Episodes

Peter Merholz on the Structure of Organizations

“If you want to deliver a meaningful experience — a sensible experience — to your customers, you have to reorganize your company in a way that makes sense to your customers.”

My guest today is Peter Merholz. Peter is one of the co-founders of the pioneering UX design consultancy Adaptive Path, now part of Capital One. After leaving Adaptive Path, he has structured and led design teams in various organizations. Peter and his co-author, Kristin Skinner, wrote Org Design for Design Orgs, the book on how to organize design teams. In this episode, we discuss how the structure of organizations influences their customer’s experiences.

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Show notes

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Jorge: Welcome to the show, Peter.

Peter: Thank you Jorge.

Jorge: So, for folks who don’t know about you and your trajectory, would you please introduce yourself.

Peter: Sure. I’m Peter Merholz, I work in — ostensibly — digital design, have for over 25 years. Started in CD-ROMs, so even pre-web. But cut my teeth on the web and through web design. Probably most notably, helped start a user experience consulting firm called Adaptive Path, which I helped lead from 2001 to 2011.

For the last eight years, I’ve been some flavor of design executive, primarily working in-house. A few years ago, co-wrote a book called Org Design for Design Orgs, which is still the only book about what it… Kind of a playbook on building in-house design teams. Though I’m happy that Russ Unger and Chris Avore’s book is coming out soon, so we will no longer be the only one on that subject.

And a few months ago, decided to commit myself to independence and started a company. The URL is petermerholz.com, but the company name is Humanism At Scale, and it’s my one-person consultancy dedicated to helping design organizations realize their potential and helping bolster and improve design leadership practices within organizations.

Jorge: What is the link between the potential of organizations, humanism, and design?

Peter: I see design as the Trojan horse for humanistic thinking within companies. Design is an obvious contributor of value, particularly in digital contexts and software contexts, and so companies are building design organizations in order to create these digital experiences. What they don’t know they’re getting with it is that design, when practiced fully, is situated within a humanistic frame that also includes social science and subjects like user research, it includes writing, rhetoric, composition, with things like content strategy…

And so I see design as this lead… It’s the tip of the spear, but what’s behind it is a full kind of humanistic understanding that design can help bring into these companies. And the importance of that is companies have been so mechanistic, so analytical with their either kind of business orientations, MBA orientations, spreadsheet focuses, or engineering orientations. They’ve been so mechanistic that design has this opportunity to bring a humanistic balance into that conversation.

Jorge: I had Andrea Mignolo as a guest in the podcast last year, and she talked about this subject as well, design as a way for organizations to map out possible futures, in distinction to using things like spreadsheets. Is that kind of what you’re talking about here?

Peter: That’s definitely part of what I’m talking about. I mean, there’s the obvious benefits or contributions of design in this business context, which is making a strategy concrete. We talked about that at Adaptive Path over 10 years ago, probably closer to 15 years ago, and, and IDEO has been talking about that. Tim Brown’s been talking about that, right?

It’s very easy for executives to have different interpretations of bullet points on a PowerPoint slide and projections and spreadsheets, but it’s really difficult to have different interpretations of sketches and prototypes of futures that those PowerPoint, bullet points and spreadsheets are actually inferring, right? Design can very quickly make concrete these abstract notions. And, so I think lead to better conversations about where an organization is headed. So, I think that’s part of it.

But I think, again, importantly, there’s a whole body of thinking, of problem solving, of looking at the world that is rooted in the humanities, that is rooted in not just design and visual expression, but in language in social science, that can inform how businesses operate in and basically encourage them to operate better at least when I think would be better.

Jorge: In your book and in your presentations on the subject, you often talk about this three-legged stool, where the three legs are, business, technology, and design. Is that the context in which you’re talking about design here, as in supplementing the other two?

Peter: I wouldn’t say supplementing, but yes, balancing the other two. And that still makes it sound like design is one against two in that equation. But essentially, business and technical approaches tend to be analytical and reductive. And that’s not bad in and of itself, but it’s insufficient, particularly given the complexity of the things that we’re building and how those things that we’re building are situated within a society.

And so the opportunity that design and humanism brings is providing a more generative, qualitative, creative, big picture frame and approach to problem-solving to balance that reductive, analytical, quantitative metrics-driven approach that has been so dominant for so long.

Something I hadn’t actually connected it with until just now as we’re talking about, when you have that metrics-driven approach, that leads to businesses so focused on the numbers, they lose sight of the, frankly, societal impact of those numbers, right? So, you know, the big issue with social media is that everything’s driving towards engagement. Because that’s what they’re measuring.

And having lost sight of the societal impact of what happens when you have two and a half billion people that you’re trying to engage, and not recognizing that the product of that engagement outside of the system is massive societal unrest.

Jorge: Which has become evident after the fact, right?

Peter: Right. Exactly. But if you had talked to or had any social scientists actively involved in that process, and you had a more humanistic approach involved in that process, you would have likely realized those potential outcomes in the process instead of simply after the fact.

Jorge: I’ve worked mostly as a consultant in my career. I did spend some time internally in an organization, but most of my career I’ve spent as an external designer who is brought into an organization to help them through some of these challenges. And in that capacity, I’ve had the opportunity to interact with internal design teams.

And one of the things I keep seeing in many of those organizations is that designers are working making either products or services better, but often at a very kind of granular level. And I’m bringing this up because I love what I’m hearing you say about design being kind of the organ of the organization that helps them think more systemically. But sometimes that can be at odds with the way that designers are actually working in organizations. And I’m wondering if you can speak a bit to that.

Peter: I agree. By and large, most design in most organizations is seen as part of production, part of delivery. This is the challenge, but the opportunity, with the Trojan horse, right? Design is being brought into these organizations because you need designers to design the interfaces, essentially, of these digital experiences.

And that is seen primarily in an output mode, right? The stuff that your users are interacting with, someone needs to design that, let’s hire designers. And so it gets very much… I often use the double diamond when talking about this type of work and it’s very much second diamond, very much on the execution side, the implementation side. Because that is the obvious value that design brings into business. And I think in many businesses, you’re right, that’s pretty much the limit of the value that design is bringing.

What I would argue though, is there’s this potential and more and more companies are expecting that potential of design to have some contribution “upstream.” I talk to companies all the time where they want design to have that seat at the table, to be a peer to product and engineering, to contribute strategically, to the conversation. And so the challenge there though, is often — this is part of the reason why design leadership is so important to me — is that I think we have a general kind of industry-wide shortcoming among our design leaders in terms of understanding the breadth of the influence they can wield and how to wield it. My concern is that many of those design leaders have come up in organizations where design was seen primarily as a production function. And so that’s how they’re approaching design leadership is just to make production better.

And so, there’s an opportunity, I believe where design leaders, one, can learn how their practices can have a broader influence. And then two, — and this is actually, I think, an even harder challenge — help those design leaders develop the confidence to assert their perspective at that more kind of executive or strategic level. Right? Because they’re often a lone voice in a wilderness, right? That wilderness is heavily analytical, heavily mechanistic. And there are some designers saying, “We’ve got to listen to users,” or you know, “What about ethics?”, or whatever the thing is that the designer is talking about. And they’re often that lone voice. And it can be hard to be that one to stand up and be the one that is — not necessarily getting along with whatever the dominant kind of cultural paradigm is — but I believe… Frankly, I believe it’s kind of our duty.

I think it’s, in an unconscious way, these businesses have realized there’s a power to this other way of thinking. That the current models aren’t working, that the mechanistic model is running its course. And so, they’re seeking other ways of working. So, then they bring in design, and when design starts doing its other way, the initial reaction is going to be one of pushing back because it’s weird and uncertain and different. And it’s up to the design leader then to manage that transition to help the business not react, not lash out, not reject out of hand, this new way of thinking and then also for that leader to help their team recognize its power and its potential in terms of influencing the organization.

And it’s really hard. Like, I think design leadership is probably, at least within a product development context, the hardest kind of leadership there is right now. It’s easier to be an engineering leader or a product leader, or a data science leader, than it is to be a design leader because of this kind of contradiction or conflict of we want design, but design is different so we’re pushing back on design, but then when we push back on it, we’re unhappy because design isn’t being interesting. Resolving that is this interesting challenge design leaders have.

Jorge: You’re validating how I see the arc of your career. We’ve known each other for a long time, and we met through the information architecture community, where — to summarize it really kind of unfairly and at a very high level — it’s all about the design of the underlying structures of — at least when we met, at the stage that the discipline was in — was mostly focused on digital experiences.

Peter: Web experiences.

Jorge: Web experiences, yeah.

Peter: Not even software or mobile.

Jorge: It was pre-mobile. But that’s what we were focused on, right? Like the structures that underlied these experiences. And my sense of your career is that there came a point in your own development where you had this insight that the structures… That you can work on the structure of the thing, or you can work on the structure of the thing that’s going to produce the thing. Right? And that’s where Org Design for Design Orgs I see basically as a book about the architecture of the organizations that define these architectures. Is that fair?

Peter: Sure. Yeah. It’s so… Conway’s law. Conway’s law is an interesting concept in this context, right? Conway’s law is that any organization is going to deliver… Whatever it delivers will be a reflection of how it is organized. And oftentimes Conway’s law is thought of not as a law, but as a thing to be aware of that you can work around. Right?

So, if your company has organized in some way, you have business units, but when you present your org, when you present the company to the world, you don’t want your customers to get caught up in the business units. Right? That’s often… That has been a role for design to play in the past — web design in particular — is to create this kind of skin, this presentation layer, over the mess that is the company in its presentation to the customers. I actually first was writing about this like literally in 2002 or three there was an essay on the Adaptive Path website called Organization in the Way, where I was talking about how the reason websites don’t make sense is because they basically reflect a company’s organizational structure.

And at that time, I thought the solution was, well, you can keep that organizational structure and the role of the design team is to understand the user and how they are approaching that company and again, create this presentation layer, this interface, this interpretation, so that the user can actually engage with the company meaningfully and not worry about how that company is structured.

What I have since come to realize is that Conway’s law is a law. That organizations will deliver their value, deliver their services, deliver their experiences, shaped directly by how they are organized. And yes, you might be able to paper over that for some brief period of time, launch a website design that, you know, in the past we would launch these kinds of task-based website designs because customers weren’t looking at an enterprise software firm and thinking about the product modules, they had tasks they wanted to solve, so let’s do a task-based architecture. And that would last maybe even a year or two, but eventually it would break down because that organizational structure has such power that it would reassert itself in how the company is presented to customers, regardless of whether or not it made sense to the customers.

And so, what the true implication of Conway’s law is, if you want to deliver a meaningful experience — a sensible experience — to your customers, you have to reorganize your company in a way that makes sense to your customers. That is the only way you’re going to solve that problem.

Jorge: Yeah. As you’re talking about this, I’m thinking that I’ve experienced that very issue as well in projects where I’ve been brought in to help an organization, for example, rethink the way that their products are presented on their website. And it seems on the surface to be kind of an information architecture challenge; I’ve been hired to fix their navigation system or whatever. And then when you start digging into the problem, it turns out that the website and its nav structures are actually a MacGuffin for these conversations that are much more strategic and more challenging that people at a very high level in the organization — for whatever reason — have not been able to articulate except in the context of having something actionable like the website to serve as their meeting ground.

Peter: Yeah. What was interesting about the web from an organizational perspective 20 years ago was it was the first time an entire company was being presented in a single unitary canvas, right? Before you would just deal with whatever channel that you were a part of and you know, whether there was a sales channel, a marketing channel, et cetera, and whichever part of the business that made sense to you, and you didn’t have to worry about anything else. But with the web, all of that got placed on a single point of entry. And you know, we all dealt with trying to figure out how to design websites for these big companies that now their complexity was being exposed to the users, and the company had never had to deal with that before.

I do think you’re starting to see some companies grapple with this in a more meaningful sense. They’re starting to change how they’re organized. Shopify. I’m not a customer of theirs, I don’t know if this has been good or bad, right? But Shopify for the longest time was basically organized functionally. You know, product team or an engineering team and a design team and marketing teams, and they would then deliver the products.

And then at some point two or three years ago, they decided to — it’s not radical — organize by products. But they also identified meaningful product distinctions. Products for merchants in one fashion, products for point of sale products, or whatever it is, right? The product line changed. And so that’s now how they organize. They had to reorganize in order to make their company makes sense to their customers, possibly make their company makes sense internally as well. And so, I think you’re seeing, you know…

I’m doing some work with a bank and they have a set of… So, banks are funny, right? Because they’re highly regulated, so that actually limits how they are able to organize. One of the things I’ve learned in working in financial services is that when a bank offers both checking and savings services as well as credit card services, those have to be treated by the bank as two independent organizations that really shouldn’t be interacting with each other for legitimately good regulatory reasons.

But as a customer, if you have a checking account with a bank and a credit card with the bank, it can be odd how it’s not seamless in engagement. And you’re like, “It’s the same bank. Why can’t I just do it?” And it turns out there’s regulatory reasons for that. But what I’m starting to see with in this one bank I’m working with, they have this thing called “missions” and “value streams,” and they’re organizing by, basically, tasks. You have a payments team and you have within that payments team; you have a value stream for moving money or a value stream for paying bills, and they’re pulling people together in these teams.

I’m doing work for a journalism company, news company, I guess you would call it. They talk about journalism; they don’t just talk about news. I’m working with a news company, and they also have adopted missions. They have an engagement mission, a growth mission. And these missions are the means by which these companies are pulling together cross-functional teams, but providing an organization that now can make some sense to the customer, right?

A customer isn’t going to want to navigate the marketing team, the sales team, the product development team, et cetera, et cetera. But a customer, you know, if you are new to this company, you are working… You are basically… Your experience is managed by the growth team as they try to bring you into the fold. If you are an active user, you are now being handed off to the engagement team that keeps you engaged, it introduces you to new experiences, et cetera, et cetera. And so, these companies are looking at ways of creating, internally, at least, some new structures that are orthogonal to the kind of functional structures that better speak to customer experiences because they recognize kind of that Conway’s law thing. If what matters is the customer’s experience, you have to change your organization to meaningfully deliver on that customer experience.

Jorge: I’m guessing that a considerable part of the people listening to us right now are not external consultants but are actually… I don’t know if to use the word “affected,” or at least their work is influenced heavily by the type of structures that you’re talking about.

Peter: Hmm? Yes.

Jorge: And I’m wondering if there’s any advice or any insights that folks working in organizations can glean from this way of thinking about the work that could help them be more effective.

Peter: “Yes” is the short answer. I think particularly designers have — which I’m assuming is the large part of your audience, designers and the design-adjacent — I think are particularly well-suited to have an impact on these internal structures because, as I was suggesting these internal structures should be influenced by an understanding of customers and the journeys they are on. And it’s oftentimes and design team working with researchers that are tasked with understanding those customer journeys.

And the opportunity, I think, for people internally, is to understand and map these customer journeys. So, do that work. And that, that’s not hard to sell. Right? That’s a pretty accepted practice now. Forrester’s been talking about journey mapping for well over a decade. But I don’t think every company has recognized the implications that I was referring to earlier, which is that that customer journey becomes a blueprint for how you reorganize your teams.

Now, it might not be their reporting organization, right? That might maintain functional organization. So, you know, your designers will still report up to a Head of Design, and you might have 50 designers reporting into it as part of a single design team. But their day to day work, those designers are spending the bulk of their time and effort in these cross-functional teams that are organized by these journeys.

And I think the opportunity is to help drive that organization, drive that conversation around, “Hey, we shouldn’t be organized by either function…” Sometimes you get companies organized by platform, right? You have the mobile team versus the web team, you have an iOS team versus an Android tea m. Because that’s not how people are experiencing it, right?

You want to organize by the nature of how people are experiencing it so that you can deliver value across the customer journey. And you’re seeing that more and more. I think we’re still at very early days for it. But the opportunity for people listening who are in-house is, one, to know that this shift has occurred.

It’s not even occurring. The shift has occurred within many companies. And if in your organization, you’re not operating in this kind of model that is… In this framework that is modeled after the customer journey, that is something to propose, that is something to continue to agitate for. And the customer journeys that you and your team are creating are that architecture for thinking through this and for organizing in this way.

Jorge: Well, that’s a great summary, I think. And, I think that those folks should reach out to you. Why don’t you tell us where they can do that?

Peter: Sure. I’m easy to find. My URL is petermerholz.com. That’s my professional URL. I’m on Twitter at @peterme. Those are probably the two best places to find me. You can contact me through either means, through petermerholz.com or through @peterme, my DMs are open. So yeah, that’s the easiest way to find me.

Jorge: Great. And I believe the book has a website as well, right?

Peter: Yes. The book has a website, orgdesignfordesignorgs.com, which also has with it a blog that we update in fits and starts. So, the book came out about three and a half years ago, and we’ve been blogging about ideas from the book, but as we’ve had new insights, new thinking, we’ve been blogging about those ideas. Improved, levels, frameworks, improved portfolio assessment tools, definitions of team leadership. As Kristen and I both do our work, and then teach a workshop based on this, we come up with things to write about. And so, the blog has all the most recent thinking when it comes to organizing your design organization.

Jorge: Well, fantastic. I hope that folks visit the site and I’m sure they’ll find valuable stuff there. Thank you, Peter, for being on the show.

Peter: My pleasure. Thank you, Jorge, for having me.