Sanctioned Informal Structure Repairs What Formal Restructuring Breaks

Definition

Every formal organizational structure optimizes for one axis of coordination at the cost of another. When a fix for one kind of fragmentation creates a new kind, the remedy isn't a second formal reorganization — it's a deliberately informal, cross-cutting network, given management sanction and support but not folded into the reporting hierarchy.

In the Book

The book's opening case is Chrysler in 1988: functional departments (design, engineering, manufacturing) handed work back and forth in slow, duplicative iterations, stretching new-vehicle development to five years. The fix was to reorganize around cross-functional "car platforms" (large cars, minivans, trucks), each responsible for a whole vehicle end to end — cutting the cycle to two and a half years. But this traded one fragmentation for another: platforms no longer talked to each other, producing "multiple versions of the same part with slight variations, uncoordinated relationships with suppliers, innovations that did not travel, and repeated mistakes." Rather than building a new matrix structure to force cross-platform coordination, managers let former colleagues from the old functional departments keep meeting informally — and then chose to "sanction and support" these meetings without formalizing them into new reporting lines. These became the Tech Clubs, which eventually took on real institutional roles: running design reviews before quality gates, and — critically — building and maintaining the Engineering Book of Knowledge (EBoK) because it succeeded only once a community, not an IT project, took ownership of it.

Why It Matters

This is a design choice with a specific shape: recognize that a structural fix has a side effect, and address the side effect with a different kind of structure — sanctioned but informal — rather than a second dose of the same medicine (more formal hierarchy, more mandated process). It generalizes to any system where optimizing one dimension of coordination (here, product focus) predictably degrades another (here, cross-cutting learning), and the fix needs different properties — voluntary membership, self-directed activity, official backing without official command — than the original structure had.