The Functional Organization: Rumors of its Death Have Been Greatly Exaggerated

For some time, futurists have been predicting the demise of the multi-layered functional organization and its replacement by a new, flatter and more fluid model.  (I mused about this topic myself in a recent post, prompted by my reading of Wikinomics.)  This organizational model of tomorrow, futurists claim, will no longer be populated by traditional jobs, but rather constantly changing clusters of activity.

Not so, Frank Giancola tells us in a recent article "New Forms of Organization Don't Justify Skill-Based Pay"  in the June issue of Compensation & Benefits Review.  Backed by his usual exhaustive research and analysis, Frank walks us through the work and conclusions of a number of leading organizational scholars and consultants - here and abroad - who not only see a future for the functional organization but believe that it will play a critical role in even the most advanced and fluid of companies.

This has important implications for pay, as compensation experts who believe in the impending obsolescence of the functional organization support abandoning traditional job-based pay programs in favor of skill-based pay, a significant shift both philosophically and administratively.  (Skill-based pay programs are those where pay is based on the skills of the employee rather than the employee's job; in other words, people-based pay versus job-based pay.  See more this topic here.)

In the article, Frank shares his conclusions regarding this debate and its implications:

The demise of the functional organization, and the associated increase of unstable jobs, is not an idea that experts in organizational design espouse.  On the contrary, they see an important role for the functional organization as the primary organizational form, or as the foundation or parent in a dual-structure company, where it provides stability, overall strategy, specialized expertise and a needed counterbalance to the task force structure.  Equally important, it also serves as the home base for employees who work on task forces to ensure they retain their professional roots and refresh specialized knowledge and skills.

Although task force participation may require additional skills, such as project management and team building, employees are still assigned to one based on their functional expertise.  Thus, their occupation is the logical choice for determining their salaries, and it is hard to understand why compensation experts see these assignments as making it difficult to determine salary based on occupation, instead of skill sets.

My conclusion:  don't write off the job, or job-based compensation systems, quite yet.

Comments

[http://almostgotit.wordpress.com]

While parsing most of this out is beyond the abilities of my own knowledge set, skill-based (people based) vs. job-based compensation does sound a bit utopian: if nothing else, it seems to ignore both capitalism and human nature.

First, I doubt that we will ever be able to rid ourselves of the need to form hierarchical structures of one kind or another. History is littered with examples of revolutions and counter-revolutions (and anarchy) that've occured whenever we've tried.

And second, if I could ever get the world to compensate me fairly for the skills-based, people-based contribution I've made it by mothering my two delightful children, I'd be richer than Bill Gates.

:)

******************
AB - Nice job of lifting this from its HR context and placing it in a broader life/world framework. And don't get any of us started on the notion of fair and equitable compensation for the overwhelming job of parenting! Thanks for the comment!

[Peggy]

Ann - You (and Frank) totally rock with this post! I love it because so much career advice out there is hyped about the fast/fluid company where people and team skills will get you where you want to go thatI am concerned we are raising a generation of generalists who don't see the value in specialization. Time bears out that specialization combined with good people/team skills will lead to greater income and greater options for work-life balance for most people (it's easier to ask for part-time if your skills are in high demand).
- The Career Encourager

[Ann Bares]

Career Encourager:

Thanks for reading and sharing the feedback! I agree with you - the idea that functional organizations will disappear from the business landscape does feed a lot of career misperceptions. Your advice here is timeless!