By Ale Fayad Gómez Palacio*
On this occasion we will conclude the year talking about an issue that many clients and apparently many organizations are considering or rethinking for the end of 2024, as well as for the beginning of 2025. And this is not a surprise if we have been observing the turbulence of the last 4 years with a nosedive in 2020 after the pandemic, and then a recovery in the last 2-3 years, with a peso that has fluctuated between 25 pesos per dollar in March of 2020 reaching 16 in April of this year and today around 20 pesos per dollar, an inflation that reached 7.82 in 2022, election periods, etc. The organizations also had the space to rethink their business strategy, after having gone through the most radical turbulence that has been observed in recent decades.
The previous factors (instability and rethinking of the business strategy) are fundamental to look at the organizational structure, perhaps the two main factors (especially the second) that must happen to review whether the structure you have is the right one. correct to respond to the environment or to address a business strategy.
Now, there is one more factor which is trends; Trends such as agility, AI, automation, climate change, etc. are trends that also affect the way in which companies should organize themselves. I am going to touch on two in particular that I have observed have an important impact:
- Agility, organizations today seek to be more liquid and agile in how they respond to the environment, as a result, the structures or way of organizing are an enabler or blocker of the liquidity or agility of the organization, agility has two elements, the cultural and the methodological. From the organizational point of view, a more liquid organization is one that, due to its configuration where teams from different areas of the business are involved to achieve a common objective, is faster and more effective in developing products, solutions, or responding to changes in the environment.
- The AI; Inevitably the AI conversation brings to the table discussions in two senses, first, what positions in the future can be accompanied or replaced by AI, and secondly, how do I use AI to predict the organizational needs that my business and industry will have in the future.
The two previous trends must be considered in any organizational discussion that is carried out, as it will not only offer a sensible look at the environment, but will also address the need to innovate and build a competitive advantage through the organizational structure.
Returning to the beginning of the approach of resolving the paradox of structures and where everything about AI fits into the topic, we are going to answer the question: When and how do I know that I already have a correct organizational structure? Answering 4 “simple” questions, which take a lot of time for reflection among the management team, board and general director of any group:
- The organization must directly address the business strategy, that is, see the strategy reflected, like tracing paper, in my organizational structure. An organization cannot say that it wants to be innovative if an organizational enabler of innovation does not exist in its organization, and just like innovation, it is important to find the strategic statements of the business reflected in the structure EXPLICITLY.
- The organizational structure must integrate good practices from the industry(s) in which it competes and use elements of AI in both cases that I mentioned above. It should be seen as an enabler of strategic positions in my business and used to predict where new positions or reconfigurations in my structure will be required.
- The structure must be healthy in its “bones and muscles”, that is, in terms of the number of positions per person, spans y layers (breadth and depth/levels). It must be healthy in the sense that there is a reasonable relationship in terms of distance between the CEO and the bottom line. layer (each organization, due to its size, has a different distance), as well as in the spans of control (one case after another we find managers without reports or with less than 3 and/or with exaggerated reports of up to 50 direct). Not being healthy in this sense generates lack of control and lack of alignment in organizations, as well as difficulty in formal and informal communication.
- The structure should excite the management team, it seems minor, but it is important. The analogy that I will use here is that, we are talking about the director’s “house”, where his team lives, it is extremely important that its structure excites him, not in the most literal sense of the word excite, but that when seeing it on a sheet , be able to explain it in a simple, articulate way that encourages you to take care of your “home” to effectively achieve your goals.
This is a topic that is enough for a complete essay, however, here the most important elements that must be considered when thinking about the organizational structure are summarized. In conclusion, I would like to say that the structure is the second most relevant enabler in an organization, only followed by its own Strategy, it is at the level of a digital transformation process, since, without it, the rest does not operate or exist, or operate in the wrong way. Having a misaligned structure has implications for several elements of any business such as talent, achievement of results, communication, spending (SG&A), culture, leadership, and even technology, so it is essential to give it the attention and maintenance required at the correct time, as it can be too late if it is not attended to on time.
Contact:
*Ale Fayad Gómez Palacio, Principal M&A and Transformation
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