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.

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 (see this GIF), you can make manual adjustments to the solution and re-group the elements so that conflicting roles are separated in different teams.

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.

Do small and innovative firms need “structure”?

September 14, 2020 By Nicolay Worren 4 Comments

Photo by fauxels from Pexels

“Structure” is associated with large and well established firms that serve stable and mature markets.

Such firms need the clarity and predictability provided by roles, hierarchy, rules, procedures, and control systems. Innovation is not so important for such firms; efficiency is what counts.

Small firms, and in particular, start-ups, require a more fluid, agile, and flexible form in order to grow and succeed. Speed counts. Having a (formal) structure would slow things down. It would also hamper innovation, which requires freedom from constraints.

Sounds logical, right?

It is what students have been taught in business schools: Efficiency requires a “mechanistic “organization, while innovation and change require an “organic” organization.

Yet a growing number of studies is challenging this view.

Several empirical studies have been conducted on this topic. They have been published in well-known journals, and are based on data from hundreds of small, fast growing firms.

Let me mention the key findings from three studies (see references below).

The first study was conducted by Wesley Sine from Cornell University with two colleagues.

They looked at several indicators of formal structure, including the degree of formalization of roles, the degree of specialization among the employees, and the number of executives relative to employees (which they call “administrative intensity”). The data came from 449 internet start-ups.

Conclusion: The firms with more role formalization, more specialization, and more administration outperformed the others.

Another study collected data about 1411 Dutch firms. The findings are similar:

..we find hierarchical, centralized structures with strongly specialized employees to occur frequently and to perform well in terms of growth.

A third study is based on data from 2,431 high-tech start-ups in Germany. It considered the role of hierarchy, and introduction of middle managers more specifically.

The autors explain that entrepreneurs are usually reluctant to introduce middle managers, because they fear that it will lead to bureaucratization and less innovation.

Instead, they find that the opposite is the case. In fact, among these firms, hiring middle managers early increased the chance of launching product innovations by 33% (!).

So the answer seems clear: Small and innovative firms do need structure.

In his book “The unicorn’s shadow”, Wharton professor Ethan Mollick concludes:

…the founders that pay attention to the boring details of people and structure will succeed where others fail; a strategic focus on growing your team wisely is the most important thing you will do for long-term success.

You can find the studies referenced here:

Grimpe, C., Murmann , M. and Sofka, W. (2019). Organizational design choices of high-tech startups: How middle management drives innovation performance. Stratagic Entrepreneurship Journal, 13, 359–378.

Meijaard, J., Brand, MJ. & Mosselman, M. (2005). Organizational Structure and Performance in Dutch small Firms. Small Business Economics. 25, 1, 83-96.

Sine, W.D., Mitsuhashi, H. & Kirsch, D.A. (2006). Revisiting Burns and Stalker: Formal structure and new venture performance in emerging economic sectors. Academy of Management Journal, 49(1), 121–132.

Should there be a computer on your organization chart?

June 11, 2018 By Nicolay Worren

I attended a conference in Denmark recently where I met Richard Burton, professor emeritus at Duke University.

It was he who first raised the question in the headline. I thought it was an intriguing one.

Computers are increasingly doing the work that middle managers used to do – planning, decision making, quality control. Many people believe that artificial intelligence and robotics will lead to a reduction in the number of middle managers in most organizations during the next decade.

So if computers are doing the work – why not put them on the organization chart?

As Professor Burton said, if your work is not yet automated by a computer, you are probably working for one! (Like the two assistants in the diagram above.)

I guess Prof. Burton posed the question to provoke us to think about the issue.

And it’s a question that goes to the heart of how we define “organization”.

Some academic researchers define organizations as “information processing systems” – systems for collecting, transferring, and processing information.

With this view of the world, you could put the computer on the chart, because people or computers are just alternative ways of providing processing capacity to the system.

But in my opinion, this definition misses a key point.

It’s obvious that information is being transmitted and processed in organizations. It’s also clear that computers can do some task better than humans can do (or at least faster and more efficiently).

But information processing is not the purpose of organizations per se.

Instead, we need to view organizations as “accountability hierarchies” (as suggested by Elliot Jaques). Organizations have a mandate and/or mission – usually tied to external needs and stakeholder expectations.

A hospital has a legal and moral obligation to provide patient care. A school is supposed to educate students. A firm should serve its customers and other stakeholders.

To get these things done, the mandate or mission is broken down into more specific functions and tasks. People at various levels of the organization are held accountable for performing these tasks in order for the organization to fulfill its mission and mandate.

You can digitalize your organization all you want. But computers are not accountable. Only people can be accountable for performance.

A case in point: In Norway, where I live, several hospitals have had problems with their digital patient journal systems. In some cases, the system has failed to schedule appointments with patients with serious diseases who needed to take diagnostic tests.

The typical response is to blame this on a computer glitch.

But we cannot avoid responsibility by blaming a computer.

People define the functional requirements to the IT systems, people program the systems, and people follow up whether the systems do their job.

So we should not put the computer on the organization chart. The organization chart has always been – and should still be – a map of reporting lines, roles and responsibilities.

As we digitalize, the organization showed on the chart may become smaller, flatter, and more decentralized.

There will be fewer and fewer boxes.

One day there might not be any boxes left.

But by then it is no longer an organization, but a machine.

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

A country without checks and balances

Can companies be too people-focused?

Do small and innovative firms need “structure”?

Should there be a computer on your organization chart?

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