The Problem With Organization Design: Part 4
The Need for Deliberately Developmental Organizations
Neither Contingency nor Institutional approaches will help organizations to truly deal with the complex-work-dynamics alive in the economy today. Neither approach can analyze or adequately dissect the complexity of work tasks at the various management tiers of the organization. Furthermore, neither approach understands those complexity bands as a factor of capability, labor, or motivation. Without an appropriate understanding of organization complexity and how that plays out through the management structure via human labor, it is impossible to design and implement an organization structure that can withstand the 21st century economy. That is what we will elucidate next.
An Example of Coping with Complexity
The most public example of a large restructuring effort establishing the next institutional wave in organization design is the monolith formerly known as Google, now organized as Alphabet Inc. Historically, this move would have been classified as a contingency approach — a new internal organization design enacted to ‘best enable’ internal prediction and response.
However, because of the legitimacy it has garnered through key external stakeholders and Wall Street, Alphabet’s move not only establishes its own new organization structure, but also a structure that likely will be adopted by others à la a meta-Institutional adoption of Alphabet’s ‘best practices’. Alphabet as a case study will likely lead organization design recommendations into the future, both because of its newly found ability to be responsive to changing market conditions due to its conglomeration of businesses, and also because there is a now a precedent for Alphabet’s structure and way of doing business since its blessing by Wall Street. (Not to mention how this new structure unlocks massive exponential potential for certain sub-organizations within Alphabet, but that is for another series.) If everyone indeed needs to become a technology company, to innovate or pivot like a startup, and at the very least, think digitally (as is the current trend), there is now, no better leader to look to than Alphabet. That is to say, on the surface it would seem that Alphabet’s birth signals a new frontier in organization design.
Yet, upon closer inspection, Alphabet has merely established a contingency organization structure, that right now is likely to be adopted as the new Institutional approach. Our prediction is that because of Alphabet’s likely success more organizations will restructure in light of the market advantages Alphabet will prove with their new organization structure. What this instantiates for organization design is evidence for recommendations that take an institutional theory approach to their design recommendations. You can imagine consultants in the future saying, “come back to the fundamentals, restructure around your products — distribute power and autonomy to CEO’s of each product, and turn each vertical into loose sense-and-respond operating systems to quickly handle changing market conditions. Turn your board into a steering committee who reinvests profits back into your network of sub-organizations. Give investors transparency to real time data, let them see how management is making decisions.”
With the changes we can identify in the economy today we believe this only serves as a limited solution to the nature of the challenges organizations presently face. As Mr. Conway’s law stated, organizations which design systems … are constrained to produce designs which are copies of the communication structures of these organizations. These new structures however exciting, do not actually help the field of organization design transcend its extant polarity of Contingency vs Institutional approaches, rather they just continue the polarity. Therefore, Alphabet may provide the field of organization design with an inspiring institution and one that may keep organizations competitive and responsive in modern conditions, but the fundamental question is if it’s requisite to meet the demands we will face into the future?
While there is huge value in working, organizing, and ‘teaming’ responsively, merely swapping out the current structure and behaviors of an organization for a new set of structures and behaviors based upon ‘best practices’ and ‘efficiency’ will only ever result in a half measure solution. Rather than continuing the polarity of Contingency/Institutional approaches, we invite you to think about how to transcend this binary.
Let’s find a way to resolve the polarity without negating it. Our recommendation is that we do that through a third approach. An approach that doesn’t paint over or ignore the current two, but rather, one that provides a new way of coming to ‘see’ and better understand how these approaches operate in the minds of the people who make up and do the work of an organization.
We are beginning to talk about this (along with our colleagues) as Deliberately Developmental Organization. In the next part of this series, Part 5, we dive into the imperative we face and why human development is at the core of how to organize and work in the 21st Century.
Read the whole series: Part 1: The Root of the Problem, Part 2: Getting before and beyond the Firm, Part 3: Laboring While Human, Part 5: Human Centric Management, and Part 6: The Nature of Work Has Changed
Nature of Work has merged with Live Grey. We’d love to hear from you!