Psychologists use the term locus of control to describe the level to which individuals believe they can control the events that affect them. This concept can be expanded and applied in an organizational setting to identify key organizational dimensions and likely decision makers. Similar to individuals with a high internal locus of control, some organizational groups dictate their near-term fate more than others and may be perceived as more powerful.

As background, large organizations are typically structured in a matrix fashion. Key dimensions of the matrix may include geography, competency and industry; product, channel and brand; alignment by function or customer; or whatever makes sense for the particular ecosystem. Understanding the degree of independence and perceived value of each entity within the organization can help determine the organizational locus (or loci) of control.

Degree of Independence

Is the business perceived as a holding company or an operating company? How closely are business units affiliated with one another? How easily can operations be unbundled for spinoffs or divestitures? To what degree are functions collectively shared or redundant across entities? How many administrative layers exist?

Perceived Value

How closely are entities connected to the revenue cycle? Who owns customer or key stakeholder relationships? How is compensation derived? How are resources allocated across the matrix? What is the proximity to senior management?

A better understanding of the tactical operating environment can enhance organization design, improve matrix management and increase contextual awareness. Assessing and adjusting can start the next evolution of organizational structure.