Organizational Design

<p>In 1904, the great sociologist <a href="http://en.wikipedia.org/wiki/Max_Weber">Max Weber</a> visited the United States. &nbsp;As <a href="http://moisesnaim.com/">Moises Naim</a> describes in <a href="http://www.amazon.com/The-End-Power-Boardrooms-Battlefields/dp/0465031560"><em>The End of Power</em></a>, travelling around the vast country for three months, he believed that it represented “the last time in the long-lasting history of mankind that so favourable conditions for a free and grand development will exist.”</p> <p>Yet while Weber saw vast potential and boundless opportunities, he also noticed problems. &nbsp;The massive productive capacity that the industrial revolution had brought about was spinning out of control. &nbsp;Weber saw that traditional and charismatic leadership would have to give way to a more bureaucratic and rational model.</p>

1. If it can fit on an org chart, it’s not a network.

Before Weber’s bureaucracies became predominant, most enterprises were fairly organic. &nbsp;People shared the work, helped out where they could and all pitched in to get the job done. &nbsp;At the end of the day, they went home and then came back the next morning, ready to tackle a new job, which was often different than the day before.

Yet the increase in scale that the industrial revolution brought about resulted in a difference in the kind of work that was to done. &nbsp;Jobs would be broken down into small, specific tasks and be governed by a system of hierarchy, authority and responsibility. &nbsp;This required a more formal form of organization in which roles and responsibilities were clearly defined.

As business became more complex, these rigid structures grew increasingly untenable and so management theorists began to look for another way—<a href="http://en.wikipedia.org/wiki/Matrix_management">matrixed organizations</a>. &nbsp;In addition to the hard lines of responsibility and authority, dotted lines were used to denote cross-functional authorities and responsibilities.

Yet before long, it became clear that <a href="/1978/05/problems-of-matrix-organizations">matrixed organizations also had problems</a>. &nbsp;Despite the often mind-numbing complexity of matrixed organization charts, they still could not match the complexity of the marketplace. &nbsp;So matrices, in a sense, led to the worst of both worlds, a cumbersome organizational structure and the inability to adapt to fast changing contexts.

The truth is that networks are informal structures. &nbsp;If it can fit on a traditional org chart, it’s not a network.

2. Silos themselves aren’t the issue.

The term “network” is often misconstrued. &nbsp;In management circles, it is often used to mean an organic, unfathomable, amorphous structure, but really a network is just any system of nodes connected by links. &nbsp;So, in that sense, any organizational structure is a network, even a formal org chart.

<a href="http://en.wikipedia.org/wiki/Clustering_coefficient">clustering</a>

For functional purposes, networks have two salient characteristics:

Clustering refers to the degree to which a network is made up of tightly knit groups

path length

path lengths is a measure of distance—the average number of links separating any two nodes in the network.

We often hear about the need to “break down silos” to create a networked organization, but this too is a misnomer. &nbsp;Silos are functional groups and they need a high degree of clustering to work effectively and efficiently. &nbsp;The real problem in most organizations is that path lengths are too great and information travels too slowly, resulting in a failure to adapt.

The most efficient networks are <a href="http://www.digitaltonto.com/2010/the-story-of-networks/">small-world networks</a>, which have the almost magical combination of high clustering and short path lengths.

So silos aren’t the issue—high clustering promotes effective collaboration—the trick is to connect the silos together effectively.

3. Small-world networks form naturally, if they’re allowed to.

The idea that clusters of close-knit teams can somehow increase the flow of information on their own, simply through shorter social distances, seems unlikely. &nbsp;Yet actually, small-world networks often form naturally, without design or complex organizational engineering.

In fact, in their <a href="http://www.nature.com/nature/journal/v393/n6684/full/393440a0.html">initial paper</a> describing the phenomenon, <a href="http://en.wikipedia.org/wiki/Duncan_J._Watts">Duncan Watts</a> and <a href="http://www.stevenstrogatz.com/">Steven Strogatz</a> found the neural network of a roundworm, the power grid of the western United States, and the working relationships of film actors all followed the small-world network pattern. &nbsp;It takes effort to design a traditional organization, but small-world networks form naturally.

traditional organizations actively discourage connectivity. &nbsp;They favor strict operational alignment within specific functional areas while doing little to foster links between them.

4. Networked doesn’t mean flat.

The latest management craze is flat, <a href="http://www.digitaltonto.com/2012/the-leaderless-organization/">leaderless organizations</a>. &nbsp;Much has been made about <a href="/2015/05/making-sense-of-zappos-war-on-managers">Zappos’ recent efforts with holacracy</a>, but as Tim Kastelle recently <a href="http://timkastelle.org/blog/2015/05/zappos-just-pulled-off-the-boldest-change-management-move-ever/">explained</a>, the jury is still out whether the effort—and those like it—will be ultimately successful.

&nbsp;My own feeling is that flat structures will work for some cultures, but not others.

The important thing is that an organization does not have to be flat to be networked.

<p>In his new book, <a href="http://www.amazon.com/Team-Teams-Rules-Engagement-Complex/dp/1591847486/"><em>Team of Teams</em></a>, General <a href="http://mcchrystalgroup.com/our-team/">Stanley McChrystal</a> explains how he drastically reinvented how his forces operated, but didn’t changed the formal structure. &nbsp;The changes mainly had to do with informal structure, communication and forging a shared purpose.</p> <p>General McChrystal’s Special Forces command was still hierarchical and clustered into small operating groups. &nbsp;What changed is how they were interconnected. &nbsp;Rather than a collection of units, they became a <a href="http://www.digitaltonto.com/2014/the-synchronized-organization/">synchronized organization</a> that acted as one.</p>

So what really needs to change is not how we describe our organizations, but the <a href="http://www.digitaltonto.com/2014/the-new-role-of-leaders/">role of leaders</a> within them. &nbsp;Whereas before, it was the role of managers to direct work, in a connected age we need to instil <a href="http://www.digitaltonto.com/2010/the-passion-economy/">passion and purpose</a> around a <a href="http://www.digitaltonto.com/2014/how-your-mission-drives-your-strategy/">shared mission</a>. &nbsp;The networking, if encouraged and not inhibited, will take care of itself.

<div class="artwork-narrow"><div class="credit"></div> </div> <p>As business buzzwords go, “collaborate” and its derivatives are surely modern favorites. Applying for a job? Emphasize your collaboration skills. Courting customers? Promise a collaborative relationship. Wooing new hires or investors? Talk up your collaborative culture</p>

Any business works better when its employees, teams, divisions, and leaders share ideas and resources to pursue a common goal.

Four new books offer advice

You’ll find the most interesting case studies—of organizations getting collaboration right and of those felled by the lack of it—in <span class="mediatitle">The Silo Effect,</span> by Gillian Tett, an editor at the <span class="mediatitle">Financial Times</span>

Tett shows us how Sony missed the digital music revolution because its competing divisions couldn’t agree on products, platforms, or strategy;

how UBS, the venerable Swiss bank, lost billions through lack of coordination between its New York and London credit derivative desks and its three risk departments (credit, market, and operational), which left everyone clueless about the enterprisewide threat

nd how tribalism among the world’s leading economists blinded them to the causes of the most recent global financial crisis.

Tett explains how Facebook uses a hierarchy-free orientation program, frequent job rotations, and regular “hackathons” to encourage cooperation among project groups

how the Cleveland Clinic reorganized its medical staff into teams that focus on ailments rather than their own skills to improve patient outcomes

how data crunchers infiltrated bureaucratic police departments to reduce crime rates in New York and Chicago.

Many readers will have heard those stories before, but the detail is impressive. And the lessons Tett offers at the end of the book are spot on:

Keep organizational boundaries flexible and fluid

use technology to disrupt them

share data and let different interpretations of it be heard

reimagine corporate taxonomies and experiment with new ones

tie compensation to collaboration

These are high-level, top-down recommendations. But she also has a few tips for any manager eager to fight silos from the bottom up

Think like an anthropologist—with curiosity, healthy cynicism, and an appreciation for how things relate to one another so that you’re able to recognize when systems no longer make sense

In <span class="mediatitle">Friend &amp; Foe,</span> Wharton professors Adam Galinsky and Maurice Schweitzer (see <a href="/2015/09/the-organizational-apology">“The Organizational Apology,”</a> in the September 2015 issue) present reams of cool research showing why, although humans are inherently social animals, we’re also wired to vie with one another when resources are scarce and conditions are dynamic or uncertain.

The most pertinent lesson for would-be collaborators: Build trust by showing warmth and competence, appreciating others’ perspectives, and revealing vulnerability.

In <span class="mediatitle">Collaborative Intelligence,</span> consultants Dawna Markova and Angie McArthur drill down into personal skill building.

They encourage leaders to understand their own and others’ “mind patterns” (six in all, based on one’s preference for visual, auditory, or kinesthetic information processing) and “thinking talents” (35, ranging from “adapting” to “wanting to win”).

The authors then describe how to use inquiry and mindset shifts to ensure that everyone is contributing to a successful shared future.

Appreciate the value in intellectual diversity, and approach every work partnership wondering, “What can we make possible together?”

Longtime management writer and consultant Ken Blanchard also believes that <span class="mediatitle">Collaboration Begins with You.</span>

to shift his and others’ hearts (intent), heads (thought), and hands (action) toward collaboration.

must build on differences;

He comes to see that leaders

talk openly about collaboration

craft a clear purpose,<span class="diigoHighlightCommentLocator"></span> values, and goals

nurture safety and trust;

empower themselves and others to spread it

Companies don’t fail at collaboration because not enough people will cooperate with one another. They fail when people work too closely in certain teams, functions, or departments without any regard for the rest of the organization.

Coaching for collaborative thinking and behavior <em>might</em> help them break through those boundaries.

But policy changes—such as the incentives and restructuring put in place at the Cleveland Clinic or the nudging mechanisms seen in Facebook’s orientations, rotations, and use of its own social network to forge surprising connections—are much more effective.

As Galinsky and Schweitzer note, the more cohesive and successful teams become, the less likely they are to cooperate with other teams, even within their own companies.

So, yes, let’s encourage people to get better at collaboration, even train them in it. But let’s also design organizations that make it energizing and fun, not forced.

The topic’s importance is not about to diminish as digital technology reshapes the notion of the workplace and how work gets done. On the contrary, the leadership role becomes increasingly demanding as more work is conducted remotely, traditional company boundaries become more porous, freelancers more commonplace, and partnerships more necessary. And while technology will solve a number of the resulting operational issues, technological capabilities soon become commoditized.

Team composition is the starting point. The team needs to be kept small—but not too small—and it’s important that the structure of the organization doesn’t dictate the team’s membership

It’s one thing to get the right team composition. But only when people start working together does the character of the team itself begin to be revealed, shaped by team dynamics that enable it to achieve either great things or, more commonly, mediocrity.

he results are remarkably consistent and reveal three key dimensions of great teamwork.

The first is alignment on direction, where there is a shared belief about what the company is striving toward and the role of the team in getting there.

The second is high-quality interaction, characterized by trust, open communication, and a willingness to embrace conflict.

The third is a strong sense of renewal, meaning an environment in which team members are energized because they feel they can take risks, innovate, learn from outside ideas, and achieve something that matters—often against the odds.

Top-team meetings should address only those topics that need the team’s collective, cross-boundary expertise, such as corporate strategy, enterprise-resource allocation, or how to capture synergies across business units. They need to steer clear of anything that can be handled by individual businesses or functions, not only to use the top team’s time well but to foster a sense of purpose too.

Many teams benefit from having an impartial observer in their initial sessions to help identify and improve team dynamics. An observer can, for example, point out when discussion in the working session strays into low-value territory.

<h3 class="sidebar-header"><div class="sidebar-title-wrapper">The ‘bike-shed effect,’ a common pitfall for team effectiveness </div> <a href="javascript://" class="sidebar-skip-link"> <span class="mck-radial-plus-icon"> </span></a> </h3> <div class="sidebar-content-wrapper"> <div class="sidebar-content"> The tendency of teams to give a disproportionate amount of attention to trivial issues and details was made famous by C. Northcote Parkinson in his 1958 book, Parkinson’s Law: Or The Pursuit of Progress. As the story goes, a finance committee has three investment decisions to make. First, it discusses a £10 million investment in a nuclear-power plant. The investment is approved in two-and-a-half minutes. Second, it has to decide what color to paint a bike shed—total cost about £350. A 45-minute discussion cracks the problem. Third, the committee addresses the need for a new staff coffee machine, which will cost about £21. After an hour’s discussion, it decides to postpone the decision. Parkinson called this phenomenon the law of triviality (also known as the bike-shed effect). Everyone is happy to proffer an opinion on something as simple as a bike shed. But when it comes to making a complex decision such as whether or not to invest in a nuclear reactor, the average person is out of his or her depth, has little to contribute, and will presume the experts know what they are doing. </div></div>

While it is important to incorporate the core practices like automated testing, continuous integration, refactoring, simple and evolutionary design and collective ownership, it is also imperative that the organization understand and incorporate the ‘core values’ that these practices are based on - fast feedback, clean code, simplicity and repeatability.

Business owners like you and technology experts like me are witness to the evolution of every organization into a digital organization. This movement is born out of the realization that technology is not just a supporting software function but is at the core of every transforming business.

The technical utopia that can sustain these business ‘ideals’ can only exist within an extremely sound engineering organization or an organization driven by an exceptional engineering mindset.

Martin Fowler, Chief Scientist at ThoughtWorks and renowned author, software consultant and speaker confirms that an organization’s Tech Excellence has never been as crucial as it is today. Creating a technology strategy that allows businesses to not only deal with, but take advantage of the increasingly rapid pace of change separates successful organizations from the obsolete ones.

McKinsey talks about how, “Small, independent teams are the lifeblood of the agile organization.”

These teams have the following qualities:

Directly connected to the business

Action a clear business investment

Trust and collaboration between team members

Low dependencies

The objective here is to craft a working environment that is fluent enough so that we can get from business idea to the production as quickly and seamlessly as possible

<strong>Simplicity</strong> – This fundamental principle can unbundle work loads down to micro units, based on the fact that smaller chunks of work are easier to get into production. It is also a key attribute to observe when scaling solutions.

<strong>Openness</strong> – Consistent collaboration thrives in an open work environment. A survey by a leading co-working operator found the happiest and most productive employees are those who regularly team up with people both outside and within the office. Such an environment ensures that every idea or problem can be augmented through diverse perspectives.

<strong>Resonance</strong> – The increasing degree of uncertainty requires organizations to develop a responsive delivery approach. Components of such an approach include building feedback into the development cycle, breaking down silos towards better collaboration, enabling collective team ownership of the solution and extensive automation.

<strong>Collaborative ecosystems</strong> – Engineering-centric organizations profit from building, nurturing and leveraging strong ecosystems. An ecosystem is built on the back of a common business objective tying everyone’s efforts together towards qualitatively superior inter-organizational communication.

<strong>Iterative models or approaches</strong> – These are a forward-facing investment of time and resources. Building simplified, observable solutions that can be automated means businesses can hit the market midway, can keep learning and deliver value.

many CIOs are unprepared for the unique challenges of the role, and <a href="https://www.cio.com/article/3245772/the-12-biggest-issues-it-faces-today.html">survey data</a> shows that they are often too deeply in the technology trenches to manage other priorities and aspirations

While there are many definitions of digital transformation, the essence of the goal is to cost-effectively leverage current and especially emerging technology onto optimized business processes and even whole business models

While the technical side of operations must run smoothly — communications networks must stay up, software applications must run, and data must be secured — CIOs must adopt new practices, missions, and modi operandi if they’re going to evolve into transformative digital leaders.

To succeed in the coming decade, companies must capitalize on the synergies inherent in human–machine collaboration. That means crafting a new kind of enterprise, one that combines technology and people in ways that bring out the best in each.

The author of this article has found that many organizations fall close to one of five natural “configurations,” each a combination of certain elements of structure and situation.

When managers and organizational designers try to mix and match the elements of different ones, they may emerge with a misfit that, like an ill-cut piece of clothing, won’t wear very well.

The key to organizational design, then, is consistency and coherence.