more flexible than authority‐based systems and rules. They are often simpler and quicker as well.
Meetings
Formal gatherings and informal exchanges are the cornerstone of lateral coordination. All organizations have regular meetings. Boards confer to make policy. Executive committees gather to make strategic decisions. In some government agencies, review committees (sometimes known as “murder boards”) convene to examine proposals from lower levels. Formal meetings may provide the lion's share of lateral harmonization in relatively simple, stable organizations—for example, a railroad with a predictable market, a manufacturer with a stable product, or a life insurance company selling standard policies.
But in fast‐paced, turbulent environments, more spontaneous and informal contacts and exchanges are vital to take up slack and help glue things together. Pixar, the animation studio, whose series of hits includes Incredibles (1 and 2), Toy Story (1, 2, and 3); Finding Nemo (and Dory); Monsters, Inc.; Wall E; and Up, relies on a constant stream of informal connections among managers, artists, and engineers in its three major groups. Technologists develop graphics tools, artists create stories and pictures, and production experts knit the pieces together in the final film. “What makes it all work is [Pixar's] insistence that these groups constantly talk to each other. So a producer of a scene can deal with the animator without having to navigate through higher‐ups” (Schlender, 2004, p. 212).
Project Teams and Task Forces
When organizations face complex and fast‐changing environments, demand for lateral communication mushrooms. Additional face‐to‐face coordination devices are needed. Task forces assemble when new problems or opportunities require collaboration of diverse specialties or functions. High‐technology firms and consulting firms rely heavily on project teams or task forces to synchronize the development of new products or services.
Coordinating Roles
Coordinating roles or groups use persuasion and negotiation to help dovetail the efforts of different units. They are boundary‐spanners with diplomatic status who are artful in dealing across specialized turfs. For example, a product manager in a consumer goods company, responsible for the performance of a laundry detergent or low‐fat snack, spends much of the day pulling together functions essential to the product's success, such as R&D, manufacturing, marketing, and sales.
Matrix Structures
Until the mid‐twentieth century, most big companies were functionally organized. Responding to strategic complexity during the late 1950s and early 1960s, many companies shed their functional structures in favor of divisional forms pioneered by DuPont and General Motors in the 1920s. Beginning in the mid‐1960s, many organizations in complex environments began to develop matrix structures in which individuals and units have more than one reporting structure. Matrix structures are often cumbersome (Davis and Lawrence, 1978; Peters, 1979), but can solve many problems when organizations figure out how to make them work (Vantrappen and Wirtz, 2016). By the mid‐1990s, Asea Brown Boveri (ABB), the Swiss‐based electrical engineering giant, had grown to encompass some 1,300 separate companies and more than 200,000 employees worldwide. To hold this complex collection together, ABB developed a matrix structure crisscrossing approximately 100 countries with about 65 business sectors (Rappaport, 1992). Each subsidiary reported to both a country manager (Sweden, Germany, and so on) and a sector manager (power transformers, transportation, and the like).
The design carried the inevitable risk of confusion, tension, and conflict between sector and country managers. ABB aimed for structural cohesion at the top with a small executive coordinating committee (9 members from seven countries at the beginning of 2021), an elite cadre of some 500 global managers, and a policy of communicating in English, even though it was a second language for most employees. Variations on ABB's structure—a matrix with business or product lines on one axis and countries or regions on another—are common in global corporations. Familiar brands like Amazon, Google, and Starbucks use matrix structures to support their business (Bradt, 2018).
Networks
Networks have always been around, more so in some places than others. Cochran (2000) describes how Western and Japanese firms doing business in China in the nineteenth and twentieth centuries had to adapt their hierarchical structures to accommodate powerful social networks deeply embedded in Chinese culture. One British firm tried for years, with little success, to limit the ability of powerful informal leaders, who headed local networks based on kinship and village, to influence hiring and wages of the workforce. In the modern era, the proliferation of information technology beginning in the 1980s led to an explosive growth of digital networks—everything from small local grids to the global Internet. These powerful new lateral communication devices often supplanted vertical strategies and spurred the development of network structures within and between organizations (Gulati, Lavie, and Madhavan, 2011; Steward, 1994).
Many large global corporations have evolved into complex networks (Ghoshal and Bartlett, 1990; Gulati and Gargiulo, 1999). Horizontal linkages supplement and sometimes supplant vertical coordination. Such a firm is multicentric: initiatives and strategy emerge from many places, taking shape through a variety of partnerships and joint ventures. Powell, Koput, and Smith‐Doerr (1996) describe the mushrooming of “interorganizational networks” in fast‐moving fields like biotechnology, where knowledge is so complex and widely dispersed that no organization can go it alone. They give an example of research on Alzheimer's disease that was carried out by 34 scientists from three corporations, a university, a government laboratory, and a private research institute. Such cross‐organizational forms continue to grow in importance and variety.
We can observe the increased adoption of platforms, ecosystems, and crowds that is meant to help solve organizational design problems. Each of these approaches reflects a type of meta‐organization that encompasses many corporations, communities, or individuals linked not by contracts but rather by technology and/or a common goal. (Joseph and Gaba, 2020)
DESIGNING A STRUCTURE THAT WORKS
In designing a structure that works, managers have a palette of options both for dividing the work and coordinating multiple efforts. Structure needs to be designed with an eye toward strategy, the nature of the environment, the talents of the workforce, and the available resources (such as time, budget, and other contingencies). The options are summarized in Exhibit 3.2.
Vertical or Lateral?
Vertical coordination is often efficient but not always effective, depending on employees' willingness to follow directives from above. More decentralized and interactive lateral forms of coordination are often needed to keep top‐down control from stifling initiative and creativity. Lateral coordination is often more effective but costlier than its vertical counterparts. A meeting, for example, provides an opportunity for face‐to‐face dialogue and decision making but may squander time and energy. Personal and political agendas may undermine the meeting's purpose.
Exhibit 3.2. Basic Structural Options.
| Division of labor: Options for differentiation | |
| Function | |
| Time | |
| Product | |
| Customers or clients | |
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