11. Organisational Structure

We take departments for granted. Finance sits with finance, marketing with marketing, operations with operations — it all seems to make perfect sense. Yet this neat arrangement, the backbone of modern organisations for over a century, could be quietly limiting our effectiveness. What if the very structure designed to create order is the reason your organisation isn’t performing at its best?

The departmental model we recognise today originated in the 19th century, when the Pennsylvania Railroad first structured its workforce this way to create accountability within areas of expertise. Over the following 150 years, this approach became the default for organisational design; creating a “top-down” configuration where customer needs flow through a sequence of often disconnected departments — each focused primarily on their own performance rather than the customer’s experience.

Consider the simplified example below. Each department in an organisation might achieve an impressive 95% service level independently. Yet when viewed as a complete system, the compound effect of these handoffs means that fewer than three-quarters of customers are ultimately satisfied*

When the company sees an overall rating of 3.7 out of 5, every department insists it’s performing well — so blame naturally shifts elsewhere. This behaviour, reinforced by departmental metrics, perpetuates division, frustration, and inefficiency.

In response, departments attempt to “improve” their own performance, often inadvertently pushing problems up or down stream, making life harder for others and actually worsening total performance. The structure itself encourages local optimisation at the expense of system-wide success.

In truth, departmental design is not only suboptimal for customers; it also creates a demotivating environment for both leaders and their teams, striving to do their best work within its constraints

Instead of isolated departments of functional expertise, imagine right-sized, multidisciplinary teams united around a single, clear goal: delighting the customer. Success is measured not by departmental outputs, but by service or product stream metrics that reflect the customer’s experience from start to finish.

Such a design accelerates delivery, improves quality, encourages innovation, and strengthens problem-solving and knowledge-sharing — all while reducing costs and increasing productivity. Most importantly, it gives everyone a direct connection to the customer and a shared sense of purpose and success is measured by total customer satisfaction, not by departmental efficiency. In this system, 95% really means 95%.

The implications for leadership are also profound. Rather than directing from above, leaders must focus on creating an environment where diverse skills and personalities can collaborate effectively. Their role shifts from managing activity to enabling value flow — fostering trust, empowerment, and shared accountability. This structural design demands faith in the team’s collective capability; trust becomes a necessity rather than an option. It’s a significant and often uncomfortable mindset shift.

For those accustomed to traditional hierarchies, envisioning this new paradigm can be challenging. The first step is recognising that the departmental model is not an inevitable truth — it’s simply the way things have always been done.

Acknowledging that alternative designs exist opens the door to experimentation, learning, and progress, benefits everyone. Customers receive better experiences, employees gain meaningful and connected work, and shareholders enjoy enhanced value.

*Example: If 100 customer requests enter Department A and 95% are satisfied, 95 remain happy. After Department B’s 95% performance, only 90 remain happy. By the time requests pass through multiple departments, satisfaction drops to around 74%