The Organizational Chart and the VSM: How Does One Get from One to the Other?

Abstract

One of the most intricate and yet not entirely resolved questions regarding the VSM is its conceptual relationship to the organizational chart. This chapter tries to shed light on this fundamental question. It clarifies firstly, the function of the organizational chart and secondly, illustrates how the organizational chart is generated from the VSM. The reader will learn in-depth how the formation of the corporate functions and organizational chart structure causes the fragmentation of the viable systems and leads to the fundamental tension between specialization and the preservation of a holistic perspective on the organization. How should one deal with this polarity? Is a holistic approach already the solution or do “silos” that mark our organizations also have a positive value? One thing is certain: A more nuanced approach is required.

Once people have understood the VSM, their attention turns immediately to the organizational chart … and I suspect this also applies to you. How does the VSM relate to the organizational chart and, the other way around, the organizational chart to the VSM? Based on the last chapter, we can now answer this question with greater precision. We will address it on a more conceptual level in this chapter and discuss the technical aspects in Chaps. 8–17.¹

1 Why Do We Need an Organizational Chart?

To clarify the conceptual relationship between the VSM and the organizational chart structure, we will first analyze the function and purpose of an organizational chart more closely: Why do we need an organizational chart at all? This question may sound a bit unusual, but less so if we consider that already today but even more in the future, many tasks will be executed by algorithms encoded; for instance, in ERP systems.² Furthermore, many daily tasks that emerge spontaneously are solved by people on the fly without reference to any kind of organizational chart. So, why does one really need an organizational chart? One wonders.

To start, one reason is that there are tasks that can only be executed by people and thus need to be assigned to them. “Jobs” or “positions” are the result of this assignment process of tasks to people, whereby tasks become grouped in such a way that people can execute them in a meaningful way (see also Chaps. 3 and 4 regarding the principles and limitations in the job design process).³

Another and much more important reason for the organizational chart is that organizations need to obtain accountability and overview, and this necessitates stable task-employee-relationships. Since organizations must accomplish many tasks and employ many people in parallel, one of the key risks is to lose the overview. For smaller and less important tasks, it does not pose a problem if the people executing them vary. For the organization’s core tasks, however, ad hoc assignments with randomly changing people lead to chaos and lack of transparency.

Also, the size of the organization may require more stable structures: Small organizations often do not need an organizational chart since everyone knows what everyone else is doing. For mid-sized and large organizations, this is more difficult or almost impossible. They need a structure that assigns people to tasks and interrelates the various job holders clearly and traceably, and, consequently, creates a stable and transparent network of accountability across the people employed by the organization. Only if tasks are assigned to people on a longer-term basis can organizations achieve transparency, continuity, and reliability. This is one of the key functions of organizational chart structures. One can easily observe this in practice: Too many personnel changes render the organizational chart as a graphical representation and orientation almost useless and increase the opaqueness of the organization.

To increase the overview and accountability, the assignment process does not stop with the definition of jobs and positions, but it also needs to interrelate them. Consequently, jobs become grouped to ever larger units, eventually ending in one position, unit, or group of people responsible for the entire organization. This grouping process then results in the known hierarchical representation of the organizational chart. Job holders and units then become connected through the lines of authority and responsibility (the so-called reporting lines).⁴

The organizational chart and related instruments, such as the RACI matrix, are the results of this assignment process of tasks to employees. They document and make the assignment logic of tasks to people visible and are intended to create transparency, overview, and structure, especially among its employees.

While being an important tool, we always have to keep the limitations of organizational charts in mind: they only provide us with a very rough overview of how the organization functions. Firstly, identical organizational charts can have completely different underlying organizational processes and even varying degrees of centralization. From an organizational chart, one can only roughly deduce which people are responsible for what kind of tasks, and thus, who needs to be asked first regarding a specific issue—but one cannot deduce how the organization as such functions. Secondly, the organizational chart, as well as its organizational units and departments, are only a very rough approximation of the organization’s true task spectrum. In reality, employees need to execute many more different systemic tasks and sometimes ones that differ from the ones indicated in the organizational chart. The tasks assigned also vary often in specificity and detail due to their nature: for tasks which recur often, the assignments can be mostly specified in detail. However, for new and changing tasks, the organization can assign tasks and responsibilities on a general level only. It is then left more or less to the discretion and initiative of the employee to assume responsibility for the tasks that emerge in his or her “area of responsibility.”⁵

2 The VSM and the Organizational Chart

There exists one further problem with the organizational chart, though, and this relates us back to the VSM and the relationship between both: The organizational chart does not specify which tasks and jobs are necessary for an organization. The organizational chart structure is only a device to order tasks that are already known. Further, the organizational chart structure does not tell what an organization needs to do to become functioning, and it does not allow the organization to verify whether all the necessary tasks for its viability have been identified.

This is where the VSM can help. It specifies the systemic tasks an organization must perform (i.e., what system functions, channels, and equilibria are required). It describes the minimum set of tasks needed for a functioning and viable organization.⁶ This does not mean that in a specific setting, other additional tasks are not necessary. The VSM does not stipulate an upper boundary of tasks but only a lower one: An organization needs to perform at least all the tasks that the VSM describes to become viable,⁷ as the dysfunctionalities in volume 2 showed.

We now come to the point where we can discuss the conceptual relationship between the organizational chart and the VSM in greater depth, which Fig. 2.1 tries to visualize. As stated above, the VSM represents the organization as a system of interrelated processes through which variety becomes processed. The term “system” should not be viewed here too statically, but instead, as a process itself; namely, as a continuous process that organizes theprocessingof variety and through which emerges what we call the “organization.” Metaphorically speaking, the VSM can be viewed as similar to the atomic model that details not only the subatomic particles, but also the movement, forces, energies, and interactions of the subatomic elements needed to constitute an atom. The VSM describes the organization and its elements as a dynamic system and an ongoing process of processing and balancing (eigen-)varieties.

Fig. 2.1

Through the organizational chart structure and related instruments employees become assigned to various (systemic) tasks

What, then, is the organizational chart? The organizational chart structure functions as a bridge between this system of tasks and processes and the employees as one of the organization’s most important resource bases. By using the organizational chart, the organization defines and documents to which group of tasks employees are assigned. The organizational chart can be viewed as an expression of the organization’s “algorithm” allocating employees to tasks and assigning responsibilities. The VSM provides the map and list of the systemic tasks that need to be accomplished by an organization to become viable.

3 The Configuration of Jobs and Units from the VSM Perspective

How then do we have to understand this process of configuring jobs and units more concretely from a VSM perspective? We will discuss the guiding principles in Chaps. 3 and 4, but to get a basic understanding, let us discuss some examples:

Interfaces to the organization’s primary environment are often grouped by organizations into the sales department (see Fig. 2.2). Depending on the recursion level, this grouping can then lead to various jobs, positions or units: All operational sales activities dealing with customers might, for instance, become grouped into a position of a sales representative or unit (at the lowest recursion level). The rationale behind this is that taking care of the interfaces to the environment needs different skills compared to purely internal tasks, or that one can gain synergies if one instead of many employees (i.e., the sales representative) visits the customers in a specific region.

Fig. 2.2

The interfaces to the primary environment can be grouped to a job or unit in the sales department

At the next higher recursion level, tasks related to the environment, such as managing entire customer groups (e.g., developing strategies, developing communities), can then become combined into a product management unit.

In the same way, the management and development of sales-side varietyamplifiersand attenuators(e.g., marketing campaigns, price, and product policies) can be grouped into a marketing position or unit, depending on their size and scope (see Fig. 2.3). This position or unit can then be, for instance, expanded by adding tasks from system 4, for example, conducting market studies, developing market and price scenarios, and analyzing customer behaviors.

Fig. 2.3

A marketing job or unit takes care of all the PR-related amplifiers or attenuators of the systems 1 as well as of scouting trends (system 4)

This grouping of tasks to jobs can also take place regarding the system 1 management; for example, the sales management function of several systems 1 can be combined into the position of a sales manager (see Fig. 2.4).

Fig. 2.4

The responsibility for managing various local stores or sales representatives can be grouped to a sales manager function

The same applies to production: Similar production steps in different system 1 operations can be combined into workstations (see Fig. 2.5) if the synergies to be gained permit it.

Fig. 2.5

Similar production steps across several products can be grouped to one workstation in a production (Color figure electronic book version)

Similarly, R&D positions orunits can be formed by aggregating individual R&D activities for specific products or technologies (see Fig. 2.6). This applies to individual research activities (e.g., analytical tasks in a laboratory), as well as entire innovation processes and research projects (e.g., product development).

Fig. 2.6

Grouping of R&D activities into an R&D position

Many expert positions in organizations are, in fact, often centralized responsibilities for specific variety amplifiers or attenuators. The trend toward installing a “Chief Happiness Officer” (Messinger, August 26, 2015) belongs to this category: This position is an expert position responsible for calibrating all amplifiers and attenuatorsthat affect the “happiness” of the employees. Whether “happiness” really is a good objective can be argued in both ways (see Carelli, 2019; Slaghuis, 2017; Spicer & Cederström, July 21, 2015), but the basic mechanism behind this is clear: Processes and variety amplifiers, which are all supposed to contribute to “happiness,” are grouped across the entire organization to one job.

In the examples above, we have, thus far, only grouped similar processes and activities for the sake of simplicity. For synergy reasons, however, it may be necessary to combine different system tasks. For example, the operational sales management as shown in Fig. 2.4 might be expanded and include higher-level system 3 tasks: It must then simultaneously lead the total group as well as some individual systems 1. Furthermore, this job profile may be expanded to include system 2 (e.g., sales planning) or system 3* tasks.

How would the grouping of tasks, as shown in Figs. 2.4, 2.5, and 2.6, look in an organizational chart structure? Let us take the example of an organization that is divided into three regions, which form the viable systems at a lower recursion level (see Fig. 2.7). Then, the interfaces to the environment (i.e., the salespeople, shops, or sales offices in these regions) could be grouped into three sales areas. A central PR and marketing department manages the PR and marketing related variety attenuators and amplifiers for these areas . The R&D activities might be grouped into one central R&D department, and the three workstations (green circles) become integrated into one central production.

Fig. 2.7

In the organizational chart, groups of systemic tasks and functions become grouped to jobs and units

Now that we have roughly sketched out the interrelation between the VSM and the organizational chart structure, the question becomes: What determines more precisely how many and which tasks can be grouped to one job or department? Here, I ask for a bit of patience; we will discuss these technical questions more in detail in Chap. 3 and from Chaps. 9 to 16 because, for now, we still need to better understand the general properties of how the organizational chart structure and the VSM are interrelated.

4 The Organizational Chart Structure—Creating Accountability but also Fragmentation

The organizational chart structure has its clear advantages: It assigns tasks to employees, creates overview and transparency and establishes lines of accountability and authority. However, it also creates some disadvantages, of which one must be aware when designing organizational structures. Based on what we have worked out in the previous subchapters, we can now illustrate the deficits that are created by organizational charts more clearly.

Let us take the example of a functional organization consisting of the three corporate functions: sales, logistics, and production. As we have seen in the previous chapter, all the organization’s sales, logistics, and production tasks and processes become grouped into jobs or organizational units for synergistic reasons (see the schematic representation in Fig. 2.8). The job holders or organizational units are now in control of a specific segment of the organization’s processes.

Fig. 2.8

Organizational chart structure emerging from grouping similar operational processes (schematic and simplified representation)

This segmentation is not yet problematic. More dangerous are the consequences: Being responsible for specific processes, the job holders and units start developing and adjusting the metasystemic functions entrusted to them according to their specific needs. This situation is illustrated in Fig. 2.9: Each corporate function develops its own metasystemic coordination, control, and innovation mechanisms, apart from all other metasystemic functions. People no longer necessarily coordinate according to the necessities of the overall system, but first and foremost, in view of their job or unit. Budgets are then, for instance, allocated according to the needs of the individual units and jobs instead of in view of the total optimum.

Fig. 2.9

By grouping processes into units, the metasystemic functions become partitioned among these units, thereby fragmenting the metasystem and losing the holistic view

The organizational chart structure catalyzes three fragmentation dynamics with which organizations struggle as a consequence:

• 1. Fragmentation of the metasystem

  Each organizational unit determines what and how should be coordinated, controlled, audited, and innovated, and what the guiding norms and principles should be. This fragments the metasystem, and especially the interaction between system 3 and 4, the “organ of adaptation” (Beer, 1995, p. 120). The seeds for internal political intrigues and struggles are sown.

• 2. Fragmentation of system 1

  As a consequence of the fragmentation, the system 1 in its entirety disappears from the perception of the employees, units and the organization. One’s job and unit become the primary purpose. Consequently, the sense of responsibility and overview of the overall process from the customer and back to the customer get lost. In the end, the concrete purpose of the entire organization vanishes from the organization’s focus.

• 3. Fragmentation of the environment

  Due to the specialization, each corporate function begins to narrow down the environment to its specific area, causing the environment to become fragmented. This is even worse for units that are cut off from the environment, where their own or neighboring unit(s) becomes the (only) relevant environment.

Due to these fragmentation dynamics, the viable system disappears in its entirety from the consciousness and attention of the organization. In Fig. 2.9, the viable system is, as an illustration, painted only in light gray to express its disappearance from the organization’s radar. This reflects an everyday experience in many large organizations: The overall perspective exists only as a faint memory of earlier times (e.g., the “golden years” of the young organization). The holistic view of the organization ceases to exist in the perception of the organization.

If the viable system itself disappears from the consciousness of the organization owing to the three fragmentation dynamics described above, the organizational chart structure remains the only guiding model. One’s own department, unit, or job becomes the main reference point and sole purpose. This dynamic, in turn, creates multiple centers of purpose and identity within the organization, and as a result, the organization loses its overall identity and cohesion.

Without clarityabout the overarching purpose, the decisive criterion that determines the point at which the entire organization should be in equilibrium becomes unclear and even disappears (see also volume 2). It then becomes increasingly difficult for the organization to determine at what point it should balance horizontal and vertical eigen-variety, how much freedom and how many synergies are necessary. The organization’s only remaining reference point is the fragments of its organization. Balancing the different demands by the organizational units then turns into a political negotiation process between the power spheres of these units (Cyert & March, 1992). The internal (power) equilibrium between all units becomes the decisive criterion in view of which all decisions are made, whereas the overall purpose and the equilibrium with the environment are lost out of sight.

These considerations show us that the negative consequences of the organizational chart perspective are not yet sufficiently described if we just refer to them as “interface problems” and “lack of cooperation and coordination.” Organizations often think that with a few lateral reporting lines, communication processes, or committees, the holistic view can be restored. “We just need to communicate a bit more,” sometimes runs the argument. However, this falls short of the problem; what is missing is much more; namely, the true exchange of perspectives and the (re)construction of what the enterprise as a whole represents and intends to achieve.Every single person needs to start seeing again what the organization, in its entirety, should be about—what value it creates, what its purpose is, and what is needed for the organization to become viable.

This missing holistic viewis difficult to measure quantifiably, but it can be sensed quickly, especially in large organizations, from its impact on operational processes (lack of circumspection and foresight) and the challenge to generate sufficient meaning for employees (“What is the purpose of all this and why do we do all this?”). This missing holistic perspective can hardly be repaired by simply setting up committees, meetings, or better communication infrastructures. These formal instruments offer only the spaces for the construction of a complete view, but they cannot create this overall view per se. Just because one meets, an overall picture does not emerge automatically; in the worst case, these spaces become the arena where the self-interests of the units are played out.

Consequently, the organizational chart structure should ideally be built in such a way that it supports the creation of the holistic view and fragments the viable systems as little as possible. And this leads us to an important principle for the design and modeling of organizational chart structures:

The organizational chart structure should be built as closely as possible along the structure of its viable systems.

Dysfunctionalities concerning the interface to the environment, such as failing to respond to customers, usually emerge in those places, where the organizational structure no longer corresponds to the viable systems and their processing of variety. Thus, the formal organizational structure and job descriptions should be designed in such a way that the employees can work along the structure of the viable systems and the actual variety processing as much as possible.

Sometimes, this might not be possible for synergistic reasons. Then organizations need to undertake counterbalancing actions, such as:

• 1. Creating regularly a common view of the organization’s environment, its strategy, and purpose,

• 2. Refocusing the organization continually on the operational processes that generate the concrete purpose of the organization,

• 3. Creating a common perspective among those who exercise metasystemic functions (this aspect will be discussed in detail in Chaps. 5–7).

If one has these three countermeasures in view, one should be able to preserve the viability of the organization.

5 The Left and the Right Wing of Organizations

Considering this problem from a greater distance, a fundamental tension in the design of organizations becomes apparent that applies to every organization: On the one hand, one must assign tasks to persons and thus allow and promote specialization.On the other hand, organizations must also implement ways that allow organizations to create and maintain a holistic perspective going beyond individual jobs, units, and corporate functions. So-called systemic consulting approaches are known for this latter aspect.

Whoever has already been intensively involved with the design and modeling of organizations will also discover that neither the first, nor the second approach alone is truly fruitful: Organizations are more than tayloristically inspired workplace optimization programs, process maps, and function diagrams. They are communities that define themselves through a common purpose and in which the individual members need a reference to the overall purpose for their actions and decisions and from which they derive meaning for their lives.

However, we also know that holistic thinking alone is not sufficient, as advocated in many organizational approaches. Contrary to the now common rejection of silos and silo mentalities, one must state that silos are also good and have their advantages. Silosenable concentration, the creation of expertise and competencies, and the accumulation of knowledge. The organizational chart structure creates order and calculability, and it provides clearly defined areas and responsibilities for the employees. Based on Herbert Simon’s concept of near-decomposability (1962, pp. 477ff), we can say that silos offer the advantage of interrupting interdependencies within an organization and thus of making complexity better understandable and manageable. Through organizational chart structures, not everything remains dynamically interconnected—the level of order and clarity increases.

The truth is thus not to be found in the famous middle ground, which blurs everything to an indefinable gray, but in the tension to keep up both poles. We have to master both: to divide tasks well into positions and jobs, but at the same time restore the holistic dimension that unites the organization and generates meaning and value (similar to this: Selznick, 1984).In the history of management theory, there have been many attempts to express dualities of that sort (for example, “management vs. leadership,” “administration vs. institution,” “anatomy vs. physiology, psychology”). However, all these terms and words again lead to definitional problems and contain implicit value statements (i.e., “is leadership better than management?”).

To avoid these shortcomings, I prefer using the more neutral picture of wings, even if it is not perfect: Birds need two wings to fly, and both wings are equally important and must flap synchronized together. Following Fig. 2.9, I call the aspect of specialization in the form of the organizational chart structure the “left wing” and the holistic dimension of an organization its “right wing”.

How to design both wings will be the subject of the following chapters. Regarding the left wing, we will first discuss the principles related to the design of jobs. The right wing will be the topic of Chaps. 5–7. The question of the right organizational structure in which jobs and positions should be embedded will be dealt with from Chap. 8 onward.

Summary

• Through the organizational chart structure, tasks become assigned to people, and the organization gains transparency, accountability, stability, and reliability.

• “Organization” is better viewed as a process of permanently organizing and processing variety to maintain the organization’s viability.

• Unlike the organizational chart structure, the VSM can describe the minimum set of systemic tasks necessary for an organization to become viable. These systemic tasks are then applied to the specific factual aspects to derive the full spectrum of tasks.

• Organizational chart structures lead to a fragmentation of the organization’s perspective on the environment, the systems 1, and the metasystem. They overemphasize the synergistic perspective of every individual job, position or unit at the expense of the overall organization.

• The organizational chart structure should be designed and correspond to the structure of the viable systems and the actual process of variety processing as closely as possible.

• Organizations must achieve both specialized and organizational synergies through the creation of jobs and units (“left wing”), as well as the creation of a holistic view, which ensures that the organization’s purpose does not disappear from the awareness of the employees (“right wing”).

Questions for Reflection

• 1. How much does the organizational chart help your organization to create transparency, accountability, reliability, and stability? If not, what are the reasons?

• 2. How well does the organizational chart structure of your organization mirror its viable systems?

• 3. How fragmented are the views in your organization regarding what constitutes the organization’s environment and its purpose? How much are the metasystemic functions fragmented? How much has the organization’s inner life become its environment and reference point (“inside view”)?

• 4. How high are the temporal, social, and mental barriers that must be overcome until all people in your organization share the same awareness and understanding? What constitutes these barriers?

• 5. In your organization, how well are the left and the right wing balanced relative to each other?