Frameworks

Core organization design frameworks.

We know the joke: consultants use way too many frameworks. But these are our favorites. Rooted in Jay Galbraith’s methodology and refined over years of practice, these are the essential models we rely on to guide our clients.

The Star ModelUsed to diagnose and design a dynamic, holistic system of human behavior in groups.ExploreEnterprise Operating ModelThe sequence of decisions to set the organization vision.ExploreOperating FrameworkA critical decision is specifying to what degree the portfolio should be integrated.ExploreStructure Design OptionsThe four classic ways to group work: function, geography, product, and customer.ViewingJay’s Ladder of Lateral ConnectionsA continuum of integration options to connect structures.ExploreWorking in the MatrixThe three roles, Matrix Manager, Matrix Leader, and Tie Breaker, that make a matrix work.ExploreOrganization DecisionsThree types of decisions, each requiring different tools and governance.ExploreFunction-Value FrameworkSorting the role of the center versus the business by core functional mission.ExploreCorporate Function Design OptionsFour ways to position a function, from fully centralized to fully embedded.ExploreProduct Team TypesLight-weight to heavy-weight design options for how product teams are built.Explore
Structure Design Options

Four ways to group work, compared.

Functional structure

Organizes people by what they do: engineering, marketing, operations, finance. This is the starting point for nearly every organization. Almost all companies begin as functional structures, and many stay that way as long as they operate a single line of business. The logic is grouping by expertise, so everyone in a discipline sits together under one leader, works to common standards, and follows one chain of authority. A company organizes this way when its strategy depends on depth in one or more specialty areas.

Example: how Apple organizes at the enterprise level.

Simplified and based on publicly available information.

Advantages
  • Increased knowledge sharing within functions
  • Ability to build depth and specialization, attracting and developing experts who speak the same language
  • Leverage with vendors
  • Economies of scale
  • Standardization of processes and procedures
Disadvantages
  • Difficult to manage diverse product and service lines
  • Cross-functional processes cause contention
  • Different departments have different priorities; the customer’s interest can get overlooked
  • Integration tends to occur only at the leadership team level
Type 1 of 4

Functional structure

Organizes people by what they do: engineering, marketing, operations, finance. This is the starting point for nearly every organization. Almost all companies begin as functional structures, and many stay that way as long as they operate a single line of business. The logic is grouping by expertise, so everyone in a discipline sits together under one leader, works to common standards, and follows one chain of authority. A company organizes this way when its strategy depends on depth in one or more specialty areas.

Example: how Apple organizes at the enterprise level.

Simplified and based on publicly available information.

Advantages
  • Increased knowledge sharing within functions
  • Ability to build depth and specialization, attracting and developing experts who speak the same language
  • Leverage with vendors
  • Economies of scale
  • Standardization of processes and procedures
Disadvantages
  • Difficult to manage diverse product and service lines
  • Cross-functional processes cause contention
  • Different departments have different priorities; the customer’s interest can get overlooked
  • Integration tends to occur only at the leadership team level

Geographic structure

Organizes around physical locations such as regions, countries, or territories. This structure emerges when a business expands beyond one place and the work itself is tied to location: service is delivered on-site, products are costly to transport, or customers expect the company to be “local.” Each region operates as its own unit with its own leadership, while certain activities, like purchasing or real estate, often remain centralized. A company organizes this way when geography defines how it reaches its customers or its supply.

Example: how PepsiCo organizes at the enterprise level.

Simplified and based on publicly available information.

Advantages
  • Local focus and customization
  • Relationships with active local governments
  • Reduces transportation costs
Disadvantages
  • Difficult to mobilize and share resources across regional boundaries
  • Often difficult to harmonize priorities and processes as people identify closely with place

Product structure

Organizes into divisions built around product lines, each with its own functions, such as R&D, operations, and marketing, inside it. This structure typically evolves from a functional one. As a company diversifies and each line grows large enough to support its own organization, it subdivides into divisions, and subdivides again as those divisions grow. Each division head is a general manager running a complete business. A company organizes this way when its strategy centers on the products themselves: developing them, differentiating them, and getting them to market.

Example: how Microsoft organizes at the enterprise level.

Simplified and based on publicly available information.

Advantages
  • Rapid product development cycles
  • Focus allows for state-of-the-art research
  • Profit and loss responsibility for each product sits at the division level with a general manager
  • A strong team identity develops around product lines, with a clear line of sight between decisions and business success
Disadvantages
  • Divergence among product lines in focus and standards
  • Loyalty to a product division can make it hard to recognize when a product should be changed or dropped
  • Duplication of resources and functions
  • Lost economies of scale when functions are spread out

Customer structure

Organizes around major market segments, client groups, or industries. This structure reflects a shift in orientation. Rather than defining the business by what it makes, the company defines it by whom it serves. Each segment gets its own dedicated organization built around that group’s distinct needs and buying patterns, the way Marriott organizes around lodging, corporate living, and senior living rather than around hotel operations. A company organizes this way when its market divides into segments that behave differently and the business is built on knowing each one intimately.

Example: how JPMorgan Chase organizes at the enterprise level.

Simplified and based on publicly available information.

Advantages
  • Customizes for customers
  • Builds in-depth relationships and customer loyalty
  • Creates more value-added product and service bundles and solutions
  • Avoids commoditized products and competition on price alone
Disadvantages
  • Divergence among customer and market segments in focus and standards
  • Duplication of resources and functions
  • The challenge of measuring customer profitability and identifying the right segments

Every organization has to choose a primary way to group its work, and there are only four classic options: function, geography, product, and customer. At the enterprise level, one of these usually dominates, chosen in alignment with the company’s strategy and its distinctive capabilities. Each option creates a different kind of focus, and a different kind of blind spot.

How we use it with clients

We use this framework early in a redesign to make the primary organizing logic an explicit, debated choice rather than an inherited default. Most companies default to whatever structure they started with. Naming the tradeoffs of each option, directly against the company’s own strategy, is often what finally unlocks agreement on which one should lead.

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