Functional versus Unit Organizations

Company organization structure defines both how and what a company builds. It is also one of the few decisions that a CEO can clearly make. Because organization (org) structures appear to be easily distilled down to simple graphs, it is frequently the case that when a company is doing well a given org structure serves as a model for others to follow; and when things are not going well there’s a chorus to change to some obvious alternative. Reality is far more complex, unfortunately.

This post is in four sections: some personal history, the two Golden Rules of orgs, a collection of pros/cons for each of the two ends of the pendulum known as functional versus unit organization shape, and then the universal truths of org design.

Editor’s Note: A very long but very good read. Highly recommended.

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