We held an amazing workshop online, and I’m so excited about it. We modified the strategies from the perspective of an individual and from a customer perspective. We came to a realization that we are building an agile hybrid organization. I need to share this with you.
This image below is our old friend, the hierarchical organization. This style of hierarchy is not doing very well in the present day. Even though it has immensely good features, it also has great weaknesses.
It’s interesting, that in a hierarchical organization everything needs to be flipped upside down every 3-4 years. A new CEO comes in and decides that things should be done the other way around, with the reason that the other way is “as it should be done”. Then after a while the same pattern repeats.
I have gained experience in this subject. No matter which organization model one creates, in a few years the cons grow bigger and the strenghts are no longer as strong as in the beginning. Because of this the model needs to be changed once again, which the CEO thinks is the biggest innovation. Sometimes the organization is organized into a matrix organisation, at other times the organization gets organized according to functions. It can also be something else, depends on what the CEO wants. That’s everyday life.
Let’s look at why the hierarchical organization is doing poorly.
The main reason why hierarchical organizations are doing poorly is that they are slow organizations. The slowness comes from this. If I have a problem, I need to ask upstairs for permission. The bigger the issue, the higher up the person needs to go in the organization to get permission. If the issue goes flat, the response never comes back down. Decisions aren’t being made. Instead, the issue is left hanging in the air waiting for the next meeting. This causes the customer to suffer, because decisions are not made. Many draw the above model upside-down, so that customers are on top and the management are on the bottom. However, it’s only a semantic change. A hierarchical organization is slow, and doesn’t tend to cope well with the competition, who oftentimes are much faster to react and to decide. A better meeting structure could help.
Another problem with the hierarchical organization is that it’s less profitable. Say what? Exactly. When matters are sustainable, profitability decreases. Lead time isn’t fast enough and the inventory doesn’t move. Surprise, surprise! Higher profitability models exist! Profitability is everyone’s advantage because salaries will continue being paid, customers are number one and the customers are happy. The owners, as well, tend to get more dividends because the company earns more money, which it doesn’t know how to invest properly, so the money is returned to the investors and owners as larger dividends.
The third problem is that the hierarchical organization is also expensive to upkeep. People need to be controlled and a huge amount of key performance indicators are created. What can’t be measured, doesn’t exist. Reward systems need to be looked at through the indicators, and that’s expensive. As you may guess, controlling costs money. That’s oversight in a nutshell. The more that needs to be measured, the more control measures need to be deployed, and that adds to costs. Simple, right?
The fourth problem is on an emotional level. The hierarchical organization is often demotivating. People don’t like having to wait and not being allowed to do what’s reasonable.
But, a hierarchy has its advantages.
First of all, it’s really clear and people desire clarity! People know exactly who’s where and who’s in charge of what.
Hierarchy is fantastic in a crisis situation. You give orders, and that’s that. That’s pretty amazing. This ability can’t be lost! If it’s lost, we lose a lot.
To many individuals, hierarchy is also the measure of success. If I go high up in the hierarchy, it’s pretty motivating, almost like winning an Olympic medal.
Another organizational extremity is not to have a hierarchy at all. Instead, a team organization is created, where people are completely self-managing. This has already been in use since the 1950s. It works! However, it needs common ground rules, a Game Book, so that things aren’t going all over the place.
Quite many are scared to switch into a complete self-managing model. The word self-managing is in itself pretty bad. A business owner easily gets scared that people will just start doing whatever they want.
I found the above image in Perttu Salovaara’s PhD Thesis. He named the image “Visions of organization”. It has two axis, co-operation and leadership. There’s not too much co-operation on the bottom level, only individualism. Co-operation begins in the middle, in teams, and spreads up to the top level.
The leadership axis has three stages. Is leadership completely top-down and lead from the outside? Or, is it involving, or are people given permission to self-manage? Salovaara came up with nine models. It’s a good image because the myriad of possibilities are made clear. It’s not so, that the next step from a total hierarchy is a total self-managing model. There’s so much in between!
At Stradigo, we consider simplification as part of our organizational DNA. I’ve wondered if Salovaara’s MATRIX could be simplified. That’s when the idea of an agile hybrid organization model struck me. What if we built a hybrid, in which hierarchy and team leading are combined?
Let’s build an agile hybrid organization with self-managing teams. The hierarchical organization stays in the background. That’s when we have a spine and agile teams. Teams are where most of the work is done. Teams come and go, as necessary. The home team, of course, is where one works the most, but in addition to that, there are many other teams one is a part of. They are on top of the hierarchy.
In a world like this, it isn’t important to communicate through the hierarchy. Anyone can speak to whom they like without the manager getting upset. Please, don’t get upset! People must trust themself and their leadership skills in order to not mind this taking place, that is, if their boss chooses to go past you, for example, by talking directly with your subordinates. The decision is made where the best information is.
When I presented this idea at one of my clients, the idea immediately got a round of applause. The agile hybrid organization model is therefore a most natural thing! People said that, yes, this is how it is, this is already how we operate. So, let’s make it formal! Let’s make the organization both clear and agile!
Now quick decisions can be made where the information is. When hierarchy retreats into the background, but doesn’t fade, and people are allowed to do what’s reasonable, a level of autonomy is created that is strongly motivating. Control improves, because the team members control each other, so that the team makes reasonable decisions.
As a young man I used to work at Nokia Electronics. No-one knew in which direction the world was going, as the new area of business was developing rapidly. A “Let all flowers bloom” culture spread throughout the company, yet there was a hierarchy, and it was in the background. It didn’t interfere with practicalities.
Because an individual is a member of several teams, they have plenty of different colored t-shirts in their bag. One team has a certain colored shirt, and when a person switches teams, their t-shirt color and role changes. This has been studied around the world. According to one study one person had approximately 6,8 roles. Therefore, we all have many roles, perhaps even seven, like in the image above.
If you’re a CEO of a company, you, as well, have many different roles. One role is active when you’re a member of the board. Another role is when you’re leading your own management team. The third role is when you’re speaking to a customer. The fourth role is when you’re speaking to the investors, and so on. You might also be a part of several customer projects as a great salesperson. All of us have many roles just like this, no matter what role or responsibility we happen to have at any one given time.
A senior HR consultant once told me:
“You know, Markus. Half of Finland’s HR people write standing orders, and the other half tries to implement them.”
It’s completely useless if roles and their definitions are written down somewhere. The definition of work changes constantly! Let people define their roles for themselves, within the appropriate boundaries, of course. The definition creates the lines, but after that, write your own work definitions! Team members write a card on a common digital board, in which the role is shortly described. Everyone gets to pick a sensible and pleasant role for themselves. The team discusses what needs to be added and agrees on it.
One must remember that our job is to help the customers. That’s why the company exists. It’s the big sun and the Purpose. People share in this Purpose and agree that it is important, and they rejoice since they can help.
When a team exists, it must sense and react immediately to the customer’s needs. That’s when the team is doing well.
Everything I’ve told you isn’t new information. This is actually about making documentation transparent. There are millions of self-managing teams all over the world. Since the 1950’s humans have created a new way to organize. Hierarchy and self-management have existed, and there are plenty of companies that work as a hybrid. The transformation, however, can be slightly painful, if a proper Game Book isn’t written.
One must define a handful of central ground rules: For example, in soccer it’s not allowed to kick other players in the legs, and only the goalkeeper can catch the ball with their hands. Some rules are needed, in order for these two organization levels to work well together.
I have facilitated the transformation of a Finnish company into a self-managing model. I suspect that this is among the first transformations in the country, perhaps even the very first. No matter what the truth of the matter is regarding this “firstness”, it is not that common to see these types of transformations in practice. This is quite a new thing after all! What happened after the transformation? This organization’s profit grew with two million euros in their first year post-transformation. We have also created many Gamebooks to tens of organizations.
What kind of rules give us and our customers the WOW feeling? It’s funny that WOW actually stands for Way-Of-Working. New central game rules should be written down in the Gamebook! I always tend to use volunteers for this.
A Gamebook is needed to make all this work out in practice.
Long live the agile hybrid organization!
Stradigo is a brand owned by Rdigo Oy (Business-ID: 2120844-1).
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Rdigo Oy is registered in Finland as a Limited company. We are a strategy consultancy located in the Helsinki capital region.
We’ve been in business since 2007. The company name comes from the latin word Redigo, meaning both ‘I shape’ & ‘I renew’.
Stradigo combines the word strategy with Rdigo.