If you were a soccer coach whose team was in sudden-death overtime during a championship match, would you allow each player to give the best of himself, or would you stop the game, take the players back to the locker room, and sketch out the plays you want them to follow in different circumstances?
If you came across a patch of potholes while enjoying a weekend bike ride with your young son, would you stop to calculate the depth of the holes and advise your son on how to steer and shift his weight to offset the force of gravity? Or would you trust him to navigate the terrain on his own?
Obsolete 20th-century organizational structures
We are now closer to the year 2030 than to the year 2000. We have been sailing on stormy seas, playing in sudden-death overtime, and dodging unexpected potholes for quite a few years now, but we continue to approach digital transformation as if we had all the time in the world. We act like we’re still in the 20th century, when changes were slow-cooked and competitors were clearly defined, each one with its own peculiarities.
In today’s unstable world, competitors are constantly morphing, so we don’t necessarily know who we’re up against. The world is changing all the time, at an exponential pace, driven by relentless technological progress.
Fast and flexible decision-making is the key to competing in today’s context, but it is incompatible with the top-down hierarchical structures of most organizations. We continue to use organizational structures designed in the 20th century. Back then, efficiency was more important than the ability to adapt rapidly to change. Companies were viewed as machines. Human resources, like technical and economic resources, formed part of an apparatus optimized for efficiency.
In 1911, Frederick W. Taylor set out his vision for rational work organization: employees would be organized hierarchically to ensure that decisions made by the people in charge were conveyed straight down the line to every component of the “human chain,” which was organized as a series of boxes representing different departments.
Fast and flexible decision-making is the key to competing in today’s context.
The hierarchy formula
As difficult as it may be to acknowledge this, the obstacle to our companies’ successful transformation is the hierarchy formula they use to organize themselves vertically in silos and horizontally in boxes. Silo supervisors set up processes to ensure control over “their” respective silos (bureaucracy). Box owners try to expand their boxes in order to gain more power (ego).
Corporate organizational structures follow a traditional pyramid-shaped hierarchy that motivates people to fight for the few decision-making positions at the top. This professional ladder becomes a breeding ground for power struggles and inflated egos (especially in the boxes closest to the top).
When teams are organized in fixed departments, people are obliged to work in silos where information is isolated, protected, and not shared with “other teams.” This leads to internal processes that hinder the flow of knowledge between members of the same company.
Knowledge and decisions travel through companies at the speed set by the organizational chart. The more silos there are and the more hierarchical the structure is, the longer it takes the organization to adapt.
Critical decisions can be held up if knowledge has to pass through multiple organizational levels to reach the people with decision-making power. The more levels there are, the less room there is to maneuver and the longer it takes to adapt to change. The more boxes there are, the slower decision-making becomes. The more departments there are, the less information is shared.
We are now in the year 2019; the rules of the game have changed. We are in the midst of a knowledge revolution where survival hinges on sharing knowledge quickly, making timely decisions, and having enough flexibility to reorganize teams as necessary. And yet we continue to organize our teams in ways intended to maximize efficiency during the Industrial Revolution.
From “egosystem” to ecosystem: the key to competing today
Some companies have realized that their organizational structure has been preventing them from adjusting to constant disruption. The CEOs of these companies have identified the solution: a profound cultural change that eliminates pyramid-shaped structures, gives employees more decision-making autonomy, and creates flexible teams capable of adapting to the environment over time, aligned under a common purpose and supported by information-sharing technology.
In these companies, bosses have been replaced by responsibility. Organizational charts have been replaced by technological platforms for sharing of all sorts of information (goals, results, milestones, content, salaries, projects, contracts, clients, financial statements, etc.).
Alignment is achieved by replacing the company’s mission with a purpose that entails a shared vision in which everyone is empowered to apply their talent and hard work to make the world a better place, above and beyond profitability.
These companies understand that they must sacrifice the synergies and economies of scale associated with hierarchical organizational in exchange for speed and greater employee motivation. In the long run, this translates into greater profitability and is also a guarantee of survival.
These companies distribute authority and responsibility among all members of the organization. They understand that providing more autonomy makes employees more responsible, develops their talent, and, most importantly, makes them happier in their jobs. At these companies, people don’t just have jobs; they have responsibilities and objectives that they have chosen for themselves in accordance with their interests, capacities, and personal circumstances.
These companies understand that they must sacrifice the synergies and economies of scale associated with hierarchical organizational in exchange for speed and greater employee motivation.
A real transformation
Although digital transformation is a hot topic of discussion in many forums, conferences, committees, and meetings, you hear very few success stories about companies that have transformed digitally. This is because none have really done it.
We have digitally transformed the way we buy things (omnichannel), the way we interact with customers (always on), our urban environment (smart cities), our processes (agile), the way we consume entertainment (pay-per-use), our workspaces (open-plan), and how we get around (self-driving cars, carsharing, etc.). But corporate organizational structures remain unalterable. We have digitalized everything except the organizational chart.
It has taken us 20 years to understand the importance of centering the customer’s needs, the power of harnessing data for faster and more precise decision-making, and the fact that we don’t have to own technology in order to use it. Will we need another two decades to realize that organizational charts drawn up in the 20th century cannot compete in the 21st century?
We must stop organizing our teams as if we had plenty of time to react. The new environment is here to stay, and the transformation is not just another project whose start and end dates were announced via PowerPoint at a recent board meeting.
© IE Insights.
