I enjoyed meeting up with friends and colleagues at this week’s E20 Summit in Paris.
The slides from my own short talk as part of a panel on leadership and organisational structure are embedded below, but here is a brief summary of the points I was trying to make.
What needs to come first: the adoption of social technology in the workplace or the creation of a more conducive organisational structure and culture?
In our experience, the best place to start with social technology projects is usually in an area of the business with clear, measurable use cases, probably involving improvements to existing processes, that can demonstrate success and build confidence. But in moving beyond local pilots to wider initiatives, we have seen how social technology projects often hit the wall of organisational structural limitations. When opening up access to a social platform on a firm-wide basis, it is great that employees can interact with their CEO’s messages or join online communities, but not so great if they are prevented from organising their own work in smarter and better ways.
Some consultants argue that the only role of social technology is to provide incremental improvements to existing processes – i.e. they take existing structures as fixed, unchangeable – and that we must not use the word ’social’ because executives think it connotes lunch (or worse: Lenin). That route may lead to minor enhancements in ERP systems and the other control mechanisms of old-fashioned corporates, but it will not realise the business improvements we believe are possible (and necessary) for 21st Century firms. Similarly, the software vendors need buyers, and those buyers are still in IT, so they also tend to downplay the case for change in order to sell more licenses and help shore up existing structures.
We take a different view. Social technology is a necessary prerequisite for the reform of overly bureaucratic enterprises, and can enable important new ways of working, but without attention to the underlying organisational structure, it is unlikely to fulfil its potential. This may be hard to sell to some middle managers who exist within such structures, but it has the virtue of being true.
The org chart and its division of firms into competing vertical structures with minimal lateral connections, remains a major obstacle to making large firms more responsive, lean and able to compete in increasingly fast-moving markets. It also looks like an increasingly poor way to orchestrate people and tasks given the changing culture of work, with more and more people wanting to take pride in their work and focus on getting it done rather than get caught up in the semblance of work that surrounds so much process-driven activity today.
It is instructive, I think, that no sensible startup today would replicate the main org design features of an established firm. Startups tend have a clear focus on tasks, rather than roles or positions in a hierarchy, and they are all about the next job that needs to get done. Anything that gets in the way of the value creation process is regarded as waste, and their agile structure means they can iterate, learn from users and market feedback, and keep tweaking and changing until they get it right. In the new world of work, productivity has gone quantum – there is no longer a direct correlation between ‘units of labour’ thrown at a task and the value created as a result. Most of the highest value firms today produce their revenues with dedicated, small teams. Ironically enough, this seems to be true even for factories, where automation means we value expertise over brute force.
There are certain features of new firms that many larger firms are looking at and trying to learn from:
- the use of small, multi-disciplinary teams in a fractal or nested structure with a strong task focus
- an emphasis on autonomy & responsibility among workers, and the idea that passion and purpose are more powerful than repeatable process alone
- an emphasis on agility & capacity to respond to change rather than premature optimisation of existing operations (see “The Innovator’s Dilemma” and the fall of Nokia)
- networked operations, a customer-centric bias and feeling comfortable working within market ecosystems
There is an obvious benefit here, which is a reduction in the transaction costs of doing business, primarily by reducing the need for bureaucratic management, but the real benefits are about creating an organisational capacity for responsiveness and action as opposed to just optimising what was done in the past.
There is nothing wrong with hierarchy in principle. It connects top and bottom of an organisation with relative efficiency and can prove invaluable when firms need to batten down the hatches and become very directed, perhaps in response to external threats. But it is only one dimension of organisational structure, and as a way of organising day-to-day working, it leaves a lot to be desired. There are also more and more examples of firms that have been successful by organising in a more decentralised way, such as Haier, Kyocera, Morning Star, Valve, WL Gore and others.
One of the most important roles of a social business / E2.0 platform is to make it easier for companies to develop the lateral connections that can overcome many of the limitations of a hierarchical system. Communities of practice that provide a home base for employees with different skills and roles is one key layer of lateral connections. Networks, which tend to be more about weak ties and lightweight sharing, are another.
But in terms of how and where work actually gets done, there is very little to beat the small, agile team of committed people with a clear shared goal. I doubt even the most timid consultant or vendor could make an argument that hierarchical operations are the most efficient way to get work done. For companies trying to become more competitive in the 21st Century, we foresee a rebalancing of structure with a reduction in hierarchy towards what we might label a minimum viable hierarchy, with pods or agile teams growing from the branches, and more focus on developing the lateral social fabric of communities and networks.
There is increasing interest in how you turn these basic building blocks into a new management and governance system, from Dave Gray’s Connected Company ideas to John Kotter’s Dual Operating System. But the most popular system of this kind right now seems to be Holacracy, which combines elements of Agile methods with prior art on Sociocracy (linked circles of governance) to create a blueprint for managing firms with far less (or zero) professional managers. There is a lot of attention on how Medium and Zappos are implementing this method in the United States, and at the E2.0 Summit, Bernard Marie Chiquet (the most highly certified European Holacracy coach) explained how the system works and where he has been piloting its use within European firms. Whether or not any one system can suit the diverse needs of large organisations, there is a lot to learn from the experience of those that are implementing Holacracy – a complex and demanding constitutional system – in their organisations.
But how do you scale a system based on small teams of 8-12 people? In the Holacracy model, lower level circles or teams have a member who acts as the link to higher, more strategic circles above, and this continues upwards until you reach the management circle. Some suggest this is just a hierarchy of circles rather than a different approach to scale. A more interesting idea, I think, is the idea of fractal structures that replicate the same pattern at every level, as described by Dave Gray. A team of 12 is a very stable unit, but so is a super-pod of 12 x 12 person teams, and this exists at what we think of as an ideal size for a business unit (roughly 144, i.e. close to the so-called Dunbar’s number). One scale higher (12 x 12 x 12) and it is possible to see how a mini-division might look, and one more level up brings us to the size of a substantial company. The beauty of fractal structures, of course, is that they are stable all the way up and down, and are more resilient in the face of changing circumstances or even the loss of part of the higher-up structure.
What does this mean for leadership?
When we look at the attributes of a 21st Century company, several key requirements of leadership stand out.
- Leadership in a network-centric world requires an ability to listen and analyse, and based on this, to shape the context in which people operate. This is described pretty well in Harold Jarche’s article on Connected Leadership.
- This requires an ability to influence behaviour in complex systems that are always changing. In this respect, I find Niels Pflaeging’s paper on the BetaCodex network quite useful.
- The ability to champion the customer or market voice and bring people together around an outside-in perspective of the firm is very useful.
- One of the most important contributions a leader can make to their organisation is to nurture the social fabric that allows people to connect, share and work together, which is partly a technology issue but largely a cultural one.
- There is a real need to create protected spaces within organisations that allow new ways of working and innovation to flourish in its early stages when it might otherwise be killed off by the wider organisation. This is one of the key lessons of the wonderful UK Government Digital Service, which has transformed the way the government here delivers online services and saved a fortune that would otherwise have been wasted.
- Finally, however, it is important to emphasise that a network-centric world provides more opportunities for some very traditional leadership strengths to shine, such as the ability to influence people and be the keeper of stories that define a company’s mission, and also the ability to be present throughout the organisation rather than sit upstairs talking to a handful of senior managers – a kind of online version of ‘walking the floor’ as we used to say about some successful factory bosses in the past.
When we think about the qualities we look for in our leaders, we cannot divorce this question from the issue of organisational structure and culture – in other words, what sort of system is it that we need leaders for? I find this a fascinating question and one that we hope to explore further over time, but it was nice to have a chance to discuss this at the E2.0 event, and also encouraging that there was such an appetite to delve into the issue rather than just talk about software, processes and case studies.