Big Tax Cut! Flatten the Management Hierarchy

What about shifting the costs to digitalize your company to someone else? Is there something to learn from an obnoxious Reality Show host? Let’s find out.

The need for a new Management Ideology

Digitalization will happen if organizations find a better way to release the creative potential of humans. A hierarchical management style is centered on control. But innovation is focused on freedom. So the hierarchical management style and hierarchical organization structures got to go.

They need to be replaced by a set of normative beliefs and ideas that focus on individual freedom. This new ideology of management is at odds with current views. Gary Hamel, an influential author on the subject of Management, provides a comparison between the current mainstream and the new ideology of management in his 2012 book “What Matters Now: How to win in a world of relentless change, ferocious competition, and unstoppable innovation.”

Conventional Managers manufacture control. Everything they do can be attributed to ensuring that work is done: Setting targets, organizing, deciding, checking, developing employees. Each of those factors is, to a large part, an attempt to control what is going on.

This is important in a factory of unskilled labor. But as workers are educated, and work is less structured and more complex, more local initiative and more ideas are needed,  and more innate sense of commitment and care is required, control needs to give way to freedom.

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But control has a value. Without control, would the company not fall into pure chaos? Would slackers have a field day? Would anything be done at all? Would there be any coordination of efforts?

Oh yes, by just stating to your organization “You are free to do what you want. Enjoy!” you ensure that the organization will go to hell in a hand basket. Control is needed. The thing is: It is a different, more refined type of control. Not the plumb hierarchical sort of control, but a social control by teammates following the same mission and playing by a set od shared social rules and values:

Management in the Digital Age =

Freedom * Discipline * Autonomy * Accountability

  • Freedom to pursue personal fulfillment
  • Discipline to care for the rules
  • Autonomy to say and do as you want without fear
  • Accountability for success and failures

One can imagine that this may be ideal for the bold risk taker, but what about the timid, honest worker type? The answer is freedom: You are free to be an adventurous or as shy as you want. As long as the composition of the team is sufficiently heterogenous, everyone can contribute in her own fashion. This is even beneficial, as diverse teams tend to perform better than homogenous ones.

So far so good for the organization and the team member. So let’s fire Managers!

Big Management Tax Cut – now!

And Mexico will pay for it!

What is a management tax? Imagine a typical organization employing one manager for every 10 employees. The manager is basically not doing any other work than controlling the work done by the ten workers. The management tax is 10% if measured in headcount, 30% of salary, supposing the manager gets three times the average pay of an employee.

Now that organization is growing. For every 10 additional teams, another manager is needed to coordinate the 10 first level managers. A company that employs 100.000 first tier employees will need 11.111 managers to manage those. The Management tax increases to 11% measured by headcount, and to >33% by personal costs, as higher level management gets exponentially larger paychecks.

33% is a very high tax just to control a company.

Now the social innovation of Management in the digital age is invented. With this invention, control is smartly delegated to the first level workforce. Managers are no longer needed in their old role as Autocrat, but in a new role as “Explorer, Gardener, and Coach.” And you need just a 1 Manager per 50 first level employees.

The Management tax decreases to 2049 Managers. That is a Management Tax of 2% in Headcount and a 6% one in personal costs.

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That’s pure efficiency. Imagine saving 27% of total current personal costs just by employing the social invention.  Let’s call it “Digital Management” (as an appreciation for “Management in the Digital Age”).

And it gets even more exciting. Digital Management has not even been invented for efficiency, it has been designed to increase innovation. This enormous boost of efficiency is just a by-product.

Middle Management is like Mexico…

…it will pay for the social invention of Digital Management.  But while Mexico, much to the surprise of  President Trump, is proud and obstinate to the rogue demands of a – six-time bankrupt – reality TV host, Middle Management will have no choice but to adapt.

The ideology of Digital Management does not only enable individuals to release their creative potentials and lowers the management tax, but it also shrinks the middle management layer by 82% from 11110 to 2049.

The vast layer of middle management has been widely recognized in the academic literature as a being the primary source of resistance to any change. The Middle Management acts like the bureaucracies immune system, fighting any intrusion on the status quo.

By adopting Digital Management, change has just been made a lot easier! Yes, there will be fewer jobs in Management – but there will be more fulfilling jobs for everyone.

Reality Check

I have been surprised by the radical nature of this list supplied in the table above by Gary Hamel. Hamel has been born 1954 and has been known to me as a leading but mainstream author about management. In 1990 he core-authored “Core Competencies“,  a very influential set of ideas which got companies to re-focus their operations and is today an accepted part of mainstream management strategy know-how. He seemed to me as one of the “Business Process Reengineering” crowd of thinkers. A thinking model that was and to a large part is still dominating management, consulting and business schools.

Twenty-two years later, Gary Hamel has evolved his views further with this radical list, calling for a “new ideology of management.” A new social innovation that has been discovered by some companies, but is still unknown to the vast majority of businesses and managers.

These Companies, are the silicon valley type of Amazon, Google, Facebook, Uber, Tesla, Linkedin, Airbnb, etc. , but this innovation is not limited to Tech Companies. Traditional Companies like the grocer Wegman in the Northwest US or the Dutch Healthcare Provider Buurtzorg are practicing the ideology of “Digital Management,” too. With great results.

This Social Innovation in the realm of management will determine corporate competitiveness in the years to come – more than any other factor. But there is more than corporate progress in this.

It’s humankind, stupid!

In the year 1909 Max Weber, on whose works a lot of today’s thinking on the organization, management, and sociology rests wrote:

The great question is … how we can oppose the machinery (of hierarchies) to keep a portion of mankind free from this parceling-out of the soul.

Digital Management, as I like to call this new management ideology for lack of a better term, is a social invention that might be bigger than the invention of  “Scientific Management” in the 1880’s by Frederick Winslow Taylor. With Scientific Management, machines found a place in the human culture.

With Digital Management, humans find a place of self-fulfillment in the age of machines.

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In the next post, I will dive deeper into the tools of “Digital Management” by contrasting them to traditional management tools such as meetings or performance reviews.

If you like to read more about “Digital Management” use the filter on the right side of the home screen of the “ManagementDigital” Blog and click on the label “Management.” Or use these links:

Tired of hierarchy? Try this

9 reasons why your organization might be left behind

Good Managers – Good Teams: Lessons from Google

What Google Inc. has to teach about Management

German speaking? Please check the new podcast.

What are the 3 Essentials of Project Management?

Suppose you want to do something sizeable, which requires the collaboration of several people over a period of time.  Something like a Start-up, a software project, a process improvement or building a house. You will be creating something new. You get something from the status quo A to a new state B.

You need to start a Project. So let’s get out the toolbox of project managers!

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The danger with these tools – reinforced by the classical training of project managers – is that they tend to imply a”one size fits all” perspective. A good tool, like a work breakdown structure (a list of the activities that make up a project) used in an innovative, start-up context is likely to suppress creativity if it forces the project team to take the route to the solution prescribed in the work breakdown structure instead of giving them the freedom to choose their own path.

Tools used without wisdom are dangerous.

A “Fool with a Tool is still a Fool” (Bill Gates) – but that Fool that is now armed.

3 Types of Projects

To be treated as robots is a major part of the reason why some people really hate projects. They are forced by “fools armed with tools” into administrative nightmares,  while they long for the freedom to get creative.

So before you start “hitting away at a screw with your new Hammer”consider the project type you are facing:

  • Explorative: Start activities right away and deal with issues as they come up
  • Control: Plan ahead in detail, communicate and start once plans have been made
  • Loose/Tight: Start some activities right away and add a certain degree of planning along the way

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The middle ground between control heavy projects (e.g. building a bridge) or explorative projects (e.g. finding a minimal viable product in a start-up) is occupied by typical business projects.

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In a project falling into the “loose/tight” category there are a lot of tradeoffs that need to be made: Adding too much control to a supposedly agile software project will be as counterproductive as to forego any structure, reporting, and standards.

So the message is: Tune your approach to the type of project you are facing.

But isn’t there a set of common factors driving the success of any kind of project? I believe there is.

3 Essentials for any type of Project

All the complexities of a targeted business change and all the perceptions of what a project should be obscure the true essence of what it takes to get anything from A to B. There are really just 3 things that matter, everything else follows from that: A Just Cause, Alignment of People on the Target and Commitment to the Cause.

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1. A Just Cause

With a “Just Cause” the project team and other stakeholders have something they desire to achieve. A “Just Cause” gives the project team the very reason for being, the reason why their efforts and dedication to the project is making sense for the organization and themselves. It provides the “true North” to orientate all decisions.

The word “just” has a moral implication. After all, people aspire to do good and the Inspiration gained by a “Just Cause” is invaluable to a project. What is deemed to be “good” is, of course, depending on the values a person hold dear to herself. But as long as the project team and most stakeholders share the conviction of the Just Cause, the project is driven forward by it.

So how is one to shape a “Just Cause” out of a dry mission objective like “implement that system”? The key is to answer the question “Why?” for multiple times until you are at the essence of the project. Finally, a project is there to make something better, to help someone getting things right, to make the world “just” a little bit better. Identify what your project contributes. If there is really nothing, then just don’t start the project at all.

2. Alignment

Alignment has a strategic and a tactical side.

Let’s start with the strategic element. It’s not enough to have identified a Just Cause for a project, it needs to be shared by others. So get project members and stakeholders to think of the just cause, discuss it with them. Sharpen the mission. Put it in writing, visualize it, display it, give your project a name. Make sure that the “Just Cause” provides true North for the lifetime of a project for everyone involved.

But Alignment is more than just strategic. It is, on a tactical level, the day to day synchronization of activities: The avoidance of waste, the clearness of areas of responsibility, the awareness of datelines, the knowledge of what the other team members are doing, the knowledge of dependencies and risks, the setting of standards, even the provision of templates.

By aligning the team on a day to day level everyone works in the same direction, towards the true north without any unnecessary waste of efforts – and therefore with speed.

3. Commitment

Even if people share a certain sense of the “Just Cause” of the project and work in an aligned, concerted manner towards the goal, that is not enough to ensure project success: They need to be as deeply committed to the project as possible on a personal level.

A Just Cause might make a good reason for the company to do something, but Commitment can only be gained by addressing the individual needs of each project team member individually. The project leader needs to understand what make the person tick, what are his strength, his interest, his desires, his fears, his passions. The more he understands, the better. The only way to find this out is to spend time with the team member, listening and asking probing questions.

To gain Commitment, Emotional Intelligence is what is needed, rather than technocratic skill.

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Perceiving, understanding, using and managing emotions is key to gain and keep the commitment of team members. A committed project team working in an aligned manner is a fast and efficient project team.

Masterful Project Management

If a project manager is able to…

  • Conjure and uphold a Just Cause that is shared by team members and most Stakeholders
  • to align the team in detail on a day to day basis without interfering into their preferred individual work styles
  • and to commit each team member emotionally to the project

…she may consider herself a masterful Manager, as she gains the maximum of the contribution of the team. And all that performance comes by using unobtrusive nudges instead of strict orders.

After all, Management is the art to get people to do things. And creative things can not be ordered.

Good Managers – Good Teams: Lessons from Google

Is management important to a organisations success? How much hierarchical power is helpful? Where is the tipping point where too much power becomes detrimental to an organisations success? Let’s take a look what Google Inc. has found out.

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What Google Inc. has to teach about Management

Larry Page and Sergey Brin took a look at management theory and were not impressed: Too much hearsay, too little data. There’s got to be a better way to manage companies. So google made their own rules.

Now, with 548 Billion$ market capitalization, 18 years since its founding, most people still think of Google as bold, entrepreneurial, unconventional and smart. It seems that there is something to learn from Google about management.

Read more

Exponential Organizations – a way forward for traditional companies?

An “exponential organization” as defined by Salim Ismael is a business model that is poised to take advantage from the digital revolution. It leverages the abundant nature of information goods to transform business models of any sector, even physical, manufacturing or brick & mortar based sectors.

Even traditional companies can harness the power of the digital revolution, change their direction and tweak their organizational structures in order to propel their business forward – instead of viewing the digital revolution as a threat, a head wind.
They can use it by changing their organization, their course and flexible exploring where customer value is – they can harness the power of the digital storm and sail.

Here is how.

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Social Physics: The Revival of Science in Management

There is much here-say in management theory. For the most part, it resembles more folk-lore than science. What we call “best practice” is mostly just a mere belief. It might be a good or even a wise guess, but is it the truth? Is it, as Frederick W. Taylor would have framed it, the one best way to do things?

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Read more

Execute crisply with sharp tools

What is the use of having a strategy when you do not have the tools to execute it? Problem is: You can rarely buy those tools. You can not buy executional strength- you need to have build executional excellence over time. How?

What is your strategy?

First a reality check: According to leading strategist Richard P. Rumelt most companies do not have a strategy, some might have intentions, at best.
Think of your own company: Do you know its strategy or do you just guess? Is it really a strategy or just stated intentions: “We want to be within the top X of…”, “We will grow consistently”, “We are proud to deliver outstanding customer service” or similar. Do you know why this strategy is chosen? Do you know how – by which actions – it is brought into execution? Do you know exactly what results are meant to be achieved and when?

A strategy can not be executed if not defined, nor if it is not communicated. Most employees and manager suppose that there most be a master plan somewhere in higher management and lower echelons just do not know it. They are – according to Rumelts studies and my experience – wrong. A well formulated, shared strategy – even if not communicated is a very rare thing.

This is quite unsettling. Organizations are drifting in time through the ocean of daily work, without a clear purpose and direction. But they are earning money and provide livelihoods. And that is not a achievement to be belittled.

Managers blues & Workers limbo

One common complaint often heard by managers is: “Who should do it? We do not have the kind of people around here to do things like that. If only we could have more people like person X, we could achieve so much more.”

On the employee side, not a few are feeling that work do not bring out the best of them. How many of your co-workers seem to go to work because they seem to be inherently motivated by their jobs, the tasks they are accomplishing or the social team spirit? Most people are there to earn money in a sometimes engaged, sometimes demotivated, most of the time neither engaged or demotivated way. Employees are drifting – just as a company without a strategy that is actually executed does.

Execute with sharp tools

Strategy is the application of strength versus weakness. The way that this strength is applied is by people grouped in organizations, acting in unison towards a single purpose. Organizations are the prime tools to execute. Every action of a company is either improved or attritioned by a good organization or by a bad organization. The organization is the tool . this tool can either be sharp or blunt.

Heinz Guderian, who had a major influence on german army operations before during and after the second world war, described his job as Inspector General of the Armoured Troops: “Provide the german army with the sharp tools of their trade“.  This encompassed every aspect: Organisation, Training, Processes, Logistics, Material.

This way of thinking was prominent in the german general staff. Erwin Rommel has once been questioned about his seemingly overly risky strategies and replied “I am seeking to create complex situations willingly – in the clear conscience to have the means available to use that complexity to my advantage“.

Both strategists, Guderian and Rommel, were quite aware that any strategy needs to have the sharp tools to implement them and even more: With sharp tools, whole new strategies are possible that could not even be dreamed of, without having entered complex situations.

To enter a complex situation with blunt tools is folly. To enter them consciously with sharp tools is mastery.

Complex situations – like the business environment created by digitalization.

Crisp execution

It seems that having a strategy is not necessary for survival of companies. But it is absolutely necessary to outperform the market systematically.

To win in the digitalization age, transform your organization into a sharp tool, so that execution can deliver decisive results. So what to do? Hire lots of outperformers? Get consultants in to draw up transformation plans?  Find a dynamic setting offsite and motivate your management team?

Whatever you do to get your organization into shape, you need to shape it with a purpose. A tool needs to be applied to something. It is not enough to hone a sharp edge on it, you need to have the right tool for the job, too.

But organizations are made of real people. You can sharpen tools – but how to sharpen people’s resolve, their individual ability to execute? That is were purpose comes into play. It is simply impossible to get individuals to focus their energies on the task at hand without giving them a purpose. Maintaining human resolve – a main part of the ability to execute on individual level – requires shared purpose. Shared purpose can not possibly created without a communicated strategy down to the individual level.

So here is the full circle:

  • You need a strategy to know what tools to use and sharpen.
  • But a strategy can be such a fickle thing in the dynamic ever changing world of digitalization.  It might change.
  • And building and honing tools is so time intensive. A dilemma.

Here any waterfall model will fail, e.g. step one: Get a strategy – with the help of lots of highly paid strategy consultants. Step two: Align the organization. Step three: Execute. Step four:  Oh wait, situation has changed lets go back to step one again.

The answer to this dilemma is: Preparedness and agility at all times.  

Be prepared: Sharpen your tools

Moore has shown in his work on Management Zones (see previous posts) that preparedness means quite different things in different parts of the organization. It really helps, for example to have a very well ordered and disciplined logistics departments. It might not be good idea at all to apply he same degree of discipline to marketing, design or even sales departments. Here efficiency is a secondary concern.

But it definitely helps to build up and maintain some standards of conduct on micro level at all time in all parts of the organization:

  • Ensure that meetings have an agenda and actions are followed up
  • Monitor and analyze quantitatively
  • Tolerate failure, but make sure that learning follows
  • Insist that managers improve their understanding and practice of their craft
  • Organize with a purpose, do not drift with events – use events, always look out for opportunity
  • etc.

Not every behaviour of an organization is strategy or situation dependent.

Focus on getting invariant behavior, the healthy habits of good organizations, right at all times.

Be Agile

Hey stop! Preparedness is fine, but how to build an agile organization? Preparedness can be worth nothing, if you prepare for the wrong kind of battle, where your strength are irrelevant, or if it takes too much time to muster your organizational strength.

One way to achieve organizational agility is to adapt a  team based management approach in some parts of your organization – as displayed in my last post.

Be prepared, be agile – or be late.

9 reasons why your organization might be left behind

Suppose your organization is well organized. A stable, well thought out and staffed hierarchy, efficiently standardized processes producing quality outputs. What could be there to fear?

The volatility, uncertainty, complexity and ambiguity that so signifies our modern world threatens to redefine many sectors, including – for example – such entrenched sectors as automotive manufacturing. Take this example:

Uber is taking away the business from NYC traditional yellow cabs at a very high rate: The number of pick-ups by Uber drivers quadrupled from 2014 to 2015. Uber is taking this business from the traditional yellow cabs, whose business fell by 10%. But the implications  are wider. Given the greater utilization of Uber cabs, their convenience and efficiency, car demand might go down not just in NYC, but globally. Now take that piece of info and combine it with the huge investments on self driving cars that e.g. Apple or Google make. This will drive utilization of cars even further. Some estimates say that the 144.000 NYC yellow cabs today can be replaced with just 9600 self driving Uber cars. Automotive manufacturers: Beware.

Automotive manufacturers seek to adjust their huge global, efficient, tayloristic organizations to face that threat. But adjust to what? The to-be state is volatile, uncertain, complex and ambiguous. The actions to get there are unclear, too. The actions are VUCA. The timing is VUCA. Budgets are VUCA.

So the game needs to be about preparedness, in order to have an organization that is ready to cope with the VUCA Environment. Not the whole organization needs to change, as cars still need to be built, sold and serviced efficiently. But as cars are likely to be very differently built, sold and serviced in the future, it is prudent to try out and learn new organizational methods in limited parts of the organization in order to be prepared.

9 Categories that distinguish traditional from agile organizations

Stanley McChrystal and others are arguing that the ability to scale the most effective organization is the key to be prepared for the VUCA world – as described in the previous post. So what is so different about traditional, hierarchical organizations and agile, team based organizations? I have clustered the differences into 9 categories.

1.Targets

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First of all, the targets of traditional hierarchies are different from those of agile, team based organizations. Traditional hierarchies are about efficiency, eliminating waste, establishing control to create robust, reliable performance every day, every year, every quarter.

In contrast to that, agile organizations are more wasteful. Their prime concern is to achieve a target, to get the work done. Efficiency is not as important. Consider this extreme clash of views:

During a presentation at a fair a start-up entrepreneur praises the value of experimenting, failing fast, learning and working iteratively through failures and success to get the new business off the runway. An executive of a nuclear energy plant listens to the sermons of the entrepreneur, but is not very exciting about the idea to fail, and to fail fast.

One could conclude: Ok, these situations are totally different and therefore totally different organizational methods should be employed. But: Both organizations value effectiveness above efficiency. So should the nuclear power plant assume an agile, team based organization? Lets revisit this question in a minute.

2. Environment

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Organizations are tools. Tools that are helpful in one environment and less helpful in others. If you own a hammer, not every problem will be solved with this tool in an optimal way…

Traditional functional organizations are build to master complicated situations. They seek the one best way to do things and let those things be done by different departments subject to a superior, central control. Such an organization is quite complicated, with a lot of departments, a lot of processes, a lot of dependencies. The organization in itself is a way to solve complicated things, like for example building an automobile.

However, it is not a tool to solve complex problems. What distinguishes complex from complicated situations is that in- and outputs are hard to predict in complex situations. Take a a car. A car is explicitly build not to be complex. A car is reliably producing the same responses to the impulses of the driver, each and every time. If you had a complex car, it would react differently to your driving every time. A scary, dangerous thing.

The problem is, VUCA environments are by definition complex. You simply can’t expect that you know cause and effects of every move of the organization. You have to learn to get better to predict success and confront failure as just one possible outcome, learn from it and move on. Sounds familiar? This is the territory where start-ups are located. They have a business plan, they have a plan to get to a solution, but they need to experiment, fail and learn in order to finally succeed. Not every organization is a start-up – but there are lessons to be learned by stable, mature organizations facing an unstable, complex world.

In a complex world you seek to find a good way to do things. Not necessarily the one best way, but an effective way that, with reasonable efficiency, keeps you flexible enough to react uncertainties.

The manager of a nuclear power plant is faced by an extremely challenging, complicated situation. But he is not facing a complex situation, as causes and effects are well known and understood and can be controlled, as the environment of a nuclear plant is stable.

So – not too surprisingly – a nuclear power plant should not be run like a start-up.

BUT: Once this stable environment breaks down, like happened at Fukushima, traditional hierarchies are lost. Studies on airline security (see McChrystal or Humble in sources) have shown, too,  that strict adherence to protocols is no good, once the environment becomes unstable. At this point of time, agile, team based organizations are needed.

The advise to the manager of nuclear power point should be: Organize a tight control through hierarchy. But be prepared and have defined and trained an agile way of organization, once the unforeseen happens. In fact, this blending of approaches is exactly what modern management is about.

To blend the organizational approaches in traditional hierarchy and agile, team based organizations is not easy to understand. Here, metaphors provide guidance.

3. Metaphors

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Metaphors are important, they provide guidance and create ideas. The prevailing organizational paradigm of the past, since the industrial revolution, is the well oiled machine, which performs like clockwork. It is about scientific management, the strong belief there is one best way to do things.  That that way needs to be researched, defined and controlled. It is the logic of the assembly line, where a central intelligence, blessed with a superior intellect brings order to the chaos of work. Most knowledge workers are still working in a world of this metaphor: Best practices, industrialized processes, shared services, service levels, global templates are all practices to bring order and find the one best solution to a problem. It is the visible hand of management forming order from chaos.

Agile organizations follow the metaphor of an “organism”. There is still functional specialization of business units or departments, as benefits of specialization are real. But every unit (organ) of the organization, down to every employee (cell) is connected via behavioral norms (metabolism) and connected to a communication channel that is open for everyone to broadcast in (nervous system). There is still is a central command at C-level which is dedicated making decisions (brain), but it shares its information with every employee (cell) freely and vice versa. The communication system does not rely on reporting lines to let info sink into the organization slowly. It relies on information to be instantly emitted to everyone, from everyone. Over time this system provides convergence of every member of the organization, a shared mindset and purpose.

4. Specialization

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Specialization is the twin of coordination, two essential pillars of every organizational model. The traditional hierarchy is following the tayloristic way of working: Through repeated execution of the same tasks people get better and better, ever more efficient. No-one needs to know more about the purpose of the task. Just do as you are told. People are used as interchangeable parts. Information is trimmed down to the necessary amount, more information would be inefficient.

A team based organization is specialized by mission. This may require a specialization by tasks inside certain teams, but the task is just a way to get things done given a certain situation. If that situation changes, the task may be replaced by another task. In order to perform a mission and not a tasks, context must be known to team members so that they can adapt their approach to work, what things are done and how things are done.

5. Coordination

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Through coordination the resources of an organization are directed to achieve a purpose. In a traditional functional organization, the resources that are being coordinated do not even need to know the purpose, they just need to perform the tasks they are told by a superior. Of course, this restrains their ability to act in uncertain, unstable environments. In those environments, coordination by shared purpose, context and the dynamic adaptation of the way of execution, even changing the outputs of work to the needs of the situation is a far superior strategy.

The benefits of specialization create the need for coordination. Coordination is big part of the reason that managers exist. In an agile organization, coordination occurs implicitly – on individual level through shared purpose- rather than explicitly – through the will of a superior. Thus has huge implications on staff composition: Less Managers are needed, especially less middle managers.

6. Innovation

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Trimming down the middle management layer removes one barrier to innovation. This is no offense to those working in middle management. Most do a marvelous job of keeping the corporate machine running, but they are by definition part of a machine that purpose is to perform repetitious tasks and outputs. Innovation is not an expected or even targeted deliverable.

Alex Pentland, an MIT professor,  writes in his insightful book social physics:  “Ideas are the result of engagement and exploration“. This does a lot to explain, why agile, team based organizations outperform the hierarchy.

7. Reaction to risks

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To say it in the word of Stanley McChrystal, hierarchies reaction to risk is to “raise the dikes to defend against flooding”. Raising the dikes is costly, but a fully appropriate respond to a known threat. But it is also a very static approach, which has a problem coping when faced with unknown threats. The Netherlands faced such a situation in the 1990’s, with water level raising behind instead of in front of the dikes, in the rivers of the Hinterland.

An agile approach to that problem is what the Dutch authorities are pursuing since that time: Controlled flooding to relieve pressures on dikes, different settling policies, even experimentation with swimming houses. This is a resilient approach: Rather than fighting the impacts head on, the impact is absorbed and the systems reconfigures in order to face a disturbance. A more cost efficient and agile approach, that leaves the system room to deal with other future unknown threats.

A different example for a resilient approach is the german defense system piloted in the first world war after 1917. Instead of relying on multiple static lines of defense, the german army reverted to a “defense in depth”. The enemy was not to be repelled, as in a line defense, but slowed down and entangled in a net of small defense points. Thereby, the initial force of an attack was absorbed and time was gained for a flexible response by the main forces held in reserve, that were ready to employ every tactic the situation might require. Interestingly, these strategic changes have been complemented with team based, mission based tactics on team level, too. Without local initiative of ad-hoc “Kampfgruppen”, this strategy of flexible response would have failed. Instead, it brought spectacular “success” – if prolonging this brutal war should be counted as a success at all.

Hierarchies are excellent to prepare for risks in static environments. But in dynamic, VUCA environments they are inferior to the agile responses by team based organizations.

8. Communication

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Essential to the notion of team based management is the key concept of “hands off, eyes on“, in other words: To empower people to act. Compare this with the value our culture  attaches to the “hands on” manager. The dynamic shaper who bends reality to his will almost on his own is a mythos of popular story telling. The hero who makes things happen is quintessential part of every attempt to tell an interesting story.

But for effective, team based management the “hero” will need to build a framework and tend to this framework, but refrain from intervening in daily work: Managers evolve from Shapers to Gardeners.

Communication is all important to establish a team based organization at scale. To empower this high degree of decentralization people need to know the overall picture, need to build a sense what the overall mission of the organization is all about and break it down into an individual target.

9. Maintenance: “There are no bosses because I say so”

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While there are a few examples of team based organizations, hierarchies rule. The number  ONE roadblock is – as in any change – culture. Not only the culture of a certain company, but of society as a whole, starting from school and the myth of the hero that we so admire in public culture, from Erin Brockovich to Mr. Tony Stark in the Iron Man Franchise. A leader that is using his power to establish a system in which individuals and teams can thrive is not the prevailing picture that story telling conveys to us.

Another roadblock towards the adoption and maintenance of a team based organization is the underlying assumption that a leader is a benevolent dictator. Adopting a “hands-off” management style and sticking to that, especially in prolonged times of crisis, is hard.

The benevolent dictator is a contradiction in terms, as the economist has put it in an article on holacracy, a very extreme democratic form of team based organizations:

“There are no Leaders because i say so”

Team based organizations work, there is enough proof of that not only in Stanley McChrystal’s work. But they are neither what is called in stable environments where efficiency is called for, nor are they easy to build and maintain.

But mastering team based organizations will be essential for businesses, as more and more businesses are faced with a VUCA world.

Hierarchy alone will leave your company in the dust of those companies, who begin to master team based organizations where effectiveness is called for, not efficiency.

Tired of hierarchy? Try this

Hierarchies suck. In so many respects: They are slow-moving, suppress  Innovation, promote siloed thinking and largely fail to give most people a sense of life – of vocation – at work.

mcsThe trouble is: Hierarchies work. They are efficient, tried, tested and well understood. They solve very complicated problems, like assembling cars or providing all kinds of food and things to the consumer day by day. Simply put: The shortcomings of todays hierarchy model of running most businesses are acceptable. There is no better alternative organizational model in the world to achieve consistent outputs at high productivity – given predictable in- and outputs in a stable environment.

Here comes the thing: In a digitalized world, there simply is less of what a well performing hierarchy needs:

  • less predictability of inputs
  • less predictability of outputs
  • less stability

In a rapidly shifting environment the traditional economic dictum to maximize the ratio between out- and inputs is still a major concern, but not the only one. It is simply not efficient to invest in maximizing a specific in- output relation if that relation might be no longer relevant to the market tomorrow.

Is there a better organizational model for those parts in the business facing a VUCA  (volatile, unstable, complex, ambiguous) environment? In a VUCA environment is quest is for effectiveness, not efficiency. Think of Moores four management zones (see last post): Efficiency is the central paradigm of the productivity zone. Effectiveness is the central paradigm of the revenue zone. There is a point, when the disturbances of the revenue zone become to much to handle by an hierarchical organization form. A more effective one is needed.

What is the most effective organizational form in the world?

It is the team. If we want to achieve great things, innovations, breakthrough performance or solve critical problems, we get together in a team to think and work interactively and collaboratively. With engagement and good team work even hierarchies solve their most critical problems effectively.

But teams do not scale. Once a team is too big, it becomes a conference where a single voice is not heard, political dynamics take over and the team dissolves into a gathering of individuals, a “conference herd”.

What if it would be possible to transfer the effectiveness of teams to the organizational level, to scale this effectiveness to thousands of coworkers?

Team of teams: How to establish an effective organization

An efficient, Taylor based organization relying on the division of labour, is often portrayed as a “mechanical” organization. A factory, imposing order on processes and humans alike. In contrast to this, an effective organization can be pictured as an organism.

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An organism is still employing specialization in functions (organs) but each part is connected through metabolism and a nervous system to the whole. In such a system, individuals are not as easily replaceable as within a mechanistic organization, as an organism reconfigures itself once an individual part changes. In fact this reconfiguring is ever-present, as the organism itself and the environment changes.

This organism metaphor may appear to be far fetched. It has the air to be “metaphysical” or even esoteric. But look at this list of organizations who have employed these metaphor to shape their organization:

  • Boeing, in building the very successful B 777 plane series
  • Southwest airline, outperforming the industry for years
  • Ford after its 2006 crisis under Allan Mulally (who was responsible for the 777 series at Boeing prior to his position at Ford)
  • NASA in the Apollo program, neglecting this approach in the aftermath during the shuttle years, and readopting is in recent years
  • the US military in Irak and Afghanistan during  Stanley McChrystal’s command starting 2003 to 2010
  • Buutzorg, a Dutch Healthcare company which went from a start-up to the largest healthcare provider in the Netherlands within a few years (see F. Laloux in sources)

Each of these organizations provide excellent case studies in itself on the principles of what Stanley McChrystal calls “team of teams” management, Adam Mulally calls “Working together” or  Frederick Laloux calls “Teal”. All these approaches do have strict focus on effectiveness, and are therefore fundamentally different to Taylor’s sole focus on efficiency.

Still, Taylor’s scientific management approach is not obsolete. Its still the optimal organizational form for stable, predictable challenges where efficient is what matters most. But, it is time to recognize that there is a better organization form in non stable, non predictable environment. In environments created by digitalization, for example.

Does this mean an organization should become a team based organization in all its parts? No. There are parts of the organization which needs efficiency, see Moore’s “Productivity zone”. But for most organizations the biggest and decisive zone, the revenue zone, should – depending on the degree of instability of the environment – really be organized according to the principles of team management.

This need for a new organizational model is recognized in established, rather traditional management literature as well. Fredmund Malik, an university professor and disciple of Peter Drucker,  has contributed a lot to central european managers view of seeing management as a craft, which can be learned and perfected. While this view remain valid, he has extended his work in his recent book (see sources) to include team based principles. As business environment has changed, so need managerial solutions in order to cope with complex environments.

In the next post let’s explore this highly effective management style by digging deeper into the factors of “team of team” management. For now, I will leave you with an interesting primer, comprehensive panel discussion about “Team of Teams” at c-span from 29th of May 2015.

Play the right game, IT!

Depending on Moore’s zones of Management, IT needs to recognize the playing field it is on and play the right game. Let’s break down the implications of Zone Management on IT:

As each of the four zones aims at different outcomes and operates on different management models, IT needs to adapt to these. Let’s have a more detailed look at the nature of the zones and its implications for IT:

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