THINKING ABOUT ORGANISATIONS.

We once knew a very senior manager who had some very simple beliefs - prime amongst which were the conviction that his organisation consisted of him as boss, and an orderly structure of hierarchy below him. He would issue orders and his subordinates would obey. That was essentially it.
Change was handled by restructuring responsibilities and issuing a new organisation chart. Malfunctions (and there were many) were due to the imperfections of individuals and could be dealt with by pay incentives, punishment, or getting rid of those who aroused his particular ire.

This may be an exaggerated case, but many of us probably would benefit from enriching our understanding of organisations, how they function and how their performance can be optimised - because it is probably the most difficult dimension of any senior manager's job.

Why Bother?

Because it is your organisation that serves your customers and clients, and there is good evidence to show that employees will treat them in the same way as they are treated by the organisation they work for.

Because your organisation and the people in it are the only dynamic elements in your enterprise.
Everything else - money, property, equipment, brands, reputation, knowledge and 'intellectual capital' - will all rapidly lose their value to the enterprise if your organisation does not stay energetic and adaptable.

Because the major difference between success and failure of enterprises is the effectiveness of their organisations.

What is an Organisation, if not just a Structure of Jobs and Hierarchy?

Organisations carry within them a large number of inter-related elements, which need to function in harmony and alignment if they are to perform and be fit to fulfil their purposes:

• The backbone is a structure of roles, arranged in a hierarchy of formal authority. Most organisations organise roles in functional clusters, defined by specialist knowledge or purpose, like finance, marketing, sales, human resources, operations and so on. Conventionally, organisations also have a defined hierarchy of formal power and authority.
  We cannot think of any effective organisation that has no hierarchy.
• The formal structure is supported by a range of mechanisms that are designed to foster co-ordination of effort and action between the functions - examples will be boards, top and management teams, project teams and so on. Without these, the parts would not work together.
• But in addition, all organisations will have devised informal ways of ensuring communication and collaboration to get the job done. Sensible managers will encourage and use the informal mechanisms to get their messages across and to sense how well the organisation is working. Any senior manager who is cut off from their organisation's informal communication networks will be out of touch with what is really going on, and limited in real influence.
• Even more invisible to outsiders will be the beliefs, values and behavioural norms that define what is OK, what is valued and what is not - and therefore what will be done or not. These norms and values will have taken time to evolve and are created by historical events and the impact of past and present people of influence.
  Leaders, especially those new to an organisation, should be very concerned to pick up these norms and values, because they will affect what will be accepted and what may be resisted. Change-minded leaders with good sense will try hard to find strategies that build on or modify the existing norms and values, rather than seeking to destroy them. Only if the existing culture is threatening the very existence of the enterprise is it sensible to set out to destroy it.
• Organisations contain within their various functions the knowledge, special skills and 'memory' that go to make up the distinctive competence of the enterprise. These may be formally recorded and codified, but will importantly also reside in peoples' experience. Any senior manager will be very careful to identify with whom and where special skills lie, and concerned to keep such knowledge fresh and updated. The more complex and specialised the work of the enterprise, the more important will be such skills.
• Obviously, organisations consist of people - only the grossest bureaucracies are thought to consist of roles that may exist whether they are occupied by people or not!
  People can be thought of as individuals, especially as some individuals may be very powerful in terms of formal and informal influence. Sensible leaders will make it their business to know who the informal opinion-formers are.
  People will also work in specialised functions, departments or divisions; for example, Production, Marketing, Accounts, Sales or Client Services. Some functions may gather together like-minded people and develop strong cultures of their own - which may or may not align with the values and needs of the wider organisation.
  Some groupings may coalesce under strong leaders and become in effect a 'tribe'. Tribal conflict is not unusual in larger organisations! (In smaller ones, conflicts tend to be more personal).
• Most organisations need defined ways of planning, setting priorities and measuring performance and progress. These systems and processes, together with those for giving people feedback on their performance and distributing rewards, form an essential glue that can hold the organisation together.
• Last, most organisations are defined to a greater or lesser degree by their physical settings. The physical design and layout of working environments will strongly affect performance and send very strong signals about the organisation's values.

The value of having a rich way of thinking about your organisation?

First, it should help to diagnose where there are problems - and what needs to be changed or improved. Diagnosis can often start with rather general concerns. For example, the leader of one organisation became frustrated that apparently agreed projects never seemed to get completed. Thus, the work of the enterprise was becoming stuck in a rut.

The roots of the problem were eventually found to be organisational - a strong founder found it difficult to delegate, there was no structure of delegated authority, subordinates were used to being told what to do and hesitant about taking responsibility, there was no structured way of reviewing projects, and there was a strong tendency to only deal with today's issues.

Improving performance required attention to several factors in concert. The founder had to be persuaded to release his grip a little, his subordinates needed to be clearer about their authorities, disciplines for deciding priorities and reviewing progress needed to be introduced, new habits of working together needed to be fostered, new skills learned and people needed to feel that they would be rewarded for taking responsibility, rather than blamed for failure.

In organisation terms, changes were needed in the formal structure of authority, cultural change was necessary, better systems for planning and monitoring needed to be introduced, people needed to learn new organisational skills and the reward system needed to be clarified.

The intended 'output' was enhanced innovation and improvement in services to clients.

'Vital Signs' of Organisational Effectiveness or Malfunction.

An Indian business school guru once compared the 'atmospheric' differences between good and bad organisations as being those of meadows in spring and the slums of Calcutta in high summer. The spring meadows lightened the step and induced energy and optimism, whilst the Calcutta slums in summer were oppressive, stifling and rancorous, inducing lassitude and a sense of hopelessness!

More specifically, here are some common symptoms that may indicate all is not well:

• Discord and disagreement at the top, leading to a lack of clarity about strategies and priorities. The worst kind of discord is often just below the surface, leading to covert conflict and subversive politics. Never believe that such discord is invisible to the wider organisation.
• Disconnects between those at the top and the rest of the organisation, leading to an inability to 'operationalise' strategies. This can happen in relatively small organisations, but is more common in larger ones, where leaders can become divorced from on-the-ground realities.
• Individuals or groups following their own agendas, regardless of the good of the wider whole.
• The same kinds of problems recurring time and time again.
• Failure to adapt to changes in the external world - becoming resistant to or unaware of the need to learn and adapt.
• Disconnect between the stated goals and values of the leadership and the reality experienced by staff, leading to cynicism and withdrawl.
• Lack of integration between the various functions in the organisation.
• Priorities and projects not being achieved, leading to low performance and possible failure.
• High and recurrent turnover of staff.

And some signs of well-being:

• High levels of constructive initiative-taking.
• Effective collaboration to get things done.
• Problems are foreseen and action taken before they become serious.
• The organisation looks outward to serve its clients/ customers, not inwards at its own navel.
• Evident mutual respect between leaders and staff.
• Leaders are felt to be an integral part of one organisation
• Priorities get dealt with - what is intended happens.
• Employees are proud of and committed to the enterprises central purpose and values.
• Good people attract others like them.
• Life just becomes simpler all round - even difficult things get done without excessive fuss!

It's always useful to have a mental check-list of how well your organisation works - try these and see what you think.

Hints for Leaders - Organisational 'Do's', and some 'Don't's'.

• Only have a small number of change initiatives going at any time - see them through before introducing others.
• Be very clear about your values and act stringently in line with them - do not express one set of values and act in line with others - people will notice immediately and distrust you. (Although they may not say so).
• Be visible and available inside your organisation - staff will be most responsive if they feel that they know you.
• Do not become trapped by the formal hierarchy - get out and about, make sure that as many people as possible know you what your priorities are.
• Use every opportunity to listen to staff, especially those on the front line.
• Admit mistakes, show that you are committed to learning and improving - encourage this in others.
• Get the balance right between reward and sanctions. Be tough on low performance and reward those who try and succeed. Use failures as a learning opportunity - but do not tolerate recurrent failure!
• Root out those who play politics and damaging 'games'.
• Don't forget to support the organisation's social side - use celebrations and 'wakes' to strengthen the bonds between people at all levels.
• Be rigorously consistent - remember that people will believe that everything you do is intentional!

Fit For Purpose, Appropriate for Context?

One of the factors that makes the design of organisations so interesting and complex is the fact that there is no one form of organisation that suits all contexts and businesses. Being stuck with the wrong kind of organisation is one of the quickest ways of killing an enterprise, so being able to create an organisation that is fit for purpose is a vital management skill.

Here are some ways of considering what form of organisation might be most appropriate for your business:

1. How Centralised or Decentralised?

   The factors that will cause power and authority to make decisions to be centralised or decentralised are:

   • Diversity or uniformity of customers, competitors and markets.

     For example, an industry with a few large competitors, large and technically complex plants and a relatively uniform product will lend itself to the centralisation of many factors, such as technical development, plant design and investment and location, marketing and competitive strategy. The international cement industry is a good example of an industry where power can be appropriately concentrated in the hands of relatively few highly knowledgeable people.
     
     On the other hand, many customers and competitors with different local needs will cause a need for the decentralisation of key decisions such as pricing and competitive tactics to local managers. The sand and gravel supply industry is like this.

   • The hostility of the environment.

     If any significant element of the external environment constitutes a serious threat, it will cause a need to centralise power.
   Thus, companies that are facing a performance or competitive crisis will sensibly concentrate power to decide and act in the hands of a few (hopefully competent) people.
   
   Two other factors that cause the often inappropriate centralisation of power and decision taking are:
   • External control - the existence of an overwhelming external power source. It can be argued that the supremacy of investors over other influencers such as customers, competitors and staff causes inappropriate power to be located with central (financial) management, whereas it may be more appropriate to decentralise power towards the 'front line' functions that design, make and sell the product. It is usually here that real value is created.
   • Autocratic power. Those at the top of organisations often take and use power inappropriately. Never forget Lord Acton's dictum that power corrupts!
   Excessive power in the hands of a few people who got out of touch with customers, competitors and staff is the probable root cause of the problems experienced by Marks and Spencer.

2. Machine-like or Organic?

   Machine-like organisations.

   The notion of a machine-like organisation has become decidedly unfashionable these days. This is wrong. Some kinds of business need the reliable replication of the same processes, and leaving matters to local initiative or personal whim would be quite inappropriate.
   Many service businesses, chain retailing and hotels and motor manufacturing all require the reliable replication of the same processes time and time again.

   The ultimate machine organisation was Henry Ford's Model T plant. Ford standardised everything, from the colour and design of the car - black - to breaking the assembly process into a myriad of sub- processes, each of which was made into a routine operation performed to rigorously controlled and measured standards.

   So, the essence of a machine-like organisation is control of the process of delivery, whether that be of a widget or a service.

   Ford controlled his production by standardisation. Generally speaking, life is no longer so simple. Consumer choice has increased, so complete standardisation is no longer possible.
   These days, control is exercised more subtly, usually by rigorous control of the training and indoctrination of staff. The so-called 'Hamburger U' of McDonalds is a good example of such control - and incidentally ludicrously different to the 'society of scholars' that is a university. In addition to training, many replicated service operations like call centres have standardised information systems to support front-line staff.

   A typical modern machine-like organisation is likely to have a creative 'brain' that controls and develops the product and service offering, and a large delivery mechanism, usually with large numbers of relatively less skilled people.

   'Organic' Organisations.

   The idea of an organisation as a natural organism is usually associated with ideas of responsiveness, adaptation and dispersed intelligence. The essential ingredient of most organic organisations is educated people, not standardised systems, processes and information systems.

   Organic forms of organisation are appropriate when the environment is subject to rapid and unpredictable change, or the knowledge that the organisation has to manage is very complex or uncertain.

   A good example of organisations that have to create both machine-like and organic forms are armies. Large-scale, set-piece conflicts require meticulous planning and logistics, together with the co-ordination and control of large numbers of soldiers and materiel.
   Peace-keeping and guerrilla warfare requires quite different skills and a totally different form of organisation, operating through smaller, responsive and flexible units. The British army has manifestly adapted to this latter form of warfare better than some of its allies.

   Where the environment is both complex and uncertain, highly decentralised highly flexible organisations are the best adapted to cope. Some research laboratories are like this.
   In organisations such as this, intelligence and knowledge are not concentrated at the top in a small elite, but dispersed through the organisation's working population.

Change.

All organisations have to change over time - and the pace and predictability of changes in the environment has become dramatically greater over recent years. It is now almost axiomatic that organisations that fail to learn and adapt will perish. So, the skills of leading change have become central to most managers' armouries.

(See 'Being a Change Leader' in this section of the website for a more comprehensive explanation of different change strategies).

Included here is a short checklist to start the thought processes.

When planning change, be clear about:

• What is fundamentally driving the needs for change - is it predominantly external pressures or internal problems?
• What it will be like when the change effort has succeeded?
• The consequences of failing to change - and the benefits and rewards of a successful change effort, so that both of these can be clearly explained.
• How extensive the changes will be - and conservatively how long a change process is likely to take.
• Who will be adversely and beneficially affected by the changes - how to present the case attractively to those who will benefit, and mitigate the negative effects for those who may be 'losers'.
• Who will support and who will oppose change (individuals and groups). How to strengthen support and weaken resistance.
• Where your power base and legitimacy for leading change comes from - and how strong it will be if things get difficult. How to strengthen your power base if necessary.
• What you will do about recidivists and those who try to undermine change efforts.
• What 'leverage' you will use to bring about change. 'Levers' are any means available to you to cause change to happen through the organisation.
  Examples of levers are changing the organisation structure, changing important individuals, outsourcing, changing what people are rewarded for, introducing new systems, coaching key people in new skills or behaviours, setting up better communication systems.

Key Points

• Create and communicate a compelling vision -
  • Why change is necessary
  • What it will be like when we are succeeding
  • Benefits of success, awful consequences of failure
  • How we are going to manage the change
  • Who will be involved and affected
• Over-communicate
• Be single-minded and ruthless
• Don't do it in fits and starts
• Don't start until you have cleared the ground and are ready to go and continue
• Pick the right leadership for the particular change context
• Don't stop too early - it take 5 - 10 years to really achieve fundamental change in a large organisation
• Major change will not be possible without breaking some eggs (convert or remove the blockers)
• Choose your disciples and get them into key positions at all levels
• Integrate and phase all initiatives, don't do it piecemeal.
• Have an overall plan:
  • Cover all the facets in the plan
  • Involve all functions
  • Drive it through the line - don't leave the responsibility with a staff function.