We are living in times where many things seem to be turned upside down. What seemed unthinkable until recently is taking place, even beyond our imagination.
What about the way we manage organizations? The traditional hierarchical model persists throughout the world. While it may be effective in certain environments such as the military, it is clear that a top-down structure places precise limits on what an organization can achieve. These limits stem from all the artificial barriers created internally, either through department and function barriers that make activities seem disconnected, or through vertical seniority barriers that block communication.
Why do hierarchies exist?
The idea of a top down hierarchy is deeply ingrained in our psyche. It has even existed for thousands of years in biblical sources. When Moses received the Torah, he began to instruct the people on how to apply its laws. Moses’ father-in-law, Yitzro (Jethro) observed how exhausting this was becoming because Moses was the only source of this information for everyone. Yitzro advised Moses to delegate part of this work to others and he listened. And so Moses appointed “leaders of thousands, leaders of hundreds, leaders of fifties and leaders of tens.” (Exodus 18:24).
However, this was not a hierarchy of power but one of knowledge. It was based on competence. It was a solution to allow the energies and competencies available to be used in the most effective way.
Exercising control
The assumption upon which a top-down structure in companies is based is that the more activities are divided up and managed vertically, the easier it is to have control over them. It is underpinned and reinforced by a method of accounting that encourages local goals (e.g. of a department or function) instead of considering how this contributes to the overall goal of the company. This accounting method, while necessary for compliance, is also unable to measure the most vital data for a healthy company: speed of cash generation.
Most importantly, this assumption ignores the fact that everything a company does has to enhance flow, from the inputs received from the market to the outputs to the customer. The first, formal recognition of this was given by Dr. W. Edwards Deming with his ‘Production Viewed as a System’ drawing. He shared this in all his lessons to the leaders of industry in post-war Japan to help them rebuild their economy. The Japanese leaders also listened. It is not an exaggeration to say that by heeding Deming’s lessons on the organization as a system and the importance of managing variation, Japan arose from devastation to becoming a global economic player.
Focusing on flow
In today’s digitized world, it has never been more urgent to shape companies so that they can accommodate and accelerate flow. Multiple efforts have been made to try and find a “fix” for silos in companies because it is evident that they create damage. These “fixes” that attempt to build “cross-functional” collaboration are workarounds rather than a solution. They do not address the inherent issue of internal horizontal and vertical barriers with all the frustrations they create – see the Fortune article ‘2025 is set to bring a ‘manager crash’ as burnout and lack of support reach a breaking point’.
Workarounds are insufficient. Much deeper thinking is required and, at Intelligent Management, we focused on rethinking not just the structure of a company but how to practically enable this structure to operate on a day-to-day basis. As with all our work, we first looked to hard science for answers and then considered the cognitive implications of a new solution. Our Decalogue method interweaves the management thinking of Dr. Deming and Dr. Goldratt, both of whom were physicists. Since they first introduced their groundbreaking solutions, modern science keeps evolving. This includes the study of systems science, non-linear phenomena and network theory. Our team has always included physicists, mathematicians, engineers and philosophers and we used this input to gain a deeper understand of what a company is at its most fundamental level.
Revealing the inner nature of an organization
We began with Deming ‘s assertion that an organization is a system, a set of interdependent components that work together to achieve a common goal. We were then able to reference contemporary science to go deeper to understand this system as a directed network, made up of hubs, nodes and linkages that are directed towards a goal. Understanding an organization in this way does not mean imposing some new fangled idea. It reveals the inner nature of an organization. We struggle to see it beneath the artificial layers/barriers of hierarchy and functions. However, once we do perceive it, we become free to design the work and interactions in the most effective way possible to enhance and accelerate flow. Processes and projects that synchronize available competencies become the natural way to operate this network, and even greater focus and effectiveness comes from identifying a strategic constraint. (See The Network of Projects.) This is how organizations can focus all their resources towards the goal and take a leap in performance.
Thinking differently
The opportunity is enormous for companies to recognize themselves and operate as an interconnected system and network. It’s not about transformation, it’s about allowing the true nature of the organization to emerge. As with any shift in reality, our thinking habits, fears and doubts can get in the way. This is only human. We have to open up our minds to the challenge so that we don’t simply revert back to more familiar ways of behaving, even if we know they are suboptimal. Having a method to continuously challenge our assumptions is what allows us to embrace new and more effective ways and to adopt a mindset of not just continuous improvement but continuous innovation.
To find out more about ten guided steps to a systemic leap ahead for your company, contact Angela Montgomery at: intelligentmanagement@sechel.ws
SCHEDULE AN INTRODUCTORY CALL WITH US
Intelligent Management works with decision makers with the authority and responsibility to make meaningful change to optimize your company for the digital age. We have helped dozens of organizations to adopt a systemic approach to manage complexity and radically improve performance and growth for over 25 years through our Decalogue management methodology. The Network of Projects organization design we developed is supported by our Ess3ntial software for multi-project finite scheduling based on the Critical Chain algorithm.
See our latest books: The Human Constraint from Routledge; From Silos to Networks: A New Kind of Science for Management from Springer; Moving the Chains: An Operational Solution for Embracing Complexity in the Digital Age by our Founder Dr. Domenico Lepore, and ‘Quality, Involvement, Flow: The Systemic Organization’ from CRC Press, New York by Dr. Domenico Lepore, Dr. Angela Montgomery and Dr. Giovanni Siepe.
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