Organigraphs:Drawing How Companies Really Work

by Henry Mintzberg and Ludo Van der Heyden

A creative new approach

\to org charts helps

\jnanagers see critical

Xrelationships -

^ ^ and competitive

^opportunities, too.

not the nice, neat managerial offices but thefactory, design studio, or sales department-and take a good look.

In one corner, a group of people are huddled in dehate over a vexing loproblem. In another, someone is negotiating with a customer halfway

around the world on the Internet. Everywhere you look, people andproducts are moving, crisscrossing this way and that. You get a

snapshot of the company in action.Ask for a picture of the place, however, and chances are

you'll be handed the company's org chart, with itsorderly little boxes stacked atop one another. The

org chart would show you the names and titlesof managers, hut little else ahout the com-

pany-not its products, processes, or cus-tomers-perhaps not even its line of

business. Indeed, using an org chartto "view" a company is like using a

list of municipal managers to findyour way around a city.

The fact is, organizationalcharts are the picture albumsof our companies, but they tellus only that we are mesmer-ized with management. Nowonder they have become so

ARTWORK: CORBIS/JULIE HABEL «7

ORGANIGRAPHS: DRAWING HOW COMPANIES REALLY WORK

irrelevant in today's world. With traditional hier-archies vanishing, and newfangled-and often quitecomplex-organizational forms taking their place,people are struggling to understand how their com-panies work. What parts connect to one another?How should processes and people come together?Whose ideas have to flow where? The answers tothose questions not only help individuals under-stand how they fit into the grand scheme of thingsbut also reveal all sorts of opportunities for compet-itive advantage.

For the past several years, we have been experi-menting with a new way to draw-and tbus, see-organizations. We call our approach an organi-graph, a tip of the hat to the word organigramme,the French term for organizational charts. Organi-graphs don't eliminate the little hoxes altogether.But they do introduce new components called hubsand webs-forms that we believe reflect the variedways people organize themselves at work today.Organigraphs are more than just pictures; they arealso maps. They do not show individuals or posi-tions so much as they provide an overview of acompany's territory-its mountains, rivers, andtowns, and the roads that connect them.

We have created organigraphs for about a dozencompanies and have found that they are much moreuseful than traditional charts in showing what anorganization is -why it exists, what it does. Organi-graphs have been able to demonstrate how a placeworks, depicting critical interactions among peo-ple, produets, and information. Moreover, exec-utives have used their organigraphs to stimulateconversations ahout how best to manage their oper-ations and whieh strategic options make the mostsense, much as hikers use maps to investigate pos-sible routes.

Take a look at the exhibit"Organigiaph of a Petrochem-ical Company." It shows howthe company operates like atraditional chain: raw materi-als are found or purchased, per-haps traded, and then refinedand sold. Those activities con-stitute the main petroleumbusiness. The organigraph alsoshows how the company'schemicals division connectswith this chain in a more itera-tive, weblike way, drawing outmaterials from the refinery andfeeding them in at anotherstage, at the retail gas pumps.While the sequential business

88

relationships could very naturally be managed bya centralized planning office, the more weblikeones - with their need for negotiation of transferprices and the Uke-may call for a more decentral-ized approach. Seeing such relationships illus-trated can help a company understand the need fordifferent managerial mind-sets throughout theorganization.

That husinesses need a new way to depict theirorganizations is hardly a novel contention. In1993, an article in Business Week suggested thatcompanies begin to replace their org charts withfigures that look like starbursts, shamrocks, andpizzas. Some commentators have even suggestedtbat org charts be stood on their heads, putting op-erating employees on the top and bosses on thebottom. But all turning them upside down woulddo is provide a better depiction of the senior man-ager's headache. Organigraphs, instead, offer a newway to look at our companies. They are picturesthat show not headaches but real businesses andtheir opportunities.

The Basic Forms of OrganizingOrganigrapbs contain two rather conventionalcomponents. The first is a set. Every organization isa set of items, such as machines or people. Some-times these items barely connect with one another,and so they remain just that-sets. Parts in a ware-house, for example, wait there asindependent items, as do the fin-ished products of a factory beforethey are shipped off. Many profes-sional service firms, such as lawoffices, operate as sets, with pro-

111

111

111

set

Organigraph of a Petrochemical Company

outside vendors\

explorationandproduction

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ORGANIGRAPHS: DRAWING HOW COMPANIES REALLY WORK

chain

fessionals working almost exclusively with theirown clients. The same can be said about the divi-sions of a conglomerate company or the professorsteaching and doing research at a university: all ofthese function rather independently. They areloosely coupled as a collection, a group, or a portfo-lio. These sets usually share common resources-facilities, funds, overall management-or else theywould not be found in the same organization. Butotherwise, they are on their own.

More commonly, though, organizations don't ex-ist to house sets. They exist for purposes of connec-tion. And connection is usually shown by the sec-ond conventional form, the chain. Materials entera factory to he transformed into parts, which are

combined into subassemblies,__ which are combined into final

^ U " * ' D " ^ Q assemblies and then shipped tocustomers. The assembly linein an automobile factory is the

prototypical example of this linear connecting pro-cess-here, chains prevail. Indeed, chains are so em-bedded in business imagery that many managersdescribe their strategies in terms of value chainsand their logistics in terms of supply chains.

The preponderance of chains in business think-ing is certainly understandable. Because chains arelinear, they promote standardization and thereforeenhance reliability. They can clarify and system-atize the many complex processes that constitutebusiness today. Imagine an automobile factorywithout chains! But do chains really describe allthe activities and relationships within a eompany?Obviously not. Think of the buzzing confusion of acustomer service office or the zigs and zags of newproduct development. And what of airports andtrading floors? These, we would suggest, are hetterdepicted in different ways-as hubs and webs.

Hubs first. A hub serves as a coordinating center.It is any physical or conceptual point at whichpeople, things, or information move. A huilding canbe a hub-think of a school oran airport. So can a machine-acomputer, for example. A man-ager can be a hub. Just think ofa football coach. And so can acore competence, such as op-ties at Canon or bonding andcoating at 3M. In fact, placesthat we usually consider chainsmay also be considered hubs. Draw a big circlearound a factory, including its assembly line (achain), and the whole place looks like a hub, towhich parts and people fiow and from which prod-ucts emerge.

hub

.

Hubs depict movement to and from one focalpoint. But oftentimes connections are more compli-cated than that. That's where webs come in. We areconstantly being reminded that we live in the age ofthe network, where different "nodes"-be they peo-ple, teams, computers, or whateverelse-connect in all kinds of ways. ^Webs, as we have come to see, are ^ r ^ / \grids with no center; they allow open- 1/ended communication and continu-ous movement of people and ideas.

Take new product development,for example. In the midst of a launch, the cast ofcbaracters talking to one another-often in very cir-cuitous ways-will include managers, engineers,salespeople, and customers. Any complex projectthese days can he seen as a weh. Think of how theOlympic Games are organized or how a movie ismade. Everyone talks to everyone else, often withcreative and unexpected outcomes.

The new vocabulary of organigraphs can expandhow we view our organizations; it can even ex-pand our thinking about strategic direction. Con-sider the exhibit "Organigraphs of a CanadianBank." For years, the company had been a classic"silo" organization, with its businesses, such asinsurance and brokerage, approaching customersindependently. Then, as information sharing andcross-selling hecame competitive necessities, thehank began exploring other ways of organizing.One was to assign company representatives-per-sonal financial advisers- to deal with customersfor all the businesses, so as to present an integratedfront. These advisers become, in effect, a hub forthe customer. Another option was to place repre-sentatives from the different businesses in adja-cent offices so that they could work cooperativelyin dealing with customers -passing on leads and soforth. That way, the business representatives couldwork as a team - a web - while doing business withcustomers. Such options would have been avail-able to the bank without organigraphs, of course,but the new vocabulary, and associated pictures,brought the choices into high relief.

Given the propensity of hubs and webs in organi-zations today, where does that leave the traditional

Henry Mintzberg is the Cleghorn Professor of Manage-ment Studies at McGill University in Montreal and aprofessor of organization at INSEAD in Pontainebleau,France. Ludo Van der Heyden is the Solvay Chair forTechnical Innovation and the Wendel/CGIP Professorfor the Large Pamily Firm at INSEAD.

To discuss this article, join HBR's authors and readers inthe HBR Forum at www.hhr.org/forum.

HARVARD RUSINESS REVIEW September-October 1999 89

ORGANIGRAPHS: DRAWING HOW COMPANIES REALLY WO

Organigraphs of a Canadian Bank

This organigraph depicts the bank's original structure. Eachdivision operates as a silo - a member of a set - andapproaches the customer independently.

banking insurance brokerage trust

A second organigraph depicts one strategic option. Alldivisions converge on financial advisers - acting as a hub -who can approach each customer in an integrated way.

banking insurance brokerage trust

personalfinancialadviser

customer

A third organigraph illuminates another strategic option.Representatives from each business work cooperatively - as aweb - at each branch, but approach customers independently.

banking ''^ >!nsurance

organizational chart? The organizational charttreats everyone and everything as an independenthox. And every one of those boxes is connected bya vertical chain -that is, a chain of authority. If thatis how we see organizations, is it any wonder therehas heen so much restructuring and delayering, somuch merging and outsourcing? These changes areinitially driven by a reshuffling of boxes on paper-

90

too often without careful consideration of an orga-nization's real ways of doing business and of creat-ing value.

Organigraphs in Actionwhen you try to draw an organigraph using sets,chains, hubs, and webs, what happens? Almostanything. There is no right organigraph. Unlike theorg chart with its strict rules of arrangement, an or-ganigraph requires managers to create a customizedpicture of their company, something that involvesimagination and an open mind. (Organigraphs can,in fact, include shapes besides sets, chains, hubs,and webs-as long as the shapes convey meaning.For instance, some organigraphs include funnels,suggesting a chain in which a transformation takesplace.) Organigraphs can he disconcerting to thoseaccustomed to doing things the traditional way.One manager we worked with resisted them ini-tially, saying, "But I like org charts. When some-thing goes wrong in my company, I know exactlywhom to call to fix it." Always formal authority!To draw an organigraph, you must accept the factthat it has less to do with names and titles thanwith relationships and processes.

To see how an organigraph works, let's look atthe exhibit "Organigraph of a Newspaper." A news-paper brings in a variety of materials from society-news, photographs, and the like. Employees atthe newspaper screen the material, transform it,and assemble it into a single document. The docu-ment then goes to a plant for reproduction, and thecopies are distributed back to society, indeed tomany of the same people responsible for the inputs,such as letters to the editor and classified ads.

The newspaper organigraph shows that whilethe organization's overall flow is a chain, otherforms coexist within it. The reporters' relation-ships with the community, for example, can beseen as a web: the stock-in-trade of many reportersis to huild networks of sources. And the wholenewspaper might be considered a hub, upon whichall sorts of inputs converge-classified and otheradvertisements, letters to the editor, article ideas,and so on-to be dispersed back into society. Be-cause they are not integral to the main linear flowof the organization, various support and adminis-trative functions, such as purchasing and finance,are shown around the huh, not within it.

What a different picture than the traditional orgchart! [For a comparison, see the exhibit "News-paper Org Chart.") Those little stacked boxes implyan organization consisting of independent agents.The picture doesn't even show advertisers, and it

HARVARD BUSINESS REVIEW September-October 1999

ORGANIGRAPHS: DRAWING HOW COMPANIES REALLY WORK

Newspaper Org Chart

generalmanager

production/operations VP

circulationdirector

addirector

finance/planning VP

deputyeditoi

publisher

editor

managingeditor

ciepuiyeditor

editorial-page editor

(if [Tillyeditor

Organigraph ofa Newspaper society ^ society

C society

finance

purchasing

HR

preparation of content

page makeup

printing m

distributionadministration

promotion IT

suggests that the hu-man resources depart-ment is somehow in thethick of the company'soperating processes.The organigraph, incontrast, shows thatadvertisers are bothsources of content (aspart of the web) and cus-tomers and puts HR'srole in perspective. It

- also draws attention tothe scope of the busi-ness, suggesting which

activities ought to be retained inside the core ofthe company and which might be candidates for

outsourcing, such as printing and distribution.The exhibit "Organigraph of Electrocom-

ponents," showing a British distributor of•, electrical and mechanical items, depicts\ an entirely different business than that of

the newspaper. When you actually visitthe company, it appears to function likea web: an automatic machine picks avariety of different items from all overlarge warehouses and moves them topacking. But this activity is, in fact,more like a set of chains: each order ispicked in careful sequence.

Overall, the company's work is achain. Electrocomponents procuresthousands of items, which are held ininventory. When customers place or-ders, products are picked off the shelves

and delivered on a day's notice. But as isoften the case, the company actually

combines organizational forms. For exam-ple, the company's relationships with cus-

tomers can also be seen as a web. Severaltimes a year, Electrocomponents sends out

Organigraph of Electrocomponents

procurement inventory

catalogs /

stomer

picking andpacking ^

delivery \

- wcnhfcasupport

91

ORGANIGRAPHS: DRAWING HOW COMPANIES REALLY WOI^K

catalogs to its customers, mostof whom are engineers. Theyphone in their orders and canuse the same call to ask for ad-vice from the technical supportstaff, who are also engineers.

The organigraph we devel-oped with Electrocomponentsallowed managers to see nearlya dozen new opportunities toexpand the business. "The pic-ture forced us to think aboutwhat our real expertise was/'recalls CEO Bob Lawson. "Andwe decided that it was in busi-ness-to-business relationships,not with consumers." As a re-sult of that insight, Electro-components decided to expandsignificantly in Asia and to in-crease its Internet business.Further, the organigraph helpedthe company's managers see the strategic logic ofsegmenting its catalog. Having sent out only oneversion before, it now issues six specialized ver-sions. The organigraph also showed managers op-portunities to expand and sell the company's test-ing services. "At a glance, that diagram allowed usto see all sorts of new possibilities," Lawson says.

A Nest of Organizational Formschains, hubs, webs, and sets can be found through-out most organizations. In the exhibit "Organi-graph of Medecins Sans Frontieres" (Doctors With-out Borders), we take that concept one step further,depicting the nesting of such relationships-hubswithin hubs within sets.

The organigraph shows a nonprofit that estab-lishes emergency hospitals in disaster areas. Mede-cins Sans Frontieres is made up of a set of nationaloffices. There is no world headquarters - no hub.Rather, CEOs from the national offices meet peri-odically, and when a crisis arises, people from theoffices communicate informally with one another.They form a loose web.

Each national office is, however, a hub unto it-self. [See the largest circle in the exhibit.) The officeis the focal point for the collection of professionals,supplies, funds, and procedures. Each office, forinstance, holds its own donations in the bank andhas a list of physicians prepared to go on assign-ment. When a crisis occurs, a national office assem-bles resources-people, supplies, and money. It thenships them to the trouhled area. There, a hospital is

Organigraph of Medecins $ans Frontieres

office

• arranges finaricing• seeks volunteersand donations

-trains staff- organizes operations

health careprofessionals

L *• suppliesmoney

publicdonations

health carevolunteers

disaster-sitehospital

created-a temporary organization - itself a hub towhich the ill are brought. Each patient also be-comes a hub in his or ber own right, on the receiv-ing end of various health care professionals, medi-cines, and food.

The organigraph shows that there are four dis-tinct areas of operation within this nonprofit:• a national office coordinates resources

available for relief operations;• that office also assembles those resources

at the time of a particular relief operation,-• a chain transfers the relief resources from

the national office to the hospital site;• that hospital then delivers health care.

The organigraph makes clear the managerial re-alities the nonprofit faces. For example, one cansee from the illustration that the burden of pro-moting the organization and raising money for itlies on the national offices themselves. The looseweb that serves as an umbrella for the set of na-tional offices is not organized to do so. Further, theorganigraph shows operating autonomy on site-yet simultaneously illuminates the need to facili-tate information flow between the national officeand the disaster area.

Competencies as HubsEarlier we described a conglomerate as a set ofloosely coupled businesses. That certainly makessense for highly diversified operations, especiallyones that have grown through the acquisition ofbusinesses in unrelated industries. The divisions

91 HARVARD BUSINESS REVIEW September-October 1999

ORGANIGRAPHS; DRAWING HOW COMPANIES REALLY WORK

constitute a portfolio, held together by a headquar-ters that manages the fiow of capital and imposesfinancial standards of performance.

But these days, the notion of conglomeration hasgiven way to the concept of core competence: thatthe many products of companies such as Canon or3M-which have grown more by the internal devel-opment of new products than by the acquisition ofexternal businesses -are held together hy some coreof knowledge, skills, or resources. These competen-cies, then, can be seen as the hub of the organiza-tion, to which all activities relate.

Consider the exhibit "Organigraph of Frontec,"which shows a Canadian company with about$130 million (Canadian) in annual sales. Foundedin 1986, Frontec's first business was providing staffand supplies to the military's early warning sta-tions in the far north. From there, it branched intoother activities, such as construction, the runningof hotels and airports, and a contract for the instal-lation of communications equipment on militaryvehicles-mostly in remote, dangerous locations,often with challenging logistics. Frontec employeeshave worked with polar bears nearby-one opera-tion is 400 miles from the North Pole-and some-times have to fly helicopters in whiteouts. Suchconditions explain why a primary core competenceof the company is people development. The mostimportant job for senior managers is to ensure thatthe right people are in chargeof field operations. They do soby carefully selecting and de-veloping key personnel.

A second core competence isbusiness development, shownin the organigraph as closer tothe field operations. The vari-ous ventures are listed allaround the business develop-ment competence, as satel-lites, or quasi-independentbusiness activities, which areshown to be associated withvarious categories such as Air-port Services and NorthernEnterprises.

The organigraph helpedFrontec's senior managerscommunicate their self-imageof a "frontier venturer" to aboard of directors that wasaccustomed to more conven-tional organizations. It al-lowed managers to illustratethe company's character - that

it is a company organized around competenciesthat allow it to venture into new and daring busi-nesses in uncharted locations.

Putting Management in Its PlaceOne of the greatest benefits of seeing organizationsdifferently is that we begin to see management dif-ferently. Isn't it about time? In the traditional orga-nizational chart, senior managers always appear ontop. But is that always the best place for them?

We think not. The very notion of "top manage-ment" may long have had a debilitating effect onorganizations and on the behaviors of managersthemselves. Bear in mind that "top management"is just a metaphor. In reality, the top manager is ontop of nothing but a chart. Managers who see them-selves on top of their organizations may not reallybe on top of what takes place there. They may sim-ply be too distant from the actual work being done.

Each organizational form suggests a different phi-losophy of managing. Sets suggest that managersstay away from the action, watching and compar-ing. In a conglomerate, for example, executives atheadquarters oversee the divisions for the purposesof allocation. Their job, basically, is to decide whogets what resources.

The chain puts a hoss above as well, but in this caseabove each link-a manager for each and a manager

Organigraph of FrontecBase Camps

Resolute Hotel Operations

Arctic Construction

Resolute Airport

Portage La Praire

Class B Airports

Goose Bay Ionospheric Observatory

North Warning System

Nofth Warning System Additional Work Requirements

HARVARD BUSINESS REVIEW September-October 1999

ORGANIGRAPHS: DRAWTNG HOW COMPANIES REALLY WORK

for all. In other words, the chain ofcommand is laid over the chainof operations. The chain of opera-tions is clear and orderly, and thechain of management exists pri-marily to keep it that way-forcontrol.

It is when we move on to hubsand webs that management movesoff its pedestal. In the hub, manage-ment appears in the center, aroundwhich activities revolve, as can beseen in the organigraphs of Mede-cins Sans Frontieres and Frontec.Management at the center has aninteresting implication: whoever isat the center becomes the manager.For example, if the hospital patientis a hub, then the nurse-not thedoctor, not the chief of staff-is themanager. Why? Because the nursecoordinates the array of services thatconverge on the patient. In a realsense, nursing is managing-whichmeans that managing can extendbeyond formal authority.

Managing at the center impliessomething profoundly differentfrom managing on top. While thechain controls, the hub coordi-nates. The chain may pretend toempower; the bub brings togetherpeople who are intrinsically em-powered. As suggested in Frontec'sorganigraph, the center holds thewhole together by working to rein-force tbe organization's competen-cies at its core.

And where can we find manage-ment in the web? At first glance, theanswer is not clear. A more carefullook, however, suggests that goodmanagement acts throughout theweb. In a network-a project or analliance, for example-managershave to be everywhere. In practicalterms, that means out from behindtheir desks-in design studios, inairplanes on the way to offices andclients, and in other places wherereal work happens. Management 'that is not everywhere in the webis nowhere. The web is so fluid thatmanagers cannot afford to remainin the center. In the web, managers

The Four Philosophiesof Managing

In the set, managers lookit over - they allocate.

In the chain, managers layit on - they control.

In the hub, managers drawit in - they coordinate.

web

In the web, managers linkit all-they energize.

have to move around, literally aswell as figuratively, in order to fa-cilitate collaboration and energizethe whole network. They need toencourage people who alreadyknow how to do their work and doit well.

In a web, management can alsobe everyone. Whoever draws thingstogether becomes a de facto man-ager. All kinds of people are manag-ers who do not carry that official ti-tle, be it scientists in a research labor salespeople in the field. (For anillustration of this point, see theexhibit "The Four Philosophies ofManaging.")

In one sense, these philosophiesof managing-allocating in the set,controlling in the chain, coordi-nating in the hub, and energizingin the web-are apt metaphors.Chains are heavy, webs are light.Hubs, in between, can explode orimplode if not managed correctly.Follow a chain and you knowwhere you will end up. Just don'ttry to go anywhere else! Find ahub and you know where to beginor end. Not so for the set, whichcan start and end in differentplaces. The web, by contrast, cantake you every which way. Thatcan leave you flexible or flustered-and often both.

For companies to thrive in to-day's economy, management hasto be put in its place- in anotherplace, that is. Not atop the chart -atleast not in all but the most tightlycontrolled, highly programmed bu-reaucracies - but down into itsessence, whether at a center, as ahub, or throughout, as a web. Thatway those old charts can be put intheir place, too (in something roundthat sits on the floor but is not ahub). By viewing management inthis way, we can recognize it forwhat it has to be: the servant of theorganization, not its purpose.

Do you see? ^

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94 HARVARD BUSINESS REVIEW September-October 1999