The board of company STN has asked its CEO to have a look at how the company is organised. The company has two divisions serving loyal customers and is faring well. However, it has an odd unbalance between its two M and J divisions: M is 10 times the size of J. Maybe there are some inefficiencies in company organisation?

The CEO hires a consultant. The first thing she discovers is that the M division actually contains 8 large sections: R, V1, V2, V3, A, 3 and T, most bigger than the J division itself. So consultant proposes to elevate the sections to divisions and create the horizontal organisation depicted in the figure.

Things, however, are not so simple: the sections of the M division are highly interconnected. If division M is dissolved, the CEO will have to do what the head of the M division actually does: coordination. But he does not have the necessary competence nor does he want to learn new tricks. Consultant digs deeper and discovers that in the last 12 months alone there have been 67 instances of interactions between the sections of the M division , and no instance of interaction between the M and J divisions.

Consultant will recommend to split the STN company in two: an M-company with 8 divisions and a J-company.