Which organisational structure for digital organisations?
Many companies supply more and more digital services nowadays. The reasons vary from one business type to another, but often involve the need to keep up with the demand of the market and the technology evolutions. Besides, the big data era requests building a digital capability tjat can help make better and faster decisions. This process improves the organisational agility and change the usual ways of working. From an organisational point of view, this strategy has several impacts. The most obvious is that new functions and new jobs must be integrated in the organisational structure. But that is just the beginning of this specific organisational design process.
In order to work efficiently, the whole structure must be reviewed in order to integrate and allow this new way of working. Most of the time, the whole company will be impacted, but not as much as the IT department which will experience a structural reset. Several business decisions must be made before we can align the elements of an organisation in a way that increases performance and delivers the business strategy. E.g. what structures will enable keeping up to speed or ahead of the curve with changes in customer and market requirements ? what structures minimise bottlenecks and risk ? what structures will maximise the flow of knowledge and information through the organisation ? For each of the potential structures, what are the levels of autonomy, accountability and participation ? what are the job designs that go with each potential structure ? how many management layers do we need ? what is the right span of control?
The organisational structure is just one element of the complete organisational design process, so there is no straightforward answer to these questions. The organisational mission, values and size can largely affect the answers. Several scenarios and all their consequences should be elaborated in order to choose between all possible structures. Let’s examine some options:
- A functional structure is preferred when the labour division is input based. The supervision is a formal hierarchy supplying a large amounts of procedures. In such a structure, the decision-making process is centralised. The drawbacks are the slow decision-making process and a general lack of clarity regarding accountability levels.
- A divisional structure can be considered when the labour division is based on the nature of outputs, which is likely to be the case for a digital organisation. The divisions may be organised based on geographic areas, product type, market segment or even process. Functional structures experience an important separation between strategy and execution, which might lower employee motivation, depending on the quality of the management. Besides, divisional structures are generally expensive to maintain.
- For large or complex business, a matrix organisation can be set up. In such structures, the labour division is based as much on input as on output. The decision right is shared and the structure is generally more informal than in the two previous, which may lead to overlapping responsibilities. It is the most difficult structure to apply, maintain and get to work.
- The most obvious structure for a digital organisation is the network structure, where flexible, cross-functional teams gather as needed. It suits volatile environment perfectly whenever necessary, and is the best option for fostering innovative strategy. Accountability may be challenging to set and track and functional expertise can lack depth, but agile organisations love this structure.
When it comes to the structure of the IT department itself, major changes are to be expected. The key jobs will evolve so as to match the new strategy. There will be champions for data and analytics, and a digital leader will need to promote data as a strategic asset can help grow the company. There are two main options :
- 1. The integration of the software and hardware engineers into the product development function, and the digital marketing and social media experts into the marketing group. This alternative mostly maintains the current status quo and puts less pressure onto the heads of the units, so it is often the preferred option.
- 2. The combination of all the new talent into a digital unit and keep that digital unit as a whole. In most cases, the digital function will consist of a community management unit, social media and mobile specialists, website management, hardware engineering, and a software function. This alternative can be seen as the creation of an additional support function to the organisation. Nevertheless, such a new unit cannot be completely separate since it will serve all the other functions.
Such changes are both a challenge and an opportunity. They will undoubtfully improve the business agility and responsiveness to market evolutions, as long as the right information sharing and decision making processes are created to support the strategy. It is worth taking the time to redesign them.
