Tag Archives: organizational structure

Humpty Dumpty Sat on a Wall

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All the king’s horses and all the king’s men couldn’t put Humpty together again.

Yesterday, someone asked me, as we move from shelter-in-place to a re-open of the economy, what should a CEO think about? Of course, there is work to be done, and we will bring people back to do that work, but what should the CEO think about?

  • What does my market environment look like in three months time, one year’s time, two years time? This includes market demand, regulations, capital requirements, availability of labor and technology.
  • What should my company look like in three months time, one year’s time, two years time?
  • What are the internal functions necessary to support my product or service in that market demand?
  • Inside each function, what is the level of decision making and problem solving?
  • What roles do I need to make those decisions and solve those problems?
  • Do I have people on my team who can effectively play those roles?

There are two concepts embedded in these questions.
Necessity
Levels of work (levels of decision making, levels of problem solving)

Necessity
If your company considered the purchase of a $100,000 machine, and it was NOT necessary, would you buy it? That same decision has to be made about the roles inside the company. Now, is an opportunity to examine your organizational design and ask, is this necessary?

Levels of Work
Most CEOs do not think about the work necessary to make the product or provide the service. Understanding the level of decision making and the level of problem solving are specific clues to the talent you need. Now, is an opportunity to examine the levels of work and ask, do I have the people on my team who can effectively make those decisions and solve those problems.

The Question of Accountability

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This is a series on Teal and Levels of Work. Here is the backstory for the series in case you are interested in the context. The purpose for the series is to explore the tenets of Teal through the lens of Levels of Work.
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The next elephant in the room is the issue of accountability. If the hierarchical schema in Levels of Work (Requisite Organization) replaces power with accountability, then where does accountability lie in the schema of Teal?

There is an adage, if everyone is accountable, then no one is accountable. Sociologists describe this effect as diffusion of responsibility. Alex Lickerman describes “diffusion of responsibility manifests itself as the decreased responsibility each member feels to contribute and work hard towards accomplishing the task or goal. The diffusion of responsibility is present in almost all groups, but to varying degrees, and can be mitigated by reducing group size, defining clear expectations and increasing accountability.”

In Elliott’s world (Requisite Organization) accountability is clearly assigned to the manager. A manager is defined as that person held accountable for the output of the team. Note this is not a definition of power, but a definition of accountability.

In Teal, accountability is distributed to the group and the role of manager does not exist. By accounts, this arrangement works well with results even-steven or better than a team with a managerial leader held accountable for the output of the team.

I have little direct contact with organizations who adopt this approach (Teal), so my anecdotal observation is this – Teal probably works just fine, until it doesn’t. And, when it doesn’t, what are the circumstances or conditions that cause the mis-step? What can be done to get the team back in productive work toward the defined goal?

These musings alone beg more questions. Who defined the goal in the first place? Who floated the project to the group in the beginning? How did the group adopt or accept the project? This is not the invisible hand of Adam Smith. Some person started the organization. Some person defined the mission and vision of the organization. Some person provided guidance (for better or worse). At some point, there was a decision by some(one) person to make a move, commit resources, spend energy. This set of questions points to context. Who creates the context in which the team works?

The self-directed work group appears on stage, but who owns the stage. Are there invisibles in the background pulling the curtain, playing the music, fading the lights, advancing the payroll. And, when those things do not happen, what becomes of the stage-players?

Who is accountable for the output of this context – some(one), every(one) or no (one)?

For now, I will leave these as unanswered questions, no hurry. I am more interested in clarity than answers.

All Problems Are Not Created Equal

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This is a series on Teal and Levels of Work. Here is the backstory for the series in case you are interested in the context. The purpose for the series is to explore the tenets of Teal through the lens of Levels of Work.
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Humor me. To see Levels of Work (Requisite Organization), as a hierarchy based on problem solving complexity (rather than power), opens up a different texture of organizational structure. Let me quickly sport a reference chart below to demonstrate the discontinuous complexity underpinning Levels of Work. I assume you agree, some problems are more complex than others, all problems are not created equal.

Level-I (S-I) – Declarative problem solving. This is the world of opinion, without the necessity of supporting evidence. The world is the way it is, simply because it is declared to be so. Problem solving methodology at this level of work is trial and error. Trial and error is a valid problem solving method, it just has a high error rate in the face of increasing complexity. If S-I was a computer, its computer code would be the Boolean operator “or-or.” S-I is a disjunctive (disconnected) way of seeing the world.

Level-II (S-II) – Cumulative problem solving. If S-I struggles to connect the dots, S-II succeeds in making those connections. Cumulative means connection by successive addition. Problem solving occurs by connecting the pattern in a problem with a documented solution. Best-practices is an S-II problem solving method. If S-II was a computer, its computer code would be the Boolean operator “and-and.” S-II is a conjunctive (connected) way of seeing the world.

Level-III (S-III) – Serial problem solving. This is where Elliott observed the first instance of cause and effect. Problem solving occurs through a process of root cause analysis. If S-III was a computer, its computer code would be the Boolean operator “if-then,” cause and effect. This problem solving method is required in the construction of a system (sequence of steps in a process yielding consistent and predictable results, a critical path).

Level-IV (S-IV) – Parallel problem solving acknowledges the existence of multiple simultaneous systems that co-exist in proximity. In the same proximity, each critical path may not intersect, but each system’s capacity has an impact on neighboring systems. Problem solving multi-system impact requires systems analysis, specifically – capacity, constraints, delay and throughput. If S-IV was a computer, its computer code would be the Boolean operator “if-and-only-if, then.” This level of work manages problems with multiple simultaneous variables and increasing ambiguity of outcomes.

So, what does this problem-complexity have to do with Laloux and Teal?

You have to read carefully (Reinventing Organizations), but Laloux identifies these specific levels of problem solving quite clearly – Another cognitive breakthrough is the ability to reason in paradox, transcending the simple either-or with more complex both-and thinking.

As he describes the organizational period of magenta, he makes the following observation –
Cause and effect are poorly understood, and so the universe is full of spirits and magic.

Cause and effect finally comes of age in Laloux’s description – At the Conformist-Amber stage, reality is perceived through Newtonian eyes. Cause and effect are understood, people can grasp linear time (past, present, future) and project into the future. Laloux’s observation is quite consistent with the timespan schema in Levels of Work, that a measure of problem solving is based on a person’s capability to operate in the ambiguity of the future.

So, Laloux clearly observes problem solving through the first three Levels of Work, without realizing how close he came to solving the puzzle of hierarchy. These nested relationships** replace the power hierarchy with an accountability hierarchy. Indeed, Elliott described this organizational form with the acronym MAH (Management Accountability Hierarchy).

I think the issue of accountability will be next on our agenda.

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**Nested relationships was brilliantly described in this article by Richard Bartlett

Hierarchy is Just a Shape

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This is a series on Teal and Levels of Work. Here is the backstory for the series in case you are interested in the context. The purpose for the series is to explore the tenets of Teal through the lens of Levels of Work.

Let’s start with this emotionally charged word – hierarchy, which appears to be the (hier)arch-enemy of all things self-directed. Tom Collins posted a comment yesterday, “I’m intrigued by your hidden hierarchy tease.”

Here was the tease – Hierarchy still exists, but not where you may have historically found it. Even Laloux (Frederic Laloux) provides a hint, but then moves on, assuming to have dismissed the idea of hierarchy altogether. Yet, if you can postpone your dismissal, you will come to find insights that open doors that seemed shut.

Let me step back and approach, replacing the word hierarchy with organizational structure. You can structure the organization anyway you want, hierarchy is one way, there are others. Organizational structure is the way we define the working relationships between people. In Levels of Work, based on Requisite Organization, we see two kinds of working relationships, managerial and cross-functional, drawn on a piece of paper, it appears as a hierarchy.

This article by Richard Bartlett brilliantly sets the context – Hierarchy is just a shape. Bartlett often uses concentric circles to visually represent working relationships. It is a more pleasant affront to the senses to see amorous circles instead of a dominating pyramid. However, if you center yourself over the concentric circles as the tip of a cone, the friendly circles become an edge-less draconian pyramid. So, is it really that draconian?

Bartlett sees hierarchy purely “as a taxonomy, a way to map a system into nested relationships.”

Bartlett pulls from Jo Friedman in the Tyranny of Structurelessness – “there is no such thing as a structure-less group. Any group of people of whatever nature that comes together for any length of time for any purpose will inevitably structure itself in some fashion. The structure may be flexible; it may vary over time; it may evenly or unevenly distribute tasks, power and resources over the members of the group. But it will be formed…”

So, why does hierarchy get such a bad name? It is the relentless connection of hierarchy with power. Hierarchy is not the problem, it is its single-minded connection to power. And, here is the tease – Laloux provides a hint – “Because there is no hierarchy (in Teal) of bosses over subordinates (power), space becomes available for other natural and spontaneous hierarchies to spring up – fluid hierarchies of recognition, influence and skill (sometimes referred to as ‘actualization hierarchies’ in place of traditional ‘dominator hierarchies.'”

How does Elliott’s research provide a lens to look through? Requisite Organization and Levels of Work is not a power based hierarchy, but one that acknowledges the complexity of problem solving and decision making faced by every organization in the pursuit of its mission and vision.

Put any group of people together, give them a problem to solve and they will self-organize into some sort of structure. They will define and normalize working relationships among them, some unspoken and informal, some formal and articulated.

Some structures work well, some are dysfunctional. As Laloux brilliantly points out in his progression of colors, the social bonds that hold those structures together change, from fear, to violence, conformity, achievement, pluralism and evolution. Hierarchy is a taxonomy to map a system into nested relationships of recognition, influence, skill and competence. Laloux had it right.

Elliott’s research describes functional organizations where hierarchy is based on the complexity of problem solving and decision making. It replaces power with accountability. Accountability requires authority (without authority, to make a decision or solve a problem, there can be no accountability). This is a natural hierarchy, that if you look closely, is described by Laloux in his progression of colors Magenta-Red-Amber-Orange-Green-Teal.

I have to break this up, or my head will hurt, but Laloux’s detailed description of hierarchy is in my path. With an understanding of Elliott’s Levels of Work, it becomes crystal.

Span of Accountability (Control)

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From the Ask Tom mailbag –

Question:
I’ve been following your blog since you spoke at an event at our office in 2015. I see a lot of posts discussing timespan and organizational structures. What’s your view of “span of control” as it relates to organizational structures? The military has a 3-5 subordinate unit rule of thumb which makes sense for matters of life and death. Yet, I’ve seen organizations with people managing 20+ direct reports. This seems to be on the other end of spectrum and untenable not just from a managerial perspective but from a human/leadership perspective as well. Your thoughts?

Response:
I am not a military expert, so I am not certain of military rules of thumb related to span of control. Any readers familiar can jump in the comments.

Before I leap in, however, I want to re-frame the question. It is not a matter of management or control (even span of control), it is a matter of accountability. Here is my re-framed question – How many people can one manager be accountable for?

Elliott acknowledged a concept know as the Mutual Recognition Unit (MRU) which addressed your question. How many people can a single manager have on the team and remain an effective manager?

It depends. The maximum number Elliott placed was around 70. Beyond 70, it is likely the manager would begin to lose effectiveness. You have to remember the primary function of a manager is to bring value to the team’s problem solving and decision making. I can already see your skepticism through my internet connection.

For a manager to be effective with a team of 70, the work must be repetitive with low variability. The higher the variability in the work, the fewer allowable on the team.

Take a high-volume call center where customer support representatives respond to the same phone calls day after day. One supervisor may attend to teams as large as 70 before losing track.

Take a US Navy Seal team. How many on the team? I am thinking six. Why? Because the work is always variable with high levels of risk. One manager to a team of six.

So, it’s your organization. How do you assess the level of variability in the work? How much is repetitive? How much risk if the team gets it wrong? These questions will guide you to your answer.

By Design, or By Chance?

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I was just about to leave when Lawrence stuck his hand in the air. “What about the people?” he asked.

“The role of the Manager,” I started, “is to create the system and make the system better. The most important system is the people system. How people work in your organization is top priority for the Manager. Look, here is the bad news. Right now, your people system is working exactly as it was designed to work.”

“How can that be?” Lawrence replied. “Our people system sucks.”

“You designed it that way, or by choice, you decided to leave it to chance. Either way, you designed it to suck.”

“But, it’s not my fault. I have only been a manager here for two months.” Lawrence was backpedaling big time.

“And so, for the past two months, you have supported a system by doing nothing about it,” I replied. Lawrence was looking for a better excuse, but I stopped him. “Look, in the short time you have been a manager, have you drawn a brief diagram about how people work around here, how they relate to each other, how they depend on each other? Have you written job profiles to document the specific accountabilities of each person on the floor?

“Lawrence, you are in charge of the most important system in your company, the design of how people work together as a team.”

The Source of Organizational Pain

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Sometimes people on your team don’t fit. Culture is that unwritten set of rules that governs our required behavior in the work that we do together. Some people don’t fit. It doesn’t make them a bad person, they just don’t fit.

Some companies hire for culture, assuming the company can train the technical stuff. Some companies require the technical stuff assuming the candidate can adapt to the culture.

Organizational structure is the way we define the working relationships between each other. Organizational structure is culture.

Based on your product or service, your business model, what is the relationship your customer wants with your organization? The Discipline of Market Leaders documents three types of relationships (why customers buy from us).

  • Product Superiority (Quality)
  • Low Cost
  • Customer Intimacy

This narrative set the stage in 1995, and, now, there are more ways to define the customer relationship. (I would like to hear how you describe yours.)

Your customer relationship platform drives everything else, specifically your structure. It is the basis of your business model. As a small business owner, being able to accept credit card payments is one of the most important small business tools that should be at the top of your list. By accepting credit cards, you’re making it easier for customers to do business with you. When choosing a credit card processing provider, it’s best to compare the credit card processing fees they charge so you can get the best possible deal.

It’s All About the Work

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“Yes, but we can’t afford to fire this person, right now. If we did, we would lose everything they know about our system. I know their performance is unacceptable, but we would be lost without the things they know about our processes, our machines, the tolerances, the setups.”

“So, where does that leave you,” I asked.

“Between a rock and a hard place. We can’t even let this person find out that we are recruiting for his replacement. He might quit.”

In the beginning, most companies organize the work around people and their abilities. As the company grows, an inevitable transition must take place. At some point, we have to organize the people around the work.

This looks like a people problem. This is a structural problem.

If you think your organization is people dependent, where work is organized around the people we have, what steps would it take to transform into a system dependent organization? It starts with the simple documentation of processes and roles. That’s the first step to prevent becoming hostage to an underperformer.

Is the COO Irrelevant?

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From the Ask Tom mailbag –

Question:
I read your book, Outbound Air, again.

And I was thinking there might be a conflict with trendier/newer business models. A lot of companies seem to be pushing flatter structures and mixed function work-groups. So there isn’t really a role for COOs as say, the CEO’s internal quarterback

My understanding is that COOs exist to corral the various functions i.e. highest timespan
while the CEO is dealing with strategy, major threats etc.

So does the timespan model change for these flatter-structured businesses where the COO is supposedly irrelevant?

Response:
Elliott’s response to a similar question goes like this –
“I hear these things, and I just have to ask, who is kidding whom?” It is not that the role of the COO disappears, but it is certainly different.

Small Organizations
First, many organizations (small ones) are not level (V) organizations in the first place. Indeed, many companies are level (III) organizations, so they have production, supervision and a CEO, who really plays the role of a level (III) manager. Nothing wrong with this small company, the CEO can make a wealthy living out of it.

Growing Organizations
As the company grows, the level of work will necessarily increase to level (IV). There are multiple functions (systems) inside the company that must be integrated together. Again, the CEO in a level (IV) company will play the role of the integrator. In a larger, more mature company, this would be the role of the COO.

Maturing Organizations
In a level (V) company, the CEO must leave the integration role and truly focus on strategy. Without an effective COO at level (IV), the CEO will necessarily be dragged down into the weeds (back into integration activity). And, as long as the CEO is doing work at level (IV), the company will not grow, likely grow and contract in fits and starts, never effectively integrating their multiple systems. Yes, it is possible to have a dysfunctional level (IV) organization.

Digital Technology
Over the past two or three decades, technology arrived. Indeed, computer systems (note the word system) supplant many level (III) functions. MRP and ERP software systems, in their algorithms, require very specific steps in specific sequences, level (IV). The algorithms were created by some very smart teams who created systems and system integration in a variety of disciplines.

However, with effective technology implementation, the managerial work changed. So, let me pose this question. If we have a technology platform that serves to move data between multiple functions in the company, integrating those functions together, a level (IV) role, then what is the work of the COO?

Here is a hint. Work is decision making and problem solving. In the presence of an effective ERP system, what decisions are left to be made and what problems are left to be solved by the COO? There is an answer to that question.

Your thoughts? -Tom

The Struggle for Emerging S-IV

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From the Ask Tom mailbag –

Question:
It took a long time, but our company has grown. Our business model is a distributor, it’s all about supply chain for our customers. Because our business model is driven by the logistics of incoming and outgoing material supply, we recently promoted our warehouse manager to VP-Inventory Control. For us, it was more than just a change of role title. Our warehouse manager took us through re-binning our inventory, bar coding SKUs, RFIDs on serialized product. He is a really bright guy. But his promotion to VP-Inventory Control seems to have gone to his head. With his new-found power, he has emerged as a prima-donna. In our executive team meetings, he believes that inventory control should be the deciding factor in every business decision for the company. If he keeps this up, he is going to get fired.

Response:
Indeed, the move from a Stratum III (S-III) inventory manager to an (S-IV) is a dramatic change in level of work.

  • S-III – System (creates the system, monitors the system and improves the system)
  • S-IV – Integration of multiple systems and sub-sytems (attention to dependent systems, interdependent systems, contingent systems and bottlenecks)

The focus at S-III system level is internal. We demand each of our systems be efficient, profitably leveraging its resources for maximum output. Your inventory manager did just that with a bin system, bar codes and RFIDs. Kudos.

The focus at S-IV is integration. With an internal focus on inventory management, his new role is to assist in the integration of inventory with all the other systems in the company. It is no longer a matter of profitably leveraging resources for maximum output, but optimizing output with the other systems in the company. It is a matter of how one system’s output (reinforcing system) is impacted by another system’s output (balancing system).

This requires the focus for the new S-IV to transition from internal to external. You don’t have a prima donna personality conflict. You have not clearly defined and communicated the new role, nor its differences from the prior role.

You also skipped a step. How did you know if the inventory manager was ready for these new accountabilities? You didn’t. You blindly promoted and now you have a bit of a chocolate mess. The step you missed, prior to the promotion, was assigning S-IV project work, coaching and evaluating the output. Team members should NEVER get a promotion. They earn promotions by successful completion of project work similar or identical to the work in their new role. -Tom