Image used with permission courtesy of Many Cornet, www.bonkersworld.net
At a conference last week in Oslo, I attended a session where we discussed the state of academic research on organization design. An interesting talk was delivered by Professor Lars Groth of the University of Oslo (pictured below).
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Prof. Groth had analyzed some purported “new organizational forms” described in recent journal articles, including:
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Prof. Groth dissected these organizational forms and argued that they could all be explained by using the terminology and concepts in Mintzberg’s book on organization design from 1979. As an example, he claimed that the so-called C-form is basically another term for Mintzberg’s concept of the Adhocracy.
Prof. Groth was also interested in the connection between information technology and organizational design. He pointed out that people have been repeatedly wrong in predicting that new information technologies would change authority relations. The advent of computer networks was supposed to create non-hierarchical “network organizations”.
He argued that this belief was like thinking that the introduction of the telephone would remove the need for bosses in an organization. It didn’t; and organizations with computer networks are perhaps somewhat flatter than before but still hierarchical.
I agree with Prof Groth that there is a tendency to exaggerate “newness” and create buzzwords, rather than building on earlier established concepts. The effect is that we become unable to build cumulative knowledge about organization design as we keep on reinventing the same concepts.
I would like to take issue with him on a couple of points, though. First, I do think there are some organizational forms today that were not described in the older literature. As an example, Mintzberg’s description of the matrix form is not identical to the current concept of the multidimensional organization (something I discuss in some detail in my upcoming book).
More importantly, though, I think it is somewhat futile to look at “new organizational forms” separately from the purposes and functions that they serve. It’s a bit like an engineer taking apart an iPad and concluding – “Well, there’s nothing really new here, only a screen, chassis, microprocessor, and battery – we have seen all that before!”. Yes, we have, but innovation is not only about new forms, but about how you re-combine existing things to meet functional requirements that were previously seen as incompatible (in the case of the iPad, these functions could be excellent usability, affordable price, great visual design and connectivity, etc.).
So rather than looking at organizational forms in isolation, we should ask about functions: Are there organizations today that are able to create organizations that meet different functional demands that we have thought were difficult or impossible to achieve (in combination)?
As an example, Mintzberg (1979) was very critical of the prospect of democratic organizations where workers elect supervisors and/or participate in decision making. He pointed out that the available studies show that democratic governance in organizations lead to less efficiency and more rather than less centralization. The question we should ask today is whether there are organizations that are able to introduce democratic governance, while at the same time maintaining speed and efficiency. If so, that would be something new.
Creative organization designers are not the ones who invent new words for organizational forms but those that use already familiar building blocks (roles, processes, structures) in new combinations to achieve results that others thought were impossible.
Purely top-down decision processes are becoming less common. The leader is still responsible for making the final decision (as he/she should be) when it comes to organizational re-designs. But most leaders realize that organization design decisions are complex, that there may be multiple alternatives, and that people at lower levels of the organization may have access to information that should inform the decision. For this reason, some degree of participation and involvement is nearly always sought, by means of interviews, workshops, distribution and analysis of surveys, or circulation and discussion of proposed models among key managers.
Yet more participation does not automatically lead to a better process. One key challenge that I have noted is to strike a balance between divergence (creating alternatives/ideas) and convergence (getting closure and reaching consensus on a given solution). It’s relatively easy to ask 100 managers for their feedback regarding a proposed new organizational model. It is far more difficult to actually process the information that you then receive – each manager may have 5 or more concerns, and their concerns or ideas may (if you are unlucky!) be both sensible and thoughtful. So then you have 500 things that may need to be considered. Do you have the capacity for that? Do you have the time?
The key is to carefully structure the organization re-design process in manner so you get divergence and convergence at the right points in time. You want as many as ideas regarding possible problems and solutions at the early stage. Later, you want a finite set of decision alternatives that can be evaluated against each other.
It is also important to consider how to ask questions during the process. If a large number of people are involved, it may not be feasible to ask open-ended questions, particularly not at the later stages. Then the alternatives and decision criteria should already be established and accepted, so people should not be asked to offer their general opinion about what to do, but be invited to evaluate specific alternatives against the defined criteria.
A project team may also create various types of tools for handling the information that is collected. I sometimes use an “issue log” – a simple list in an Excel file – where I write down observations and ideas that I have myself as well as ideas and comments from those that I interview or work with in workshops. I try to categorize the issues so that I can quickly group and search through the items when the need arises.
Far too often, project teams ask for input from the organization, but have insufficient capacity for processing the information that they receive. The result is often the opposite of what is intended: Rather than increased engagement and ownership, people become frustrated and even cynical if they perceive the participatory process as less than genuine. If we want real participation in a re-design process, we need to plan how to collect, analyze, and act on ideas and suggestions from people that get involved.
I just returned from Frankfurt where I participated in the first meeting of EODF – a European community of people interested in organisation design. We were a small group of participants from Britain, Germany, Austria, the US, the Netherlands, and Norway (myself). We hope to attract a lot more people – from many more countries – at the next meeting.
We were pleased to be joined by two leading academics, namely Andrew Campbell (pictured below) from the Ashridge Strategic Management Centre and Georges Romme from the Eindhoven University of Technology.
I gave a talk based on a project I did this Summer together with an internal consultant in a financial services group, providing a brief introduction to functionally based analysis of organizational structures. You can view the slide sets I used below.
A particularly interesting discussion, I found, dealt with the future of organization design. This discussion was initiated by Tim Pidsley of the consulting firm Tricordant, who captured our ideas about how organization will be done in 2021 on the flip chart shown below.
The key items listed here were about:
- Using methods and tools from product design to design organizations (this is already happening to some extent)
- Organization design as an “embedded activity”, i.e., something that is done on a continuous rather than an episodic basis
- New ways of visualizing organizations (no longer reliant on organization charts)
- Using “crowdsourcing” to engage a larger group (perhaps outsiders) in suggesting design ideas
- Greater use of data-driven, analytical tools – away with the educated guesswork (or worse, political and ad hoc decision making) that characterize design processes today
- The use of simuation and modelling tools to visualize and predict the implications of making organizational changes.
- New ways of designing interconnected enterprises (networks of firms).
I touch on some of these future developments in the textbook I have written, and was glad to see that others seem to agree where the field might be heading and what potential there is to raise the discipline to a new level. At the same time, naming the trends is one thing, a lot of conceptual and practical work will be required to introduce and facilitate the adoption of new organization design methods. Hopefully, the EODF and similar communities in the US and in Africa may play a positive role in this.
I am right now in Frankfurt where a small group of people have gathered to establish a European community of organization design practitioners (modelled on the US Organization Design Forum). We’ll spend two days discussing how to create a community of managers, consultants, and academics.
But we also will discuss some key organization design topics and are happy that three well-known “thought leaders” have agreed to join us: Professor Andrew Campbell from the Ashridge Strategic Management Centre, Professor Georges Romme from Eindhoven University of Technology, and Jane Lewis, a partner with the consulting firm Woodward Lewis.
I myself will give a talk about how to define high-level organizational architectures, utilizing a recent project for a bank as an example.
You can find the program for the event here. I will return shortly with a summary.
Have you ever noticed how people use metaphors in describing how their organization works? In my experience, managers and employees make extensive use of metaphors in explaining how they perceive their current organization, why they think it should be changed, and what the ideal organizational model would look like.
We should take this topic seriously. In the classic book on the subject, Metaphors we live by, the authors suggest that metaphors not only help us communicate an idea but also shape how we perceive and understand the world.
Particularly important in my field of work are metaphors, sayings or proverbs that are used to communicate criteria for evaluating the current organization or principles one should adhere to in designing a new organization. Here are some examples and possible interpretations (there may be many alternative interpretations depending on the situation):
- “We’re in the same boat” – we need to collaborate
- “Our firm is top heavy” – our firm has many management layers
- “There’s no captain on the bridge” – there’s no direction and leadership here (maybe too few management layers?)
- “The left hand doesn’t know what the right hand is doing” – our units are poorly coordinated
- “Too many cooks spoil the broth” – if too many people are involved nobody is responsible
Some proverbs are remarkably similar to more rigorous principles developed by management and economics scholars. Consider the proverb “Let the wolf take care of the sheep”. There are many versions of this proverb both in English as well as in other languages (e.g., a Briton might say “Let the fox guard the hen house” and an Australian might say “Let the dingo take care of the kids”).
In the Scandinavian languages, we say (literally translated) “letting the ram take care of the bag of oats”. A friend from India told me that the equivalent expression in his language was “to give the keys to the thief”. I like that latter two versions better because they focus on the potential for conflict of interest without creating the mental image of aggression or predation.
Many economists who study organizational issues make use of the so-called Principal-Agent theory. This theory basically says that you can avoid conflict of interests by separating the role of the principal and the role of the agent (the agent is someone who carries out a task on behalf of the principal). You can then use monitoring and incentives to ensure that the agent acts in the interest of the principal. This is the foundation for many of the recent recommendations regarding improved governance and control in financial services, for example. You actually sum up the essence of the theory quite well by using the proverb.
Although proverbs and metaphors are effective pedagogical tools and shape our thinking in many ways, one should be careful not to accept them as proof of the validity of an idea. At times they lead companies astray. I recall the story about a company (I think this was back in the 1980’s) that had two main product lines but the CEO argued that the company needed to introduce one more product line in order to have a “three legged stool”, i.e., a more stable business. Yet the diversification that followed proved disastrous and was later abandoned.
Metaphors is one way of thinking – another way is using logic. We should use both – a metaphor can powerfully express a key principle, but we should apply logic to define, test and refine it before putting it into action.
