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Nov 13, 2018 | 5 min read

Transformation

The 4 ills of organizations

Tom Morisse

Research Manager


FABERNOVEL
Last week, we introduced you to our POP model to help you (re)design your organization. Today, we're going to use this model for problem-solving. There are four major stumbling blocks that can slow an organization down: reduction, incoherence, linearity and ambiguity.

N°1 – Reduction

The first major issue for an organization is when one of the pillars of the POP model is reduced to just one (or a few) of its components.

 

(1) Reducing Purpose to strategy

First scenario: a lack of vision or mission – or vague clarifications that ultimately are the sum of the products’ and services’ parts – that reduces purpose to mere strategy. Imagine a large group with centuries of tradition behind it, having been consolidated again and again over the years and the founders having long since disappeared, with an offer that didn’t need to change until fairly recently. How many of its employees would be able to describe the business’s purpose? In situations like these, strategy serves no other purpose than to uphold a sort of tautological survival instinct: « we exist because we’ve always existed ».

 

(2) Reducing People to one of their categories

Stakeholders are diverse and aren’t always taken into account. Or rather, they’re taken into account but not in equal measures. The most common criticism thrown around is when a company makes shareholder value its only compass. Pressuring employees, clients and suppliers and neglecting the environment to boost sales, even if this drains shareholder value in the long run!

But rather than ramming home this point even more, it’s more useful to focus on how these conflicts between stakeholders are becoming increasingly complex as a result of the digital revolution. Here are three case studies:

  • Employees vs. locals: over the past few years in San Francisco, the Big Four and Unicorns have been under fire for pampering their employees while driving up rental costs, pushing local populations further out of town. As a result, we’ve seen locals throwing stones and heckling at Google buses.
  • Clients vs. suppliers: platforms sometimes prioritize one side to the detriment of the other. A good example of this is Uber: the company is continuously cutting ride fares while raising their criteria and expectations for drivers. Social media platforms sometimes go too far in exploiting data provided by their suppliers (users), in order to better serve advertisers (their actual clients).
  • Founders vs. shareholders: Page & Brin at Google and Zuckerberg at Facebook have managed to keep legal control over their companies to ensure they don’t depend on the fluctuating expectations and demands of the financial markets. They sometimes come under fire for this approach: their control over their own business is praised when times are good, but when times are hard, there’s nobody in place to act as a safeguard.

And because there are so many solutions available to better take into account each category of person (empowerment with respect to employees, lean startup with respect to clients, CSR with respect to suppliers and the general population, etc.), it is increasingly difficult for an organization to strike the balance between all these different needs. 21st-century businesses must be well-balanced in order to survive.

 

(3) Reducing the Organization to its routines and structures

In major, incumbent groups, the holy trinity of culture, routines and structures focuses predominantly on the latter two to allow companies to scale up in a consistent, cohesive manner. That’s ultimately what we discussed in one of the series’ earlier articles.

 

(4) Reducing the Organization to its culture

In a U-turn to the previous point, startups may find themselves off-balance when it comes to culture: state of mind, corporate philosophy and values are considered crucial to meeting set goals. Facebook’s famous ‘move fast and break things‘ mantra is a good example of this, as is a recent illustration from Google. A few years ago, one of the pioneers of the driverless cars’ movement, Anthony Levandowski, took action that was dubious to say the least. He set up two companies completely separate from Google and offered his employer the opportunity to buy them, whilst in talks with competitors. Faced with in-house unrest, Larry Page bypassed the hierarchy and usual procedures and gave the green light to buy out Levandowski’s companies. He claimed it was absolutely essential to hold on to the ‘hacker spirit’ and remain at the cutting edge of advances in autonomous driving — whatever the price.

 

N°2 – Incoherence

An organization is a complex system, a machine that requires strong coherence between its many parts to reach optimal functionality and ensure all stakeholders are aligned. But contradictions can also emerge between the three central pillars which are culture, routines and structures. Let’s look at a few examples for each of these components in pairs:

  • (5) Culture <> Routines: CSR goals that aren’t backed up by changes in how relevant tasks are carried out. For instance, setting up a criteria grid for selecting suppliers, but an operational-based decision-making process that continues to make price the priority.
  • (6) Routines <> Structures: setting up internal startups without ensuring that advancement and pay frameworks are in place to support this new approach.
  • (7) Structures <> Culture: claiming to be prioritizing client-centric value, which contradicts the company’s silo mentality in which functional and product teams are incapable of working together to meet new needs.

 

N°3 – Linearity

As you can see, the POP model is a never-ending loop: through the medium of Organization, People bring Purpose to life, with the latter feeding back into the People themselves. The process is gradually refined over time, but the clean, unbroken ‘loop’ structure of the process must first be firmly in place.

 

(8) When Purpose isn’t shaped

Other than a company’s actual directors, which means are employees, clients and other stakeholders given to influence the organization’s Purpose? A lack of appropriate channels, and potentially even bottom-up blocking mechanisms, can prevent them having their voices heard. Middle management can therefore sometimes serve as a buffer between on-the-ground recommendations and upper management’s instructions.

 

(9) When the loop is inverted

The organizational model of a big traditional company is often based on an inverted loop, which is synonymous with the loop completely vanishing. The overarching organization in the industrial era had purpose shaping people (standardizing preferences and tasks), and people serving the purpose. In doing so, the loop lost its sense of virtuous iterations.

 

N°4 – Ambiguity

(10) The last stumbling block for an organization is ambiguity, meaning a lack of formalized frameworks and guidelines explaining how it is designed.

Each of the major components inherent to an organization (culture, routines and structures) are both implicit and explicit. While every organization will always build on implicit, impalpable aspects, intangible, tacit concepts are more difficult to pass on and are more open to personal interpretation. This can sometimes have a negative knock-on effect, such as efforts being dissipated or unnecessarily repeated (if for example information-sharing guidelines for a new project aren’t clearly stated), or rattling stakeholders’ confidence and trust (such as a lack of transparency on progress or mobility conditions, etc.).

That being said, the difficulty here is that there’s no one-size-fits-all solution to deciding what needs to be formalized. You just have to keep your eyes open. Here are two ideas you can try:

  • Hold ‘post-mortems’ or retrospectives of failed projects (to clarify roles and responsibilities for the future, for example).
  • When you hear one colleague ask a second for further details of organizational aspects, and if the second colleague replies that that’s an obvious question, it may be time to ramp up your formal rules on the subject!

 

In short…

To help you spot dysfunctional areas in your organization, we give you a few pointers that are easy to remember thanks to our amazing acronym (it’s what we do best!). Just think: ‘back on track and on the RAILs…’ RAIL: Reduction, Ambiguity, Incoherence, Linearity.

A quick summary of the 10 pitfalls in a single diagram:

 

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