Harvard Business School Working Knowledg e Archive

Organigraphs: Drawing How Companies Really Work

1/4/2000
In a time of new and often complex organizational forms, the traditional organizational chart no longer does the trick. Henry Mintzberg and Ludo Van der Heyden have introduced a new and more revealing tool — the "organigraph" — that maps a company's functions and the ways people organize themselves to help managers see untapped competitive opportunities. In this excerpt from their article in the Harvard Business Review, they describe the basic elements of this new way of understanding organizational forms.

Organigraphs

The Basic Forms of Organizing
Organigraphs contain two rather conventional components. The first is a set. Every organization is a set of items, such as machines or people. Sometimes these items barely connect with one another, and so they remain just that – sets. Parts in a warehouse, for example, wait there as independent items, as do the finished products of a factory before they are shipped off. Many professional service firms, such as law offices, operate as sets, with professionals working almost exclusively with their own clients. The same can be said about the divisions of a conglomerate company or the professors teaching and doing research at a university: all of these function rather independently. They are loosely coupled as a collection, a group, or a portfolio. These sets usually share common resources – facilities, funds, overall management – or else they would not be found in the same organization. But otherwise, they are on their own.

More commonly, though, organizations don't exist to house sets. They exist for purposes of connection. And connection is usually shown by the second conventional form, the chain. Materials enter a factory to be transformed into parts, which are combined into subassemblies, which are combined into final assemblies and then shipped to customers. The assembly line in an automobile factory is the prototypical example of this linear connecting process – here, chains prevail. Indeed, chains are so embedded in business imagery that many managers describe their strategies in terms of value chains and their logistics in terms of supply chains.

The preponderance of chains in business thinking is certainly understandable. Because chains are linear, they promote standardization and therefore enhance reliability. They can clarify and systematize the many complex processes that constitute business today. Imagine an automobile factory without chains! But do chains really describe all the activities and relationships within a company? Obviously not. Think of the buzzing confusion of a customer service office or the zigs and zags of new product development. And what of airports and trading floors? These, we would suggest, are better depicted in different ways – as hubs and webs.

Hubs first. A hub serves as a coordinating center. It is any physical or conceptual point at which people, things, or information move. A building can be a hub – think of a school or an airport. So can a machine – a computer, for example. A manager can be a hub. Just think of a football coach. And so can a core competence, such as optics at Canon or bonding and coating at 3M. In fact, places that we usually consider chains may also be considered hubs. Draw a big circle around a factory, including its assembly line (a chain), and the whole place looks like a hub, to which parts and people flow and from which products emerge.

Hubs depict movement to and from one focal point. But oftentimes connections are more complicated than that. That's where webs come in. We are constantly being reminded that we live in the age of the network, where different "nodes"—be they people, teams, computers, or whatever else – connect in all kinds of ways. Webs, as we have come to see, are grids with no center; they allow open-ended communication and continuous movement of people and ideas.

Take new product development, for example. In the midst of a launch, the cast of characters talking to one another – often in very circuitous ways – will include managers, engineers, salespeople, and customers. Any complex project these days can be seen as a web. Think of how the Olympic Games are organized or how a movie is made. Everyone talks to everyone else, often with creative and unexpected outcomes.

The new vocabulary of organigraphs can expand how we view our organizations; it can even expand our thinking about strategic direction. For years, a Canadian bank had been a classic "silo" organization, with its businesses, such as insurance and brokerage, approaching customers independently. Then, as information sharing and cross-selling became competitive necessities, the bank began exploring other ways of organizing. One was to assign company representatives – personal financial advisers – to deal with customers for all the businesses, so as to present an integrated front. These advisers become, in effect, a hub for the customer. Another option was to place representatives from the different businesses in adjacent offices so that they could work cooperatively in dealing with customers – passing on leads and so forth. That way, the business representatives could work as a team – a web – while doing business with customers. Such options would have been available to the bank without organigraphs, of course, but the new vocabulary, and associated pictures, brought the choices into high relief.

Given the propensity of hubs and webs in organizations today, where does that leave the traditional organizational chart? The organizational chart treats everyone and everything as an independent box. And every one of those boxes is connected by a vertical chain-that is, a chain of authority. If that is how we see organizations, is it any wonder there has been so much restructuring and delayering, so much merging and outsourcing? These changes are initially driven by a reshuffling of boxes on paper, too often without careful consideration of an organization's real ways of doing business and of creating value.

Excerpted from the article "Organigraphs: Drawing How Companies Really Work" in the Harvard Business Review, September/October, 1999.

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Henry Mintzberg s the Cleghorn Professor of Management Studies at McGill University in Montreal and a profesor of organization at INSEAD in Fontainebleau, France. Ludo Van der Heyden is the Solvay Chair for Technical Innovation and the Wendel/CGIP Professor for the Large Family Firm at INSEAD.

Organigraph of a Newspaper

To see how an organigraph works, let's look at the exhibit "Organigraph of a Newspaper." A newspaper brings in a variety of materials from society news, photographs, and the like. Employees at the newspaper screen the material, transform it, and assemble it into a single document. The document then goes to a plant for reproduction, and the copies are distributed back to society, indeed to many of the same people responsible for the inputs, such as letters to the editor and classified ads.

The newspaper organigraph shows that while the organization's overall flow is a chain, other forms coexist within it. The reporters' relationships with the community, for example, can be seen as a web: the stock-in-trade of many reporters is to build networks of sources. And the whole newspaper might be considered a hub, upon which all sorts of inputs converge- classified and other advertisements, letters to the editor, article ideas, and so on- to be dispersed back into society. Because they are not integral to the main linear flow of the organization, various support and administrative functions, such as purchasing and finance, are shown around the hub, not within it.

What a different picture than the traditional org chart! (For a comparison, see the exhibit "Newspaper Org Chart.") Those little stacked boxes imply an organization consisting of independent agents. The picture doesn't even show advertisers, and it suggests that the human resources department is somehow in the thick of the company's operating processes. The organigraph, in contrast, shows that advertisers are both sources of content (as part of the web) and customers and puts HR's role in perspective. It also draws attention to the scope of the business, suggesting which activities ought to be retained inside the core of the company and which might be candidates for outsourcing, such as printing and distribution.