Organisation Design

One of the findings from Andrew Campbell’s research was that managers lack a language for describing organisation designs. For example, the words used for describing different kinds of units are often ambiguous. The term “business unit” is used universally, but means different things in different companies.

Sometimes it refers to a highly autonomous, largely self-contained profit centre. In other situations, it is used for units that are much less autonomous, drawing on resources that are shared with other units and accepting the authority of upper levels of management on many key decisions. There is similar ambiguity in terms such as “product gap”, “division”, and “national operating company”. This lack of clear language leads to confusion and cross purposes when managers talk about their organisation designs. The problem is particularly acute when managers talk about “matrix” structures, which can mean very different things in different companies.

What is more, a key challenge in organisation design is to find a means of defining units in a way that clearly conveys the intentions behind the design. Managers need clarity about what they are supposed to be achieving, in order to provide a context for decentralized, self-managed decisions about specific issues. But manuals that spell out responsibilities in great detail lead to bureaucracy, rigidity, and lack of initiative. Organisation designers have faced a difficult choice between too little clarity and too much detail.