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Make it real! 08 Think about organizational design. You are now probably conjuring up images of managers or management consultants shuffling boxes on an organization chart. Right? Organizational Design: The Lost Art. Wel , that kind of ”corporate restructuring exercise“ hardly deserves to be cal ed organizational design. The topic of effective organizational design transcends disciplinary lines. That´s why it is not effectively taught at business schools, that´s why there is little decent research in the topic, that´s why nobody in an organization, except ”top management“, dares to touch it. To design an organization effectively, you need to understand business models, organizational behavior, information technology, accounting, and leadership. In recent years, writers and thought leaders have coined a dizzying array of buzzwords to help managers design organizations. There is talk of networked organizations, boundaryless organizations, virtual organizations, learning organizations, federalist organizations, wiki organizations, starfish organizations, and the like, to name only a few. But if you actually read and study these works, you will share our frustration. With few exceptions, most writing on this topic is either utopian, or limited to certain types of organization, or is shal ow in a sense that it offers advice that has no theoretical underpinning. The utopionans rail at the stifling nature of hierarchy and extol the virtues of “organizations without structure“: self-organizing work, networks, and employee empowerment wil , they argue, miraculously drive out command-and-control empires. The other set of books and articles offers design choices supported by detailed lists of pros and cons. Yet these analyses quickly prove to be unsatisfying. Lists of tradeoffs and considerations fail to provide a clear sense of direction. When you finish a chapter, it is never clear what exactly organizations should do – choices abound, but no rationale for decision and no convincing theoretical underpinning is given. The BetaCodex, in contrast, presents an integrated theory that gives clear direction about how to design organizations and how to make it fit with management processes, and leadership. To outline how the new breed of organizational design works, this paper offers a tour de force through different disciplines, and through many of the conceptual frameworks that the BetaCodex is based upon. BetaCodex Network white paper – Cel Structure Design © Niels Pflaeging & Gebhard Borck – Al rights reserved Some considerations about organizational design first. Organizational design is a means to an end. Not more, not less. And that end is to create and maintain an organization capable of achieving sustainable competitive success in a dynamic and complex world.* In this context, it is important to remember: There is more to organizations than design – so to bring the design to life, you need to create a coherent whole including values, language, communication, leadership style, processes, etc. There is no single right design for your organization – but your design process should be based on robust design principles Organizational design is an evolving, iterative process – which only feels messy and complicated if the principles that are applied are messy, and if important assumptions are not made explicit. The design you wil come up with at first wil not last forever, or even for long – because you wil learn more and more about different design options and learning loops wil inevitably occur. * This is a claim that is closely related to the BetaCodex Network´s mission. BetaCodex Network white paper – Cel Structure Design © Niels Pflaeging & Gebhard Borck – Al rights reserved The notion of dividing an organization into functions, and then departments, is fundamentally flawed. But what is the alternative? Why should we look for an alternative way of building and governing organizations? The notion of dividing an organization into functions, and then departments, is fundamentally flawed. Dividing a firm like that, you actual y impede work flow, build organizational territories, and drive out initiative and entrepreneurial thinking. But companies have done exactly that for ages. Organizations today are crippled by tayloristic thinking and division between functions. Taylor's idea of separating thinking from execution – like the assumption that responsibility for control and coordination should be located one level above from where the work is actual y performed – have created immense misalignment with today’s critical success factors. These problems have been laid out in detail by the BetaCodex movement since its foundation (then coined “Beyond Budgeting”) in 1998, and also by a fair amount of management thinkers and scientists. As soon as 1960, Douglas McGregor wrote, in his groundbreaking book “The Human Side of the Enterprise”, that “it is probable that one day we shal begin to draw organization charts as a series of linked groups rather than as a hierarchical structure of individual reporting relationships” For further reference on the problems with tayloristic management, see the BetaCodex Network's website. The alternative to taylorism, however, has not been that clear, until recently. And knowledge about how to transform tayloristic organizations into post-tayloristic organizations, which are capable of reinte-grating thinking with decision-making and execution, has been patchy at best. So if we want to depart from the current standard of corporate modern-world “slavery“, based on now obsolete thinking, we need two things. First, we need new mental models to build and govern 21st century organizations. And we also need new, systemic models for change, in order to enable wide-spread transformation of organizations. The problem, overal , is not that people were not fit for accelerated dynamic and more fierce competition. We clearly hold a different view: that, instead, organizations as they are designed today, are not fit for the capabilities of the human beings that work inside them. The tayloristic “machine organization” is doomed, in an age of dynamics and competition. The tayloristic model now has become an immoral choice as a blueprint for organizational design. Why? Because, quite simply, it stands in the way of their people to fulfil their potential, and furthermore because quite recently, the vision and practical road-map to an alternative model has emerged. We cal this alternative the “BetaCodex”. BetaCodex Network white paper – Cel Structure Design © Niels Pflaeging & Gebhard Borck – Al rights reserved Outlining the ‘industrial age’ model and its pitfalls “command and control“ “keep on track” strategy Fixed performance contracts • Too centralized • Too inward-looking control • Too little customer-oriented • Too bureaucratic • Too much focused on control • Too functionally divided • Too slow and time-consuming • Too de-motivating • … From the film ‘Modern Times’ with Charlie Chaplin, 1936 BetaCodex Network white paper – Cel Structure Design © Niels Pflaeging & Gebhard Borck – Al rights reserved Recurring themes in organizational design that any robust design model must address Clarify ownership Allocate authority and power Define resource and Embed value creation governance flows Assure coherence and … cohesion Create robustness for growth and evolution BetaCodex Network white paper – Cel Structure Design © Niels Pflaeging & Gebhard Borck – Al rights reserved Common alternative ways to visualize organizations – according to Henry Mintzberg Oranizations as “pyramids • Process chain strengthens the vertical chain (hierarchy) and chains” • Sustains centralization and heroic management: “The top manager as an important person, removed from operations, taking decisions based on analyses and calculation” • Imagine a hospital, a laboratory or a project– they simply don't work this way! Organizations • The points of focus are hubs: it's them who attract, as “hubs” emit and move people, things and information • Less focused on sequential activities • Example: Hospital - the patient as focal point Organizations • Some organizations natural y don't have a centre as “networks” (e.g. labs, or project teams...) • They are networks with free interaction, embedded in col aborative relationships that work in any direction • It's not a model “without structure” – it just fol ows another logic. One that is not focused on activities or managers. Source: Mintzberg, 2004 BetaCodex Network white paper – Cel Structure Design © Niels Pflaeging & Gebhard Borck – Al rights reserved How to leave taylorism behind… Highly devolved organizations, as opposed to command and control organizations, are not structured hierarchical y. In fact, since hierarchies don’t accept any other rulers but “top management”, or “bosses”, radical empowerment based upon the decentralization of decision-making is not compatible with structures based on power relationships and hierarchy. Although it is wel -known that many organizations are factual y ruled not by formal, but by informal networks, the common way to make teams act responsibly is stil to give some of the organization´s members a “commanding”, or “managing” position. BetaCodex organizations, on the other hand, want to achieve something entirely different: They want everybody in a company to think, to be and act responsible, in order to increase the value and wealth creation. Therefore, a BetaCodex organization does not “believe” in hierarchy. It believes in empowerment and in the capabilities of its people. And the best-known and successful y practiced route to empowerment is to turn the organization into a network of interrelated cells. A cel structure (as opposed to a design based on “departments” and “functions”) is capable of interacting situational y, in more diverse ways than functional y divided hierarchies. Even more so, it doesn’t need commands to be control ed – it can be control ed and governed just through “market pul ”. Other control mechanisms that make sense within a decentralized cel structure are self-control, “peer pressure”, cultural control inspired by strong shared values and culture, as wel as a far higher level of internal and external transparency than is common in the tayloristic management model. Overal , by creating a network of these cel s, and by making use of people´s ful potential, business is being turned as simple and as straight-forward as executives always dreamt it would be. BetaCodex Network white paper – Cel Structure Design © Niels Pflaeging & Gebhard Borck – Al rights reserved