ABSTRACT
This chapter details the first organization design variable, i.e., the primary vertical dimension of the architecture. It describes eight alternative dimensions: product, region, customer segment, distribution channel, business function, asset, program or competence area and account. The primary dimension is the one for which the highest hierarchical management level (CEO and executive team) directly defines the business objectives (without delegating to a lower management level), allocates resources, assigns accountability for performance and, crucially, arbitrates. The chapter explains the logic for selecting the primary vertical dimension. Two or more such dimensions can be placed in parallel or stacked, with one subordinate to another. The choice should reflect the company’s strategic focus, facilitate clear governance and minimize structural costs. The chapter indicates when it is appropriate to consider a change in the primary dimension. One should not change it lightly, as the risk of disruption is high. It is advisable to first consider whether changes in other design variables would suffice to achieve the desired benefits as articulated through the design criteria. A change does make sense when the company’s business model is changing fundamentally or when an accumulation of design adjustments has led to a hopelessly complex organization.
