A New Organizational Model for the Digital Age

As we’re enjoying a visit here in Victoria, BC from Goldratt’s original publisher, Larry Gadd who published our foundational work, ‘Deming and Goldratt: The Decalogue’ – the first book to be published by North River Press on the Theory of Constraints that was not by Goldratt himself – it’s a good occasion to look again at the Decalogue.

Ten steps for transformation

The 10 macro steps of The Decalogue methodology for systemic management were first published in 1999. They bring together the work of W. Edwards Deming and the Theory of Constraints in steps to shift organizations from a mechanistic, fragmented structure in silos to operating as a whole system. The ten steps are:

1. Establish the goal of the system, the units of measurement and the operational measurement (without a common goal there is no system)
2. Understand the system (draw the interdependencies)
3. Make the system stable (understand variation and its impact on the network, make sure that the oscillation of the processes is statistically predictable)
4. Build the system around the constraint (subordinate the organization to the constraint, the only part of the system that can never stay idle)
5. Manage the constraint (protect the constraint from the intrinsic variation 
present inside the system with a “buffer”—buffer management)
6. Reduce variation at (of) the constraint and the main processes (wider variation implies poorer management; low variation improves predictability, reduces inventory and WIP)
7. Create a suitable management/organizational structure (design the 
network of interdependencies as a network of projects to improve the 
performance of the system)
8. Eliminate the “external constraint” (sell all the capacity the system has)
9. Where possible, bring the constraint inside the organization and fix it there (an “internal” constraint is much easier to manage than an external constraint)
10. Create a continuous learning program (motivate people to learn, improve the system through personal improvement)

Complexity and networks

We did not have a complete answer for Step 7 of the Decalogue, ‘Create a suitable management/organizational structure’ when ‘Deming and Goldratt’ was published. Over the years of working with the Decalogue, and, true to our vocation as organizational scientists, with our increasing familiarity with complexity science and Network theory, what emerged was a new organizational model for complexity.

Moving beyond the blockage created by a hierarchical/functional structure is, above all, a cognitive challenge. The notion of hierarchy is deep in the human psyche. What we need, then, for a viable solution is something that preserves the concept of hierarchy but that shapes it in a completely different way.

We call this the Network of Projects. We’re discovering more and more that this organizational model is appropriate for an increasingly digital and decentralized way of working.

Sign up to our blog here and shift your thinking towards broader, systemic possibilities for yourself and your organization.

About the Author

Angela Montgomery Ph.D. is Partner and Co-founder of Intelligent Management and author of the business novel+ website  The Human Constraint . This downloadable novel uses narrative to look at how the Deming approach and the Theory of Constraints can create the organization of the future, based on collaboration, network and social innovation.  She is co-author with Dr. Domenico Lepore, founder, and Dr. Giovanni Siepe of  ‘Quality, Involvement, Flow: The Systemic Organization’  from CRC Press, New York.