Peter Drucker, Management: Tasks, Responsibilities, Practices — Chapter 45: Work- and Task-Focused Design: Functional Structure and Team
Introduction
In the early 1990s, many Korean conglomerates introduced “team-based” organizations. The goal was to flatten the hierarchy and shrink reporting layers.
Three decades later, are we really working as teams?
I cannot exempt myself from this question. Every organization I have led carried the name “team.” Yet looking back, I cannot say with confidence that what makes a true team work — clear mission, shared objectives, joint accountability — was ever well defined.
In this reading session, one of our discussants put it bluntly: “There are no real teams in our company.” The name is “team,” but the functional structure is what actually operates.
Drucker’s Chapter 45 explains why this gap exists. A team is not an advanced version of a functional structure. It operates on a fundamentally different principle.
Does the Work Move to People, or People to the Work?
Most companies are built on functional structures — development, procurement, production, sales. Each person knows their role, expertise deepens, and the organization runs with stability. But once size and complexity grow, the dysfunctions appear quickly. Functional interests override the whole. Communication breaks down. Decisions concentrate at the top, and innovation suffers. We call this the silo problem — not the failure of any one company, but a structural feature of functional organization itself.
Team structure is built on a completely different principle. In a functional structure, work moves from one functional unit to another. In a team structure, the task is fixed first, and people with different skills move to the task. The center of gravity shifts from “function” to “task.” This is why a team — when it actually works as one — can be free of silos by design.
That said, Drucker does not argue every organization should abandon functional structure for teams. The realistic approach for a functional organization is to complement its limits with teams in two specific areas: top management work and innovative work. The essence of both is not routine operation but problem-solving — the problem comes first, and the functions needed to solve it are mobilized as required.
Changing the Name Did Not Change the Principle
When Korean conglomerates introduced team-based structures, the change was largely cosmetic. Reporting layers shrank, and the org chart was relabeled. Meaningful steps, but not what Drucker meant by a team.
The gap shows up most clearly in teams formed around new strategic mandates. Consider one such case from a Korean tech parts manufacturer.
No Task, No Team
A few years ago, this company announced a transition into a “solutions provider.” The vision was to evolve from a parts supplier into a partner that solves customer problems — and to expand the customer base beyond existing tech manufacturers, all the way down to end users. The CEO’s declaration was clear. But the responses from internal executive interviews told a different story.
“What exactly is the solutions provider we’re building? New customers, value chain expansion, comprehensive offerings — all at once, or just one of them?”
“Does this mean we now compete with our own customers?”
“Are we becoming a software company instead of a manufacturer?”
These are questions about the task itself. When what needs to be done is unclear, you cannot build a team around it. Drucker names the first condition of a team as a “continuing mission.” Specific tasks may change, but the team’s reason for existence must be clear.
This is why the solutions team failed to function, even though the organization was created. “Solutions” was never defined as a shared task within the company.
The Problem Isn’t Silos — It’s the Lack of Authority
In the same set of interviews, one comment stood out:
“Across functions, collaboration isn’t working. Communication happens in silos.”
Many organizations treat silos as something bad and try to eliminate them. But silos are an inherent feature of functional structure. As each function deepens, it develops its own logic and language — it is how functional structure operates.
The problem is not silos themselves. The problem is that team leaders lack the authority to execute tasks across silos.
When the solutions team launched a business for a new customer segment, a crisis hit. A two-day shipping delay arose at the China plant. For existing customers, two days was a minor matter. But for the new customer, it meant production lines coming to a halt. The solutions team leader had to fly to the overseas plant himself and persuade the plant managers one by one. The plant managers, operating within a functional structure governed by the existing business, struggled to understand why such an effort was necessary.
Drucker argues that team leadership must be authority derived from the task, not from rank. He identifies four conditions for a team to function: continuing mission, clear objectives, task-based leadership, and joint accountability. The solutions case shows what happens when none of these are in place.
A discussant who leads talent development cut to the heart of it:
“They are teams in name only. In practice, they are just functional structures. Just gathering people together does not make a team.”
When a team built to cross silos lacks the authority to do so, it is not a team — it is just another department.
Closing
Take a moment and think of one organization in your company that carries the name “team.” Does it have a clearly defined task to solve? And does the team leader have the authority to carry that task out?
If the answer to both is not “yes,” then it is a team in name only.
From a Monday morning reading group on Peter Drucker’s Management, every week at 7:00 AM.