In past blogs we have explored the “how tos” and evolving approaches towards the process of organizational design. In this first blog of a five part series on innovative and emerging alternatives for the organization of the workplace, organizational design expert David Creelman explores the fissured organization.
When you walk into a brand-name hotel, who are the people behind the counter? You probably think they are hotel employees; after all, they are wearing that brand on their uniforms. However, chances are they are not that brand’s employees; they probably work for an intermediate firm like White Lodging, which runs hotel operations for famous chains like Marriott and Hilton. If you walk out of one hotel to a competitor across the street, you might well find that the workers at the new hotel are also White Lodging employees.
The world of organizations is not as it seems. Design is more complex that we usually imagine — and that means if we stretch our imaginations, we can find better ways to get work done.
The fissured design
Imagine an organizational chart with a large horizontal fissure separating the lower half from the upper half. That design, where a whole layer has been sliced off to be run by another company, is called the “fissured organization.”
David Weil coined the term and authored a book on the topic. Weil is a professor at Boston University, and works for the US Department of Labor where he examines, among other things, how to protect the rights of workers in fissured organizations.
Advantages and disadvantages
You probably think it’s crazy that front line workers who represent a brand to the customers are not that brand’s employees. However, organizations have proven that it can work. The lead organizations (the top half of the organizational chart) have very detailed standards that are tightly monitored. The workers fulfill the lead organization’s wishes even though they are employed by another firm.
This form of organization is more common that you might think. Franchise organizations like McDonald’s are a familiar form of fissured organization. At a McDonald’s franchise, the workers are employees of the franchisee but live up to McDonald’s standards. Most workers at a building site may be employees of subcontractors. Big coal mining companies have (with some notoriety) “fissured out the work” of miners, which leaves the workers’ health and safety in the unsure hands of much smaller organizations.
The advantage of fissuring is that it allows the lead company to focus on what it does best and lets another company that is better at managing day-to-day operations handle those duties. In the case of franchises, the franchisee can provide needed capital, local knowledge, and the spirited commitment of someone who is a business owner, not just a manager.
However, it is also true that this form of organization makes it easier to drive down wages and is more likely to lead to violations of labour and safety laws. In case of an accident, the lead organization may be able to say, “It wasn’t us; it was our contractor.”
The fissured organization can produce operational efficiencies that benefit everyone, but at times it hurts workers because the smaller organizations that actually employ them pay less than a lead organization.
What it means to you
What might you learn from the fissured organization? It is possible that the work that you’ve always felt had to be done by your employees could be better done by another organization. If you are looking for new clients, then you should seek out intermediate firms, not the famous brands. You should draw the lesson of how detailed standards can effectively lead to the right behaviour from workers even if you don’t employ them.
The world of organizations is a strange one, and the standard pyramid of the organizational chart doesn’t begin to cover all the possible forms. As this series of blogs continues, we’ll explore some alternatives.
David Creelman is CEO of Creelman Research. He helps organizations identify, make sense of, and address important new issues in human capital. His work with Andrew Lambert on one such issue (board oversight of human capital) won the Walker Award. His work with Wanda T. Wallace on “leading when you are not the expert” topped the “Most Popular List” on the Harvard Business Reviews blog. His much endorsed book on the on-demand economy & future of work is called Lead the Work: Navigating a world beyond employment. It is coauthored with USC professor J. Boudreau and Towers Watson thought leader Ravin Jesuthasan. David lives in Toronto. To get in touch email firstname.lastname@example.org; or to simply establish a connection LinkIn at https://ca.linkedin.com/in/davidcreelman.
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