D078 Task 1 Organizational Structure Analysis Example

From Six Friends to Thirty Consultants: Analyzing and Redesigning the Organizational Structure of a Composite Consulting Startup Organized Around the Industries It Serves

Student Name

School of Business, Western Governors University

D078: Business Environment Applications I: Business Structures and Legal Environment, Task 1

Course Instructor

Month Day, Year

From Six Friends to Thirty Consultants: Analyzing and Redesigning the Organizational Structure of a Composite Consulting Startup Organized Around the Industries It Serves

The Business

Northline Advisory, a composite consulting firm in Denver, was founded four years ago by three former colleagues who help mid-sized health care providers and manufacturers improve operations. It began with six people who shared an office, worked on every project together and reported informally to the founders. It now has 24 employees and plans to reach 30 within a year. Revenue has tripled, but the firm's way of organizing has not changed. Every consultant still reports to one of the three founders, depending on who hired them; project staffing is decided in a Monday meeting; and there are no defined roles below partner beyond consultant and analyst.

Problems With the Current Structure

The informal structure that suited six people now creates four problems. First, overloaded founders: each founder supervises seven or eight people while also selling work and leading client engagements, so consultants wait days for decisions and receive little coaching. Second, unclear accountability: when a health care client complained about a missed deliverable, no one could say who was responsible, because three consultants had rotated through the project. Third, lost expertise: consultants who build deep knowledge of hospital operations are staffed on manufacturing projects and vice versa, so the firm cannot build a reputation in either industry. Fourth, stalled careers: without levels or managers, consultants see no path to advancement, and two of the firm's best consultants left last year for firms with clearer career ladders.

How Size and Growth Change Structure

Small organizations can coordinate informally because everyone can talk to everyone. As an organization grows, the number of possible relationships among its members rises much faster than headcount: six people have 15 possible pairings, while 30 people have 435. Textbook treatments of organization design explain that growth therefore pushes organizations toward more formal roles, more levels of management and more delegated decision making, and that the structure chosen should match the organization's strategy and the kind of work it does (Daft, 2021). For a consulting firm, the work is knowledge-intensive, varies by client and depends on judgment, so structure should give professionals room to act while making clear who is accountable for each client and who develops each person. Northline's current structure does neither, because it was designed, informally, for a size the firm has left behind.

Structure Options

Organizational structure defines how work is divided, how it is coordinated and who has authority. Mintzberg (1979) described how organizations coordinate work through mechanisms such as direct supervision, standardization and mutual adjustment, and how structure should fit an organization's size, work and environment. Three options fit a professional services firm of Northline's size.

A functional structure would group people by capability, such as a data analytics group, a process improvement group and a change management group, each led by a manager. It builds deep technical skill and clear career paths within functions, but clients would deal with several groups, and no one would own the relationship with an industry.

A divisional structure by industry, or market-based structure, would create a health care practice and a manufacturing practice, each led by a practice leader responsible for clients, staffing, quality and people in that industry. It builds industry expertise and clear accountability for clients, but can duplicate some capabilities and create competition between practices.

A matrix structure would have consultants report both to a capability leader and to an industry leader. It combines skill development with client focus, but dual reporting can create confusion and conflict, and it requires strong management capacity that a 30-person firm lacks.

Recommended Structure

Northline should adopt a divisional structure organized by industry, with a small shared services group. Galbraith (2014) describes how the choice of structure should follow strategy; Northline's strategy is to be known as the go-to firm for operations improvement in two industries, which favors organizing around those markets.

The structure, described as an organization chart, would place the three founders as partners in a leadership team at the top. Reporting to the leadership team would be two practice leaders, one for health care and one for manufacturing, each drawn from the founders or senior staff. Each practice would have two engagement managers, who lead client projects and supervise four to six consultants and analysts. A shared services group, led by an operations manager, would handle finance, recruiting, HR and marketing for both practices. One founder would focus on firm-wide business development and quality, and consultants with specialized skills, such as data analytics, would form a small center of expertise that both practices can draw on, a light touch of the functional approach without full matrix reporting.

Effects on Communication, Decisions and Growth

Communication would move from everyone-talks-to-the-founders to clearer channels: consultants communicate with engagement managers daily, engagement managers with practice leaders weekly, and the leadership team monthly with the whole firm. Decisions would be delegated: engagement managers make project decisions, practice leaders make staffing and hiring decisions within budgets, and the leadership team sets strategy. Accountability for each client would be clear. Consultants would build expertise in one industry and see a path from analyst to consultant, engagement manager and practice leader. The structure also scales: a third practice could be added if the firm enters a new industry.

Risks and How to Manage Them

The main risks are silos between practices and loss of the collaborative culture that made the firm attractive. Northline can manage these by holding monthly firm-wide knowledge sessions, rotating consultants across practices for a limited period in their first year, sharing profits at the firm level rather than only by practice, and reviewing the structure annually as the firm grows. The founders will also need to let go of daily decisions, which may be the hardest change; clear authority limits written into the new roles will help.

Conclusion

Northline Advisory's informal structure has become a bottleneck that overloads its founders, blurs accountability and drives away talent. A divisional structure organized by industry, supported by shared services and a small center of expertise, fits its strategy, clarifies communication and decisions and creates career paths, while practices for knowledge sharing and firm-level rewards protect the culture that made the firm successful.

References

Daft, R. L. (2021). Organization theory and design (13th ed.). Cengage Learning.

Galbraith, J. R. (2014). Designing organizations: Strategy, structure, and process at the business unit and enterprise levels (3rd ed.). Jossey-Bass.

Mintzberg, H. (1979). The structuring of organizations. Prentice-Hall.