The Missing Department Revisited

By Hal Reid

I wrote an editorial back in February 2006 about the "missing department" in which I advanced an opinion about jettisoning parts of the enterprise - those that were probably better outsourced and which inhibited (in my opinion) the growth and dynamics of the organization. In this way, companies could transition toward a 21st century model of dynamic business, and away from the tradition of housing both dynamic and static business elements under one umbrella.

An interesting approach to this same line of thinking appeared in an article by Jay Holman in the September 4th edition of Manufacturing Insights from IDC. In his article, entitled Redefining the Roles of High Level Managers and Executives" (PDF) he suggests that high value managers and executives should get out of managing minutia and focus more on creating strategic contributions to their enterprises.

Holman applies some concepts from SOA (system oriented architecture) and modular software development to managing the enterprise. He explains this using an example from manufacturing modularity – that is, one module can be used in several different products, thereby reducing cost (see figure 1). On the left side of the figure, you can see that the radio module and cassette player module can be modularized.

Figure 1. (Click for larger image)

Thinking in terms of organizational structure, that module could also be a department or a function. On the right side of figure 1, payroll and relocation services are modularized. They could easily be outsourced, saving both company A and B money and high-level management resources.

Holman further applies SOA concepts at the individual level. In figure 2, data collection and data compilation (modules) are moved from the program manager to an individual contributor, optimizing both roles. So outsourcing can be done within the organization as well. In this example, Holman identifies a function underneath a senior manager that could be off-loaded to an individual contributor, allowing the program manager to focus on more strategic and higher value functions.

Figure 2. (Click for larger image)

My article last February included the graphic shown below as figure 3, which identifies parts of the enterprise I thought could be outsourced to help the company concentrate more on the dynamic side of the business. Here, you see that finance, IT, HR and some of operations/manufacturing get outsourced.

Figure 3. (Click for larger image)

As I said previously, in order to be competitive, the company should have a 2nd generation intelligence department for understanding the marketplace, competition and customer base. The strategic organizational focus should be on new products and marketing, driven by actionable intelligence (derived from the 2nd generation intelligence department). These groups would be supported by a flexible response team and a new type of IT group that would drive the business and not be focused on general ledger and payroll.

My purpose was to look at organizational functions (especially static ones) that were common within industries and identify when they could be moved outside, much as Holman has done. The structure I came up with could also be perceived as modular, as it could be extended to contracted modules (reusable, temporarily outsourced), used for specific projects, just like the modules in an SOA software configuration.

Perhaps the reality of 21st century business organization is that everything is modular, from the CEO on down. Total flexibility, tuned to the strategies at hand, creates a purpose driven organization. This could include multiple semi-outsourced functions directed toward whatever is needed at the time. Quite possibly we may have seen this already expressed as the concept of the "coalitions of the willing," as portrayed in international relations, sometimes even successfully. Coalitions directed to a common goal, modular in nature, could be the new reality for modern organizations.

Published Thursday, September 21st, 2006

Written by Hal Reid

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