Scalingthe Organizationmanagement30.com/meddlers-game

What is the best organizational structure?

How do we scale the business in an agile way?

Conway’s Law

Organizations which design systems are constrained to produce designs which are copies of the communication structures of these organizations.– Melvin Conway

We want to be agile, resilient and we want to learn effectively and fast. The tension of our time is that we want our firms to be flexible and creative but we only know how to treat them as systems of boxes with a limited number of arrows between them.– Esko Kilpi

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An organization should operate like a city. Some parts emerge bottom-up while others are designed top-down.

The art of management is finding the right balance between these two approaches.

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In which ways do organizations need to

achieve structural balance?

Knowledge work requires specialization (going deeper) but innovation requires generalization (spreading out).

The economies of specialization make functional division the most common. But innovation requires us to do things we’ve never done before and thus innovation is incompatible with the functional organization.

– Peter F. Drucker, Management – Burton, Obel, DeSanctis, Organizational Design

Specialization versus Generalization

Efficiency versus Effectiveness

Efficiency is a primary focus on inputs, use of resources, and costs. Effectiveness is a focus on outputs, products or services, and revenues.

You can achieve efficiency only in predictable, stable environments. You need effectiveness when environments are complex and changing fast.

– Burton, Obel, DeSanctis, Organizational Design

Centralization versus Decentralization

Centralized decisions are coordinated, limit waste, and lower average costs by managing the use of fixed resources.

Decentralized decisions are quicker, with local information that is probably better in ambiguous and fast-changing contexts.

– John Roberts, The Modern Firm– Tim Harford, Adapt

It is possible to be centralized and decentralized at the same time: centralized on common processes and support operations, and decentralized on business decisions.– Bjarte Bogsnes

Hierarchies versus Networks

In a hierarchy, rules and processes create predictability, facilitate coordination, and reduce cognitive load because people have proven responses to routine situations.

In a network, there is collective intelligence. The crowd, with its many connections between members, can be smarter and more innovative than a central authority.

– Steven Johnson, Where Good Ideas Come From

Even small organizations can’t function without hierarchies and specialized roles, groups, and divisions.– Bob Sutton

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Exploitation versus Exploration

Innovation is more usually successful when an autonomous unit is charged with exploring a disruptive, innovative idea.

However, in the rare cases where organizations are able to combine exploration and exploitation, the successes are usually larger.

– Jens Maier, The Ambidextrous Organization

HierarchiesEfficiency

SpecializationCentralizationExploitation

NetworksEffectiveness

GeneralizationDecentralization

Exploration

balance(ambidexterity)

What are common patterns for balancing

organizational structures?

T-Skilled People

Hire “generalizing specialists” who go deep in one area but also branch out in other areas.

Value Units

Organize people around cross-functional core processes and value streams, supported by shared specialist units.

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Small Teams

Team members become less productive as the size of the group increases (The Ringelman Effect). Therefore, keep teams small, but large enough to cover a value stream.

– Jacob Morgan, The Future of Work

Semi-stable Teams

The best-performing teams are those that stay intact as a group. However, a small but steady variation in membership is healthy even for stable teams.

https://medium.com/@davidburkus/write-and-then-keep-rewriting-your-org-chart-403f508cbd81

Replace Job Titles

The concept of a fixed job is obsolete. Instead of a steady job, expect continuous adaptation and responsiveness to meet the needs of the moment.

– Tom Coens, Mary Jenkins

Communities of Practice

A community of practice (CoP) is a group of people with a shared concern, interest or passion, who deepen their knowledge and expertise in this area by interacting on an ongoing basis.

– E. Wenger, R. McDermott, W. Snyder

Open Allocation

Let employees pick and choose the projects that interest them most instead of being told what to do and what teams to be part of.

http://www.forbes.com/sites/quora/2012/11/26/what-is-open-allocation/

Double Linking

Liaisons are like ambassadors who serve to connect teams. Make links between dependent teams but always keep a low number of dependencies.

The more loosely coupled the design, the easier it is to experiment with changes in any aspect of the organization.– John Roberts

Illustration: Quote slide (man in front of chalkboard)

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2 3

Team Number One

Multi-tasking is bad but multi-projecting is fine. It’s normal for people to work on multiple teams. But they should know which team is their first priority.

Local Rules

Every team should be allowed to differentiate themselves and operate according to their own local rules, as long as the rules are in harmony with their environment.

Create a City

Netflix gave up trying to organize its software as one large monolithic application and broke it down into independent services that can manage their interactions in a peer-to-peer way, like companies in a city.

– Dave Gray, The Connected Company

Exercise

Play the Meddlers Game!management30.com/meddlers-game

Management – Peter F. Drucker http://bit.ly/2cmNCFl

Organizational Design - Burton, Obel, DeSanctis http://bit.ly/2cmNHJ8

The Modern Firm – John Roberts http://bit.ly/2cE1puu

The Ambidextrous Organization – Jens Maier http://bit.ly/2cXaf48

The Connected Company – Dave Gray http://bit.ly/1PkwvAB

Reading List

Want to work with your peers to solve problems facing today's change management?

Learn to increase employee engagement at a Management 3.0 workshop!

https://management30.com/events/

info@management30.com

Text: Jurgen Appelo Illustrations: Chad Geran Design: Muuks