Organisations Designed and Built on Principles
By Dr. Reg Butterfield
16 — minutes read
Image: Silviu via Pixabay.com
In last week’s newsletter we discussed some of the key elements that are linked to, and part of the discussion around managing power and control of organisations together with the idea of distributed authority and associated decision-making. During that discussion we highlighted many of the important elements that need to be re-thought through now that the socialisation processes of society are changing and what that means at both the individual and organisational levels. These changes are now challenging traditional relationships between power and authority, which are arguably holding back the responsiveness and team approach to work that is emerging and needs to be supported and maintained if organisations are going to flourish.
This week my colleagues Dr Ross Wirth, Silvia Calleja, and I discuss the use of Principles as the foundation for designing organisations. In doing so, we explain their rationale and how together with a combination of appropriate directives, guidelines, and minimal processes an organisational structure and operating system can be developed.
That’s not my Job!
When was the last time you heard, “That’s not my job!”? So often this statement is used to avoid doing something that a player does not want to do, or they say that they do not have the knowledge or experience to do the task, or there is no clarity as to how that task fits into the organisation’s job description approach to defining work.
It is so common that we wrote about the issues around job descriptions in our 4 September 2022 newsletter, “Challenging the Foundation of Organisations”. The job description is a key part of the foundation of the industrial age hierarchical approach to organisational design, which is no longer meeting the needs of organisational flexibility and timeliness. It reinforces narrow views of what work is and discourages the idea of responsibility outside of that narrow view.
Another key element of the traditional hierarchical organisation is the Scalar Principle, which we contend is no longer feasible in its traditional form.
Scalar Principle
The scalar principle, also known as the scalar chain, is a management principle predicated on establishing an unbroken line of authority from the highest levels of management and down. An important aspect of this top-down model is that the person at each management level communicates with only those directly above and below them. However, this encourages silo thinking and behaviour as people from one business area are not encouraged, or in some organisations not allowed, to communicate across these business areas outside of the line of hierarchy. In an emergency or for operational efficiency, two people at the same level can communicate directly with each other if their supervisors are aware. This exception is called a gangplank. When the supervisors are not aware, the players involved are often seen as disloyal to their boss by talking to colleagues in another area of the business (silo). Figure 1 demonstrates the scalar chain approach in action.
If D has to communicate with G, he will first send the communication upwards with the help of C, and B to A and then downwards with the help of E and F to G which will take quite some time and by that time, it may not be worthwhile therefore a gang plank has been developed between the two. The gang plank is a temporary arrangement between two different points to facilitate quick and easy communication in certain circumstances.
Figure 1: The Scalar Chain in Action
A crucial point about the ‘gangplank’ is that it is only allowed for operational efficiency and is not permitted as part of decision-making! Leaders at the lowest level may need to communicate about sharing people to accomplish a task, yet not decide how many people to hire for the different parts of the organisation, that is the responsibility of the higher levels in the scalar chain.
This ‘scalar principle’ approach originates from the work of the French mining engineer Henri Fayol. In 1916 he published “General and Industrial Management”, one of the first theories of management. His publication included fourteen principles and the scalar chain was number nine, which is commonly known today as the chain of command. Table 1 illustrates the fourteen Principles, many of which will seem familiar to readers just as some remain pertinent today and should be considered when designing new ways forward — never throw the baby out with the bathwater!
More than half of the Fayol principles listed below (4, 5, 6, 7, 10, 11, 12, and 13) used wisely today would help move towards a healthy organisation provided the overall structure and management system was different to his hierarchical scalar approach. It is the power and authority model that causes most of the difficulties today.
If we take just one example, number four — unity of command, where players should only receive orders from one manager. In our 5 June 2022 newsletter, “A Complex Journey” we discussed the difficulties associated with matrix organisations, a common approach to organisational (hierarchical) design, which demonstrates the reality of Fayol’s assertion that — ‘if an employee works under two or more managers, then authority, discipline, and stability are threatened’. As we discussed in our earlier newsletter, experience and research tell us that this can also cause a breakdown in management structure and cause employees to burn out.
Table 1: Fayol’s Fourteen Principles of Management
1. Specialisation of labour
2. Authority
3. Discipline
4. Unity of command
5. Unity of direction
6. Subordination of individual interests
7. Remuneration
8. Centralisation
9. Scalar chain (chain of command)
10. Order
11. Equity
12. Personnel tenure
13. Initiative
14. Esprit de Corps
Implications of the Scalar Principle Today
This military-based approach designed by Fayol (it was first used by the French military) now permeates most organisations around the world that employ a traditional hierarchical approach to work. Whilst it may have been appropriate in the industrial age period of different social levels in society and technical stability in organisations seldom seen today, it is no longer the case. The perceived appropriateness of management wisdom and associated decisions cascading down is a severe constraint on an organisation’s ability to remain competitive today.
Work is no longer simply about how jobs are linked together and controlled by a hierarchy with linear (silo) mindsets and associated processes (Fayol’s principle 1 — Division of Labour). In our newsletters of 26 June and 3 July 2022 (“Control of Organisations”) we discussed how organisations are a complex network of networks of people using their skills and experience where they are needed, often outside of normal management control systems.
The ability for people to react to and or predict the nature of their task in the prevailing circumstances as they vary is critical for the flexibility that is demanded by the business environment and society. This means that people no longer just work on specific goals for a department. Today, work is increasingly team based focusing on enterprise functions with cross-functional outcomes allied with knowledge-sharing to achieve the organisation’s purpose and associated goals. In our 12 June 2022 newsletter (“Knowledge Workers”) we discuss this shift of what work means today. To help make sense of the nature of work and its relationship to technological and other changes in society we encourage you to read our 19 June 2022 newsletter (“The Complexity of Work”).
People are no longer the foot soldiers who are ordered and controlled by a hierarchy as envisaged by Fayol and generations of management who followed him. The challenge for organisations today is to understand and harness the full capability of its knowledge workers. Management needs to enable its people to contribute more by removing the barriers and demolish the internal obstacles that prevent the growth and maximisation of knowledge sharing and personal development across the organisation.
In our 21 and 28 August 2022 newsletters (“Weaving Organisations and Communities”) we encouraged the development of organisations as communities. To enable such an ambitious, yet important move, everything else needs to be in place so that the design and management of an organisation not only aspires to such an approach but can also support and enable the citizenship of communityship (Schein, 2009).
Modernising the world of Fayol
One thing that Fayol certainly got right, and which is still important today is the use of Principles to guide thinking and action.
Any organisation that wants to survive in today’s increasingly volatile, uncertain, complex, and ambiguous world (VUCA) needs a structural design and management system that is created for that organisation and not a replica of some model or process used by others. Principles that are designed for such an environment can assist in achieving this.
The way that an organisation carries out its activities is its own unique DNA, which makes it hard if not impossible for others to replicate. Whilst some people may refer to this as the organisation’s culture, we avoid this overused and often misinterpreted word because it is not actually accurate in describing how organisations propagate and behave. No organisation behaves in the same way across and within the different parts of its entity. There may be an agreed value system that all the membership ascribes to and then the rest is based on the climate created by the constituent membership of the different parts such as teams, departments, project members, and so on. For example, does the sales and marketing area of the business work and behave in the same way as the technical engineering people? Of course not, and the same can be said of the nature of what risk means at the individual level, and so on. Yet so often the way organisations operate is based on Fayol’s managerial principles alone even within technical organisations where relationships and decision-making are very different. To overcome these hurdles and misunderstandings, we use organisational behaviour (OB) as the descriptive term for the different active behaviours of people in organisations, which are almost as varied as the number of people working in the organisation.
Some may demonstrate from research that a harmonious culture is more successful than others. We say that this is not the result of one organisational culture, it is harmonious behaviour that is a result of synergies developed to achieve the organisation’s purpose. The very thing that we are now moving towards through principles.
Planning, Organising, Controlling, and Leading
If the people within an organisation are to work more collaboratively and break away from the Fayol-based hierarchical approach, it will be necessary to identify ways of meeting the four basic functions that management traditionally undertakes. These are planning, organising, controlling, and leading. These, together with much more understanding of the people side of organisational behaviour, has been a major focus of our work for some years.
We have identified that one important perspective to take, irrespective of the nature of the organisation is to focus on achieving the work itself. This is a very different approach to take when compared to the traditional approach, which focusses on the use of power and control as its predominant centre of design. In the latter case the management control system dictates the overall organisational design and operating model.
Start with the Work itself to Think Differently
The interesting point about focussing initially on the work itself as opposed to what types of leadership models to use or how to motive people, or even worse, introduce performance measures to ensure compliance with management decisions, is that we can look at the problems from a process of different thinking.
Einstein is attributed as saying, “We cannot solve our problems with the same thinking we used when we created them”. Yet, this seems to be the case in so many new approaches to organisational design such as Sociocracy, and Holacracy (based on sociocracy), whereas others that looked at things from a different perspective have had more success. This is discussed in our 29 May 2022 newsletter “Are you innovating or stuck in the mud?”
In our 15 May 2022 newsletter, “To build for the future, first understand the alphabet”, we discussed the different needs, interests, concerns, and expectations of the current multi-generational people who now populate organisations. Whilst we acknowledge that each person is different, there are trends in each generation that are important to understand when designing how work can get done. It is like an artist who must make sense of the material that they have available to work with before deciding what is possible to make. A potter cannot make fine chinaware plates from the same clay that is used for a statue. Organisations are no different. It is important to start with identifying and making sense of the people available from the various sources internally and externally. The bandwidth of knowledge is different as education systems have changed over generations, experience of old needs to be blended with innovation and naivety of the younger people and so on. Whilst some will tolerate command and control systems others will shun such approaches, particularly knowledge workers today.
This reinforces that whatever approach an organisation takes; it needs to start with its raw material — its people. The principles approach is well suited for this different mindset.
Principles of Organisational Design are not a new invention
There is nothing new about using Principles as a means for guiding management and beliefs.
During our many discussions around emerging ideas that came from the plethora of material we were wrestling with, my colleagues and I were reminded of what Gary Hamel one of the most influential business thinkers, author, and consultant (described by Forbes magazine as “the world’s leading expert on business strategy”, 13 October, 2009), wrote in the preface to his book “The Future of Management” (2007).
It was almost like a motivational speech for us as we struggled at times to find ways that were practical and not some hypothetical academic approach to a new world of organisational behaviour and we quote:
“I dream of organizations that are capable of spontaneous renewal, where the drama of change is unaccompanied by the wrenching trauma of a turn-around. I dream of businesses where an electric current of innovation pulses through every activity, where the renegades always trump the reactionaries. I dream of companies that actually deserve the passion and creativity of the people who work there, and naturally elicit the very best that people have to give.”
We were also reminded of something the late Peter Drucker used to point out to managers in the 1970s: that they are “fond of saying our greatest asset is our people,” while knowing that little of the human potential of any organisation is put to work.
This observation was repeated by the work of Sumantra Ghoshal and Chris Bartlett who in late 1990s bemoaned the persistence of traditional management models in which “thousands of capable individuals” continued to be “crushed and constrained by the very organisations created to harness their energy and expertise.”
Central to all these prior comments by distinguished and acknowledged leaders in their fields was that any organisational model reflects a set of underlying management principles and beliefs, and that new principles will be needed to guide the evolution of a high-engagement organisational model. We set out to do this through a new set of principles that are aimed at meeting the needs of today and the foreseeable future as best we can.
In doing so, our approach acknowledges these important words and aims to replace them with action that places the people as the centre and foundation of organisations by using the principles that we have developed.
The Principles approach of Futocracy
When developing the Futocracy approach to organisational design and management we took cognisance of a wide range of existing organisations that have been developed as alternatives to the traditional hierarchical bureaucratic approach, all of which operate with a set of principles. While there was not a single set of principles in use across all these innovative organisations, a common set of principles and supporting values were discovered.
Principles alone will not ensure that an organisation operates in the way that the designers and owners envisage. Where traditional organisations depend on power and authority to ensure compliance, Futocracy focuses on the three major criteria that we have identified as important for success from both our research and the experience of existing successful organisations. These requirements for successful organisations in a VUCA world are briefly summarised:
Autonomy and action orientation
· Timely decision-making that is principle-based and supported with directives, guidance, and minimal processes (soft ‘hands-off’ control)
· Appropriate relationship between causation and effectuation behaviour, particularly in relation to risk and resources
Responsiveness that is purpose driven
· Customer focused thinking and behaviour (both internal and external)
· Direct lines of open communication (reduce hand-offs and message filtering)
Cross-organisation linkages (alignment)
· Address boundary conflicts and clarify decision-rights
· Focus on purpose alignment & active collaboration to create synergies, harmonisation, and whole system thinking and behaviour
When designing principles, it is important to understand that there are different types of principles. The higher-level principles are the ones that encapsulate the philosophy of the organisation and those below them are more detailed and directional in application.
Each of the principles below the high-level principles is supported by a combination of three things: directives, guidance, and processes. Each of these will be discussed in more detail in next week’s newsletter.
Futocracy’s High-Level Principles
As we bring today’s newsletter to a conclusion, we describe the five high-level principles that summarise Futocracy. They are supported by lower-level principles, directives, guides, and processes that are identified and tuned to the needs of the relevant organisation. The high-level principles are:
· Organise around the work
· Autonomy — (independence) through distributed authority and decision-making
· (Strategic) Entrepreneurial mind-set
· Purpose alignment
· Transparency
These will be described in more detail next week. We will demonstrate how they and the supporting relationships of effectuation, directives, guidelines, and processes can create an organisational design that meets the emerging needs of the workforce and at the same time is both flexible and controllable in operation whilst delivering the outcomes necessary for continued success.
