Tag Archives: organizational structure

The Entrepreneur Becomes Prey to the Charlatan

WHY I wrote Outbound Air

As organizations struggle with (normal) growing pains, I watch entrepreneurs grasp at futile straws to make the pain go away. Often the solutions they seek aggravate the condition. Most often, the effort is to find a quick answer to a complex circumstance.

The entrepreneur becomes prey to the charlatan. There is a multi-billion dollar industry dedicated to fleecing CEOs looking for a quick fix. Outbound Air is a warning. The helpful stranger is not necessarily your friend.

Most issues that organizations face are structural. The symptoms look like breakdowns in communication or personality conflicts. They are NOT. Most challenges that organizations face are structural.

Structure is the defined accountability and authority embedded in the working relationships of the organization. Most companies do not define those accountabilities and that is where the trouble begins.

“Oh, we must have a communication problem.”

No, you don’t have a communication problem, you have an accountability and authority problem.

“Oh, we must have personality conflict.”

No, you have an accountability and authority conflict.

This is the beginning of WHY I wrote Outbound Air.

What Comes After Go-Go?

WHY I wrote Outbound Air

I watch organizations struggle. It is normal, uncomfortable, but normal. This organizational discomfort causes the founder to look for answers, in all the wrong places.

Go-Go is the most fun stage for any business. There is energy and enthusiasm. With a sustained momentum of sales, there arises a new feeling, invincibility. The entrepreneur says, “We faced the odds against us and we didn’t die. Our customers love us. We have a superb business model. Flawless execution of a brilliant business plan. We could take our business model and conquer any industry.”

This organization bounces inside its geography, opportunistic in its behavior. Its organizational challenge is focus. It cannot figure out if they are in the real estate business or the shoe business, because they believe they could make a fortune in both.

The momentum of sales has turned the negative cash flow of infancy into revenue streams of Go-Go. With a credit facility for expenses, this organization is on top of the world. The customer is happy and promises to buy more. But a subtle inspection in the wake of this organization produces body bags and friction. It is a wonder there is not more collateral damage. Efficiency is elusive. Profit is fleeting (in spite of the appearance of cash).

All of this is normal, but the entrepreneur is stumped, wondering why the organization does not run more smoothly and why it staggers in inefficiency. There are many who would provide answers, but most would be wrong.

This is the beginning of WHY I wrote Outbound Air. Tomorrow, the next stage.

The Manager Lives and Dies by the Decision

From Outbound Air

“I have an issue where I could use your help,” Jim explained to the group. “And I think your understanding will have impact all the way to the top of this organization.

“As a manager, you each have a team,” he continued. “And you defined a manager as that person held accountable for the output of the team. So, if there is a decision to be made, related to the objective for that team, who is accountable for the consequences of that decision? Is it the manager, or the team?”

“Are you kidding me?” Johnny replied. “It’s the manager. If it turns out to be a wrong decision, we don’t fire the whole team, the manager is accountable.”

“Then, whose decision is it to make?” Jim floated the question, the same question that frustrated Kevin DuPont. “Whose decision is it?”

“It’s the manager’s decision,” Johnny responded. “The manager is accountable, the manager lives and dies by the decision.”

“But what if the manager doesn’t have all the facts to make an informed decision,” Jim protested, “and needs the team to participate. Needs the team to gather the facts, analyze the facts. Then, whose decision is it?”

Doesn’t This Look Like a Hierarchy?

From Outbound Air

“You know, this is beginning to look like a hierarchy,” Johnny said. “Do you remember Preston Pratney? If there is one thing he railed about, it’s that hierarchy is bad. It goes against all the tenants of Tribal Leadership. Having layers inside the company makes it too bureaucratic, too much red tape. If there is a decision to be made, why should someone have to check with their manager?”

Mary stepped in. “You’re talking about Preston Pratney? The problem with Preston is that he read too many books on leadership. He never understood the purpose of hierarchy. He got it confused with command and control. Hierarchy is necessary, to create this value stream for decision making and problem solving.”

Outbound Air Now Available on Amazon

Outbound Air is a fictional account of a regional airline acquired by an investment group. The story illustrates the adolescent pains of organizational growth as the new CEO takes one mis-step after another. Outbound Air’s return from the brink of destruction is a vivid tale of how organizations work.

Why read this book –

Every management team wants to take their company to the next level. Most have no clue what that means. I press for answers and get general responses, like –

  • Higher revenues
  • Larger geography
  • More stores

I am a structure guy, and, levels actually exist. Each level in the life of a company has defined characteristics and carries predictable challenges that must be solved before the organization can go to the next level. This book answers the question that no one asks, “Just exactly what is the next level?”

These levels teach us about organizational structure. This structure helps a company understand why it has its problems and how to solve them. This book is about the structure of work, specifically –

  • Predictable levels of organizational growth, a prelude to levels of work.
  • Levels of work and accountability, in both managerial relationships and cross-functional relationships.
  • How to implement functional structure based on levels of work.

The safety briefing is over, buckle up and prepare for an immediate departure.

Outbound Air – Levels of Work in Organizational Structure

Outbound Air

Who Should This Person Report To?

“I think we have these roles sorted out,” Peter proclaimed. “I like the picture. It makes sense. But how do these roles relate to each other? I mean, who decides who is whose manager?”

Johnny jumped in. “It’s true. Whenever someone new joins the company, that’s always the first question. Who will this new person report to?”

Jim Dunbar knocked gently on the door. “Hope I’m not disturbing. How are things going?”

“We have a problem,” Johnny declared. “Who decides who reports to whom? Whenever we have a new employee, we all sit around the table and that’s the question. Who will this new person report to?”

Mary looked out the window, but suddenly turned and came back into the conversation. “Usually, we unload the new guy on the manager or supervisor who is the least busy.”

Excerpt from Outbound Air, Levels of Work in Organizational Structure, by Tom Foster, now available on Kindle, soon to be released in softcover.

Outbound Air

What About in Individual Technical Contributor?

From the Ask Tom mailbag –

Question:
In the levels of work definition, from Elliott Jaques, you have highlighted that

  • Strata III – creates the system for production (typically a managerial role).
  • Strata II – makes sure production gets done (typically a supervisor role).
  • Strata I – production (typically a technician role).

Assuming one is working in a highly technical field, one might have a Systems Architect role at Stratum III, with no reports. Does this then mean that they fulfill ‘
“production” and that a Strata IV role would be the supervisor and a Strata V role creates the system? Or, would you say that the Systems Architect fulfills all three roles? Or something different altogether?

Response:
Thanks for the question. You have tipped off a number issues. The example I use most often in my Time Span workshop is a manufacturing or direct service model. These models are easy to understand, both in level of work and managerial relationships.

But there are hundreds (thousands) of business models that are not so straightforward in level of work. The calibration to determine level of work hinges on the length of the longest time span task in the role. As you suggest, in a technical industry, you may have “production” work at S-III, meaning the longest time span task would take longer than 12 months and shorter than 24 months to accomplish. This is quite typical in professional service firms (accounting, legal, financial advisory, engineering, architecture).

Your illustration also reveals the role of an individual technical contributor. An individual technical contributor is not necessarily a managerial role, but likely requires level of work at S-II, S-III or S-IV. Again, this is typical in technical business models.

If you have interest, I describe more details related to level of work, in the book Hiring Talent, for the following business models.

  • Managerial roles
  • Accounting roles
  • Engineering roles
  • Computer programming roles
  • Sales roles
  • Restaurant roles
  • Fleet service roles
  • Creative agency roles
  • Financial planning roles
  • Insurance agency roles
  • Construction trades roles
  • Legal firm roles
  • Public accounting roles
  • Medical roles
  • Educational institution roles (K-12)

Your question also asks about the nature of the managerial relationship for an individual technical contributor where the level of work is S-II, S-III or S-IV. I will save that for tomorrow.

Difference Between Non-Profit and Profit Organizations

From the Ask Tom mailbag –

Question:
We run a non-profit organization. Curious, related to Requisite Organization, what differences between not-for-profit and a profit organization.

Response:
Biggest differences between for-profit and not-for-profit –
1. Profit is called surplus.
2. The entity doesn’t pay taxes, or pass through taxes.
3. No person “owns” the entity.
4. Governance is achieved through a board of directors, which, in turn, hires the CEO.

While it is a fair question, the contrast in RO between for-profit and non-profit is minimal. The technical name for most of Elliott’s research is a Management Accountability Hierarchy (MAH). It’s purpose is to get work done.

There are larger contrasts between entities organized for purposes other than getting work done. There are differences between an MAH and a religious organization, a political organization, a family unit, a collegial organization, a fraternity, a sports team. Organizations are not necessarily designed for the purpose of completing work. And, there, is where you might see larger differences in accountability and authority related to problem solving and decision making.

Massive Update to Time Span 101

Just wanted to tell you about a massive content update to Time Span 101.

New Video Content (2-1/2 hours worth)
Time Span 101 now contains video from our most popular workshop Management Myths and Time Span. We recently produced this recording, and embedded more than 2-1/2 hours in 23 video segments into the learning platform at Time Span 101. If you attended one of my live workshops over the past ten years, this is your chance to re-capture the things you discovered about your organization.


New Updated Workbook
Subscribers will receive our pdf workbook, based on the workshop handout, to help organize your notes as you go through the program.

Old Subscribers
If you already have a subscription to Time Span 101, your login still works. You will receive a separate email with more details, including the pdf workbook.

New Subscribers
Get your login, now, for only $100. Register here – Time Span 101.

Learn the Way You Want to Learn
It’s up to you –

  • Follow the program – Timespan101.com is built in a logical sequence, so that one principle builds on another. It’s a no-brainer.
  • Random Access – You might have a particular interest. You can access any of the topics out-of-order based on your own interests.
  • Just Watch the Videos – If you just want to watch the videos, there is a link in [How to Use This Program] to just watch the videos. There are (23) video segments in the playlist. More than 2-1/2 hours of embedded videos.

Share This Critical Research
If you know someone else, who might also be interested in the Time Span research of Elliott Jaques, let me know. If you have any questions, just Ask Tom.

“Zappos just abolished bosses” – Baloney

“The latest management trend to sweep Silicon Valley requires CEOs to formally relinquish their authority and grants special protection for every employee to experiment with ideas. It’s called holacracy and big name tech leaders have jumped on the bandwagon,” proclaims Gregory Ferenstein in his post on Vox, July 11, 2014.

“Zappos CEO Tony Hsieh announced that he will transition his entire Las Vegas company — with a billion dollars of revenue and 1500 workers — to holacracy by the end of 2014.”

Holacracy is described as the latest management craze and it is just that – craziness. The problem with craziness is that a manager or CEO will read his article and naively follow a prescription that will cost hard dollars and create untold havoc. Following Ferenstein’s prescription could be fatal.

Holacracy is a weasel word. It attempts to use new (made up) terminology to mask a vague notion of contrived credibility.

“Holacracy is management by committee with an emphasis on experimentation. The CEO formally relinquishes authority to a constitution and re-organizes everyone into decentralized teams that choose their own roles roles and goals,” explains Ferenstein. Think about this. What is delegation? Delegation is the assignment of accountability and authority to complete a task. Delegation shifts the accountability and authority to a “decentralized” team that chooses to complete the task (or not).

And believe me. If the “decentralized” team chooses not to complete the task and adopts a six hour lunch break, some manager will step in and say “Guys and gals, that is not what we had in mind.”

If you read this column regularly, you know I am a structure guy focused on the research of Elliott Jaques. This notion of giving a team direction (an objective) and providing them latitude (time span of discretion), within limits, to solve a problem is not a new notion. Holacracy is baloney (weasel word).

Ferenstein would argue with the words “within limits.” He would argue that Hsieh would set those limits free. That will not be the case. Hsieh will define those limits (discretionary authority). Holacracy obscures what is really happening using words without meaning.

“Advocates for holacracy argue that centralization of power suffocates innovation.” Here is the biggest problem with Ferenstein’s description – most managers, CEOs and writers about management DO NOT UNDERSTAND the purpose for hierarchy. They believe that management is all about centralization of power. Hierarchy has little to do with power. Hierarchy has everything to do with accountability and authority.

So, is Tony Hseih misguided in his actions and decisions related to his management structure? No. What IS MISGUIDED is the understanding of what he is doing and its description as holacracy. Over my next few posts, we will look closer at what Tony is doing and see that it is nothing new. And if Tony understood his decisions more clearly, in the context that I will describe, those decisions would be more effective in creating his image of an organization.

The purpose of an organization is not to broker power, but to get work done. I know that is what Tony wants to do. The question is, what does that structure look like? It ain’t holacracy.