Organization Design and Structure.
As I have observed executive groups in action, particular first generation groups led by their founder, I have noticed that the design of the organization – how product lines, market areas, functional responsibilities, and so on are divided up – elicits high degrees of passion but not too much clear logic. The requirements of the primary task – how to organize in order to survive in the external environment – seem to get mixed up with powerful assumptions about internal relationships and with theories of how to get things done that derive more from the founder’s background than from current analysis. If it is a family members or trusted colleagues, cofounders, and friends. Even in the first-generation publicly held company, the organization’s design is often built around the talents of the individual managers rather than the external task requirements.
Founders often have strong theories about how to organize for maximum effectiveness. Some assume that only they can ultimately determine what is correct; therefore, they build a tight hierarchy and highly centralized controls. Others assume that the strength of their organization is in their people and therefore build a highly decentralized organization that pushes authority down as low as possible. Still others believe that their strength is in negotiated solutions; therefore, they hire strong people but then create a structure that forces such people to negotiate their solutions with each other. Some leaders believe in minimizing interdependence in order to free the unit of the organization; others believe in creating checks and balances so that no one unit can ever function autonomously.
~ Edgar H. Schein, Organizational Culture and Leadership