The cost of our obsolete management thinking
Technology goes fast while organizations and management models go slow. Or, at least, this has been our reality for so many decades with quite an infinite series and always accelerating adoption rates of new technologies (from steam, electricity, radio & television, up to automation, social media and now artificial intelligence) versus never changing, centuries-old ways of conceiving, structuring and coordinating work.
Why should this be important in an era of customer obsession? Sadly enough, it is easy to say:
- Companies are dying faster and faster. Longevity forecasts for corporations are falling across the market (from 61 years in 1958 to 12 years by 2027).
- Investments are no longer coming back. Shareholder returns have been constantly diminishing for the last 40+ years.
- Job safety is vanishing. In last two decades, all the net new job creation has been generated by ICT / Tech startups. All this without mentioning the pressure introduced by automation.
- Organizational bureaucracy is exploding. The number of managers and supervisors have been growing 90% in 20 years. Such hierarchical complexity and overhead cost $3T (17% of the GDP in US) and $5.4T in OECD countries every year.
- All the factors above contribute to stagnant and dramatically low levels of employee engagement (15% worldwide).
- Disengagement directly damages customer engagement
Gallup measured the impact that obsoleted management models are generating and it is impressive. Workforces in the top quartile of engagement achieve 10% more customer loyalty, 20% more sales, 21% higher profitability, 17% stronger productivity, 70% less incidents, 59% less turnover, 41% less absenteeism and 40% less product defects. Not bad, right?
Going to the root cause
What most organizations still don’t get is how deep the root cause of this malaise is in their DNA. The pathogens infecting our business are called beliefs, values and behaviours together with the management, leadership and organizational models that codify and operationalize them.
Our apparently pervasive need to control and micromanage, assign targets used for rewarding or punishing, fit individuals into cells, plan for a 3 years term, disregard the unique creativity and expectations of each individual as a noise, all still descend from the scientific management lessons that Taylor and Ford generously dispensed more than 100 years ago.
Guess what? Such replicable and scalable efficiency that was once the main reason for attracting and coordinating thousands of resources through a firm now plays only a marginal role in organizational success. In a time of exponentially growing turbulence, uncertainty, transparency, interconnectedness and technology-driven business models, efficiency cedes its primacy to agility, ambidexterity, growth, innovation.
What can we do about it? After decades of relatively limited discussion and in any case insignificant adoption of alternative models for breaking the chains of the tayloristic prison, we are finally living a cambrian explosion of modern design principles, proposals, theories and movements that try to unlock the human abilities required to compete in the new world.
A cambrian explosion of better models
The list is growing everyday. Among those necessarily deserving a mention, I would include:
- The Semco model promoting trust, creativity, accountability and self-management.
- Holacracy, for its dynamic, circle and role based, purpose and tension driven, self-managed human operating systems that increases transparency, accountability and agility.
- Sociocracy and Sociocracy3.0, tracing back to 1851 and acting as a source of inspiration for Holacracy through their distributed and consent-based decision making, circles, double linking feedback loops and high level of attention to equivalence, harmony, resilience, effectiveness and empiric experimentation.
- Teleocracy, a management system based on a sense of clear purpose and meaning, self-organizing teams, open book management and innovative compensation schemas.
- Aequacy, a new entry that removes any element of hierarchy (even between roles and circles, not just between individuals) from self-management.
- Responsive org, a movement and manifesto for transparency, agility, openness and empowerment.
- WordBlu with its freedom, purpose, respect, transparency and accountability centered organizational democracy
- Theory U, theory of learning and management developed by Professor Otto Scharmer to nurture specific leadership capacities and to design social systems through awareness, attention and consciousness.
- BetaCodex by Niels Plaeflaging with its 12 laws for defining a 21st century organization guided by market sensing, systemic thinking, decentralized decision making, transparency and self-management.
- Beyond Budgeting, an adaptive management model and philosophy rooted in purpose, shared values, autonomy, transparency, directional and flexible planning.
- Teal organizations focused on self-management, purpose and wholeness as proposed by Fredrik Laloux in its book Reinventing Organizations.
- B Corporations and their purposeful omni-stakeholder vision of business as a force for good and not just for profit, already aggregating thousands of certified organizations in tens of countries.
Last but not least, Stelio Verzera of Cocoon Projects recently published his Adaptive Organization Design Manifesto, as a call for the organizational design community to further invest in this area.
As you may have noticed already, all of the models, movements and approaches in the list run around some basic set of foundational levers. Unfortunately each of them also comes from slightly different perspectives, with largely diverse levels of internal consistency and especially comprehensiveness in terms of the organizational aspects addressed.
From a single obsolete solution (scientific management), we now have million of partial, impossible to compare, very different alternatives. How to compare the multitude of options now available? Even more, how to adapt them or parts of them to each unique business context, culture and goals?
While we all agree that it’s no longer time to look at firms purely through a static, mechanistic, linear and deterministic lens, I feel organizations and organizational designers still lack a holistic and yet modular framework encompassing the many aspects that influence engagement, productivity, agility and ultimately corporate survival.
In the last year or so, I’ve done my best to research, review and extrapolate the salient ideas, lessons learned and approaches shared by the community so far, to synthesize a more comprehensive model of the parallel roads that bring us towards a human organization. You can find it below:
How is this model meant to work?
I will leave the description of the 17 dimensions (from strategy to workplace design) to a follow-up post but let me highlight a few critical considerations about this diagram here. The Human Organization Model explores 3 levels:
- Organization – The common organizational structure that cuts across each unit, office and team
- Team – The dynamics that apply within and to each team
- Individual – The role and support offered to each individual
While some of the dimensions may indeed act at more than one level, this distinction is key to understand which model addresses which level. Some models tend to sacrifice individual demands and development journeys at the benefit of a better coordination and simplicity, while others do the opposite, hoping that a higher level of individual consciousness will automatically bring organizational clarity and alignment.
In contrast with a traditional organizational design exercise, the following is true for the Human Organization Model:
- It’s not mutually exclusive. Dimensions are clearly related. Acting on one of them will bring improvements or harm to other interconnected dimensions
- There is no mandated sequence. Multiple dimensions should be addressed at the same time, probably more than once and not necessarily in a given order. Even purpose and strategy will fully emerge only through a serious of dynamic refinements that cannot be imagined at the very beginning.
- The far right is not always the goal. Complex problems rarely admit solutions. Each dimension thus acts as a polarity. Moving to the extreme right-hand side doesn’t necessarily guarantees better performance for every organization, as the ability to accept and thrive from changes will largely depend on the current culture, maturity and goals.
- There is no recipe. While self-management pioneers are surely paving the way in terms of practices to consider, solutions to learn from and mistakes to avoid, progressing on each dimension requires a non linear, incremental effort of trial and error that no organization can avoid.
- A basis for co-creation. The model is not meant to be used for a small team to design the target organization in a vacuum. First of all because no such end target exists. A vital organizational is in constant flux and exploration. In addition to this, the solution should be informed, chosen and owned by the organization itself, more than by its managers or consultants. This is where the real power comes from. At some point, self-governance (the constant redesign) will be codified in the governance model itself.
- Each dimension is an immediate opportunity to improve. Even if I not aware of any organization fully laying at the extreme right in the diagram, I know hundreds of stories and examples of companies that act as examples of what can be immediately done to move one step further towards a better way to engage your employees and ecosystems. I’ll post more about this when looking at the individual dimensions.
How to use it?
I can imagine more than one way to take advantage of the model. As an example, I’m using it:
- To compare multiple self-management approaches (e.g. Holacracy vs Sociocracy), not really to find the best one but to identify or build the one that best matches your needs
- As a benchmarking tool to assess the maturity reached by a single organization or to compare it against the readiness of an industry / market
- As a checklist to limit or prioritize, with the organization itself, the design on the dimensions that really matter
- As a taxonomy to collect and classify the many success stories and transformation practices that are emerging
- As an aid to reflect on the minimum viable set of levers to considered towards a human organization.
What comes next?
Is this model really comprehensive and minimal (meant as including the minimum number of dimensions required)? It is surely not and not even meant to be. Even doing my best to collect, integrate, consolidate ideas from most of the best experiences on the market I could find, I’m sure some dimensions may be missing, others will keep emerging through daily practice, some others will end-up being merged or removed entirely. That’s all fine. We are all learning together, while we move along the journey.
The model is offered to the community to collect feedback, suggestions, critics or, in any case, to get the conversation started and stimulate reactions that could help to improve it and use it together.
That’s why I hope you’ll find it useful as a working tool and that you’ll consider commenting below or reaching out directly. Please let me know.