Friday, May 29, 2015

Foundations of a General Theory of the Organization V (general rules)

In my last post I presented in graphical form my ADVISE model of generic organizations, after a short review of some alternative models that are still widely in use in the field of organizational design. Before moving on I would like to reflect on why I’ve taken things like technology, resources and specially processes (being initially so heavily indoctrinated to think in term of input, output and transformations happening in each organizational substructure) out of the model, as they are obviously important, and it may be judged an impoverishment not to consider them when purportedly describing how organizations work. In defense of my model, I’ll remind my readers that many of the mentioned things are important only for a certain, very particular subset of organizations, namely those devoted to improve de social status of their members through the provision of certain goods or services to anybody willing and able to pay for them (what we termed productive/ commercial, or previous to that, “economic” organizations), and within them they are considered mainly to assess the viability and response to an exogenous change (as opposed to provide the “thick description” I mentioned previously), whilst I’m pursuing a “general” theory of any kind of organization. We normally do not care much about technology, style, resources or processes within the Catholic Church (an example we may have abused a bit by now), within a marriage or within a lama monastery, or even within an old fashioned university (meaning a medieval one, modern day universities, if they want to get a ISO 9001 certification, need to document their processes, measure their “performance” and be able to “continuously improve” them, silly as it does indeed sound).

If we talk specifically about processes, this may go a bit against the grain of some management trends, that see them as the ultimate source of competitive advantage for certain organizations (again, economic ones), as products can be duplicated, customers can be lulled away, technologies can (and frequently are) copied and transplanted without much ado, but the glue that links it all, the processes and the internal mechanisms that connect everything together are famously difficult to transplant from one organization to the next. Although we get in murkier and murkier terrain here, as processes are inextricably intertwined with the culture, the informal organization, the people’s skills and general outlook (motivation, beliefs, personality), etc. so any of those factors can be considered at the end of the day the “secret sauce” that lies in the origin of an company’s success as much as the processes themselves, when in reality every one of them is just the residue that is left unexplained by the analytical tools employed to analyze such success. Suffice it to say for now that I’ve grown more and more skeptical of the importance of processes (as they are typically understood, embodied in detailed flow charts where every step and activity is described, along with who performs it, when, how, why and with what tools, what they produce and how they are measured) as they are highly dependent on a host of other (typically unacknowledged) features that seldom get much attention but in the end determine to what extent they are followed at all. Indeed the management trends I mentioned as being heavily oriented towards process improvement (the Michael Hammer school) has been a tad out of fashion lately, as analyzing and documenting good ‘ol traditional processes fits poorly with the current focus in disruptive innovation, blue ocean design and reinventing traditional structures. Of course people of a process persuasion can retort that you can equally well model and monitor a process of “innovate and disrupt” (what previously was more modestly called “define and deploy new products”, or even before that “portfolio management”, which doesn’t sound nearly as glamorous), but following a process defined and documented by someone else doesn’t sound as the best recipe for having groundbreaking ideas or paradigm shifting insights.

At the end of the day models are models, and they are only as good as the validity of the predictions they allow us to make. But before starting to make predictions we need to understand the principles (the “rules”, or for those with a scientific bend, the “laws”) underlying the evolution of the model, something which all the models examined sorely lack (beyond “changes in a box –or in an oval- somehow influence the rest of the boxes –or ovals”). Not to fall in the same trap, I’ll present then the fundamental rules of organizational change (or rather, of organizational evolution) that go along with the ADVISE model:

·         R1: With time, the ability of any organization to achieve its ends gets worse. This is the organizational equivalent of the second law of thermodynamics, entropy in this case being the opposite of that ability (so as “organizational entropy” increases, the ability to achieve the pursued end decreases). There is a number of reasons why this is so: normally the pursued end is also pursued employing different means by competing organizations (“competing” because there is only so much of the end to go around, so the extent to which it is achieved by organization A necessarily detracts from how much of it organization B can in turn achieve). As machines, organizations also experiment the wear and tear associated with continuous functioning, and an increasing amount of their internal “energy” (resources) is lost in the equivalent of friction (either degraded energy that can not be applied to produce work, or waste –resources that do not contribute to the attainment of the goal, what in lean methodologies is designed with the Japanese word “muda”).
So with time educational organizations become worse at discovering (this-worldly) truths, and may end up just repeating the received wisdom without being able to add nothing new to the existing canon; religious organizations become worse at communicating (other-worldly) truths, and either stop expanding and become less and less relevant to the remaining faithful or become a bureaucratic enterprise centered around improving the material well being of their members with the thinnest veneer of transcendental aims to mask their true interests; political organizations become worse at reproducing, and grow at an ever slower pace until they finally implode (more or less violently depending on the force and status of their neighboring groups); economic organizations, lastly, become less successful at enhancing the social status of their employees (their salaries stagnate compared with those of the competition, their products loose market share, their profit dwindles, they have to cut back production and lay off people… you get the idea). Distinct as the experience of increased friction/ waste may be in the different types of organization, the degradation of their abilities to achieve their ends almost always have the following impact in some of their features:
R1.1 Their Dominance increases, as the universal response to the failure to get the desired outcomes (or to get them to a lesser extent, or a lesser portion of them) is to make members of the group try harder, devoting a higher percentage of their waking lives to the enterprise
R1.2 Their Isocracy diminishes, as power tends to be concentrated in those most able to exert it (and those differences become more marked in an environment of greater dominance, where the activity within the organization becomes more important relative to that outside it)
R1.3 Their Simplicity decreases, as the organization becomes more complex in an attempt to better achieve its end through grater job specialization, and thus through the creation of more differentiated roles
R2.4 Their Egalitarianism decreases, as there are less rewards to distribute (a direct consequence of the diminished ability to reach their stated goal) and there is Isocratic deciding structure, most times the elite where the decision power is concentrating will act taking a greater share of the remaining bounty
·         R2: There are only three responses to the diminishing ability to reach an organization’s ends: acceptance, growth or innovation. The first two are quite uninteresting (we will have a bit more to say about growth later on, right now we will just point out that as a strategy to improve goal attainment it fails at least nine times out of ten), so we will explain a bit more of the third. I define innovation as the systematic accumulation of changes that improve the organization’s ability to reach its goals. There are a number of features within that definition that merit a closer look: 1) it is a systematic accumulation, not a haphazard occurrence that happens, to everybody’s surprise, to translate in some improve. Being systematic means being preceded by some analysis of what the consequences are going to be for each of the dimensions of the organization, and of its impact in the elements of it (its people and the roles they play, the relationships between them, the resources it uses and its viability within the existing environment). And do not forget it is an accumulation of changes, not the result of a simple, time bounded effort that can afterwards be discontinued and forgotten (we’ll see why in a moment). 2) when we speak of change, of course, we mean doing things differently, not just talking about it or writing about it in a blackboard. Some of the elements within the model have to be modified… and not return to their previous configuration. 3) the change has to have a measurable, meaningful impact in the ability of the organization. Change for the sake of change does not qualify. Neither does, of course, destructive change that actually impairs the organization’s efforts towards its goals. With that we have probably eliminated 90% of the organizational “changes” that have afflicted modern corporations for the past three decades, regardless of how well they were sold back in the day to the respective boards.
Now regarding the intensity, timing and need for accumulation of changes I will recur to a concept developed originally in the first half of the XXth Century by an Austrian endocrinologist (Hans Selye) named General Adaptation Syndrome, and which has recently known a surge in popularity thanks to its adaptation to the powerlifting world through the work of Mark Rippetoe (whom with readers of this blog should be pretty familiar by now). Selye posits that organisms try to stay in a stationary state (homeostasis) unless disturbed by an external stressor (be it the demands of a taxing training session or the launch of a product by a competitor). In response to that stressor, the organism response is to exert itself, and initially that exertion causes a decrease in its ability to respond again to a similar stressor. However, if left enough time to recover, it not only recovers its ability to respond to the previous level, but increases it a bit for a period of time afterwards (the phenomenon known as “supercompensation” in the training literature):
Of course, if we want to actively combat a consistently decreasing trend, we have to keep on applying judiciously timed stressors in order to reach a slightly higher capability level in each supercompensation cycle.

We will deal in more detail with the implications of Selye’s model later on, right now we have to consider that the sustained application of innovation has a number of desirable effects in some of the dimensions we use to characterize the organization:
R2.1: Their Adaptability increases (indeed, it could be said that it is the other way around, being adaptable in the first place is what enables organizations to apply sustained, beneficial innovations to combat the pull of increasing entropy)
R2.2: Their Voluntariness increases, as people naturally feel attracted to positive changes (it could be argued that if changes were shown to be detrimental, and to hinder rather than foster the attainment of ends, they would reduce voluntariness, as people is naturally reluctant to accept change if it is not accompanied by a clear, tangible reward)
We should note at this point that the first rule affects dimension D(ominance), I(socracy), S(implicity) and E(galitarianism), and is indeterminate regarding how it impacts A(daptability) and V(oluntariness) which may go either way really, while the second rule does the opposite, modifying A and V in a definite direction, whilst leaving the potential change in D, I, S and E undecided.
·         R3: There is a direct correlation between the amount of time an organization has been declining in its capability to reach its ends and the amount and intensity of conflicts within it. We define conflict as any divergence between the end of any member of an organization and the end of the organization itself. As individuals have to renounce to some goods to join any organized group and obey their rules (that renunciation takes the form of time devoted to the organization, lack of liberty so rules are followed and other member’s rights are respected, material resources whose enjoyment is foregone as they are rendered to the group, like member’s dues or the like, etc.)  there is always a certain tension, a certain expectation of a modicum of reciprocity, so the individual enjoys in exchange of that renunciation something (the furtherance of the organization’s ends) that is for him at least equally valuable. Now as the organization becomes less capable of ensuring those ends are met, and has less to give back to its members in terms of rewards, the original covenant between them may be threatened and their commitment may be weakened. Thus each member may disagree with the rest about:
o   The current level of Adaptability (how much change there is)

o   The current level of Dominance (how much work is being demanded from him)

o   The current level of Isocracy (how decision power is distributed –normally claiming more for himself)

o   The current level of Simplicity (how complex work has become)

o   The current level of Egalitarianism (how the decreasing rewards are distributed)

There you are, then. With the elements we identified as belonging to the model in the previous post, plus those simple three rules I maintain we have the conceptual tools required to explain, and to a sufficient extent predict, the likely evolution of every type of organization (I admit that is quite a tall order). We will apply them to a couple of example in the next posts within this series to see how well the framework holds up against the dirty and complex real world, and we will see if there is some tweak needed. 

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