Walmart earns $400 billion each year by serving over 100 million customers every week in 4,500 retail locations (covering a land-area that is greater than Manhattan) with products from over 100,000 suppliers. A big part of its success lies in what it chooses not to do as a company. It has a focused strategy. But another major success factor is the way in which Walmart’s organisation structure aligns people and processes behind its massive product delivery system. It has over two million unique, individual employees working in a streamlined way to add value to its customers.
Our recent research shows that most organisations have evolved to be too complex. This prevents people in these companies from focusing on the most important things, performing key activities efficiently or making important decisions fast enough. Costly complexity resulting from organisational design problems is one of the key areas that constrain the performance of firms of all sizes and across all industry sectors.
Organisation design (OD) refers to how a business is organised and structured to deploy people and resources to add value to customers. It includes the structural divisions, such as business units or functions (sales, manufacturing, finance etc.), the relationships between them and the way that decision-making is organised. Firms organised around product groups or global regions, or as matrix or network structures, all suffer from the same challenge: how to avoid the kind of ‘corporate treacle’ which slows down or prevents, rather than facilitates, value-adding activities.