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.
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.
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.
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.
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.
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.
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
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.
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”
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.