Organisations Designed and Built on Principles
The rationale for using Principles
By Dr. Reg Butterfield
Image: Quang Nguyen vinh via Pixabay.com
19 minutes read
Last week my colleagues Dr Ross Wirth, Silvia Calleja, and I discussed the need to break away from the traditional hierarchical organisational design and the associated management systems, often based on variations of Fayol’s Scalar Chain. We also acknowledged that whatever approach an organisation takes it is necessary to ensure that the four basic functions of management, planning, organising, controlling, and leading, are considered. In doing so, we posit the need to focus primarily on achieving the work itself as opposed to the traditional approach that focuses on the control and power systems of the organisation.
When discussing our Futocracy approach with other people we are almost always asked how we will manage and control an organisation if the power and control systems are secondary in order of design priorities. Just because they are secondary in the design process, it does not mean that management and control are neglected. This is where the use of active principles and appropriate support systems come into play and are discussed in this newsletter.
Management is a process by which managers create, operate, and direct purposeful organisation through systematic, coordinated, and cooperative effort by people and associated technology. The traditional approach has been to use a hierarchical management system and performance management systems that are designed by managers (with the assistance of HR) to achieve outcomes in ways that demand compliance.
For example, in our 16, 23, and 30 October 2022 newsletters (“Is performance Management really the best approach for success?”, parts 1–3) we challenged the ideas behind conventional methods used by management to ‘motivate’ people and harness effort towards organisational goals. Our conclusion, with the assistance of neuroscience was that a new level of thinking was necessary if cooperation and true coordination were to be achieved. Traditional management processes are not delivering what is needed.
In our 6 June 2022 newsletter (“Knowledge Workers”) we discussed the increase and importance of the role of knowledge workers and their impact on organisational design and management. The traditional approach is not sustainable.
In our 6 November 2022 newsletter (“Decision-making and Risk in a Strategic Entrepreneurial Environment”) we outlined the importance of decision-making in organisations and how this process is one of the keys to effective work outcomes. If people engaged in the work itself can make necessary decisions at their level of activity, the outcome can be timelier than waiting for escalations up the management hierarchy and often more appropriate because of the inherent and more detailed knowledge of the situation by the ‘local’ decision-maker.
Organisational Tensions
However, the risk of allowing employees such freedoms is that everyone can go in a different direction or have competing directions, which can tear apart the organisation. This means that the challenge for managers and leaders is to corral the individual approaches in some way.
Organisations have always been in tension, just as society in general needs stability organisations need to destabilise to be successful. As Steve Jobs, the founder of Apple, said in one of his televised interviews, “organisations are run by ideas — not hierarchy!”
There is also the relationship between individual and organisation and the responsibilities to one another, the increased demand for socially responsible organisations, and the tension between specialists and performance of the team. These do not mean that the only solution is to control all behaviour or stifle ingenuity and freedom. To do so today will mean the end of organisations and the economic future of society as knowledge workers will not tolerate such an organisational approach.
Management as a Process
Traditional approaches to management often discuss management as being a number of different processes that enable things to ‘get done’ through and with people in formally organised groups.
Frederick W. Taylor is attributed as saying, “Management is the art of knowing what you want to do and then seeing that they do it in the best and the cheapest way” and is clearly in line with his industrial efficiency mindset. Whereas the great management guru Peter F. Drucker put it another way, “Management may be defined as the process by means of which the purpose and objectives of a particular human group are determined, clarified and effectuated”, which is more in tune with his philosophy of motivating employees and his introduction of ‘management by objectives’ in 1954 is a case in point. He also referred to the term ‘knowledge worker’ decades ago, which is in everyday management language today. Mary Parker Follet, an often-forgotten management influencer, used a basic approach where she is attributed as saying, [management is] the “art of getting things done through people.”
In our earlier newsletters we have discussed all three of these influencers and identified that the most predominant approach to management is arguably still the Taylor view with Drucker’s objective setting the main approach to aligning people and organisational objectives, which has led to compliance and not the motivation envisaged by Drucker. This combined approach has been successful for a long time if the profitable outcomes of organisations are used as a measurement, which is mostly the case. Yet, the cost to the people themselves is increasingly identified as just too high and not only unsustainable, but also being rejected by the workers themselves.
By way of example, the UK Government statistics (2022) indicate that there are 9m people of working age who are economically inactive (21%) and not shown in the unemployed statistics. Taking away early retirement and ill-health (such as long-Covid) the figure is still around 6.5m people who have decided to quit work. Commentators argue that this is caused by a combination of taxation and unpleasant working conditions. A similar picture is emerging in France according to the Jean-Jaures Foundation.
Something needs to change as the cost to society not only in voluntary inactivity, but also in healthcare through associated increased stress, mental health illness, and addiction issues is now disproportionate to the benefits to society.
Management is more than a process or decision-making
When discussing management, it is important to realise that it is a purposeful activity that is currently seen as more than just making the right decisions at the right time. This means that when changing the age-old hierarchical approach, it is important to also take into account the other areas that are considered as part of a managerial role. Academics tend to use specific categories when researching managerial work, we will use them here for illustrative purposes.
· Management as a profession
· Management as an activity
· Management as a process
· Management as a discipline
· Management as a group
· Management as a science
· Management as an art.
Each of these categories are then subdivided into different elements of that category. For example, management as a profession may be viewed as requiring specialised knowledge and experience regulated by a representative body. In such cases they may use elements such as: specialised knowledge, formal education and training, code of conduct, social commitment and so on.
Yet, for many managers it is not a profession in the formal sense as many of the elements may be missing or not seen to apply in their case or circumstances. Hence management has many interpretations and associated activities, which are not consistent within or across all organisations. This makes sense because organisations each have their own ecosystem and behaviours that need to be considered; there is no one-size-fits-all to management just as there is no one-way of doing things in organisations.
It is not our intention in this newsletter to delve into each category in detail as space does not permit. However, in our design of the Futocracy approach, we do consider each of these and have developed ways of encompassing them all.
Some may ask how management is an art. We suggest that whilst the principles may have some standing in science, it is the art of their application that brings about success.
Subsidiarity and its importance in organisational design and management
In earlier newsletters we have reported and discussed the changes in the attitude of employees to what work is, when, where, and how it is undertaken. This change has been happening slowly over the last decades and the recent impact of Covid has brought it to a crescendo and world-wide focus.
In the 1990s researchers were pointing out that the post-industrial age was leading to the flattening of organisations, more emphasis on flexibility as opposed to rule-following and the introduction of more permeable boundaries internally and externally (Grey & Garsten, 2001, p.230). Castells (1996) observed that the ‘network-formed’ organisation could play an important part in the trend to move away from bureaucracy. We discussed the importance of understanding and capitalising on organisational networks (formal and informal) in our 21 and 24 July 2022 newsletters (“Towards a Collaborative Form of Network Organisation”).
In 1997 a publication by the European Foundation for the “Improvement of Living and Working Conditions” showed that the benefit of innovations in work organisation lies in a better use of people while, for workers, it lies in the possibility of a more meaningful job and a greater input into those workplace issues that directly affect their working lives.
This human dimension perspective raises the issue of the ethical quality of various organisational forms, and of how ethical principles can give moral bases to organisational forms and the nature of work (Mele, D., 2005, p.204). Today, social responsibility and ethics are increasingly in the forefront of society and as a result, reflected in the changing behaviour of an increasing number of organisations.
Mele’s work indicates that by using the ‘principle of subsidiarity’ it is possible to bring the ethical side of work and organisations together in the organisational form.
“Subsidiarity is a principle of social organization that holds that social and political issues should be dealt with at the most immediate or local level that is consistent with their resolution” (Wikipedia, 2022).
A shorter alternative is, “every issue should be decided at the lowest level that involves all those who are affected” (Fischer, D., 2008)
We believe that the principle of subsidiarity is an important element of designing an organisation that is focusing on the work itself as opposed to the control of organisations. Using the subsidiarity approach helps to make sense of the infrastructure requirements and the associated philosophy of distributing authority and decision-making across all parts of an organisation in line with its reason for existence — the Statement of Purpose.
The principle of subsidiarity is a complex construction of many attributes that need to come together for it to truly meet its desired goal of releasing the potential of the people, both politically (its most understood use) and in other forms of organisation. It consists of nine attributes which are important to understand in their totality and they are described briefly below based on extracts from Mele’s work (2005, p.301–2).
Subsidiarity is:
1. a concept of humans as beings endowed with reason and freedom, and takes into consideration the dignity, uniqueness and diversity of each person and human group, their social character, and the capacity of each person to flourish as a human being, which should be fostered.
2. an ethical principle, not a pragmatic rule or mere political principle used only to decide how power should be distributed.
3. has to be considered together with other ethical principles for social life, derived from the same bases, and they have to be balanced in a prudent way. For example, those of solidarity, authority and participation are especially relevant.
4. a principle of reflection. As a principle of reflection, rather than a mechanical rule, it must be applied by considering all the relevant circumstances in any situation. As such, the way in which this principle is applied in practice differs greatly from one instance to the next.
5. establishes that whatever could be done by an inferior social group should not be absorbed by transferring the task to a superior organisational or social entity. In this way, the principle of subsidiarity does not eliminate authority within an organisation or community, but prevents both authoritarianism, which does not respect freedom and diversity, and the anarchic activity of inferiors, be they individuals or groups. [Note: the use of the terms inferior and superior here are old terms seldom used today and, in this context, refer more to relationships of higher and lower power.]
6. the authority must ensure that initiatives by individuals and groups contribute to the good of the whole community. This goal requires coordination of the social groups and the maintenance of order within the community.
7. indirectly requires individuals and inferior social groups do as much as they can. It carries a positive requirement to be entrepreneurs, to have initiatives and to strive to obtain whatever one can in accordance with the maximum extent of one’s capabilities.
8. points out the duty of a superior entity to favour the initiatives of inferior groups by fostering, encouraging, and stimulating their initiatives and activities.
9. reflects the consideration that if an individual or an inferior group cannot perform a necessary activity, even if provided with appropriate help, then the superior group can and ought to carry out the activity.
These are powerful building blocks for us to consider when moving towards a new form of organisation and its management. We have used these concepts in our design approach to the Futocracy approach to organisational design, which we announced during our 2021 online Global Organisational Change Conference as Futocratic Principles.
The Rationale for Principles of Management
The principles approach to organisations is an important and well-founded method to provide at least three main outcomes. These are briefly described generically and not specifically for managers in the traditional definition or understanding of manager. As we have shown in our subsidiarity discussion above, this is important for organisations using distributed authority and decision-making as not all incumbents will be managers, albeit they are an integral part of the management system.
Clarity of Understanding
Principles provide a clear message of what is required by the organisation in specific areas of importance to that organisation. Together with supporting information, the principles enable people to accomplish tasks and to handle situations which may arise and need to be managed, such as referring to a specific written process or the focus of decision-making.
Support and Development
Principles provide support for inexperienced and/or new people in the organisation with guidance and/or directions. In doing so, they form part of the training and development-by-doing process.
Role Clarity
Principles and their associated support documentation remove the ambiguity for the roles of people in areas which are not implicit in their job activities. This is particularly the case in team and/or project-based operations where there may be a risk of overlapping work activities in areas such as system integration, or several projects in parallel for a single customer.
We mentioned the tensions within organisations above and principles provide a soft form of control to allow freedom of action within some boundaries. Organisational experience of using this principles approach also enables the introduction of a feedback process for fine tuning the support information and the recruitment process.
Leader and followers are both following the invisible leader — the common purpose.
Before getting into the detail of how to use the principles approach to management and control, we refer once again to Mary Parker Follet, known by her peers as the prophet of management. In one of her publications in the 1920s she wrote, “That is always our problem, not how to get control of people, but how all together we can get control of a situation” (Graham, 2003, p.130). Her preference was for ‘power-with’ (coaction) as opposed to ‘power-over’ (coercion), which is exactly the aim of both subsidiarity and using principles in the context of managing and ‘controlling’ organisations. However, this will require that the principles move away from the scalar approach and some of the other principles of management advocated by Fayol and discussed in our last newsletter. This is reinforced by Follet continuing, “It is all right to work with someone, what is disagreeable is to feel distinctly that you work under someone? Executives as well as workers object to being under anyone.”
It is no wonder that Peter Drucker said that Follet was ahead of her time. As my colleagues Dr Ross Wirth, Silvia Calleja, and I have often found, earlier work by social scientists, researchers, and others, discussed and recommended many ideas and concepts that were never taken up at the time and yet are ripe for today. So, let’s move on with just one more quote from Follet that is fundamental to our proposed approach to a new organisational form through principles and supporting instruments.
“Leader and followers are both following the invisible leader — the common purpose.”
At a high level, the ‘common purpose’ that Follet refers to is known today as the organisation’s Statement of Purpose (SoP). As we have discussed in previous publications and our 11 September 2022 newsletter (“Challenging the Foundations of Organisations — part 2”), organisations are poor at defining this in terms of what they do, how they do it, why they do it, and who they do it for. The ‘what’, ‘how’, ‘why’, and ‘who for’, are in effect the direction that all employees need to help them understand the bigger picture of the organisation and how they fit in.
This then leads to the overarching Principles that capture the essence and values of the organisation, from which everything else develops.
A search across hundreds of organisations on the web found almost no true statements of purpose, which supports the data and discussion in our earlier newsletter (11 September 2022). One very successful organisation that we found in our search is Cognizant, an $18.5 billion global business employing just under 350,000 people. Its description of ‘What we do’ is a statement that covers all the signposts that a true Statement of Purpose needs to provide. Whilst it could be improved, we quote from their website and illustrate in parenthesis the focus of the words:
“We use expertise that’s been proven and tested around the globe [what we do] to help you [who we do it for — clients] get ahead of challenges [how we do it], sense opportunities sooner and outpace change [why we do it].”
Supporting this statement they have a set of high-level value statements, which can also be seen as a set of principles that have an infrastructure at a deeper level to ensure that the principles are alive and always operate. The statements are:
“We help imagine, build and implement technologies to keep our clients constantly aware and responsive.”
“Our social purpose weaves environmental and social considerations into every element of our business model.”
“Every day, all around the world, our people engineer impact — with their clients, communities, colleagues and in their own lives.”
“We respect everyone’s unique voice and background because we know that diversity helps us thrive, and we benefit from having everyone at the table.”
NOTE: we have no commercial alliance, links, or association with Cognizance or any of its subsidiaries or partners. We have informed Cognizance of our use of information obtained from their corporate website.
Principles
Using principles is more than just creating another business strategy or process. Together with supporting information, principles determine specific areas and types of focus, and to a large degree, what is out of bounds or the subject of specific processes.
In doing so, they are also an important way of providing boundaries to maintain some control over the decision-making process used to achieve mandated outcomes. This means that people can more easily make decisions when and where needed without having to resort to escalation or discussion with the hierarchy, where it exists. Where there is no hierarchy in the traditional sense (scalar principle) it also ensures continuity of decision-making across the organisation. This is important when there is distributed authority and decision-making not linked to any form of hierarchy and is based on achieving the work itself.
There are many approaches that organisations can take when using principles to achieve their SoP. The important point is that the principles lay out the directions and philosophy for achieving the SoP. Some organisations may focus on shareholder value, whilst others may focus more on research and development projects, and so forth. Increasingly, there is a move towards two specific areas of focus, one is on customer relationships, and the other is on environmental and social issues.
Having decided on the number and content of principles required, the next stage is to develop the support infrastructure. This is necessary to provide the organisation’s membership with the boundaries and conditions that align behaviour, whilst at the same time providing significant authority, autonomy, and decision-making powers. This alignment is important to achieve continuity of activities and behaviours associated with the principle concerned.
Typically, the support infrastructure is provided in three categories: directives, guidelines, and processes. The category names here are not sacrosanct and the actual names used will depend on the organisation’s standard protocol language and will vary from one organisation to another; some organisations may call directives, instructions for example.
Directives typically set out the responsibility and authority for certain attributes or decisions in the organisation. These include what must be done as well as what must not be done.
Guidelines are in the form of advice and/or clarification of some or all aspects of the directives.
Processes are normally related to basic activities that are day-to-day protocols that need to be followed accurately for legal, compliance or consistent management, such as a process for granting holidays for example. They are not the detailed operational or manufacturing processes, which are part of a different area of control and management.
As a simple guide to this form of designated support material figure 1 uses the example of a company car principle based on comfort and safety.
Figure 1: Company car principle based on comfort and safety.
Summary
This week we discussed the tensions between increasing the freedom of authority, decisions, and involvement across all parts of an organisation. We demonstrated that this is not new and the demand for change has been sought for decades by a wide range of organisational experts, researchers, and management. We showed that the principle of subsidiarity is a major aim for democratic organisations and politics, and we highlighted the importance of finding ways to bring this into the new organisational designs. Given the wide range of management activity experienced by organisations today, we suggested that an approach based on principles would assist in enabling the changes to take place provided there is an appropriate infrastructure to support such a move.
Principles and their support components of directives, guidelines, and processes are but one part of the infrastructure and jigsaw puzzle of organisational design. There are still some outstanding management activities and people needs to be considered and built into the system, which will be explored as we move forward.
In next week’s newsletter we will continue our journey towards a sustainable organisation designed and built around the production of work. In doing so, the focus will be on the next stage in developing the relationship between the need for control and the process of subsidiarity.
Major references:
Castells, M. (1996) “The Rise of Network Society” (Blackwell, Oxford).
Cognizance website: https://www.cognizant.com/us/en/about-cognizant#innovation
European Foundation for the Improvement of Living and Working Conditions/EPOC Research Group (ed.), (1997) “New Forms of Work Organization: Can Europe Realize its Potential? Results of a Survey of Direct Employee Participation in Europe” (Oce for Ocial Publications of the European Communities, Luxembourg).
Fischer, D. (2008) “Economics of War and Peace, Overview”. Encyclopedia of Violence, Peace, & Conflict (Second Edition), p.660–672.
Graham, P. (2003) “Mary Parker Follet Prophet of Management”, Beard Books, Washington, DC.
Grey, C. and Garsten, C. (2001), “Trust, Control and the Post-bureaucracy”, Organization Studies 22(2), 229–239
Mele D. (2005) “Exploring the Principle of Subsidiarity in Organisational Forms”, Journal of Business Ethics (2005) 60: 293–305 DOI 10.1007/sl0551–005–0136-l
