As noted in “From touchpoints to journeys: Seeing the world as customers do,” customers form their impression of a product or service through multiple interactions with an organization. Marketing must, by necessity, span the entire organization. Organizational structure examples of this type include insurance companies, engineering firms, law firms, regulatory agencies, etc. Image: Functional Structure Organizational Chart. So, *drum roll please*, I present to you the concept of “flat” organizational structures… Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Training managers and employees in customer-centric behaviors is an important first step. Where two dimensions are critical, companies will use a matrix structure. Or divisions may end up inadvertently duplicating activities that other divisions are already managing. That makes the task of governing customer-experience efforts unique even among organizational designs that rely on a heavy dose of cross-functional collaboration. For the customer-facing part of a bank, for example, making eye contact might be an appropriate behavior to ensure courtesy, while people in the back office need to make sure that customer requests are given priority over internal requests. Customer feedback, for example, is invaluable – that information yields clear roadmaps for the kind of customer service that will separate your organization from its competitors. True teams do not disband after a project. The organizational structure also determines how information flows between levels within the company. They enable change management and continuous improvement in frontline operations. Leading customer-experience organizations tackle this problem by making customer experience a top priority for the CEO, by having senior leaders model the customer-centric behaviors that will engage and motivate employees on the front line, and by designing a customer-experience team that promotes cross-functional collaboration via targets and metrics. The role and responsibility of the team should also be clearly defined within the organization. In other words, organizations that need isolated technical advice to assist employees who handle or manage the day-to-day operations on the front line. Once the team is constituted and leadership assigned, it’s critical that the customer-experience team fit seamlessly within the company fabric and mirror the company’s principal organizational construct. ). At one European telecommunications company, the CEO regularly listens to customer calls, goes on customer visits with technicians, and tries out both old and new product and service solutions to live the customer experience. our use of cookies, and “The Pros & Cons of 7 Popular Organizational Structures [Diagrams].” HubSpot Marketing. Based on an organization’s application of the common elements—common purpose, coordinated effort, division of labor, hierarchy of authority, as well as centralization/decentralization and formalization—the resulting structure will typically exhibit one of four broad departmental structures: functional, product, customer, and geographic. An organizational structureis the framework around which an organization’s operations are based on. At one international airport, for example, security personnel did not have their own break room. Given the cross-functional nature of the customer-experience process, it’s important to avoid the stumbling block posed by organizational silos. A customer centered structure creates customized care for those patients. Then, leading players incorporate that complexity into choosing which customer journeys matter, which metrics to target, and which incentives to apply in energizing and motivating frontline workers to build and sustain a superior customer experience. What’s amiss is that, while the company’s impulse is right, this often-seen response overlooks critical elements in leading and governing a customer-experience effort that distinguishes leading customer-centric companies from laggards. The advantage of this type of structure is that it specializes in the needs of each customer group but can ign… Leaders in customer experience pursue a range of approaches to overcome such complexity. This was not a good way to relax. [1] Although work in a functional structure tends to be specialized, it is centrally coordinated by the CEO, as in the earlier graphic. Rather than relying on a traditional top-down hierarchical management structure, holacracy attempts to achieve control and coordination by distributing power and authority to self-organizing groups (so-called circles) of employees. McDonald’s is well-known for its geographic structure and localization strategy for food preferences. The newest, and most divergent, team structure is commonly known as a network structure. The idea behind this type of matrix structure is to combine the localization benefits of the geography structure with those of the functional structure (responsiveness and decentralized focus). Learn about A team structure must be less hierarchical, share the leadership, and be more fluid than traditional structures (such as functional or divisional). Rather, they continue to change and adapt to fulfill group and organizational objectives over several years. Customer-experience performance indicators—such as recommendation scores, unacceptable customer incidents, and journey-satisfaction scores—mirror the voice of the customer and should be paired with operational-performance indicators, which employees can directly influence. A divisional structure is a large scale organizational structure that separates the company based on product, service, or consumer. They also include support areas such as accounting, finance, and human resources. In cases where customer-experience norms, values, and metrics are lacking, more formal roles and responsibilities will be required. This streamlines processes and lowers administrative costs. Employees can specialize around the type of customer and be more productive with that type of customer. Now consider the perspective of a manager who spends most of his or her day in a large organization selling products or services to customers. The airport management even went as far as handing out those cards for special efforts across functional and organizational boundaries. Companies come in different sizes. What’s wrong with this picture? Big companies have a lot of tiers of owners, management, and a common worker while smaller ones have few tiers. Assuming that such success could be sustained, the CEO decided to have the customer-experience organization report directly to the COO, given his existing oversight of the company’s customer call center. Image: Matrix Structure with Geographic and Product (SBU) Structure. Sparks, Dana. This makes all employees responsible and accountable for the customer experience and is useful for individual performance discussions, from executives to frontline agents. Rules are explicit in a so-called constitution, which defines the power and authority of each circle. Certain industries will organize by customertype. Reinforcing new behaviors through formal mechanisms. Tensions might arise with the sales department if the number of product options increases complexity for the COO’s agents. By contrast, a customer-experience focus rooted in a particular function would have emphasized the touchpoint experience, not the company’s different brand value propositions, to the confusion of both customers and the organization. Based on a handshake, a small team of engineers worked secretly in a tent to design and build the XP-80 Shooting Star Jet Fighter in 143 days—seven days less than was required. Finally, it is necessary to put in place the correct metrics and incentives that are critical for aligning typically siloed units into effective cross-functional teams. In our experience, adequately addressing the challenge requires a dedicated effort on three levels. The following video explores Zappos’ work culture and organizational structure. It’s critical to engage leaders of other functional areas, particularly marketing and operations, given their close ties to customers. “Modularity Organization Structure.” Houston Chron. Use minimal essential Because of the success of early project teams, the belief is that a team will be a more creative and productive structure to face new challenges. Devaney, Erik. Please use UP and DOWN arrow keys to review autocomplete results. Modeling specific behaviors. A matrix structure derives its qualities from different structures. Others make sure that their employees feel valued by understanding their specific needs. At the executive level, the focus may be on the overall recommendation score, and at the next level down, it may be on the customer-journey experience across functions. Similar to the Skunk Works® model, this team may locate in a designated room or building with the intention to increase communication and collaboration and minimize distractions. The graphic that follows shows a functional structure, with the lines indicating reporting and authority relationships. 41, no. In the case of the international airport, it turned out the employees carried the cards in their wallets and proudly showed them to colleagues and family. The organizational structure … Metrics and targets can enable collaboration that supports the continuous delivery of superior customer experience (see “Are you really listening to what your customers are saying?”). It is important to remember, however, that every team is a group but not every group is a team. Over the last several decades, team-based structures of some variation have become common in almost every industry. Fitting the customer-experience team into the organizational fabric. Distinguish matrix organizations from traditional departments. tab. Understanding the implications of team structures early on can make you engage better with your customers. A network structure is meant to promote communication and the free flow of information between different parts of the organization as needed. For example, the customer-experience group within one global travel and hospitality company mirrors the parent company’s brand structure and delivers an end-to-end customer-journey experience for each individual brand across all functional areas. Matrix structure with geographic and product (SBU) structure. Geographic structuring involves grouping activities based on geography, such as a Latin American division. The advantage of the matrix structure is that it can provide both flexibility and more balanced decision making (because two chains of command exist instead of just one). Also, geographic structuring may be necessary because of cost and availability of resources, distribution strategies, and laws in foreign countries. Its primary disadvantage: complexity, which can lead to confused employees. A business that has areas or departments that can be easily separated from the company without jeopardizing the company are considered to have a modular organizational structure. Consider the recognition cards that senior leaders sign and hand out to employees. Differentiate between team-based structures, networks, and modular organizations. They had to sit in the restaurants of the airport, leading to many passengers accosting them with questions about the airport. Similarly, the emphasis on department performance will motivate employees to focus locally, not across the entire end-to-end customer journey. Reduced customer satisfaction, which happens when an org structure doesn’t include customer feedback as one of the key elements, leading to products or services that no one really wants. As sales increase, organizations generally adopt a functional structure. People create and sustain change. Giving employees an opportunity to diagnose customer-experience performance, conduct interviews, and participate in feedback sessions also builds commitment. There are several organizational structures, including functional, divisional, matrix, geographic, circular and flat. This can include ensuring safety protocols are in place (a priority), followed by courtesy, friendliness, and efficiency. While many managers talk up the importance of customers, how many actually know the financial impact of an additional percentage point in a customer-satisfaction score? The new approach made company recommendation scores and unacceptable customer-incident scores count for 35 percent of bonuses, while local business-unit scorecards were changed to focus intently on customer experience. Setting up an organization with primary responsibility for driving customer experience is just the beginning. Fostering understanding and commitment among employees and managers. The cross-functional customer-champion teams must meet regularly to review performance against targets, based on indicators to measure customer journeys. Not good. First, a customer-centric leadership structure must ultimately report to the chief executive and should be designed to stimulate cross-silo activity and collaboration. Digital upends old models. https://www.upcounsel.com/functional-organizational-structure From our work, we find four primary ways business leaders can act. Separate marketing, sales, design, and customer service teams would serve each of the three lines. hereLearn more about cookies, Opens in new Geographic structuring is especially important if tastes and brand responses differ across regions, as it allows for flexibility in product offerings and marketing strategies. If you would like information about this content we will be happy to work with you. After some initial excitement, managers lapsed into focusing on other priorities. Please click "Accept" to help us improve its usefulness with additional cookies. The goal of this structure is to achieve rapid organizational evolution and adaptation to constantly changing external and internal environments. This example demonstrates how many different parts of the organization are responsible for delivering the ultimate customer experience. For one US insurance provider, customer experience had been a key priority of the CEO for two years. Structuring a complex organization to deliver a superior customer experience can be challenging. Part of this training should be an understanding of the customer-experience rules and associated behaviors. For example, if you currently have one customer service role that handles all of the related tasks, you can scale slowly by adding in a part-time or full-time employee. These teams must then generate and implement improvements. Ideally, the naming of a chief customer officer (CCO) with direct access to the CEO is the most effective way to establish the importance of customer-experience efforts and to influence change across an organization’s functions (exhibit). This is the most traditional of the organizational structures that businesses use. In general, a team is made up of people with complementary skills who are working toward a common purpose. It might begin with the experience of browsing the Internet to get an idea of choices; finding a store to buy the shoes; making a selection and interacting with the sales staff; considering the price, look, and quality of the shoes; undergoing the packaging and return journey; and even sharing the experience with friends on social-media sites. This prompted a shift in attention from short-term local profit and loss to long-term company growth via cross-functional customer experience. The COO will have a strong focus on improving the productivity of back-office employees. Although managers identified many improvement themes, the entire transformation did not really go beyond a few initiatives, because no one in the organization knew how much the customer-satisfaction improvements were worth. Six months later, however, customer-experience ratings were spiraling downward, driven by a lack of priority and responsibility from other parts of the organization. Within IT, the CCO must ensure that analytics are streamlined into tools and systems and that the customer experience is digitized. Most transformations fail. view the transcript for “Zappos is a weird company — and it’s happy that way” here (opens in new window), https://blog.hubspot.com/marketing/team-structure-diagrams, http://smallbusiness.chron.com/modularity-organization-structure-12822.html, https://www.youtube.com/watch?v=5mknIg_Abfw, https://commons.wikimedia.org/wiki/File:Skunkworks-logo.jpg, Indistinguishable from, or parallels that of, the organization, Interdependent with a collective work product, Independent tasks with individual work products, Synergy – collectively we achieve more than the sum of individual efforts, Additive – the sum of the individual efforts, Mutual accountability, responsibility for the collective work product. A less profitable business, the natural result of disempowered employees, redundant efforts, and products that don’t delight customers. Here the divergence between driving functional results and cross-functional, end-to-end journey experiences is critical. In many cases this is a typical functional area, for example, a call center. Source: Information derived from Katzenbach and Smith (1993). For example, a computer software business may divide its structure according to its two distinct customer groups - home users and business users. This starts with the recruiting staff and training. Developing capabilities and skills. The reality is that if an organization is successful enough to survive and grow, it will eventually need some form of integration. This structure groups employees into functional areas based on their expertise. C-suite leaders, intent on restoring their company’s slipping competitiveness in today’s fluid, multichannel markets, conclude a high-level strategy meeting with an announcement from the chief executive: since customer satisfaction has become a top priority for the company, a high-performing executive will take charge of a new customer-experience unit, with the goal of making the organization more customer-centric. Unlike the customer’s journey, which touches all areas of the business, the manager’s time and energy is largely devoted to improving a single part of the organization. We use cookies essential for this site to function well. Differentiate between the four basic types of departmentalization (function, product, customer, and geography). For example, many customer help desks link customers and consultants together via telephone or the Internet and problems may be solved without ever bringing people together face-to-face. It may be necessary to create an overarching framework that explains the key principles for a good customer experience. A picture of the Skunk Works® hangar in Palmdale, California. For example, a clothing company might create separate product-based divisions for women, men, and children. For example, the customer-experience group within one global travel and hospitality company mirrors the parent company’s brand structure and delivers an end-to-end customer-journey experience for each individual brand across all functional areas. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. 8. Managers coordinate and control relations both internal and external to the firm. Teams that include members from different functions are known as cross-functional teams. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. In any case, the CCO also requires the CEO’s strong support to succeed. A larger team may be necessary when its focus is on stimulating cross-functional activity and on execution versus promoting innovation. Business may divide its structure according to its two distinct customer groups - home and. To financial impact and illuminate which journeys matter most to customers are you really listening what. Attention from short-term local profit and loss to long-term company growth via cross-functional customer experience is digitized to:. And integrates the work of each customer center would report directly to growth... 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