Unchallenged assumption #2 Functional separation

Functional separation is closely related to a Hierarchical reporting structure. Knowing where there's inertia and the assumptions that lead to it is a good starting point for change.

Each functional department such as software developers, human resources, sales and customer service are in a maze separated by walls

In the introductory post for this series, I introduced the idea of unchallenged assumptions in organisations that had become so accepted as the way work is done that they become very difficult to challenge, even when doing so would be very impactful:

The unchallenged assumptions I had identified were:

1. Hierarchical reporting structure.

2. Functional separation.

3. Projects are the means of doing work.

4. Project-based funding.

5. Individual performance management.

6. Managers hire for their area.

7. Categorical organisation of strategy.

There are others, and I encourage you to share your examples in the comments, but these were the most prevalent ones I’ve experienced.

Functional separation

Often closely linked to the reporting structure, which I covered in this post Unchallenged assumptions #1 Hierarchical reporting structure is the departmental structure - the groupings of people. In many companies, the grouping of people is entirely linked to the reporting line. This means that the people reporting to a line manager form the team for which the line manager is the leader.

The most common departmental structure is a functional one. This means the overarching pattern for department membership is closely linked to the skillsets of the manager. This often follows the logic that people are best managed by someone who can help further develop the employee’s skills and assess their performance when they apply that skill set.

Organising this way can lead to a range of challenges:

• Coordination across many functions to achieve an outcome. To achieve an organisational goal may require many functions to contribute. Coordination across each function is an overhead; the more functions there are, the more difficult it is to achieve a result. Activity-oriented project management has significant appeal in functionally organised companies as the approach allows for the activities of each department to be coordinated by the plan and the project manager.

• Siloes are the most commonly recognised issue with Functional separation. The ease of prioritising activities that only involve parties within the functional boundary tends to increase the frequency at which these options are taken rather than priorities that may need cooperation with other functions. This can happen even if the latter are the most critical priorities to focus

• Activity focus over outcome focus. Suppose traditional project management follows a functional organisation. In that case, focusing on the activities as the primary method of understanding progress can put outcome-focused progress into the background, an after-activity, not continuously tracked. It becomes more likely that progress towards the outcome will be assessed less frequently than the completion of tasks.

• A functional separated organisation can also dilute the focus on the organisational goal as each function may prioritise its own goals. This can even lead to conflicting goals, such as a Security team taking actions to ensure security, which impedes a software delivery team from delivering value, and the software delivery team taking actions that compromise the organisation’s security. It will not happen naturally for functional teams to prioritise answering the question ‘How do we deliver these improvements securely?’ or ‘How do we support secure development to be efficient?’. An integrative view of goals, especially potentially conflicting ones, takes effort.

• Is inefficient at certain levels of complexity. It is possible to work on alignment across these; however, sometimes, the effort might outweigh the importance of the impact needed. Any group of people will also form its tribal tendencies and preferences, which, in effect, pull it in its direction instead of the organisation’s. To organise differently being available as an option is very useful. The inertia which discourages changing these organising principles is very high in most organisations.

Matrix Reporting Structures

Some organisations might deal with the complexity of their business by evolving their reporting structure into a matrix. That is when there are multiple dimensions of the reporting line - in practice; this may mean multiple managers can provide direction to an employee, or it may mean different teams ladder up to different senior leadership - a leadership group for each matrix dimension.

When it involves multiple reporting relationships with leaders for each employee - this may be the manager providing direction along different aspects of the employee’s performance - for instance, one on objectives and one on behaviours or both providing input into each performance area. Some matrices might have leadership for a service provided within an organisation and one providing direction on how that service is provided to yield business value.

In reality, each of these variations of matrix reporting structures tends to be quite confusing for employees. For example, I’ve experienced large organisations where one dimension of the matrix had chosen to grow and hire more people, and the other had chosen to reduce - conduct layoffs. The messaging when both are happening simultaneously is pure cognitive dissonance. And there will be people who will swear it makes business sense to you. The collective influence of organisational incentives on one’s motivated reasoning is incredible.

The assumption

Organising into functional units on shallow analysis seems to make sense. The logic follows that for someone to assess their performance and contribution and coach on improvement, it makes sense that they have more expertise in the same skills. Functional organisation is essentially organisation by skill collections. Other approaches can be taken to support the application and development of skills in an organisation, so alternatives will be a good option when the negative side effects of functional separation outweigh the convenience.

Functional separation may be the best way to organise at some point in any organisation’s evolution. But at some point in an organisation’s evolution, considering different approaches becomes possible and necessary.

The alternatives

For decades, agile and lean approaches to working have demonstrated that value can be delivered efficiently when working cross-functionally. Looking across industries, cross-functional teams have been formed when attention to qualitative outcomes is critical. In healthcare, this is a common approach for improving patient outcomes. In car racing - pit crews work together with precision to shave off fractions of a second to provide a race advantage. This is a common pattern of organisation in the Military and emergency services’ rapid response teams. The more you look, the more examples you find. And yet, within corporate enterprise cultures, organising this way can face much resistance.

One alternative to organising by function is to organise cross-functionally, aligned by purpose, mission or some other organising property, reducing the coordination overhead required to the company to produce value. This might involve bringing together the relevant skills and capabilities to address an important enduring need for the organisation. This can take a variety of forms. In its simplest form, a team responding to a crisis tends to form a cross-functional unit with priority access to resources and will remain until the crisis is abated.

One example from my work history: we formed a cross-functional operations team focusing on monitoring and defending against web-scraping from competitors. It needed constant attention and constant improvement as strategies evolved frequently; thus, the countermeasures also needed improvement. It required technical skills, analytical and problem solving, and operating specialist tools and appliances that contributed to the defensive counter-measures that could raise the cost for anyone trying to scrape our data.

Some companies will reorganise around value streams; teams form around each discreet step, contributing to the eventual value the company provides its customers. The idea is that each step has the skills and resources needed and can, therefore, be achieved efficiently through to the next link in the chain.

For similar reasons, other companies might organise their teams around aspects of the customer journey or aspects of the architecture to pool complementary skills and reduce the need to optimise the hand-off across different teams to only occur when necessary. Ultimately, reducing coordination costs occurs in Functionally separated environments and those organised cross-functionally. The difference is the functional separation is almost always arbitrary - the skill groupings are ‘unaware’ of what contributes value to the company. Cross-functional organisation is a deliberate attempt to bring together the relevant skills to deliver value.

What examples of cross-functional team structures exist in your organisation? Does cross-functional organisation happen in all the areas it could streamline work, or does inertia impede it? Share your experiences in the comments.