Organization Architecture – Evolving strain!
Posted by Hindol Datta
Innovation is happening at a rapid pace. An organization is being pummeled with new pieces of information, internally and externally, that is forcing pivots to accommodate changing customer needs and incorporating emerging technologies and solutions. Thus, the traditional organization structures have been fairly internally focused. Ronald Coase in his famous paper The Nature of the Firm (1937) had argued that organizations emerge to arrest transactional costs of managing multiple contracts with multiple service providers; the organization represents an efficient organizational unit given all other possible alternatives to coexist in an industrial ecosystem.
However, 1937 was a long time ago. Companies had smaller reach and technology infrastructure relatively quaint. Distances from all economic agents were an appropriate consideration in setting up the organization. There was far greater stability with respect to extraneous shocks to the company: at least far more than what we have today. The bedrock of innovation stood upon longer runways of patience. The race naturally gravitated in favor of large incumbents. Thus, organizations were built more around defensible parameters. This led to organizations crafting resources in the company which was typically hierarchical. Hierarchy caused layers of filters that vetted out risks and sometime opportunities for the sake of stability and entrenchment in the industrial landscape. Information was not dispersed … thus fuelling less radical affronts by challengers. Capital circulated in limited circles further consolidating the big organizations and stultifying the challengers. Hence, the organization architecture was built around cost containment, incremental innovation and tenureship. It was wiser to put a lid on the creative energies … creativity would be construed as introducing chaos which would pilfer the foundations of an organization’s existence. All of this for the most part held true, but there are and have always been exceptions. These exceptions were needed to achieve breakthroughs … to force inflections.
Today is different. The advances in technology, the boundaryless organizations, the ambition of the workforce, the elevated consciousness of consumers, the global discussion via media and social platforms, the increased ability to parse relevant data … these have all become the signature milestones of our new era. Talent management which was rarely offered more than a glance in the past have come to the forefront: Organization has a new definition. Here is the interesting development: it challenges Coase’s theorem. In other words, organizations have now built-in organic mechanisms for dispersion. In other words, there are forces always in place to disperse the economic agents in the organization to potential free agents … and there are no boundaries … intellectual, geographic, cultural, linguistic, skills, etc. So sculpting organizations based on the precepts of the past sets the tone for entropy and self-immolation; a new architecture is needed to create the framework to accommodate the workforce.
The term “organization architecture” was originally conceived by Delta Consulting in the book, Organizational Architecture: Designs for Changing Organizations. It provided guidance around creating formal and informal systems and structures to advance change. A paper by Partners in Progress (1997) posits the following on the goal of instituting an organizational architecture – “The goal of organizational architecture is to create organizations that provide ongoing value to current and future customers while, at the same time, they optimize the performance of, and align, all aspects of the system. In this context, the system includes suppliers, the organization, its distribution systems, its customers, and the external environment within which these elements operate on a regular basis. “
But in the space of less than 20 years, things have changed and what was advanced as a way to counter change has less relevance now; having said that, the organization architecture is critically important though its meaning may have significantly changed. So here are three things that are critically important to defining the successful elements in the new organization architecture.
1. Create a Learning Organization: Peter Senge had discussed five elements in the learning organization. The only one that I am picking up on is the one referring to mental models as a key element to the learning organization. Mental models are a host of assumptions that individuals and organizations have based on their past experiences. These experiences and memories preserve certain norms of conduct, protocols for exchange of information, and a canvas for product and service development. To create the learning organization, it is just as important to set up systems to unlearn the morass of dead habits. That is not to say that the information gathered is irrelevant and obscure; it is to only review the information in the light of fluid and changing contexts and encouraging experiments in conduct and development. Organization must be crafted to support experiments and hypotheses.
2. Provide Transparency: Experiments and hypotheses testing conducting in silos have no value. It has to be surfaced. Failures and Successes are important lever points. So a great architecture is to create a support structure that will foster transparency, co-operation and perhaps some healthy competition. We often hear of organization creating knowledge-base – for many, this means a categorical presentation of knowledge in the organization. My idea of providing transparency means that the challenges and the objectives are clearly defined, a forum is established for dialogue, systems are in place to support experimentation whose results can be viewed by all, and enabling volunteerism among all participating parties the in the crucible of knowledge.
3. Recognize Organization Participants: Experiments fail. Some succeed. It is imperative that both get equal measure of recognition. Recognition is very important glue that keeps the organization architecture meaningful. Spotlights and tollgates have to be created, and the wins and the failures have to be recognized. The organization has to have the ability to go out on a limb to enable this recognition to be broadcast over a platform extending beyond the organization’s reach. As discussed before, you are architecting the organization for breakneck innovation, yet seeding the fruits of dispersion in the organization by creating a democratic platform for recognition. Thus, the organization has to work harder to counter the gravitational pull of other elements and in that process … the organization becomes best in class.
In summary, talent management is the key denominator across all three elements. It is no wonder that we see a lot of activity around HR technologies as of late. I daresay we will see more deeper and vertical solutions that will solve for the three elements above, and all of these will be enabled by technologies and social platforms. The new organization architecture is based on dialogues and discussions between talented economic participants that are gathered around value systems that will advance meaning in their lives and make a difference in the world.
Posted on August 25, 2012, in Employee Engagement, Innovation, Learning Organization, Organization Architecture, Recognition, Social Network, Talent Management and tagged employee recognition, experiments, innovation, learning organization, organization architecture, rewads, social network, talent management. Bookmark the permalink. Leave a comment.
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