Defining roles, accountability and governance Archives

Defining roles, accountability and governance

In this series of posts I describe how to define the high level architecture and governance model of an organization, as well as individual level roles and accountabilities.

How to create effective unit mandates

November 27, 2022 By Nicolay Worren 2 Comments

To deliver on the purpose of an organization, we need to focus on the mandates of the different units in the organization (teams, departments, and so on). That was the topic of my previous blog post.

In this post, let us look more closely at this topic. How do we establish effective unit mandates? As I mentioned last time, this is the topic of an article that Shawn Pope and I are working on.

In the article, we propose five criteria that you can use as a check list when formulating a mandate.

1. Vertical alignment. As I explained last time, the mandate should first of all describe the unit’s key function or purpose.

For example, the key purpose of a team can be to serve customers, to develop new products, or to ensure that the IT infrastructure is working.

But the team is not an isolated entity; it is probably part of a department, which may be part of a business unit, which (in a large firm) may be part of a business area.

So one has to ask oneself how the team, by performing its function, will contribute to fulfil the mandate of the department of which it is part.

2. Clarity. An effective mandate is one that clarifies why the unit exists, what its domain (or, to use a legal term, jurisdiction) is, and its authority or decision rights.

To evaluate the degree of clarity, you can ask employees how easy or difficult it is to set goals and determine which actions they should pursue to reach the goals.

Another method (suggested by Julian Birkinshaw of LBS) is to ask several people to describe the mandate and check whether they have the same interpretation.

3. Coherence. The three elements of the mandate (purpose, domain, authority) need to reinforce each other.

As an example, a few years ago, I wrote a case study about a market development team of a large food production company.

The team’s mandate was to define tools and frameworks for brand managers related to business development, portfolio management, and innovation.

The team was also supposed to ensure that brand managers actually made use of these tools and frameworks (in order to ensure consistency across different brands).

But this turned out to be an impossible task. The team was placed at the same hierarchical level as the brand managers and had no formal authority to ensure compliance.

In other words, the team had an incoherent mandate. The authority it had been delegated was not commensurate with one of the key functions it was supposed to perform.

4. Focus. How broad or narrow should the mandate be? You can err in both directions.

If it is too narrow, it reduces the autonomy of the team. The team will not be responsible for a complete deliverable (e.g., a product, module, or feature) but only provide inputs to others.

But if the mandate is very broad, it may include so many goals and activities that some of them are likely to conflict with each other (making it impossible to attain all of the goals).

The marketing team that I described above faced this challenge as well.

On the one hand, it was supposed to ensure compliance with company guidelines to standardize the marketing processes. But it was also supposed to provide support based on requests from the brand managers.

These are two roles that can be hard to combine.

5. Horizontal alignment. It is not enough that a team mandate is aligned with the mandate of units at higher levels of the organization; it also needs to be aligned with the mandates of other units at the same level.

One thing you can do is to interview people in different units and ask them to describe their respective roles and the interfaces toward other units. For example, do they consider themselves as internal clients our suppliers to the other units?

The idea is that the unit mandates need to be complementary to each other (as opposed to conflicting) and that people need to understand both their own mandate and those of other units that they interact with.

* * *

This was a summary of the key points in the article that we are writing. Let me know if you have any comments or questions!

Related post:

Why you need a focused mandate

One more time: How do you simplify your organization?

Image by peoplecreations on Freepik

Can formal contracts improve collaboration?

August 22, 2022 By Nicolay Worren Leave a Comment

Fire departments are responsible for reducing casualties and saving property due to fires and other accidents within their district.

At times, however, they may lack the resources to put out a fire, and require help from neighboring fire departments.

The authors of one study looked at 8,000 pairs of U.S. fire departments. Some had informal agreements with neighboring fire departments, while others had formal contracts that stipulated how they would help each other during a fire.

One finding was that departments that collaborate save lives and save costs – estimated at 340 fewer casualties per year and $3.5B in less property damage annually (2018 figures) in total – compared to departments that do not collaborate.

And this is just from informal collaboration or “handshake agreements” to help out.

The authors then looked at the effect of entering into formal agreements.

Formal contracts are of course more costly to negotiate, implement and enforce than informal agreements.

But it also turns out that they have some unique benefits.

The results show that using formal contracts have either a small positive (1% reduction) or slight negative (3% increase) effect on casualties, depending on whether one goes directly from no collaboration to contracting, or via informal collaboration first.

However, there is a big effect on reduction of property damage: The authors find that there is a 60% reduction in property damage for those departments that move from informal to formal agreements, and for those that first collaborate informally and then move to formal contracting, a 6% additional reduction on top of the gains from informal collaboration.

So why is there such a strong effect for property damage, and not for casualties?

The authors explain that it is related to motivation, and to the way responsibilities are allocated.

Saving lives is more intrinsically motivating than saving property. In addition, firefighters are not mandated to save property outside their own district.

The effect of a formal contract is to align the goals and incentives.

When fire departments enter into a formal contract, it compels workers “to show up to their partner’s fires as if they are their own”, in the words of the authors (p. 413) – and to help put out fires that only damage property and do not pose a risk to humans.

Formal contracts are quite common, not only between external parties (e.g., customers and suppliers), but even between units of the same firm.

When used within firms, too, we see that the use of formal contracts help people clarify expectations, improve coordination, and reduce conflicts.

One participant in a study of internal contracts stated:

What a relief it was once we had formal contracts …It provided a common language that everyone could understand … It also made it easier to have good relationships with people in other units. There were no longer discussions. We knew what to expect and what we were supposed to do, and who was to approve or pay for what … People stopped fighting about things.

So, you may ask, what’s new?

Well, quite a lot, I would say.

Most of the management concepts that we read about on social media and hear about at conferences seem to deal with informal ways of working.

If we can work across boundaries (social networks), remove the hierarchy (bossless organizations), stop using written documentation (agile) and rely on trust instead of control (transformational leadership; the organization as a community), etc. etc., things will be so much better.

These ideas are useful in some situations, but are based on the naive belief that we all share the same goals and interests and that we can just “work together” without a supporting structure. The example of the fire departments reminds us that there’s an important role for formal systems.

Formal systems (including contracts) are useful in situations where units pursue different and potentially conflicting goals yet need to integrate their efforts.

Which is the typical situation for most organizational units.

Related post:

How firms learn to contract

When should you separate rather than integrate roles in the same team?

April 8, 2022 By Nicolay Worren Leave a Comment

A key challenge in organization design is grouping – finding out which roles to organize in the same team or department.

Or, at higher levels of the organization, deciding which teams or departments to group together in the same business unit or division.

On what basis should we do this?

A general principle was formulated by James Thompson in 1967. It says that you should group interdependent roles in order to minimize coordination costs.

That is, you should take those roles that depend on each other in the work processes (e.g., with regards to information, resources, and so on) and therefore need to collaborate or exchange information, and ensure that they are placed in the same team or department.

This design principle is the basis for the Reconfig software that we have built. We chose it as the main design principle because it’s so fundamental and generic – it is relevant in nearly every organization and re-design project.

Nonetheless, there are important exceptions that we need to consider.

One key exception is when there are conflicts between roles. When this is the case, you should not necessarily integrate roles, even if they are interdependent, but separate them (i.e., place them in different teams or departments).

With my colleague Shawn Pope, I have been working on an academic article where we analyze this issue in depth. The article was recently published in Academy of Management Review.

One thing we discuss in the article is how to deal with problematical cases where a set of roles are both highly interdependent and conflicted.

We propose the framework that you can see in the slide below. It says that potential conflict should “override” or take precedence, because a failure to separate is more serious than a failure to integrate.

Handling conflicting roles from Nicolay Worren

A typical example would be roles that are responsible for monitoring or auditing a process unit, which normally should not report to the same manager that is being monitored or audited.

If you know Reconfig, you may wonder how you can take this into consideration.

First of all, it is, as I mentioned, an exception. In perhaps 80% of the cases, you can group by interdependency and produce a good solution. So this should be the starting point.

But in the design module of Reconfig, you can make manual adjustments to the solution and re-group the elements so that conflicting roles are separated in different teams (see screen image in the White Paper posted on the web site).

The key implication is that it should be a routine part of any organization re-design effort to consider not only integration but separation. And hopefully, the framework that Shawn and I have developed will remind people of this and suggest design solutions.

A country without checks and balances

March 5, 2022 By Nicolay Worren Leave a Comment

This blog is primarily about the organization of business firms, but let me start at another “level of analysis” this time: The organization of societies.

As all of you, I have been watching with horror the brutal and senseless war in Ukraine.

I have also been reading the discussions about Putin’s intentions and speculation about his mental health.

Up until recently, you could argue, as did the renowned political scientist John Maersheimer, that Putin was a rational person and that he was “playing the winning hand”. But right now it is harder to defend that viewpoint; this war will only have losers.

But in addition to focusing on Russia’s leader, we also need to recognize how a system of government can allow a despot like this to emerge and completely control not only political decision making, but also the media, the courts, and the military.

And unfortunately, Russia is only one of many totalitarian states, which not only repress their own citizens, but also pose security risks for the rest of the world.

A few years ago, I visited the building where Norway’s constitution was drawn up and signed in 1814. Next to this building, there is a museum, with various displays that describe the principles that our constitution was built on.

The first thing I saw in the museum was the description of Rousseau and his book “The Social Contract”. But the next one I found even more interesting: The principle of separation of powers, proposed by Montesquieu in 1748.

To learn more, I ordered Gwyn’s book from 1965.

As he explains, the principle proposed by Montesquieu also formed the basis for the U.S. constitution. One of the founders, James Madison, wrote the following (the Federalist papers, 1788):

“The accumulation of all power, legislative, executive and judiciary in the same hands, whether of one, or few, or many, and whether hereditary, self-appointed or elective, may justly be pronounced the very definition of tyranny.”

To avoid tyranny, Madison explained that each branch of the government needs to have a “will of its own”. As explained by Carpenter (1932, cited in Kemp, 2010); this is:

“a mechanism for the distribution of power between discrete components that [are] locked into constant tension by an arrangement of checks and balances so as to achieve and sustain a dynamic equilibrium”

I am simply in awe of the people who, more than 200 years ago, were able to not only propose but implement this principle. Today, it forms the basis for every democratic country, and its absence characterizes the failure of every totalitarian state.

This principle is also more broadly relevant to the design of organizations, because even within each branch of government, and within each individual organization, we need to separate incompatible roles if we are to minimize conflicts of interest (more about that in a later blog post).

Still, we are probably overstating it if we say that failures to adhere to the principle is the root cause of dysfunctional government.

The problem is that in addition to laws, democratic governance also relies on norms. So if leaders don’t adhere to democratic norms, it may not be possible to establish or maintain separation of powers.

So it is a fragile system.

If something good can possibly come out of the current crisis, it must be that we develop a stronger commitment toward the norms and values that underpin democracy, while doing what we can to manage the risk posed by authoritarian regimes.

What is happening now should never happen again.

Can companies be too people-focused?

September 14, 2021 By Nicolay Worren Leave a Comment

People focus is the key.

Who would want to work for a company that is focused on structure and systems, rather than people?

Probably few, but maybe they should reconsider.

Let me explain.

In an earlier career, I worked as an internal consultant in a large engineering firm.

During this period, the HR director once invited Stephen Drotter, author of the book “The leadership pipeline” to give a talk to our group (I believe it was in 2002 or 2003.)

I still remember his presentation, because it was rather provocative.

He argued that we should focus less on the people, and more on the work that needs to be done.

This was rather counter-intuitive to most of us: Here was a well-known HR guru, talking to a group of HR advisors, arguing that we should focus less on people!

It didn’t make any sense.

But Drotter explained that paradoxically, if HR starts to focus more on the work and less on the people, people will actually be treated better!

I was reminded about this line of thinking recently, when I came across a German podcaster, Christina Grubendorfer, discussing a similar topic.

So how can this be?

Drotter did not go into details in his talk, but here’s my take.

I think that he addressed a common misunderstanding: That structure and systems constrain us; that they are “mechanistic” things that are opposed to more “organic” and humane ways of organizing.

But an organization without a structure isn’t very humane. It is either a chaotic anarchy or a clan that is dominated by those with the most power and political influence.

As Paul du Gay, professor at the Copenhagen Business School, puts it: The question is not whether you want to have structure or not, but whether you want to have formal or informal structure.

So the risk is that by focusing too much on people, you ignore the systems and procedures that may seem bureacratic, but that actually create consistency, efficiency, and the perception of “fair process”.

As one example, consider how teams operate.

Some teams may allow people to work however they want. “The road is made while walking.” “Let’s just trust each other and things will work out.”

So the they don’t take the time to define the roles, accontabilities, and priorities. The structure is emerging and informal.

This very issue was examined in a rigorous study of 44 production teams in a Fortune 500 company.

It found that the well structured teams were not only the most productive – but also had fewer conflicts between the members.

These teams were also rated by outside observers as more likely to “improve work practices” and more likely to “help team members develop their skills and competencies”.

Sounds quite humane to me.

As the authors of this study concluded:

(…) structure and bureaucracy have become scapegoats for a wide variety of organizational problems which, ironically, would likely disappear if organizations and teams simply utilized structure appropriately (Bundersen & Boumgarden, 2010, p. 621).

P.S. If you are interested in data-driven approaches to organization design, I will hold a free webinar on September 29 12.00-1:30 EDT (18:00-19:30 CET) in collaboration with ODF. Use this link to sign up.

How to create effective unit mandates

Can formal contracts improve collaboration?

When should you separate rather than integrate roles in the same team?

A country without checks and balances

Can companies be too people-focused?

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