company-operating-system

04 · Organization: Department Structure and Cross-Functional Collaboration

The vertical view is about “specialization.” But every company gets stuck behind “departmental walls” — horizontal processes need cross-department collaboration, while vertical departments are measured independently. This chapter solves the question of “how horizontal × vertical mesh together.”

1. Typical department structure (manufacturing company)

Marketing | Product | R&D | PMC | Engineering | Production | Logistics | Warehousing | Quality | Customer service

Department	Core responsibility	Key KPIs
Marketing	Customers / orders / brand	Order value, gross margin, new customers
Product	Product definition / roadmap	Product success rate
R&D	Design / development / validation	Project on-time rate, patents
PMC	Planning / material control	Kitting rate, delivery rate
Engineering	Process / equipment / ramp-up	First-pass yield, OEE
Production	Mass-production execution	Output, yield rate, cost
Logistics	Transport / shipping	On-time delivery
Warehousing	Inventory management	Inventory turnover, dead stock
Quality	Quality system	Complaint rate, defect rate
Customer service	After-sales / complaints	Time to close, satisfaction

2. The departmental-wall problem (a disease every company has)

R&D says “the design is fine,” production says “we can’t make it”
Sales promises a delivery date, PMC says “it can’t be scheduled”
Quality holds the goods, sales says “the customer is waiting”
Departments measured separately → every silo for itself

3. Solution 1: the Process Owner model

Assign an Owner to each major horizontal process (not necessarily the department head):

Core process	Owner (suggested)
Order fulfillment	PMC
New product development	Product / project manager
Quality assurance	Quality department
Customer delivery	Sales / logistics

The Owner is accountable for the end-to-end result of the process and has the authority to coordinate cross-department resources.

4. Solution 2: project-based / matrix management

Pull new products through from approval to mass production with a project team:

Project manager (integration)
├─ R&D representative
├─ PMC representative
├─ Production representative
├─ Quality representative
└─ Procurement representative

The project team is accountable for “launching the product on time”
Departments are accountable for “building professional capability”
Dual reporting: matrix structure

Huawei’s “Iron Triangle”: an account manager + a solution manager + a delivery manager jointly own the customer.

5. Solution 3: RACI responsibility assignment

Task	Responsible (R)	Accountable (A)	Consulted (C)	Informed (I)
New product approval	Product manager	General manager	R&D / Marketing	Everyone
Quoting	Sales	General manager	Finance / PMC	Customer
Delivery commitment	PMC	General manager	Production / Procurement	Sales

RACI prevents “nobody owns it” or “everyone owns it”
Every critical task deserves one

6. Organization design principles

Structure follows strategy: when the business changes, the organization must change with it
Flatness: fewer management layers, faster decisions (2-3 layers for companies of 5-100 people)
Accountability, authority, and incentives in balance: if you hand out responsibility, you must also hand out power and rewards
A/B roles for critical positions: never depend on one person
Meeting cadence: weekly stand-ups (execution) + monthly business reviews (data) + quarterly retrospectives (direction)

Case studies

Company	Organizational trait	Lesson
Huawei	Iron Triangle + rotating CEO + process-based organization	Processes cut across departments
Midea (Chinese home appliance maker)	Business-division structure (each product line is a profit center)	Shrink the accounting units
Haier	RenDanHeYi (micro-enterprise model)	Energize the front line
ByteDance	Flat + OKR + information transparency	Fast decisions

📌 One-line summary: Vertical departments deliver “professional depth”; horizontal processes deliver “value creation” — mesh the two with process Owners + project teams + RACI.

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