Logic of the Organization Structure
20th Century enterprises organize people in a rigid organization structure
The common 20th century method of business organization is to define organization units, positions, and reporting relationships in an enterprise organization structure. The objective is to organize functions and people. The organization unit performs defined functions or duties. People are placed into positions, within an organization unit. Often position or job descriptions are defined to show the scope of duties within the unit. Reporting relationships fix how positions and units report in the management line. The organization structure is rigid and inflexible, restricting business flexibility.
20th Century enterprises lay a rigid organization structure over the business, creating the need for reorganization
One of alternative structures is selected as the arbitrary organization. Since the objective is to organize people, the structure does not organize the business, but is “aligned” with the business. Therefore, the organization structure is implemented over the business. The organization structure is rigid, while the business needs to change, creating conflict. Each time the business changes the organization structure is further out of alignment with the business. Eventually there is the need for reorganization to align another rigid organization structure closer to the actual business.
We organize people, but people are just one category of capital
Why do we organize people? What are people? Many say that people are human capital. If people are human capital, why organize human capital and not other capital? If we are going to organize capital we must organize all capital. But we cannot organize all capital because capital is not defined to be organized. Human resources are defined as employees, but most capital is lumped as an asset, was produced as results of a project or a department effort and never defined, or is labeled as “intangible assets”.
We call it business organization, but do we actually organize the business
When we organize, we usually call it business organization, but is it really business organization. A previous post on the Logic of Business said the generally accepted definition of business is “the activity of providing goods and services”. The article logically defined the business as “the utilization of capital in performance to produce value in results”.
If we are to truly organize the business, we must organize the “the utilization of capital in performance to produce value in results”. This means that the business organization must organize the capital utilized in one structure and then organize the results produced as one structure. The business can be organized by assigning the capital to be utilized to the result to be produced.
It is important to manage the actual business, and to organize people as individual performance solutions within one category of human capital that is utilized in performance to produce value in results.
In order to have a true business organization structure, we must organize the business as one business structure
The previous post in this series described the Logic of the Business Structure that must be used to organize the business. The business structure defines the business organization and is used for all aspects of business management. The business structure is created by combining the business performance solution structure and the business result structure into one holistic structure that defines the complete business.
The business is organized in the business structure when one specific solution in the business performance structure is deployed to produce a result in the business result structure. The business structure changes with each change to a performance solution in the solution structure or change to a result in the result structure, making the business very flexible. The business structure is used to record business transactions for the utilization of a solution to produce a result or for progress on a specific result.
The Business Structure is the most important tool of 21st century management
21st century management manages the enterprise business as one integrated business structure. The enterprise business structure replaces the rigid organization structure and all the other 20th century structures laid over the business. The business structure provides one transparent view of the business used for all management and governance. It will be very important to know how to organize your business as one integrated business structure as you move into 21st century management.
