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A Consultant's Guide to Understanding Companies' Internal Structures

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Published:
September 29, 2021
Reading Time:
10 minutes
Lynn
Lynn's diverse perspectives on business stem from her extensive experience as a management consultant - her role as a beloved wife, mother and grandmother adds further depth to her insights.

A company structure can be a bewildering – and frustrating - aspect of starting a new client project.

Yet, if you don’t have the right consulting questions to ask, you could spend the rest of the project speaking to the wrong people or waiting forever for the go-ahead on your suggestions.

So, let’s look at some possible organizational structures and what their implications are for consultants.

What Is A Company Structure?

A company or organizational structure tells us how the business runs. It defines the rules, roles, and responsibilities for interaction and how information flows within the company.

It is often converted into a visual chart, showing how the company has been segmented, who reports to whom, and their relationships.

The way a company chooses to segment itself has a significant impact on how it is run and resourced.

Some of the more usual ways are by

  • Function, e.g., Finance, HR, Marketing, Sales
  • Market segment
  • Products
  • Geographic location
  • Processes, e.g., R&D, Customer Acquisition, Order Fulfillment

All structures have pros and cons, and there is no “right” one. What is essential as a consultant is to find out what the client’s company structure is before you start on a project.

For example, let’s assume your client project is about marketing. If the company structure is Product or Geographic, you might have to liaise with several Marketing teams. If there is a Functional structure, you could work just with the head office team.

The next thing to consider is the management reporting structure. There are three ways to look at it:

  • Chain of command
  • Span of control
  • Centralization

Let’s look at them in more detail and consider how they might impact your consulting project.

But before we do that, consultants should also be aware of the truism expressed by Harold Geenen: ​​“Every company has two organizational structures: The formal one is written on the charts; the other is the everyday relationship of the men and women in the organization.”

So while you will consider the formal organizational chart, a smart consulting question to ask might be, “Who do you normally ask for advice?” or “What’s the best way to get a fast decision here?”

​​”Every company has two organizational structures: The formal one is written on the charts; the other is the everyday relationship of the men and women in the organization.” - Harold Geneen

Chain Of Command In A Company Structure

The chain of command shows the order of decision-making and responsibility. Those at the top have the most power and usually the final say in decisions. At each level below, the power decreases.

The longer the line shown, the more hierarchical a company structure is.

The benefit of a long line is that there is clarity. Everyone knows who is responsible for what, who reports to whom, and where to turn to for answers. Individuals can be held accountable for specific tasks.

The downside is the lack of autonomy for people at lower levels and slow decision-making.

If you are a consultant and your primary contact for the client project is too low in the structure, you might face extended delays and reversals of what you thought had been agreed upon.

How low should you go? That depends on the scope of the project.

If it is relatively simple and affects a limited number of people or only one area of the business, the level of your contact person is less important. For more complex projects, it is worth negotiating to have a more senior internal project leader – or at least to have access to someone more senior.

In very hierarchical organizations, it is very bad form to go over someone’s head. If you sidestep the system and attempt an informal route to higher positions, you risk losing the trust of the assigned project leader.

Span Of Control

The span of control can be wide or narrow. It refers to the number of subordinates that report directly to a single supervisor, manager, or executive.

Narrow spans of control are also associated with hierarchical structures, while wider spans are associated with flatter, less hierarchical ones.

a company structure, A Consultant’s Guide to Understanding Companies’ Internal Structures

There is no optimal number. The number of people that one person can supervise depends on several factors:

  • Organizational culture: The more relaxed and flexible the culture is, the more likely there will be a wider span of control. Part of the culture might also be that staff members are expected to be autonomous, with managers stepping in only to answer questions or assist with complex tasks. This will also lead to a wider span of control. Of course, the opposite is also true. If more stringent control is required, managers should be given fewer direct reports.

  • Organization size: Larger companies tend to have more employees reporting to a single manager.
  • Type of work: The more routine and simpler the tasks are, the less direct supervision is required, and managers can control more employees. Complex jobs or those that lack structure require more frequent decision-making and more managers.
  • Manager and employee competency: The more experienced the manager and/or the staff members, the more people can report to one person. However, if the manager has technical work in addition to supervision, the number should reduce.
  • Executive or management level: Generally, it is better to have fewer than too many direct reports at senior levels. Too many can complicate communication and lead to delays for crucial decisions.
  • Level of digitalization: As organizations become digitalized, routine and repetitive work becomes automated. Everyone has access to the same and more up-to-date information. Pressure is reduced, and the span of control can generally become wider.

In my experience as a consultant, I have found that an inappropriate span of control, particularly at the most senior levels, is often the cause of problems being experienced by a client.

If there are too many direct reports, executives are spread too thin and are often overwhelmed with operational issues. Strategic or organizational changes that you want to introduce as part of your client project can go to the bottom of the pile of issues to be dealt with!

One-on-one manager reporting is just as ineffective. No one can be held accountable, and lower-level managers are often the only ones delivering any work. If you are talking to the most senior manager but not to the person who must implement your proposed changes, you will likely experience gaps in execution.

Digitalization of organizations can be very helpful in resolving span of control problems. It becomes a selling point if you are a digital consultant. However, you must be aware of the dynamics and build ways to manage them in your project plan.

While working on a project, remember to adjust the company structure diagrams to visualize how new workflows would work.

Centralization Of Decision-Making In A Company Structure

Some companies centralize decision-making at the top of the organization or the top of functional or geographic units. Others decentralize according to team structure, product difference, project, or other considerations.

Understanding how your client is structured for decision-making is perhaps the most critical consideration for consultants introducing digital or agile systems as part of their client projects.

Agile organizations depend on decentralized decision-making and flexible team structures.

  • By definition, they are non-hierarchical, with short chains of command and wide spans of control.
  • The focus is on customers and shifts in the market rather than on internal reporting lines.
  • Fast and open communication is essential.

All of this might sound good. But it is easier said than done if you are working with a client with a more traditional company structure. Interestingly, it is often those at lower levels who are being offered more autonomy that are most resistant.

A carefully designed and executed change management program will be needed if you want to take the company structure into account and bring people at all levels in the company along with you.

The Consulting Question To Ask About Company Structure

The consulting question to ask at the start of a project is a simple one: “What is your company structure?” This can be followed up with more detailed questions to better understand the chain of command, span of control, and centralization aspects.

You should ensure you know where your primary contact persons are placed, as this has a significant bearing on planning and executing the client project. And remember to ask them who they turn to for help and advice, so that you also understand the informal company structure.

If you are a digital or agile systems consultant, knowing the current structure is not enough. The consulting question to ask is more likely to be, “Is this the best company structure for this client?”