authority to get things done – and I agree with it all. It’s the way we need to learn to work in order to make this all work, but I have to tell you, it’s hard to let go.” I had more respect for that man than I have had for most of my clients. He recognized the difficulty of letting go of the way he had been leading for the past 30 years, but he was willing to do it anyway, even if it didn’t increase his own personal power because it was the best thing for the organization. That’s something I call organizational accountability.

Marc: What is organizational accountability? I don’t think I’ve heard that term before.

Hobart: That is the obligation that everyone who works in an organization has – to put the good of the organization first, before their own selfish interests. It’s really part of the contract you have with an organization when you become employed. That contract says you will work for the common good, and not do anything that gets in the way of that common good.

Marc: What about contractors? Do they have organizational accountability?

Hobart: No, they don’t. They have a customer/supplier relationship with the organization and the nature of this relationship is that the supplier and the customer, who is part of the organization, work together to meet the needs of the customer. Now, if that customer is representing organizational needs, then the subcontractor is obligated to do what she can to help meet those needs. But the obligation to understand and represent organizational needs is greatest with employees, at least contractually. They are there for the longer haul.

Marc: So, who decides what the organizational good or its needs are?

Hobart: The leadership team. It’s part of their role in the organization – to set strategy and priorities. To articulate values. To define the common good.  To define the rules of the game.

Marc: Rules of the game? You make it sound like a sport.

Hobart: In a way, it is. Yes, there are rules of the game. Most organizations are playing by antiquated rules.

Marc: A topic for next time.

Hobart: Yes, I’ve got to get back to my manuscript.