Three Ways to Organize

With that in mind, let's look again at the three methods of organizing a professional service company:

  1. Function-based departments
  2. Matrixed departments whose members also report to customer-based teams
  3. Self-directed, customer-based teams

Any one of these models will work. Success for these models will be determined by how well they are executed. However, my contention is that self-directed teams are more in tune with the needs of people today and the clients they serve. Everything else being equal, self-directed teams will outperform the other models.

A little more detail on each model:

Function-based departments
This model was born of the Industrial Revolution. It worked best when the factory was "king." It focuses on doing things in ways that appear to be best for the supplying company, making function-based departments even less appropriate for today. This method too often results in doing things in the way that's best for the departments – not necessarily the customer. It's epitomized by the answer to a customer request being something like, "We don't do it like that in this department." Or, "I don't handle that, let me transfer you to the right department." (Don’t you feel a little frustrated by simply reading that line?)

Of all parts of the supply chain, the best place for the function-based department model is in the factory. However, Edward Deming, the "father of self-directed teams in modern times," showed Japanese car manufacturers the advantages of getting rid of the quality control department and making the assemblers themselves responsible for their own work. When he brought this team-based model to Detroit, the Ford Taurus was its first test case. The Taurus set Ford’s record for the fewest defects and went on to become America’s most successful car model.

Amazing, isn't it, that the self-directed team model is more accepted in the automotive "rust belt" than it is by professional service firms where knowledge workers demand the most trust and freedom?

An example of a professional service firm organized in function-based departments would be a law firm that’s organized with departments for litigation, estate planning, real estate, bankruptcy and criminal law. Or an accounting firm organized with departments for auditing, taxes and management consulting.

Matrixed Departments
When departments and teams are matrixed, individuals report to two masters, the internal department head and the client-based team. This type of organization recognizes the need to organize around a client’s needs. But it's not totally committed to the concept. And there are distinct disadvantages to not going all the way to purely self-directed teams.

Matrixed teams are stuck in an inefficient, anxiety-producing purgatory – halfway between function-based departments and the truly client-based teams that are responsible for every aspect of the work they do for a client.

Example: Marketing communications agencies today are most commonly organized with a creative department, a media department, an account management department, a public relations department, a direct marketing department, etc. The people in these departments officially report to their department or division manager. Yet they work on specific accounts, so they are also on those informal client-based teams. The question always arises: "Am I working for my department manager or the client?"

A Roman proverb states: "If a slave has three masters, he's a free man." This applies in principle to having two masters as well. Who is prioritizing the tasks when you have two masters? There's a built-in conflict of interest.

Another adage that applies here is, "Everyone's responsibility is no one's responsibility." When a job goes through a department, and it's the ultimate responsibility of the department head, it can't also be the ultimate responsibility of the specialists working on it. More conflict of interest.

Self-directed, customer-based teams
Considering the fact that the word "team" is used a lot when referring to teams in a matrix system, let's clarify.

In this book, when I speak of "teams," I'm referring to self-directed, client-based or project-based teams, whose members live and die by their own sword and do not report to department heads.

This book champions this model. Companies using this method of organization are rare. We believe the reasons for this lack of acceptance center around three obstacles:

  • Overcoming the inertia of past traditions
  • Opposition that typically arises from department heads who perceive their power as stemming from an individual profit center
  • Lack of awareness that it has proven to be an effective model for organizing a professional services firm.

The best proof we can offer for this in the service industry is The Phelps Group. According to various industry experts, The Phelps Group is an excellent example of this model in action. It's working, and Pyramids are Tombs was written to explain why it’s successful.

That being said, we know there are exceptions to every rule. There is no one single organizational structure that will fit all professional service firms. However, we're passionate about the advantages offered by the pure self-directed teams model – so please forgive me as we sing its praises throughout this book.

Task-Oriented Departments vs. Matrix Organisation

Purely task-oriented departments suffer from the least amount of interdisciplinary communication. This improves with the matrixed organization, but there's conflict of interest due to people reporting to both the department head and the client.

Client-Based Teams Structure

In self-directed, client-based teams, communications are optimized among disciplines and conflict of interest is eliminated. Coaches advise, educate and inspire, but authority remains with the team.