Scaling Organisations (1) — Consider Not To
As multiple clients start shopping by and projects start to take shape, organisations get this temptation of increasing their footprint on the market. It is, perhaps, the ecstasy of gold that rushes through the veins of many organizations passing through a very particular phase of their existence: that sweet spot where roping in more people starts looking as the natural next step, a sweet spot that tends to hit organizations most when they reach a headcount of between 100 to 150 people.
Maybe because many organisations passing through this phase are essentially similar to teenagers who give the world a linear interpretation (after all, that is, roughly, what they have experienced up until that point), the complexities of scaling are often missed out. In this series of articles we would like to propose a slightly different point of view when it comes to scaling organisations, and we will start by giving an unusual advice: start approaching scaling by considering not to scale as a first step.
It is not a matter of escaping the reality that at the end of the day organisations are bound to grow (whether financially, in their product range or headcount), the advice is to delay scaling for as long as it remains feasible.
This series was inspired by Geoffrey West’s book Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies in which the author condenses scaling into three main points:
- Scaled organisms have space filling networks
- They have nodes of invariant size
- They are built to be efficient in their use of energy and resources
Scaling organisations requires an understanding of the organisation’s capability to handle the load of scaling. As organisations rope in more and more people the dynamics and foundations are tested, and should the organisation (pretty much like organisms) not have managed to consolidate its networks, nodes and resource efficiency, it will collapse under its own ambitions.
In this article we will address the three points above by using principles and practices from Kanban. Why Kanban? Because Kanban is concerned most with systems and data, and we consider this as the right level of perspective we need for the scope of this article.
Space Filling Networks
Work and workplaces are essentially networks that transfer knowledge and value. When we talk about an organism we talk about networks of veins, of branches. When we talk about cities, we talk about the electricity grid and the interconnected networks of roads. It is because of these networks that the organisms or cities are considered as a single unit. When scaling that unit, the network needs to scale too in order to support and sustain the change. Failing to do so, the extension will be detached and the unit will become frail.
When we talk about organisations we should also talk with networks in mind, yet what are the spaces they ought to fill? In their article about Buurtzorg, which was also an inspiration for this article, Corporate Rebels mentioned the organization’s network spread of cooperative teams across the various geographical locations as an example of space filling networks. The marketplace is one space that an organization as a network aims at filling, and it is an external space vital to its existence that will ultimately justify and sustain its purpose to scale. In the context of this article, the question to ask is “what is the business value that our organisation has not yet untapped, and that we can unlock without the need of increasing our headcount?”
Another space the organisation-as-a-network should aim at filling is the organisation’s existing state of being organised. Essentially: “How organized is the organisation, really?”, the playing with words is intentional.
Behold, for this might inspire for the curse of micro-management for those who rush. Let us, instead, talk Kanban for some lines, change the wording and ask “How does our current flow of delivering value look like?”
Mapping the flow will kick-start the understanding of the processes and types of work that are necessary for the company to deliver its products. In some companies there might be blind-spots, in other companies there might be bureaucratic cycles that tangle the network. The exercise of listing down the steps will make all of these visible, and visibility is an essential first when it comes to understanding.
So many other questions can be asked once the process is visible. Can you spot the waiting phases? Would a scaled version of your organisation survive with your current flows? Order will guarantee better chances of a successful effort for scaling.
Nodes of Invariant Sizes
Organisms have cells and capillaries that cannot be too big or too small for them to serve their purpose. Organisations too have these nodes, and their nodes will also be crucial in understanding the organization’s readiness for scaling.
One node within an organisation to mention is the team. What is the definition of a team within the organisation? Is it tying a number of people working on the same project, client or area? Does the organisation have teams that feel too big or too small? How does the organization recruit team members?
There is a lot one can do to understand the health of an organisation’s teams, but starting from data is always a safe move. Many companies nowadays make use of some work planning or organising software, and this software gathers a lot of very useful data. Taking a sample of teams which have varied in size over the years and looking at their Throughput (the rate at which a team outputs value generating items) and at their Cycle Time (the time it takes for the team to start and finish working on a value item), we can soon start to spot some trends.
Quoting Klaus Leopold, throughput “will increase because more employees can work on more orders”, but cycle-time will also increase and thus the company’s time-to-market. Why does it increase? In essence, it is because when an organisation recruits more people it recruits them to speed up the active phases (points in time where valuable work items are actively worked upon) of its workflow, when in reality workflow is composed of idle phases too (points in time where valuable work is waiting to be worked upon). The idle phases often occupy a bigger chunk than the active phases (Leopold estimates that these may take up to 90% of the entire workflow), and so the direct improvement attributed solely at scaling is minimal at best.
How would your organisation react should more people join its forces? How can you prevent impacting the Cycle Time into becoming so slow that drags the organisation into the abyss of irrelevance to the market?
Efficiency in the use of Energy and Resources
Behold, once again, for there is the verb “use” followed by the word “resources” in the same sentence, again a trigger for the curse of micro-management! Let us instead consider knowledge and the energy to transfer it for delivering value as the real topic we need to address.
When talking about organisms, for example, this topic is fascinating. Geoffrey West mentions that while there seems to be a “fixed number” of heart beats a mammal can have in its lifetime, small mammals (like mice) have very fast heart rates whereas large mammals (like elephants or whales) have really slow heart rates. The efficiency, therefore, is in the ability of the organism’s heart to distribute oxygen and other resources across the (space filling network of) veins and appendices of the organism. The size of the heart, in this case, has adjusted to make this transfer of energy and resources efficient.
Organizations too have their precious, vital resources to spread across its networks. These might be domain knowledge, alignment, decision-making and development of ideas, to mention a few, that will help the propagation of the business only if they reach all nodes and spaces. How does your organization cope with transferring knowledge? How does starting a new project or initiative feel in your organisation? Is it vibrant and responsive or too hectic and heavy? Do your efforts in building up enthusiasm fall on passive hearts?
The workflow (which we spoke about mapping in the first point) gives a clear indication of the flow of energy and its conversion into value for the organisation. The work items currently being worked upon can (should) be mapped onto the flow, and this will start exposing some patterns too, like bottlenecks, “invisible” waiting states and constraints. There may be a pattern of overcommitting inspired by the myth of multitasking. How would your work really flow if you consider setting up Work In Progress (WIP) limits? It is counter-intuitive in the beginning, but what this would imply is that you start shifting your organisation into thinking about finishing work rather than just starting it. When scaling up, more workers will pull more work, and with them bottlenecks and constraints. How can the organization prepare for this?
Conclusion
Scaling is often inevitable, but it can be postponed until the organisation is prepared for it, and this without missing any important opportunities.
In this article we have looked at the laws of scaling in nature and referred to principles and practices in Kanban to draw an understanding about an organisation’s readiness for scaling before it takes crucial steps that will either turn it into a dysfunctional organisation or else shape it into a strong value generating powerhouse.
First we looked at spaces the organisation needs to fill as a growing network, and we identified the market for tapped and untapped opportunities as an external space, and the organisation’s internal workflow as a space that organisations should look at to solidify their current capability of delivering value.
Then we discussed the teams as an example of an organisation’s nodes whose parameters will impact their ability to work effectively. An organisation should aim at having teams that have predictable throughput and cycle-time to be able to have a reliable and effective time-to-market.
Finally we looked at the organisation’s capability of distributing knowledge, ideas and its various (knowledge and creative) resources across its networks in a way that is efficient to its efforts.
We used Kanban to draw connections between the theory of scaling and practical approaches for systems thinking. In the coming articles we will dig deeper on how data can be used to decide the parameters of scaling and also on ways how organisations can grow leaner while maintaining, and increasing, their capability of delivering value.
