Towards a Future-Proof Organisation

Towards a Future-Proof Organisation
Time to cast aside the past and listen to the future

By Dr. Reg Butterfield
13-minute read (Image by Arec Socha via Pixabay.com)

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In our last two articles (Control of Organisations) we discussed the importance of understanding the different informal networks that exist within organisations. In our quest to find ways of future-proofing organisations we find the emergent task-based network (ETRN) to be an important candidate for part of the solution. Before exploring more of this concept, it is helpful to remember where we left off last week.

Whilst the traditional functional and hierarchical organisation consists of rigid formal relationships to achieve its desired outcomes, the informal organisation shapes itself to deal with the current objective through close interactions of people based on personal rather than formal relationships. This flexibility is particularly good to bring about successful execution of day-to-day business. Eccles and Crane (1987) called this a ‘self-designing’ organisation because it was a mechanism for allocating resources and people (information, experience, and knowledge) to tasks in a decentralised manner.

Before moving forward, it is important to understand the reason for going into such detail and understanding of the informal network of networks that are built up through personal relationships. To gain this understanding we will first discuss the current major organisational design approaches — the transactional mechanistic approach and the organic design. In doing so, we will also introduce the socio-organic design that is currently seen as an important shift for organisations to make in the light of changes in society. Having done so, we can then explore the role of the personal informal networks and their role in future-proofing organisations.

For hundreds of years businesses have been predominantly transactional based. This was certainly reinforced in modern history through the work of Frederick Winslow Taylor, an American engineer who in the 1920s was one of the first management consultants and is known for his work on improving industrial efficiency. He famously said, “In the past the man has been first; in the future the system must be first.”

Taylor had very clear views about the introduction of his ideas, “It is only through enforced standardization of methods, enforced adoption of the best implements and working conditions, and enforced cooperation that this faster work can be assured. And the duty of enforcing the adoption of standards and enforcing this cooperation rests with the management alone.“ (F.W. Taylor, 1911, Ch2. P. 11). This statement shows that he was very clear about the role of management. He believed in transferring control from workers to management and set out to increase the distinction between mental (planning work) and manual labour (executing work). There are very few businesses today that have not adopted or been influenced by his work and that of his management disciples, who are active in various forms to this day.

His work has led to the notion of transactional work relations where the focus is on the trade of time, effort, or results for money and forms the basic contract of most activities where the terms are primarily about the tasks and the rewards. Today, we know that Taylor’s ideological message required the suppression of all evidence of worker’s dissent, of coercion, or of any human motives or aspirations other than those his vision of progress could encompass (ACJ. 17, 1974). Yet, the transactional approach is very much the predominant model of business today, hence the current disconnects between the new evolving workforce and the traditional management systems. We argue that this Taylorism view of the world of business has led to the reinforcing of the hierarchical management command and control systems with the emphasis on compliance as opposed to motivation. This is more the Theory X management approach (people dislike work and must be coerced) than the Theory Y where people want to work and engage with organisational goals (Douglas McGregor, 1960).

It is worth noting that prior to the Second World War there was no such word as organisation to define what we now take for granted in the business world. It was not even in the Concise English Dictionary in this context in 1950. The term organisation as a concept in business has been created specifically and distinct from other institutions of society. The pressure to become socially responsible today is an indication of this separation that was sought and created by businesses as they focussed on wealth generation.

Traditional hierarchical bureaucratic organisations are built on the foundations laid by Taylor and Theory X of McGregor. It made sense in the past because of the emergence of industrialisation and the need to ‘harness’ resources that enabled high productivity and large profits. Today, the likes of Amazon with their rigid processes and well publicised personnel disputes and litigations at their fulfilment centres are an example of the system in operation (Forbes, Oct 25, 2021). As with many other companies, the use of robots, automation, and AI are being introduced to continue this Taylorism and Theory X approach and, in the process, suppressing the people issues.

Ironically, whilst Taylorism was expanding across the USA, an important management guru was emerging as a new thinker about organisations, Mary Parker Follett. Follett was known as the prophet of management, yet few people have ever heard of her. She was an American social worker, management consultant, philosopher, and pioneer in the fields of organisational theory and organisational behaviour. Along with Lillian Gilbreth, she was one of two great women management experts in the early days of classical management theory. A famous quote attributed to her is, the problem is “not how to get control of people, but how all together we can get control of a situation”.

Her writing and work on power were incredibly insightful and even though she wrote about business in the early 20th Century, we can still learn from her today. Follett was a contemporary of F. W. Taylor and whilst embracing some of his ideas, her ideas on power and authority were very different. Taylor focussed on the boss knowing best, Follett focussed on getting people to cooperate, with the view that genuine power is not ‘power-over’ but ‘power-with’.

My colleague Dr Ross Wirth and I suggest that this distinction is still very pertinent and important today. As Follett said, the power-over is inadequate for two reasons. One is moral and the other a legal distinction. She gave the following example, which may not sit well with some of today’s readers. “You have rights over a slave; you have rights with a servant. The second reason that power-over does not work is that people simply do not want to be led or patronized”. How often do we read or hear this today as the emerging workforce challenges the status quo of most organisations? It is one of the underlying reasons for the much publicised ‘Big Quit’. We discussed this in an earlier newsletter, The Big Quit.

I am at risk of falling into one of my own management minefields by becoming seduced by the rich history of organisational research and development. I will move forward by returning to Follett’s statement mentioned earlier, “not how to get control of people, but how all together we can get control of a situation”.

Follett discussed that real authority that people respect and obey, comes from function and experience. The challenge for effective management is giving authority to those who have real responsibility for their function. She summarised her thoughts as, “The o­ne who gives an order should try to bring those ordered into the situation.”

So, we have a situation where for decades Taylorism and Theory X have dominated much of the world’s approach to organisational design and management. Whilst there have been attempts to break away from this approach, particularly in respect of the leadership models and improved HR practices, little has really changed. Interestingly, Follett’s work pioneered the understanding of lateral processes within hierarchical organisations, and this led directly to the formation of matrix-style organisations in the 1920s, the first of which was DuPont. Even this structural approach did not lead to the ideal that Follett sought and has become simply a more complex form of hierarchical control, which was discussed in one of our earlier articles, A Complex Journey.

To counteract this transaction, hierarchical, bureaucratic (mechanistic) approach to work and management, some organisations have moved more towards what is known as an Organic organisational structure. The term organic in respect of organisational behaviour came from the early work of Friedrich Ratzel, a German geographer, whose theory in 1897 centred on the political world and associated physical territory as a survival mechanism.

Today, the term Organic means something different and was first introduced by Burns and Stalker in the 1950s and made popular through their book The Management of Innovation (1961). Organic organisation indicates an organisational structure that is flat and allows for improved horizontal interactions and communication. It is often seen in use by creative organisations and is decentralised, which provides all employees with an opportunity to participate in business-related decision-making. An important part of our discussion today is that companies with an organic structure tend to encourage group participation and the sharing of work responsibilities. The open communication systems and the closer relationship and face-to-face meetings with executives and ‘lower-level’ employees in verbal communication is an important aspect of organic organisations. It is relationship and trust building, which is also the foundation for the personal informal networks we mentioned previously.

The transactional, mechanistic organisation encourages specialisation and expertise in functional units, whereas the organic organisation encourages joint specialisation based on the jobs-in-hand. This provides for a wider array of expertise and greater flexibility in operations. Whilst the mechanistic transactional approach relies on strict hierarchy and positional power, the organic approach sees status tied to the perceived intelligence and aptitude of the employee. The distribution of the people in an organic organisation is based on a network of people or teams working together in varying capacities to achieve the company goals.

For a small business in a dynamic market, the relative informality of organic over mechanistic structures provides a competitive advantage. However, large companies such as Microsoft and Google also have a predominantly organic structure. Earlier I mentioned Amazon as a transactional organisation and yet it also has elements of an organic organisation, which enables it to move across traditional product and service boundaries.

It is important at this stage to say that a business can operate different structural approaches at the same time within its organisation and is not constrained to using just one or another. Equally, just because an organisation is relatively flat, it does not mean it is organic. For example, Netflix Inc. has a U-form or unitary organisational structure that involves a hierarchy for maintaining executive control and direction throughout the organisation. Yet their corporate structure is relatively flat compared to many businesses that have a more traditional hierarchical organisational architecture.

Before moving on let’s summarise the two approaches.

An organic organisational structure is characterised by flexible working environments. A horizontal approach to communication where employees share responsibilities in teams and interact with colleagues and managers in different departments to ensure operational success. They are flexible and have the least specialisation of functions. External knowledge is valued, and a reduced hierarchy is characterised by equal employee levels and, in many cases, no job descriptions. It is more towards a Mc Gregor Theory ‘Y’ approach.

A mechanistic transactional organisation is characterised by centralised authority and specialised roles. It is often illustrated as a triangle in the form of Weberian bureaucracy where the higher positions indicate more authority. They tend to be process driven with strict delineation of roles and responsibilities, which do not allow for much flexibility or decision-making outside of the line management system. Managers make all the decisions. Communication is often top-down with limited opportunity for discussion across functions and levels outside of the formal work processes. It is more towards a McGregor Theory ‘X’ approach.

An emerging form of organic organisation known as the socio-organic organisation is endeavouring to improve flexibility and communication. The flow of information is increasingly identified as the critical element in the future of organisational survival and success.

The infamous, distinguished professor, writer, and guru of management, Edgar H. Schein talks about the relationship between information and power. Today, information is even more important if organisations are going to be able to adapt to changing conditions. Information must be shared for organisations to grow and innovate. The grid below is an indication of the importance of the shift around information from the perspective of the machine transactional model and the socio-organic approach.

Changing Perspective On Information

Machine Model

1. Information is required to perform a role or function

2. Information is withheld to maintain stability (“You want the truth; you can’t handle the truth”)

3. I can amass power by holding onto information as “currency”

Socio-Organic Model

1. Information is required to adapt to changing conditions

2. Information is shared in order grow, accelerate innovation

3. I will lose power (be left behind) if I do not share information

Source: Schein E. H., & Schein P. A., 2022

Pulng it all together

Throughout recorded history the nature of work has changed in response to the emergence of new technology, which in turn has had an impact on the way work is organised. The focus throughout the post-industrial age has been to gain the maximum output possible with minimal resources and maximised profit. The way that organisations move their production sites around the world to less economically developed countries is testament to this process. This is now changing for many reasons.

Businesses are now facing probably the biggest challenges ever. Ranging from environmental concerns, resource and energy shortages, political imperatives to ‘return production home’, a more socially aware customer base, and employees who will no longer tolerate the Theory ‘X’ approach to employment and work. At the same time, the degree to which technology is bringing solutions or just creating more problems is an interesting debate, which you can read in one of our earlier article on the Complexity of Work.

The traditional hierarchical bureaucratic transactional organisational design lacks the flexibility to meet the Volatile, Uncertain, Complex, Ambiguous (VUCA) world of today. Its operational approach is also at odds with the style of working that the next generation of workers demand. The organic flatter organisation is arguably more flexible and moves towards the type of work environment that will attract the modern workforce who thrive in the McGregor Theory ‘Y’ environment, and yet still lacks some of the flexibility in its ability to re-shape itself when the need arises. This is where the socio-organic organisation arguably comes to the fore. Its design is predicated on being more dynamic and flexible in form, and not just flatter. This dynamism is more likely to attract the ‘knowledge workers’ who are emerging as the major driving force of the future of work. Their role was discussed in an earlier article Knowledge Workers.

As we move further towards dynamic, flexible organisational designs we also need to understand how they can remain relevant and future-proof, and what this means to management. Dr Ross Wirth and I believe that the role of the emergent task-based network (ETRN) is one of the keystones, which will be explored next.

Originally published on Substack on July 10.