The structural case
One well-evidenced answer is structural. Jay Galbraith’s research on organisation design, published in Interfaces, argued that organisational form has historically been optimised around moving information vertically — up through reporting lines for decisions, and down through them for direction. Hierarchies are efficient at this by construction. They were never designed, in their basic form, to move information sideways between peers in different functions, and most organisations don’t build a deliberate lateral mechanism to compensate; they rely on informal relationships, which don’t scale reliably as the organisation grows.
On this account, weaker cross-functional coordination isn’t a failure of effort or culture — it’s what should be expected from a structure built for a different purpose. The fix implied by this explanation is architectural: building genuine lateral mechanisms — shared forums, joint accountability, dedicated coordination roles — rather than hoping goodwill compensates for a structure that doesn’t support it.
The incentive case
A second, equally well-evidenced explanation points somewhere else entirely. Steven Kerr’s research, published in the Academy of Management Journal, examined reward systems across manufacturing, insurance, politics and several other domains, and found a recurring pattern: organisations frequently reward one behaviour while stating they hope for a different one, and people reliably respond to what’s actually rewarded rather than what’s stated. Kerr’s own summary was direct — that people “seek information concerning what activities are rewarded, and then seek to do… those things, often to the virtual exclusion of activities not rewarded.” The breadth of domains his research covered — well beyond any single industry or organisational type — is part of what makes the pattern difficult to dismiss as specific to any particular sector’s culture.
Applied here, the explanation for weak cross-functional coordination isn’t primarily structural at all. It’s that most performance measurement is built around individual functions — a sales target, a production quota, a departmental budget — and almost never around the quality of a team’s cooperation with a different function. Vertical alignment tends to be measured, directly and specifically. Lateral coordination, in most organisations, isn’t measured at all, and behaviour follows the measure. On this account, the fix isn’t architectural — it’s about what gets rewarded, independent of how the org chart is drawn.
What it means for a leader
Both explanations are supported by credible research, and they don’t cleanly resolve into one being right and the other wrong. It’s entirely possible for an organisation to build genuine lateral structures — joint forums, shared accountability — and still see weak coordination if nothing about how people are measured rewards using them. It’s equally possible to fix measurement and still see weak coordination if no structural mechanism exists for the cooperation to actually happen through.
Worth adding is that these two explanations can also mask each other. An organisation that has built lateral structure but not aligned incentives may conclude, watching the structure go underused, that structure “doesn’t work” — when the actual gap was never structural. An organisation that has aligned incentives but never built a forum for cross-functional decisions may conclude that its people “just aren’t collaborative” — when there was, in fact, nowhere for the collaboration to concretely happen. Each misdiagnosis tends to reinforce the belief that the other lever wasn’t the answer.
The genuinely open question for a leadership team isn’t which explanation is correct — the evidence doesn’t settle that cleanly — but which gap is currently doing more damage in their own organisation: is there a structural route for cross-functional work to happen and it simply isn’t being used, or is there no route at all? The two diagnoses look similar from a distance and point toward very different places to look first.
The same pattern appears across many kinds of organisation; see Other Sectors for how it is read elsewhere.
Questions worth considering
- Where cross-functional work is happening well, what is making it possible — a forum, a role, or individual goodwill that could disappear with a change of personnel?
- What is each function measured on, and does any measure reward the work that sits between functions?
- Is the weakness in lateral coordination a missing route, or a route that exists and goes unused?
More on this topic: Strategy Execution.
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