Wouter Aghina, Aaron De Smet, Suzanne Heywood

… the matrix organization […] gained favor in the 1970s as a solution for large organizations struggling to coordinate decision making and activities that cut across functional and business-unit lines. The theory was strong, but when Tom Peters appraised the scene, in the late 1970s, “the matrix ‘solution’ had brought with it problems at least as knotty as those it was supposed to cure.”

The quest for an alternative led Peters, Julien Phillips, and Bob Waterman to assert that “Structure is not organization” and McKinsey to develop the 7-S framework of organizational effectiveness and change. Interestingly, four of the seven (skills, staff, style, and shared values) pertain to people, one (systems) to processes, and one to structure. The seventh, strategy, spoke to the important and still-relevant idea, first articulated by Alfred Chandler in his 1962 book, Strategy and Structure, that the structure of an organization can be designed only after it has formed its strategy. The underlying focus of the 7-S framework on structure, people, and processes still represents a useful summary of the challenges in global organizational design today. In our experience, corporate leaders devote most attention to the first two and probably not enough to the third—even though processes can greatly influence both structure and talent.

Processes admittedly came to the fore during the business-process reengineering movement of the 1990s, which involved “rethinking and, if necessary, fundamentally reengineering how a company delivers value to its customers.” Such a rethinking […] “inevitably runs up against the company’s entrenched business system and organizational structure,” requiring process redesign to “help managers break through these barriers.” For large, complex organizations, taking a clean-sheet approach to processes rather than automating existing ones as information technology advanced was a sensible step. But it was far from sufficient to ensure a smoothly humming, healthy organization.