Every month, Aaron and I hold an internal session devoted to collective learning about our evolving Responsive Operating System practice. Just before break, 8 UCers and I spent some time with these two Stratechery posts before the holidays and I took a few notes during the discussion.
- Functional organizations display characteristics of Responsive Operating Systems, while divisional organizations represent a Legacy way of doing business: organizing around core user functions is the first step toward getting it, whether through squads, circles, or some other non-hierarchical method.
- Functional organizations prize experts, while divisional organizations require generalists. A few notes here: The CEO has to be an expert at the core work of the business; both experts and generalists are needed, but what’s more important are experts that are willing to learn and do dirty work; organizations don’t become great by passing people around management rotations.
- Functional organizations are driven more by vision, while divisional organizations are built around commerce: The only way you can pull off 4, 6, and 7 is through a strong Purpose, as employees must be willing to trade compensation for fulfillment.
- Functional organizations require more effort to be put into the work, while divisional organizations require more effort to be put into the politics: What we’re observing is that product- and vision-first companies require more and more taxing hours from each employee; the actual work of the organization is harder, all else being equal.
- Functional organizations often need to be physically centralized, where divisional organizations can be easily distributed: This may be why new ways of organizing are difficult to scale, as the physical demands of product- and vision-oriented businesses are unique.
- Functional organizations are often smaller than Divisional ones, normalized for revenue: I believe the way we’ll measure success in the future won’t be in terms of profit or growth, but the amount of capital generated per employee.
- Functional organizations rely on intrinsic employee motivations, while divisional ones rely on extrinsic motivators: Left to their own devices, I’d wager that professional middle-managers wouldn’t keep managing if they weren’t paid to do so. Do you work for love, or for money?