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© 2024 N. Dean Meyer and Associates Inc.
Excerpt from www.NDMA.COM, © 2024 N. Dean Meyer and Associates Inc.

Book: Principle-based Organizational Structure

Executive Summary: The Five "Building Blocks" of Structure

the lines of business that exist within every organization

by N. Dean Meyer

Book: Principle-based Organizational Structure

A healthy structure does not define jobs in high-level phrases like "operations," or vague language like roles and responsibilities.

Rather, every box on an organization chart should be defined as a line of business -- defined by what it "sells" rather than what it does or what it knows.

The result: jobs that are well focused, results oriented, entrepreneurial, and have a minimum of conflicts of interests.

Types of Businesses Within Organizations

There are five different types of businesses found within any corporation, company, or internal service provider organization -- five fundamental "Building Blocks" of structure.

[Click on a Building Block for its explanation.]

  • Service Providers

    Service Providers deliver ongoing services. They may buy solutions from Engineers, and then use those assets to deliver a service (like an airline that buys airplanes and sells a transportation service). Or the service may be delivered primarily by people.

    The distinguishing attribute of Service Providers is the ongoing nature of services. This doesn't include a stream of small, unique projects (like the repairs that Engineers sell). Rather, it's essentially the same routine service, day after day, like water from a tap.

    Service Providers keep things running reliably, safely, and efficiently. They seek continuous improvements and introduce new services, but are not generally proponents of major changes that might disrupt their operational efficiency. They should change only when it's safe.

    There are two types of Service Providers:

    Asset-based Service Providers own and operate shared-use infrastructure. The services they sell are based on access to their infrastructure; the people are there to ensure that the assets run properly.

    In a corporation, this is the manufacturing function and product managers for commodity products.

    In IT, this includes the computer center, telecommunications network operations, and the telephone system.

    This also includes Brand Managers for the enterprise's externally focused products/services. The asset they own is the intellectual property of product designs. They subcontract to other lines of business for market research, product design, manufacturing, logistics, sales, marketing, etc.

    People-based provide ongoing support services which are produced by people rather than assets. Equipment, such as computers, is employed only to make the people more productive at tasks they conceivably could do manually.

    There are three types of functions which are categorized as People-based Service Providers:

    1. Services to clients that enhance the organization's primary product line.

      The most common example is customer service (service desk).

    2. Services to others within the organization to leverage their time and enhance their abilities.

      Examples include project management facilitation, testing services, and field technicians that act on behalf of other product lines.

    3. An organization may also include some business support services which are outside the primary intent of the organization.

      Examples include procurement, education services, finance, human resources, IT, administration, library (including AI prompts).

      These support functions may, in turn, include all of the Building Blocks. Nonetheless, from the perspective of the organization in question, they are considered People-based Service Providers. For example, when the framework is applied at the enterprise level, IT is a People-based Service Provider; but the entire framework can be applied within IT departments.

    Service Providers are experts in service management (not products). They're responsible for stability, responsiveness, reliability, safety and security, cost, and attention to detail.

  • Engineers

    Engineers create the organization's products. They are the technology or discipline specialists, the designers, and the gurus in those products.

    Engineers maintain a locus of expertise in a specific engineering discipline, technology, or professional specialty. They use their expertise to design, build, and install "solutions." A solution may be a physical asset, software, or a design of intellectual property. They may create it from scratch, or procure vendors' products and then add value.

    They also enhance, tune, repair, configure, and support those solutions. This definition does not distinguish those who design and build products from those who repair them. Essentially the same professional specialty is required to do both. Engineers sell anything that requires in-depth expertise in the design of the organization's products -- knowledge of what's inside that black box.

    In many functions and industries, there are multiple layers of Engineers. Some design fully assembled products; others are experts in components that go into various products.

    Those who assemble components into complete products (the top layer) are called "Applications Engineers." They produce purpose-specific products.

    All lower layers are termed "Base Engineers." They design the components that go into various applications. These components are purpose-independent.

    For example, civil engineers are Applications Engineers; they build bridges. They employ a wide variety of Base Engineers, such as stress engineers, electrical engineers, and traffic engineers, who contribute parts and advice.

    Architects (Applications Engineers, in this framework) who build buildings employ the same list of Base Engineers.

    In a corporate example, Applications Engineers design the company's ultimate products, like cars and trucks. They employ Base Engineers who design engines, suspensions, interiors, manufacturing processes, etc.

    In IT, the term "application" refers to data-object-specific software -- systems designed to handle information about a particular topic. Base Engineers sell and support computing, database, and telecommunications platforms; end-user computing tools; software-engineering tools and methods; and information-handling disciplines such as artificial intelligence.

    In any industry, the domains of Engineers are defined in terms of a specific domain of technology, field of science, professional discipline, or branch of engineering.

  • Coordinators

    Some things require a consensus among stakeholders -- people throughout the organization, and in some cases clients as well.

    Take planning, for example. Every internal entrepreneur is responsible for a plan for his/her own business within a business. But all their plans must be coordinated to add up to the organization's plan.

    Furthermore, planning is a specialty in its own right; there are methods and analytical skills which require study.

    Thus, there's a role for a "Planning Coordinator" whose job is not to decide the plan, but rather to help everybody develop their own plans in a coordinated manner. This is just one example of the "Coordinators" Building Block.

    Coordinators help stakeholders (within the organization and beyond) come to agreement on shared decisions such as policies, plans, and standards.

    They establish processes for decision making. They structure those processes with methods and project plans. They ensure that the right stakeholders are involved. They provide common information, such as assumptions and trends, templates and formats, methods, frameworks, and timeframes. They help individuals with their respective duties in the process. They facilitate collaboration on interdependencies, such that each group's plan fits into a higher-order organizationwide plan. And they compile the results and make them available.

    Coordinators also help people individually as experts in the library of shared decisions, for example helping others find, interpret, and apply the relevant policies, standards, and plans.

    But Coordinators are not accountable for the content; the participating stakeholders are. Coordinators are just accountable for effective consensus-based decision-making processes.

    There are many types of Coordinators, including the following:

    • Strategy Planning: Based on an ever-changing environment and the organization's strengths, weaknesses, opportunities, and threats, a strategic plan answers the questions, "What businesses do we want to be in? And how will we get from here to there?"

    • Operational Planning: An operating plan looks one or two years ahead, and answers the questions, "What do we plan to deliver in the coming year? And how will we fulfill that demand (including the needed resources, such as budgets)?"

    • Research: A Research Coordinator doesn't do any research. Rather, it helps others do research with expertise in research methods, and in how to develop research proposals. It also helps the executive coordinate decisions on which research projects to fund, as a portfolio of investments aligned with the organization's strategy.

    • Organizational Effectiveness: The focus of this Building Block is on how the organization does business (not what business it produces). Its scope includes: culture, structure, resource-governance processes (termed the "internal economy"), shared methods and tools, and metrics and rewards. This Building Block leads transformation projects, and then helps everybody work within the organizational design.

    • Audit Response: Coordinators do not audit or judge people. But external parties may audit the organization; and when that happens, the organization must provide a point of contact, and a coordinated response. An Audit Coordinator helps everybody respond to auditors and provides a point of contact, but the content of the audit response is the responsibility of the appropriate groups throughout the organization.

    • Regulatory Compliance: Everybody is accountable for complying with laws and regulations. A Regulatory Compliance Coordinator helps them do so by providing expertise in laws and regulations and how they apply to the organization. It also provides a point of contact for regulators, and coordinates any compliance examinations and remediation projects.

    • Business Continuity: In case of a disaster, the organization must ensure that its staff are safe, stabilize the situation, and then bring the business back to normal operations (disaster recovery). And advance planning can mitigate the damage done by disasters. A Business Continuity Coordinator helps everybody develop their own plans, and coordinates interdependencies to optimize the resilience of the organization.

    • Security: Security means minimizing the risks of harm from espionage, theft, and sabotage. Everybody is responsible for their own security, and for providing safe, secure products and services to their customers. A Security Coordinator helps them protect themselves from threats and deal with incidents.

    • Standards: To ensure the interoperability and supportability of the organization's products, standards are conscious constraints on design. A Standards Coordinator does not decide standards. Rather, it creates a framework of standards, and pulls together the appropriate stakeholders to decide each "cell" within the framework (specific standards).

    • Design Patterns: A Design Patterns Coordinator is an expert in the "ripples" -- how decisions about, or changes in, one product affect others. It facilitates consensus on design guidelines that minimize future ripples, and helps Engineers identify ripples so that a change in one product doesn't harm others.

    Although similar in that they coordinate and facilitate shared decisions, each of these types of Coordinators requires unique skills, and each is a profession (a line of business) in its own right.

  • Sales and Marketing

    Sales and Marketing is the client-facing part of an organization. Within internal service provides, this may be called "business relationship managers."

    Sales and Marketing adds value in two ways:

    • It enhances the organization's relationships with clients.

      Sales facilitates effective communications and constructive relationships between clients and everybody in the organization. This is not a single point of contact, but rather a default point of contact.

    • It helps clients address their business challenges using the organization's products and services.

      It facilitates the discovery of high-payoff opportunities, and helps clients acquire just the right products and services from the organization's entire catalog. In this way, Sales aligns the organization with clients' strategies and business needs.

    In companies, the need for Sales and Marketing is obvious. But this Building Block is equally essential to internal service providers. They have tough competition from decentralization and outsourcing. And despite monopolies in a few areas, they must earn "market share" by developing great relationships with clients.

    Beyond just relationship building, an internal service provider must find ways to contribute value to clients' critical challenges and strategic opportunities. Sales provides expertise in the linkage between clients' business and an organization's deliverables, and helps clients discover creative, high-payoff uses of the organization's products and services.

    The goal of external Sales is to maximize revenues. But for internal service providers, the goal is not to convince clients to spend more (an expense to the enterprise). Rather, it's to maximize the organization's contributions to clients' success, i.e., to generate the right business and deliver the most value.

    External or internal, and whatever the name, great salesmanship focuses on helping clients, not on helping the organization "push" its products and services. In the sales literature, this is termed strategic selling, consultative selling, or partnership selling.

    Great relationships are built by understanding what's unique about each client, and connecting clients with the right suppliers in the organization. That's why Sales staff spend most of their time with clients, getting to know the people and their business challenges.

    There are five types of Sales and Marketing:

    • Account Sales: high-level account representatives who are responsible for entire client accounts, regardless of geography. In companies, these might be called "named account managers," where the accounts are one or more global companies. In internal service providers, these might be the "business relationship managers," where the accounts are one or more business units.

      This is a very senior function. Account Sales professionals can (and should) attend clients' executive-level meetings and credibly discuss business strategies and challenges (without descending into product discussions). They're the kind of people clients would like to hire for senior management positions.

    • Retail Sales: available to anyone on demand for business advice and unbiased business diagnoses.

      In companies, this would be the geographic sales force and any retail storefronts for walk-in customers. In internal service providers, these are the default points of contact for clients' inquiries and concerns. They may even manage a showroom or demonstration center.

    • Function Sales: experts in clients' professions or business processes, available to help Account Sales (in any territory) with opportunity discovery.

      While Account Sales is the primary representative to a client business unit, when working in, say, the procurement and manufacturing areas, Account Sales may call in a Function Sales professional who specializes in supply-chain issues to help diagnose their strategic requirements.

    • Customer Success: a service to Account Sales; ongoing post-sale customer contact, with the objectives of optimizing the benefits customers receive, and growing customers' usage of the organization's products and services..

    • Marketing: the one-to-many functions that coordinate communications with the client community, for example, with brochures, newsletters, awareness events, and public relations. They also offer peers within the organization help with marketing planning. And they offer market research services that answer questions about what sets of clients think (eg, customer satisfaction surveys and demand forecasts).

    • Sales Support: sales methods and tools, sales training, account management, business analysts, proposal writing, territory planning, metrics.

    In all its forms, Sales and Marketing facilitate partnerships with clients, and link clients' business challenges to the organization's various products and services.

  • Audit

    The Audit Building Block includes more than traditional financial and compliance auditors. Any function which inspects and judges others, and reports the results to someone other than those being inspected, is considered Audit.

    Audit may even have some authority to block others (veto their requests or decisions). This is the only Building Block with such power; all the others focus on serving, not judging, others.

    Audit is distinguished from service-oriented Building Blocks in that it delivers its findings to someone other than the people being judged. While Auditors should treat those they're examining professionally, these are not their customers. Rather, they sell their services to people other than those whom they inspect, such as the enterprise's Board or external entities.

    For example, a testing service which Engineers can voluntarily use, and where the test results are reported back to the Engineers, is not Audit. (It's a Service Provider.)

    Similarly, on any topic, an assessment service that delivers findings back to the people being inspected to prepare them for real audits is a service, not Audit.

    Audit's job is to catch people who are not in compliance with rules (such as security policies, regulations, and financial reporting), or to stop people from making mistakes.

    The mission of Audit is strictly to uncover problems. It must not recommend corrective actions to those problems. Auditors' expertise in finding problems doesn't qualify them to design solutions (which requires the expertise of other Building Blocks).

    Furthermore, recommending solutions would be exercising undue influence, a conflict of interests. Imagine the Internal Revenue Service recommending that you solve your compliance problem by buying a particular brand of financial software!

    Also, if Audit recommends solutions, it would no longer be "arm's length." It might judge more harshly a solution that complies but isn't what it recommended, or overlook problems just because others followed its recommendations.

    Furthermore, Auditors must not disempower managers by setting objectives or giving orders. To have legitimacy, the order to comply with audit findings must come from one's chain of command, not Auditors.

    Audit is not only a distinct building block of structure. It must be kept entirely separate from the other service-oriented functions. It's impossible for the same people to both serve and judge others.

"The [Building Blocks] language itself is an enormous benefit. It's helping us clarify our boundaries, and improves our ability to discuss our business with our clients."
Ron Pace
Director of Information Management
U.S. Army, Fort Detrick


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