…So lately I’ve been doing a lot of reading around execution capability. As part 1. I have no idea what to make of Ben Thompson. As far as I can tell he is a blogger that used to work for a lot of different tech companies, but I can’t stop reading his blog. Absolutely brilliant guy…of that journey, I came upon a great article by Ben Thompson 1 over at Stratechery that examines (among other things) the difference between functional and divisional organizational structures. This is an absolutely incredible read, and I highly recommend checking it out here.
…I could ramble for quite a bit about the differences in the two org designs, but honestly these two visuals from Ben’s blog tell the story much more compellingly than a couple hundred words ever could:
As you can see, in a functional organization products/businesses cut across (siloed) functions like a matrix. Unlike a divisional structure which is organized by products (example below), this greatly expands the role of the CEO and ELT because they’re the central coordination point.
On the talent front, Thompson points out that functional org structures favor specialists – or, rather, people that prefer to go really deep in one area of expertise. This is because in functional org structures it’s a lot more difficult to make lateral moves that provide the diverse experiences, increased responsibility and (as these things go) nice bumps in pay afforded employees in divisional structures. e.g. In functional organizations you have a lot of people that stay in the same department (and in many cases even role) for much of their careers. Conversely, in divisional organizations we see that career/extrinsic reward focused generalists are the preferred type of employee because such a structure favors their proclivity towards movement (and capabilities to quickly pick up new concepts and responsibilities).
This is a really powerful concept because when we think about talent being a “cultural fit”, among other things that refers to that talent’s ability to thrive and advance in a company’s structure. And much of that ability to thrive is governed by one’s career expectations and preferences around development. Unfortunately, many companies focus strictly on behavioral and personality aspects of fit when assessing this dimension; and in the process, they make some really bad hires.
I have a lot more thoughts on the subject that I want to go into, but it’s getting a bit late in the morning and I have to run. I’m looking forward to 2. I reached out to my comp mentor for his thoughts on this subject because – when one thinks about it – the implications around pay are pretty astounding. I will write more on this later…having some more discussions around this topic in the coming days 2, however, and will perhaps turn this into a series.
As always, please share your thoughts in the comments section below.