Tag Archives: organizational structure

Timespan as a Measure of Capability

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There is a famous psychology experiment using marshmallows and children to illustrate delayed gratification. Walter Mischel’s study collected data about participants and their choice to eat one marshmallow now OR wait fifteen minutes for the promise of a second marshmallow. Participants were then assessed years later where stark differences were observed related to academic achievement, health, obesity and SAT scores.

While the study seems to indicate a subject’s willpower or self-control, it can also be seen to illustrate an individuals timespan framework. What sacrifice can be made now for an improved future outcome?

Why organize for a better future outcome? Why not eat the marshmallow, or all the marshmallows now? If the problem is hunger, it certainly seems like a proper solution. Except, at some point, we might get full. And, we might even have some marshmallows left over for later. Boom. Delayed gratification becomes a concept in the scenario “Be kind to your future self.”

It also opens up the possibility of being kind to other people with our leftover marshmallows. In children, we see this as sharing. In adults, we see this as trade. Sharing is not a one-sided transaction, it is sharing now with the promise (at least hope) that at some time in the future, when we are out of marshmallows, that a friend would reciprocate.

This example illustrates short timespan options, but what if the organizational sacrifice is larger? Can we organize more complex sacrifices to solve more complex problems? Can we commit our time in research and study with no near-term payoff to create a technology in the future that will solve more complex problems?

What sacrifice can be made now for an improved future outcome? A bag of marshmallows might satiate immediate hunger, but what about our hunger for tomorrow? And what about next week? It has been said that man cannot live by marshmallows alone, so what of the health impact of a diet of sugar treats? Enlarging the problem of feeding an individual to feeding a family, to feeding a community, to feeding a nation-state, it is not just detail complexity, but complexity defined by the uncertainty of the future.

Would you agree there are some problems in the world that most people can solve?  But, as the complexity of the problem increases, some of those people will struggle. We can measure that complexity in timespan.

Timespan becomes a proxy for problem complexity with a concomitant proxy as a measure of human capability.

After Midnight

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Elliott Jaques was a Canadian born psychologist, scientist, researcher, practitioner who focused on organizational structure. Through the course of his research, he discovered the lynchpin. You would think the discovery would have been in the hallowed halls of a research library, or standing beside a chalkboard of mathematical equations. But it had more to do with a knock on the door after midnight with a small group of addled shop stewards who had consumed one too many pints.

Order and chaos. Order is what we know, chaos is what we don’t know. We know the past, at least our perception of the past, all the way up to the present time. But, once we move through the present time into the future, uncertainty creeps in, ambiguity tiptoes in the shadows. Chaos lives in the future. And the further into the future, the more chaos there is, uncertainty, ambiguity.

“Elliott, Elliott. Wake up Elliott. We think we found it.”

“Found what? It’s after midnight and you guys have been drinking.”

“Elliott, Elliott. Could it have anything to do with time?”

“Guys, can’t we pick this up in the morning? It’s late.”

“No, Elliott. Could it have anything to do with time? You know, the guys on the shop floor, they get paid by the hour. Their supervisors, they get paid by the week. And the managers, well, the managers get paid by the month and the vice presidents, their compensation is stated in terms of a year. Could it have anything to do with time?

“The guys on the shop floor, they are accountable for things happening on a day to day basis. Their supervisors are accountable for scheduling and lead times for the next week or a month. Their managers are accountable for annual plans and targets. The vice presidents are accountable for the longest projects, more than a year.  Could the lynchpin we are looking for in organizational structure be all about time?”

And they never looked back.

Water Flows Downhill

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It’s a plumbing analogy, but demonstrates a law of physics.

Hierarchy is a value sorting process to bring order to the chaos of the world, order being what we know, chaos being what we don’t know.
Hierarchy, in a functional organization, is a value stream characterized by competence. We build the organization based on the competence required in the roles in our design. A visual picture of our design, on a piece of paper, looks like our organizational chart, our organizational structure.

Organizational structure is the way we define the working relationships between roles, related to accountability and authority. The way we define the value in the hierarchy determines the energy flow and whether that organization is functional or dysfunctional.

If the value is power, the organization will be a hierarchy of power and its energy will flow based on power. If the value is command, the organization will be a hierarchy of command and its energy will flow based on command. If the value is control, the organization will be a hierarchy of control and its energy will flow based on control.

And, if the value is competence, the organization will be a hierarchy of competence and its energy will flow based on competence.

Water still flows downhill. 

Hierarchy as Framework

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From the Ask Tom mailbag –

Question:
Can the hierarchy change based upon the nature of the work?

Response:
Hierarchy is just a framework. The framework gets populated only by those functions and roles necessary (Lee Thayer) for the work of the mission. So, yes, it changes.

A painting contractor with 20 employees is likely an S-II organization. Team members play roles as painters, and helpers at S-I with a supervisor and a scheduler at S-II.

A software developer may have no team members at S-I, with coders at S-II and S-III. If it’s complex software, likely a senior project manager at S-IV, CEO at S-V.

Structure may also change over time. Many years ago, I worked for a CPA firm who made most fees from bookkeeping services at Hi-S-I. Review of the books was done by supervisors at S-II and the work product delivered to the client by a manager at S-III. Between 1986 and 1990, computer accounting systems emerged inside of our client companies and all of our bookkeeping services disappeared.

So, hierarchy is the framework, but the business model (the work) defines what sits inside the framework.

Hierarchy of Competence

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Hierarchy, of anything, is based on a defined value. In a proper organization, hierarchy is based on competence.

Competence in relation to what? Competence in relation to the work.
Work, defined as decision making and problem solving. Competence begins with the potent combination of capability and skill. A competent person must possess the necessary cognitive capability and the skill to exercise that capability. Skill is a potent combination of technical knowledge and practiced performance. Practiced performance is the expression, the application of competence.

The first question in organizational structure is, who should be the manager? Hierarchy in an organization is based on a value of competence.

Natural Hierarchy

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Order out of chaos. What we know and what we don’t know. There are people in the company now. As the mission was discussed, some left, some stayed, some enrolled. Those that are left have to work together, but in what way?

Organizational structure is simply the way we define the working relationships between people. Some of those relationships are vertical. Vertical working relationships are described as managerial and define two things. In that relationship, what is the accountability of each person? In that relationship, who has the authority. Accountability and authority. And, so, a manager is born.

But, who should be the manager? The instant the founder selects a manager, a hierarchy emerges. Some modern companies decry, that because they are modern, they have no managers and thus no hierarchy. Some modern companies believe that hierarchy is an evil social construct that should be banished for social good. But, if there is no manager, there is no hierarchy. If there is no hierarchy, there is no accountability and no authority. And chaos re-emerges.

Hierarchy is a natural sorting of value. Hierarchy is a product of nature, not a social construct. Value can be placed on many things. For mate selection, the value may be attractiveness, physical, chemical, economic. The Tinder swipe is based on a hierarchy of value.

For a company, the value is competence. The organizational structure is a hierarchy of competence. A person climbs the ladder of organizational hierarchy based on their ability (capability) and expression of competence.

In the Beginning

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Order and chaos. What we know and what we don’t know. No material successful output is accomplished alone. The most spectacular achievements require a team, a company, an organization.

Prior to a team, prior to an organization, there is chaos. There is no order. Defining and planning an organization brings order. The design is an analysis of what we know, or what we think we know translated into thoughts. This is thinking and the most important part of every CEOs role.

Fielding the organization, hiring people, introduces more chaos, uncertainty, ambiguity, because real people do not follow the perfect design. This is the bane of every startup.

People must be adapted to the organizational design, but there is no motivation to do so. The founder first tries to be the parent, with impatient instruction, repetition and increasing volume. “If I told you once, I told you a thousand times.”

After some time, the founder realizes that motivation will only come by enrollment of the people into the purpose of the enterprise. Next to the perfect organization design emerges the perfect purpose in the form of mission. And the founder has to talk about it. Without people, the founder only had to think. Now, the founder has to communicate, but the thoughts are ill-formed and people have questions. A discussion ensues and, if successful, a company is born. This is the constant struggle of order out of chaos.

Bringing Order From Chaos

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Order and chaos. That is the balance beam, one foot in order and one foot in chaos. Order is what we know. Chaos is what we do not know. We bring order to chaos by exploring its value in relation to what we know. Assigning value is the framework of hierarchy.

Organizational hierarchy is the sorting of value according to some value assignment. Before I tip my hat to the value, let’s look at the role of CEO, stand back and just watch. What do we observe about that role? What are the decisions that must be made, what are the problems that must be solved, what are the risks that must be considered and assumed? At the top? In that solitary role, for which no one else is accountable?

The value hat tip is timespan. While other members of the organization work on different things, the CEO must make the longest timespan decisions and solve the longest timespan problems, considering the longest timespan risks.

The most important task of the CEO is thinking. Thinking about what might happen in five to ten years. That thinking is full of uncertainty and ambiguity, it is full of chaos. It is the role of the CEO to bring some sense of order to that chaos. Because, today we have to make a decision. Five years from now, we may know if that decision was good or if it was bad. Who is to say? We just have to wait. But the decision must be made today.

In Praise of Hierarchy

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Order and chaos. That is the balance beam, one foot in order and one foot in chaos. Order is what we know. Chaos is what we do not know. We bring order to chaos by exploring its value in relation to what we know. That value sorts into a mental construct called hierarchy. Human beings (and other life forms) do this as a natural process to determine what we pay attention to.

We assign something a value based on what we know. That value will be different for each person, if each person stops to think about it. Some people do not stop to think about what is of value and simply adopt the value chain of other people (without thinking). In this value chain, some things are more valuable than others and in the sort, a hierarchy emerges.

Organizationally, some mistakenly believe that hierarchy creates a rigid “command and control” sequence for making decisions. We don’t understand hierarchy in relation to its value chain. Organizationally, hierarchy is a value chain or value stream where managers bring value to the decision making and problem solving of their teams. This is the central role of management.

When I ask a group of managers if they have “direct reports,” all hands go up. I announce they have already fallen for the mistaken understanding that they are managers so people can report to them. The truth is, everyone in the company reports to lots of different people. But each team member can only have one manager, and the purpose of that manager is to bring value to the problem solving and decision making of each team member.

Organizational structure is simply the way we define the working relationships between two people. That most important relationship is between a manager and a team member. That is the beginning of the value stream naturally embedded in hierarchy. Bringing order out of chaos.

Levels of Work in an SME

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Why would small (SME) organizations have curiosity around the research of Elliott Jaques? Admittedly, Elliott worked with large organizations, containing multiple layers of management, which demonstrates that his research had relevance in very complex structures.

But, will it work for my SME company?
If a large organization has a problem, they have budget and people resources to throw at the problem. And if they miss, they have more resources left over to try again.

If a small enterprise has a problem, they have a smaller budget and fewer resources to resolve the issue. And if they miss, it might be fatal.

Why a structural approach?
Most people call me with one of two issues. They feel they have a communication problem or a personality conflict inside the company. I allow them to explain for about ten minutes before I interrupt and interject that I do not believe it’s a communication issue or a personality conflict. I think it’s a structural problem.

Most SMEs have a flexible organizational framework, which is the beginning of the problem. The company was organized, out of necessity, to focus on things that look non-structural, like sales. Every startup has to focus on sales. If there are no sales, the company dies, sooner rather than later. As the organization creates a sustained momentum of sales, things become more complex and the organizational structure takes shape, without forethought, without discipline.

Organizational structure is simply the way we define the working relationships between people, related to these two things.

  • Accountability
  • Authority

When we fail to define the accountability in a working relationship and fail to define the authority in a working relationship, we get organizational friction that appears to be a communication problem or a personality conflict. You can have all the communication seminars you want, do all the personality testing you want, until you get clear about accountability and authority, the problems will remain and become more persistent over time.