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The Organizational Structure of the 21st Century


Under Construction



The Stevens Organizational Structure of the 21st Century

Based on the paper: 


Stevens, C.A., "Step 4: A Different "Extreme-Virtual-Organic" Organizational Structure Designed to Use Change as a Driving Force and Competitiveness Tool," American Society of Engineering Management, 21st National Conference Proceedings, October 4-7, 2000.



YouTube Video 21Org1 - Introduction to the Organizational Structure of the 21st Century by

Craig A. Stevens, PMP, CC.





A Different “Extreme-Virtual-Organic” Organizational Structure Designed to Use Change as a Driving Force and Competitiveness Tool

By Craig A. Stevens, PMP




The world is different today than we would have ever thought twenty years ago. Everything seems to be changing faster than ever before.


Our story may go something like this:


We sometimes kid ourselves into thinking that taking more control will give us a quicker response time. But, every action we take seems to hit some other part of our organization in ways we don’t fully understand. The old segregated pockets of knowledge just will not work today. We may be able to forecast the trends with someone in our company seeing them coming from a distance, but even this is not communicated well. From our vantage point here at the top, change happens so fast that by the time word of the effects reaches our executives (if it ever does) we are still only reacting to the first generation of changes that have since evolved two or three times. Furthermore, we know that every business process change we make also carries with it a potential dip in productivity. We have implemented good management systems but the functional kingdoms and politics within our organization keeps the effectiveness of our efforts down. To complicate matters, we don’t have enough people to get our work done even under the best conditions. -- If we could create an organizational structure to automatically take advantage of trends, even the largest companies could wield resources at a speed closer to the change itself. This presentation will outline a unique structural approach designed to move with and be driven by change itself.


We know what doesn’t work! The Great Writings collected by Boone and Bowen (1987) describe what has happened over the last century with business environments and management styles. Some of these writings describe a bureaucratic/mechanistic business environment (Weber, 1947, 1987) that was popular and effective many years ago for a business setting that had low levels of technology, change and skills. Unfortunately many still subscribe to that approach today. It advocates strict control, division of labor, and chain of command. Employees react unfavorably today to this approach and as a result can be noncreative low producers. This causes conflict in the labor relations and further erodes our competitive posture. This approach to business is not effective for dealing with business today. (Argyris, 1957, 1987)


We know what does work! High producing organizations are those where employees have more ownership, are more involved in the thinking and decision-making, and feel that they contribute -- where there exists a culture of openness, trust, confidence, and two-way communication. Rensis Likert found that high producers were managed differently to reach the high producing state. (Likert, 1961, 1987) Others have suggested that organizational structure has an effect on performance. This includes both functional structures as well as employee structures. (Burns and Stalker, 1961, 1995)

The goal of this paper is to report on a seven year effort to create a blueprint for an effective virtual organic organizational structure that can thrive on change, anticipate trends and be automatically driven by internal and external influences.


In the book Built to Last, James C. Collins and Jerry I. Porras (1997) explained that those companies that have had lasting impacts have had certain things in common.

First, each had a “few” core values that were greater than any one person and even greater than financial rewards and profits. One could picture these values as those things you can take with you when you die -- what matters when life is over! Some of the possible core values could be to:

  • Start with and then remain with high moral character, (do what is right regardless of the short-term cost);

  • Surprise and delight the customer;

  • Create a fun environment to work;

  • Give great rewards to those who help the company succeed; and

  • Build “a legacy” and “a reputation for high quality and honor.”

Second, each of the companies “built-to-last” was organized to continue to prosper even as leaders changed (not based on “time tellers” but rather “clock builders”). The companies were not reliant on great leaders who have all of the answers (like the time tellers who could miraculously tell time by looking at the sky 100 percent of the time), but rather, had organizations that could lead the company to success (more like clocks that could tell time when the time teller was not there). The entire proposed organizational structure is designed around this concept.

Third, the companies did not base their existence on any specific set of great products or services, but rather on their core values and solid performance. As products and services changed, the companies embraced the changes. The proposed organizational structure is intended to almost automatically change and evolve with business/economic, product, service, market, and technological changes.

Fourth, the companies created BIG HAIRY AUDACIOUS GOALS (BHAGs). The companies used BHAGs to push themselves up to the next level. To summarize some possible goals, we may want to create an entirely new way of doing business that will:

  1. Build a Reputation:

  • Build a reputation so that we will be instantly recognized as leaders in management thought;

  • Create an economic legacy that can provide support to worthy causes; and

  • Transform the thinking of business in the U.S. to a more holistic and modern way.

  1. Capitalize on Change by building a perpetually growing and changing organization that will:

  • Grow without constant “management” effort by creating a company that grows, automatically, enters new markets and creates new opportunities, much like an “organic” biological process;

  • Maximize speed of “pre-action” and reaction time around change by anticipating trends and directions; and

  • Automatically change, as conditions change based on systems thinking, yet be easy to control and override when needed.

  1. Maximize Customer Service by:

  • Maximizing customer satisfaction and participation by placing those employees doing the work closer to the customers.

  1. Create a Flexible Work Environment That Delights the Employees by:

  • Maximizing employee satisfaction and development;

  • Creating fortunes by connecting rewards to profits and building a momentum that is profit and customer driven, rewarding participants when success is achieved; and

  • Using virtual organizational elements that can fill the gaps in our workforce.

  1. Allows Control at the Lowest Levels by:

  • Using the strengths of organic structures;

  • Using participative leadership and an empowered workforce with a system that will remove the political barriers and provide guidance instead of a hindrance; and

  • Minimizing layers of management and barriers to the achievement of results.

Every goal should be connected to a performance metric and every metric will be driven by a goal. Every lower level goal will have to lead to the highest goal in a hierarchical relationship. If any one person’s lowest level goal does not lead to the highest organizational goals then we should question it.


The Organizational Structure


Exhibit 1, “The Stevens Organizational Structure of the 21st Century”, graphically shows the organizational structure. Jokingly I call it “The Extreme-Virtual-Organic Organization structure as would be designed by God.” This is only because it looks so much like some set of planets with gravitational type attractions. Or, it appears to have some basic life form characteristics. It reproduces itself using a mother daughter type relationship and a DNA type set of rules and codes. (Don’t stop reading, my definition of DNA may be different than yours.) It also makes use of natural life cycle processes where entities are born, thrive and die as life cycles end -- all in support of the health of the mother organization.


Exhibit 1, The Stevens Organizational Structure of the 21st Century


Informal Simulations: The entire set of change management models and concepts in this session has been evolving for the last ten years. During this time I informally interviewed many different leaders of different types of organizations and have proposed applications of each of these models (and in particular, the new organization structure) to their particular organization. The model organizational structure is flexible, in that, in the very largest organizations more control may be exercised and in some of the smaller ones less control will be the norm. Accordingly, I have found that the new structure is appropriate for a wide variety of entities.


  • The Department of Energy Simulation: This was an interesting case for me, after spending 15 years as either a federal employee or contractor. Looking at the Department of Energy (DOE) and its prime contractors moving from an Management and Organization (M&O) structure to a Management and Integration (M&I) structure, the simulations seem to work much better than what they had at the time. One issue faced by DOE was how to get work accomplished (do something), finish the work, and move onto something else. Two of the big hidden problems seem to have been:

  1. Integrating large companies who focus all metrics on growth into an environment that has, as part of its mission, a limited lifecycle. The structure that was being used forced these growth-minded companies into self-managing the diminishing work in a way that could never work well under the current bureaucratic structures. The systems were designed to build kingdoms.

  2. Integrating a large number of highly layered management structures with hostile competitive companies each being forced together in an effort to do work. This has the potential of adding layers on layers of politically volatile management.

Although these were two of the larger issues; the many others needing to be faced could be solved by variations of this structure.

  • Large, Medium and Small Consulting Firms: Spending 20 years in this environment gave me enough case experience to easily apply this organizational structure. All these types of companies can benefit greatly from this material.

  • Large Temporary Staffing Companies: When I first explained this concept to the chief executives of a large staffing firm, mouths dropped open. We were able to use the concepts on the spot.

  • High Technology Start-ups: It naturally fits very well into the design of entrepreneurial Internet-type companies as well as high technology companies.

  • High Technology Manufacturing: Fits if designed specifically for this industry.

  • Large Entertainment and Publishing: Fits and, in fact, is presently being used to help create a huge multi-faceted entertainment organization.

Centralized Corporate Offices:


Top Level of Management: The ball in the middle of the organizational structure (Exhibit 1) makes up the top layer of management. It represents the corporate management team, internal board of directors, and contains policies and procedures. Exhibit 2, “Corporate Ball,” shows the ball in more detail. The role of this level is to paint a vision that all can understand and then to plot the course for the company.


Members of the Corporate Management Team: The management team is made up of the owners or top executives at the center and an internal board of key individuals providing counsel and continuous improvement to the policies, procedures and direction.


The Internal Board Represents All Parties: employees, customers and leadership. The role of this group is to set policies, keep them current and flexible, focus on core vision, decide on company directions, investigate investment opportunities, and formulate macro-strategies.

We have all heard the slogan “People Are Our Most Important Resource.” In this organization we will act on this concept. The employees will elect the employee members of the internal board who will represent the interest of the employees in setting policies and procedure. The employee members may rotate every couple of years.

Exhibit 2, Example of a Corporate Ball

With the internal teams on the board of directors we hope to eliminate Peter Senge’s “Organizational Learning Disability” of not having an empowered top management team. Because the management teams also have input from those responsible for each of the different groups of the organization, we also hope to minimize the slowing actions that limit growth and reaction time. The organization will also minimize the number of middle managers and the lack of top management understanding because the team is made up of representatives from every part of the organization.


Corporate Policies and Procedures: The policies and procedures exist to keep the organization moving and are centered on the core values and mission of the organization. Polices and procedures are the rules that represent executive authority. Every action taken by the divisions and project teams will adhere to these high level values (summarized by, “do good, honest work at a reasonable price and speed”). This process helps to create a “Corporate DNA” that is implanted in each of the divisions and work teams and runs through the networks of the entire organization. By following these simple to understand general policies and procedures the working teams are able to make decisions, hire temporary support and spend money (within their budgets) to invest in localized project needs, employee rewards and other business opportunities.

Purpose Story: In many successful companies, stories have been passed down about good quality, leadership, hard work, etc. The purpose stories of this organization will come from the personal experiences of the leaders. A set of strong parable type stories will be written to create emotional explanations of the goals of this organization.


As an example of what not to do, at one large service company the founder compared the division managers to cats and was reported to say, “If you place nine cats in a bag, the strongest will come out. He is the leader.”

Although this company is very successful the story is ridiculous.   Cats do not work. If we were to place nine sled dogs in a bag, the strongest may come out, but who cares. The dogs will be wounded, will not trust you again, and the sled will never go anywhere pulled by one dog. Build the team, not the individual by sacrificing the team.


Organic Characteristics:

Some of the organic characteristics and features we are building into the company will include:


Little preoccupation with the chain of command -- Our organization should be organized so that chain of command is not be an issue. Our policies and rules of conduct of operations guide the thoughts and actions of those doing the work.


Years ago, I experienced an example of why a preoccupation with the chain of command is bad. I was preparing to present a paper on “Combining Configuration Management with Value Engineering, Creating Configuration Value Management” to an international conference in New Orleans. While preparing for the next set of presentations, a group of five older officers were standing around discussing how the next group of presenters needed a table and chairs set on stage for a panel discussion.


The conversation went something like this:

Officers, “Someone should tell the coordinator that this next group needs a table. That was my job last year and he’s responsible for it this year.”


I say, “Here is the busboy, he can set up the table.”


The officers, “No, no, we can’t ask him, the coordinator has to ask for the table.”


I say, “Here is a table we could set up in a couple of minutes.”


Officers, “No, no, we have to follow the chain of command.”

The end result – relying upon the chain-of-command, even the simplest task of setting up a table did not get accomplished and the panel speakers had to set one up during their presentation time. It became an excuse for not doing anything. I used this example during my presentation -- no brownie points that day.  The point is this; politics, pride, and lust for power (I told you so power) ruled over making the organization look good through self-sacrifice. 


A strong reliance upon or adherence to a strict chain of command is a bad thing (Likert, 1961/1987 and Argyris, 1957/1987). In the 21st Century, it is a symptom of a sick and dying organization. When we deal with knowledge workers in a collapsing worker pool, any systems that segregate people into classes will cause resentment, low productivity and motivation and is a slowing action for innovation. It also takes energy away from the overall goals of the organization.


Being in and out of many different organizations allows me to see and hear the reactions to many chain-of-command power plays and on the other side, excuses for not performing. Some symptoms of organization malfunction in today’s workforce could be as follows:

  • Adjusting office sizes by rank.

  • Adjusting office furniture by rank. (One company I know of is spending much time and effort hunting for those who have wooden furniture beyond their class of employment.)

  • A management ladder based on time spent working, not on skill and abilities.

  • Executive parking and dining areas.

With all the problems facing an organization’s mission, spending resources on tracking down who has what furniture seems to be outside of the process of achieving good valuable strategic goals. The rule of thumb here is: any action that does not lead in a measurable way to the achievement of a goal may not be worth doing. Furthermore, if that lower level goal does not lead up to the very highest organizational goals then it probably should not be pursued, as the resources will likely be wasted.


The organization will emphasize a network structure for communications (specifically, lateral communication) and consultation rather than command. I’ve heard it said that in tall bureaucratic organizations one could expect 33% of information to be lost in the first step down from the top. Only about 20% of the information is normally left by the time the information reaches the bottom. To make matters worse, almost zero goes back up. Our organization will use multidirectional open communication. This is one of the reasons the Bill Gates had email developed for Microsoft. He wanted a flat organization with a network for communicating, where every employee could communicate to everyone else including him (Heller, 2000).


Strong Organizational Culture -- As expressed in the book Built-To-Last, we should build a cult-like-culture that says, “this company is a family, the information is important but you, the employees, are special and can be trusted with all the information (maybe the only ones in the world who can).” We will treat all information as company sensitive yet all employees as worthy to be trusted. As in the early years of Saturn, each employee will be “dipped into the culture” and, as explained in the book Built-To-Last, this will not be a great place to work for those who cannot buy into the culture.


The Ring Of Overhead Functions:


To keep the cost down, one must keep the overhead cost down. The ring around the corporate management ball in the middle of Exhibit 1 represents overhead type functions. We want all overhead type functions to charge directly to the division or project for which the work is being performed using activity-based costing systems. Exhibit 3 shows the ring of overhead in more graphical detail.

For example, time cards are important for the pay process. The work done to prepare the pay will be charged to the same set of charge numbers as the people getting paid. The accountants and bookkeepers will charge directly to the project team’s numbers as specific duties are performed. Any other overhead-type work will also be charged directly to the source requiring the services, whenever possible coming out of the profits of that specific group.

Exhibit 3, Ring of Overhead

The small circles shown on the overhead ring represent people performing work directly for a division, project and/or corporate management. The overhead ring will also cover most of the cases where corporate-type functions are performed (like internal and external audits) or those things that cover more than one division or project.

The goal is to minimize overhead by keeping overhead kingdoms from forming. If the work does not lead to satisfying the customers directly then it may be deemed overhead. No overhead kingdoms are allowed.

With this ring we also hope to eliminate Peter Senge’s “Organizational Learning Disability -- of not learning from experience,” by keeping records of lessons learned. In addition to the records management function, the centralized organizational structure will also use many of the systems and functional, standards based on the ISO and Baldrige National Quality Award.


The Divisions And Projects:


The different shapes surrounding the center ball (in Exhibit 1) represent the different divisional organizations or projects being managed. Each division will stay small and is custom designed by those people serving the customer through that division. The underlying principle here is based on Peter Drucker’s assumption, there is no one right way to organize and there is no one right way to lead people. Who better to understand what that means for a particular organization than those doing the work for a specific customer. If all of the divisions within the organization look and act alike, it may be a symptom of fitting the job to the organization instead of the organization to the job.

Exhibit 4, Project Structures


The main point here is to keep small divisions. We want decentralized decisions and broad leaders who can handle many different types of issues. With the smaller divisions we will be able to focus more on the products and processes instead of the politics and personal kingdoms. We want the focus to be on what needs to be done, not on how to build a department. The smaller and more empowered the projects and divisions are, the quicker we can respond to change. (Dessler, 1995) Exhibit 4 graphically shows a project structure.

The key to avoiding tall bureaucratic organizations is to empower the employees at the lowest levels, keeping decision-making at the lowest level. The people doing the work are the only ones qualified to make the day-to-day decisions concerning the work being done. To look at Peter Senge’s laws of fifth discipline, “The harder you push the harder the system pushes back” The goal, rather, is to have the system designed to pull.

The company’s leaders and employees may sometimes act as consultants, trainers and facilitators in support of those areas for which they are not directly assigned. Everyone is responsible for helping make each project or task a success.


Virtual Workforce:


The “cluster of grapes” looking shapes at the bottom of Exhibit 1 (details shown in Exhibit 5) represent the virtual work force. Like a plumber we need from time to time in our house, there are people that we need from time to time in our business. These people have the skills we occasionally need but are not part of our desired core competencies -- not part of what we strive to be world class in. Divisional teams and leaders follow the corporate rules when hiring temporary staff and do not have to obtain the signatures of higher-level managers. This virtual concept will also be expanded to push us into the world of the Internet and electronic commerce. For example, we could obtain editorial support from locations we have never visited and from people we have never met in person.

Exhibit 5, Virtual Workforce


This is a potentially difficult cultural issue, for, to make the temporary workforce feel valued and part of the staff is important to high productivity and morale.


Personnel/Employee Pool:


The personnel pool is a database. Like a matrix organization, divisions and project teams will select people to work on their projects and processes as needed. However, unlike a matrix organization there will be no functional managers. Our personnel pool is virtual in nature and is nothing more than a database of people without a manager. All people resources (including top-level executives and owners) will be included in the database along with continuously updated resume-type details explaining strengths, education, training, availability and other relevant information for each individual.



Exhibit 6, Employee/Personnel Pool


We will only hire people who will fit into the pool of employees’ concept. We are looking for competent people we can make into superstars -- not below average people we can make competent. This pool is represented by the large ball at the top of the Exhibit and will be the invisible organizational structure in which everyone is an equal member.

Each employee in the pool is hired based on core skills, competencies and cost issues. They are responsible for supporting the divisions and for billing as close to 100% of their hours as possible to real work and for keeping internal as well as external customers happy. The charge number feeds back to an activity-based costing system.


One large service company is currently experimenting with the idea of employee pools; however, the employees are very dissatisfied with the arrangement. According to the employees, there is no effort to consider the employees’ needs in the process. They feel used, have no input in decisions, have no professional support in career development, and say they have no funds available for self-improvement.


The company in the above example does not grasp the complete picture. If you don’t invest in your people you are not investing in your company. A service company’s only asset is its people. Think of it as preventative maintenance. Even in large product companies like Microsoft, the people are the assets. Break up the people and the stock has no value.

We must build the pool concept around a win-win philosophy. Employees must win by developing broader, more interesting working conditions, be able to see rewards for self-improvement and be emotionally, professionally and financially backed by a company that supports their long-term interest and lifetime learning goals.


Replace Job Security with Self-Security. The role of personnel development becomes “personal” development. In each case it is the responsibility of the individual to commit to a program that makes them more marketable and useable by the company. It is to everyone’s benefit to make the pool of personnel more valuable by helping them and by funding them to become smarter, happier, more skilled, more experienced, better marketers, better leaders and generally more empowered. In the words of Bill Gates, “We won’t guarantee a job for life, but we will guarantee you will be more valuable and marketable if you ever leave.”


I once was a part of an employee owned company, where employees owned most of the stock. Unfortunately, the employees seldom felt ownership but often felt fear of the possibility of being laid-off. It was common for employees to be hired and laid off within the same year. Many very productive employees would be asked to take leave without pay with every bump in the contract road. My 12 years as a program/project manager put me in the top 5 to 10 percent of old timers. During that time my team and I brought in an average of one million dollars a year in revenue. As the business went through a period of slowing economic pressures, many people were being laid off. I was laid off the first week that I was without a charge number.


This “quick to the trigger” layoff policy is a shortsighted one. A layoff is a liquidation of valuable assets the same as selling equipment, land, facilities or inventories. (Likert, 1961/1987) The difference is, the human asset is harder to replace. It may take more money than it is worth in the cost of recruiting, training, familiarization, lost capability, community good will, employee motivation and development knowledge. Another hidden cost is all the facility configuration and corporate knowledge that is lost. When replacing people there will be no guarantees that the work will be done as well. In the case of the company I worked for, it took a year before someone could learn the system well enough to bring in significant work.

As in Exhibit 7, some companies hire highly qualified consultants to manage projects or who have the world-class skills needed to compete. Although this builds the same core competencies that your company needs, it does so in a way that may one day be used against you. Build your own company’s skills. Keep your employees safe and use trusted lower skilled temporary talent pools. These staffing companies see you as a customer and expect to change jobs from time to time.


Exhibit 7, Staffing


The personnel will be paid differently than ever before. We will pay each person based on an average. What is the average pay for a person based on like skills and experience in a specific region of the country? You may make more going someplace else and you may make less going someplace else. The difference comes in the ability of the person to affect their income based on profit.

The pitch goes like this, “you are guaranteed an average salary and based on your own performance you could theoretically double your salary with bonuses and gainsharing plans.”


For helping to make the company more profitable, the benefits to the average employee will be far greater than ever before. These bonus plans will be well communicated and documented to the point where people can actually understand how a dollar of profit is distributed to their paycheck.


In the words of Victor Dingus, to the East Tennessee Chapter of Industrial Engineering (1993), while he was a Quality Manager for Tennessee Eastman, “We used to have 14,000 employees and only 400 were paid to think. Our goal is to have 14,000 employees paid to think…what makes the system work is everyone knows the rules and everyone knows the score.”



YouTube Video 21Org2 - Story of Theft by

Craig A. Stevens, PMP, CC.




YouTube Video 21Org3 - Gainsharing/Profit Sharing for the 21st Century

Craig A. Stevens, PMP, CC.





The bonus formula may be similar to this:


  1. The profit for a specific Division/Project in a given period of time (say a month) is $100,000 after all salaries and expenses are taken out for this period.

  • 50% (or $50,000) goes to the corporate office (ball in the middle) for seed capital, profit and expenses.

  • 50% (or $50,000) goes to the Division/Project.

  1. Of the amount kept at the Division/Project Level ($50,000):

  • 50% (or $25,000) goes to the Division/Project Team to decide how to spend. The rules are, the money has to be spent on what is best for the company (following some procedures and guidelines) and the decision has to be a team effort. Here, the people bringing in the money have a say in how the money is spent. They may decide to spend it on corporate emergency funding pools, computers, with maybe a small amount on celebrations, etc.

  1. All of the 25% remaining (or $25,000) will go into the employee’s pockets in the form of bonuses; to be distributed based on a points system. Those who have worked the hardest and do the most should receive the most. If a bonus system is not based on quality of work the same system will act as a dissatisfier to those that do carry the weight. One possible bonus formula follows:

  • For the marketing effort… The goal is to make everyone want to market new customers. The person(s) who marketed the customer and won the work gets a percentage off the top (maybe 10% ($2,500) of the bonus pool), plus a residual percentage of any future work done for the same customer (maybe 5% of future bonus pools). This may be for only as long as the person stays with the company. In addition to the percentage, the marketer will also get 2 times the number of hours spent working on this project in bonus points.

  • For the Project/Process Manager…The goal is to make everyone want to become a leader. The project or process manager will get 2 times the number of hours spent working on this project in bonus points.

  • For the worker… The goal is to motivate everyone to spend money wisely, reduce waste and theft, work hard, think in terms of continuous improvement, treat the customer well, and build a culture of people who like their work. Each of the permanent workers will get 1 times the number of hours spent working on a specific project in bonus points.

  • For the temporary/consultant staff… The goals are similar to those of the worker, plus to help motivate the temporary person to want to become a permanent employee. Each temporary /consultant staff will get maybe a half of a point for every hour spent.

I once had a person argue for a cap or ceiling on the amount the employees could make on bonuses. The point is, the more the employees make, the more you make. If I give you a dollar for every quarter you give me – at what amount do you want to place a cap?

Human resource people will be charged with the responsibility of helping advise and plan the individual employee’s development. The roles of the HR people are to:

  • distribute funds for training and education,

  • track the trends within the company,

  • develop self-improvement tools,

  • find candidates and facilitate the project team selection process,

  • help develop the plans for educational vision, training and funding,

  • manage the benefits and the average pay issues,

  • manage personality expectations, problems, and the law.

With the pool concept we hope to build a company culture not a departmental us-against-them mentality. Also, we hope to create a more realistic division of work, eliminating the phrase “that’s not my job,” and replacing it with “everything is my job.” These efforts should help eliminate Peter Senge’s “Organizational Learning Disability” of “I am my position” and help to build a systems approach to personal mastery.


Parent Daughter Relationships:


In Exhibit 1 three unique structures were shown next to boxes titled Major Customers 1, 2, and 3. These boxes are… you guessed it… “Major Customers” or groups of customers. They are so significant that daughter organizations could (one-day) spin-off making entirely new organizations dedicated to serving only those groups of customers or to sell a specific product or service, much like a company sponsored franchise ( See Exhibit 8). This is a good thing. We are trying to build a network of businesses in alliance (kind of like the United States) not just one super-size organization that moves slowly and is ineffective in a volatile economic or high tech market. We want the growing parts to grow as effectively and as efficiently as possible not to be weighted down by dragging dead or dying organizational white elephants. At the same time, we want the dying organizational units to die as painlessly as possible. If the company decides to keep the unit from dying using the company funds, it should be a planned effort and not an automatic one. Remember, we have an employee pool structure so the loss of employees is not the issue.



YouTube Video 21Org4 - Introduction to daughter organizations for the organizations of the 21st Century by

Craig A. Stevens, PMP, CC.


You know it is time to push the daughter out of the nest when a couple of the following things happen:

  • The layers of management increase above a limit (say 3 layers);

  • The daughter organization can stand on her own with customers who are unrelated to the mother organization;

  • The daughter organization costs more than she is worth in effort and financial gain;

  • When the daughter’s vision, values and direction are pulling the mother organization away from her goals;

  • The dynamic team within the daughter organization can do more good outside of the corporate oversight;

  • The dynamic team wants to and is ready to do so;

  • The daughter organization is sinking and threatens to bring the mother down also;

  • You can make more profit from the sale of the daughter than from its long-term operation; or

  • When conflict is high.

Exhibit 8, The Daughter Organizations


If it is best for the entire company, those divisions that pull in different directions could be allowed to create a new and separate, yet affiliated, company with a new and separate direction. The hope is that by doing this we can create greater profits, a strong family of businesses and greater influence with our management principles. If you’re interested in power for power’s sake, try a different structure. If however, you want to maximize profits, good quality work, employee motivation, building something bigger than yourself and your ability to control, this may be one way to go.


Bottom Line:

  • Our future organizations will be designed differently than those from the past.

  • Changing environments will require more use of the knowledge based decision-making skills with an empowered workforce.

  • To just keep people in our organizations we will have to build internal relationships and greater degrees of employee satisfaction and ownership.

  • Future successful organizations will be extremely virtual and organic organizational structures that can thrive on change, anticipate trends and be automatically driven by internal and external influences.

  • One answer to this environment for the 21st Century is building an eXtremely Virtual Organic Organizational Structure designed around change.


  1. Argyris, Chris, “The Individual and Organization: Some Problems of Mutual Adjustment (1957),” The Great Writings In Management and Organizational
    Behavior, 2nd Ed., Boone and Bowen, McGraw Hill, 1987, pg. 139.

  2. Boone, Louis E. and Donald D. Bowen. The Great Writings in Management and Organizational Behavior, 2nd Ed., Irwin McGraw-Hill, 1987.

  3. Burns, Tom and G.M. Stalker. The Management of Innovation, London: Tavistock, 1961.

  4. Dessler, Gary. Organization Theory Integrating Structure and Behavior, Prentice-Hall, Inc., 1995.

  5. Collins, James C. and Jerry I. Porras, Built-to-Last, Successful Habits of Visionary Companies, HarperCollins Publishers, 1997.

  6. Heller, Robert and Dorling Kindersley, Bill Gates, 2000 ISBN 0-7894-159-X.

  7. Likert, Rensis “An Integrating Principle and An Overview (1961),” The Great Writings In Management and Organizational Behavior, 2nd Edition , Boone and Bowen, McGraw Hill, 1987, p. 216.

  8. Senge, Peter, The Fifth Discipline, The Art & Practice of The Learning Organization, Currency Doubleday, 1990.

  9. Weber, Max, “Legitimate Authority and Bureaucracy,” (1947), The Great Writings In Management and Organizational Behavior, 2nd Ed., Boone and Bowen, McGraw Hill, 1987.


A future organizational Structure in Action.


Old Bios:  Craig A. Stevens has worked as a consultant with every possible level of worker and management and with over 100 different organizations. Mr. Stevens has experienced a wide variety of organizational environments including: health care, hotel/motel/restaurant, retail, manufacturing, education, agriculture, government, and services of all kinds, from extremely high technology to virtually no technology, in about 25 different states. Currently, Mr. Stevens teaches at Vanderbilt University in Nashville, Tennessee; is an Organizational Development Coordinator for NASA; a corporate trainer/consultant for the American Management Association International (AMA); a partner in the consulting firm of Westbrook Stevens; is assisting in the development of 5 start-ups and co-authors an executive management column for Ag-Knowledge Magazine. He hopes to soon complete his dissertation for a Ph.D. in Engineering Management at the University of Alabama in Huntsville. He received his MS (1985) and BS (1983) from the University of Tennessee in Knoxville in Engineering Management and Industrial Engineering


Allen Gentry has 23 years of work experience and is currently a manager of Production Process Support at the Tennessee Valley Authority. He is responsible for processes and methods for maintenance, preventive maintenance, work management, and records management. He has developed standard policies and practices used at the fossil group and operating group levels. He got his BS in Mechanical Engineering from Tennessee Technological University and is working on a MS in Engineering Management from the University of Alabama in Huntsville.

Craig A. Stevens, 2000


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