The Organizational Structure of the 21st Century
The Stevens Organizational Structure of the 21st Century
“Extreme-Virtual-Organic” Organizational Structure Designed to Use Change as a
Driving Force and Competitiveness Tool
The world is different today than we would have ever thought twenty years ago. Everything seems to be changing faster than ever before.
Our story may go something like this:
We sometimes kid ourselves into thinking that taking more control will give us a quicker response time. But, every action we take seems to hit some other part of our organization in ways we don’t fully understand. The old segregated pockets of knowledge just will not work today. We may be able to forecast the trends with someone in our company seeing them coming from a distance, but even this is not communicated well. From our vantage point here at the top, change happens so fast that by the time word of the effects reaches our executives (if it ever does) we are still only reacting to the first generation of changes that have since evolved two or three times. Furthermore, we know that every business process change we make also carries with it a potential dip in productivity. We have implemented good management systems but the functional kingdoms and politics within our organization keeps the effectiveness of our efforts down. To complicate matters, we don’t have enough people to get our work done even under the best conditions. -- If we could create an organizational structure to automatically take advantage of trends, even the largest companies could wield resources at a speed closer to the change itself. This presentation will outline a unique structural approach designed to move with and be driven by change itself.
We know what doesn’t work! The Great Writings collected by Boone and Bowen (1987) describe what has happened over the last century with business environments and management styles. Some of these writings describe a bureaucratic/mechanistic business environment (Weber, 1947, 1987) that was popular and effective many years ago for a business setting that had low levels of technology, change and skills. Unfortunately many still subscribe to that approach today. It advocates strict control, division of labor, and chain of command. Employees react unfavorably today to this approach and as a result can be noncreative low producers. This causes conflict in the labor relations and further erodes our competitive posture. This approach to business is not effective for dealing with business today. (Argyris, 1957, 1987)
We know what does work! High producing organizations are those where employees have more ownership, are more involved in the thinking and decision-making, and feel that they contribute -- where there exists a culture of openness, trust, confidence, and two-way communication. Rensis Likert found that high producers were managed differently to reach the high producing state. (Likert, 1961, 1987) Others have suggested that organizational structure has an effect on performance. This includes both functional structures as well as employee structures. (Burns and Stalker, 1961, 1995)
THE ORGANIZATIONAL STRUCTURE OF THE 21ST CENTURY:
In the book Built to Last, James C. Collins and Jerry I. Porras (1997) explained that those companies that have had lasting impacts have had certain things in common.
Second, each of the companies “built-to-last” was organized to continue to prosper even as leaders changed (not based on “time tellers” but rather “clock builders”). The companies were not reliant on great leaders who have all of the answers (like the time tellers who could miraculously tell time by looking at the sky 100 percent of the time), but rather, had organizations that could lead the company to success (more like clocks that could tell time when the time teller was not there). The entire proposed organizational structure is designed around this concept.
Every goal should be connected to a performance metric and every metric will be driven by a goal. Every lower level goal will have to lead to the highest goal in a hierarchical relationship. If any one person’s lowest level goal does not lead to the highest organizational goals then we should question it.
The Organizational Structure
Exhibit 1, “The Stevens Organizational Structure of
the 21st Century”,
graphically shows the organizational structure. Jokingly I call it “The
Extreme-Virtual-Organic Organization structure as would be designed by God.”
This is only because it looks so much like some set of planets with
gravitational type attractions. Or, it appears to have some basic life form
characteristics. It reproduces itself using a mother daughter type relationship
and a DNA type set of rules and codes. (Don’t stop reading, my definition of DNA
may be different than yours.) It also makes use of natural life cycle processes
where entities are born, thrive and die as life cycles end -- all in support of
the health of the mother organization.
Exhibit 1, The Stevens Organizational Structure of the 21st Century
Informal Simulations: The entire set of change management models and concepts in this session has been evolving for the last ten years. During this time I informally interviewed many different leaders of different types of organizations and have proposed applications of each of these models (and in particular, the new organization structure) to their particular organization. The model organizational structure is flexible, in that, in the very largest organizations more control may be exercised and in some of the smaller ones less control will be the norm. Accordingly, I have found that the new structure is appropriate for a wide variety of entities.
Centralized Corporate Offices:
Top Level of Management: The ball in the middle of the organizational structure (Exhibit 1) makes up the top layer of management. It represents the corporate management team, internal board of directors, and contains policies and procedures. Exhibit 2, “Corporate Ball,” shows the ball in more detail. The role of this level is to paint a vision that all can understand and then to plot the course for the company.
Members of the Corporate Management Team: The management team is made up of the owners or top executives at the center and an internal board of key individuals providing counsel and continuous improvement to the policies, procedures and direction.
The Internal Board Represents All Parties: employees, customers and leadership. The role of this group is to set policies, keep them current and flexible, focus on core vision, decide on company directions, investigate investment opportunities, and formulate macro-strategies.
Exhibit 2, Example of a Corporate Ball
With the internal teams on the board of directors we hope to eliminate Peter Senge’s “Organizational Learning Disability” of not having an empowered top management team. Because the management teams also have input from those responsible for each of the different groups of the organization, we also hope to minimize the slowing actions that limit growth and reaction time. The organization will also minimize the number of middle managers and the lack of top management understanding because the team is made up of representatives from every part of the organization.
Corporate Policies and Procedures: The policies and procedures exist to keep the organization moving and are centered on the core values and mission of the organization. Polices and procedures are the rules that represent executive authority. Every action taken by the divisions and project teams will adhere to these high level values (summarized by, “do good, honest work at a reasonable price and speed”). This process helps to create a “Corporate DNA” that is implanted in each of the divisions and work teams and runs through the networks of the entire organization. By following these simple to understand general policies and procedures the working teams are able to make decisions, hire temporary support and spend money (within their budgets) to invest in localized project needs, employee rewards and other business opportunities.
Purpose Story: In many successful companies, stories have been passed down about good quality, leadership, hard work, etc. The purpose stories of this organization will come from the personal experiences of the leaders. A set of strong parable type stories will be written to create emotional explanations of the goals of this organization.
Although this company is very successful the story is ridiculous. Cats do not work. If we were to place nine sled dogs in a bag, the strongest may come out, but who cares. The dogs will be wounded, will not trust you again, and the sled will never go anywhere pulled by one dog. Build the team, not the individual by sacrificing the team.
Little preoccupation with the chain of command -- Our organization should be organized so that chain of command is not be an issue. Our policies and rules of conduct of operations guide the thoughts and actions of those doing the work.
Years ago, I experienced an example of why a preoccupation with the chain of command is bad. I was preparing to present a paper on “Combining Configuration Management with Value Engineering, Creating Configuration Value Management” to an international conference in New Orleans. While preparing for the next set of presentations, a group of five older officers were standing around discussing how the next group of presenters needed a table and chairs set on stage for a panel discussion.
The conversation went something like this:
The end result – relying upon the chain-of-command, even the simplest task of setting up a table did not get accomplished and the panel speakers had to set one up during their presentation time. It became an excuse for not doing anything. I used this example during my presentation -- no brownie points that day. The point is this; politics, pride, and lust for power (I told you so power) ruled over making the organization look good through self-sacrifice.
A strong reliance upon or adherence to a strict chain of command is a bad thing (Likert, 1961/1987 and Argyris, 1957/1987). In the 21st Century, it is a symptom of a sick and dying organization. When we deal with knowledge workers in a collapsing worker pool, any systems that segregate people into classes will cause resentment, low productivity and motivation and is a slowing action for innovation. It also takes energy away from the overall goals of the organization.
Being in and out of many different organizations allows me to see and hear the reactions to many chain-of-command power plays and on the other side, excuses for not performing. Some symptoms of organization malfunction in today’s workforce could be as follows:
With all the problems facing an organization’s mission, spending resources on tracking down who has what furniture seems to be outside of the process of achieving good valuable strategic goals. The rule of thumb here is: any action that does not lead in a measurable way to the achievement of a goal may not be worth doing. Furthermore, if that lower level goal does not lead up to the very highest organizational goals then it probably should not be pursued, as the resources will likely be wasted.
The organization will emphasize a network structure for communications (specifically, lateral communication) and consultation rather than command. I’ve heard it said that in tall bureaucratic organizations one could expect 33% of information to be lost in the first step down from the top. Only about 20% of the information is normally left by the time the information reaches the bottom. To make matters worse, almost zero goes back up. Our organization will use multidirectional open communication. This is one of the reasons the Bill Gates had email developed for Microsoft. He wanted a flat organization with a network for communicating, where every employee could communicate to everyone else including him (Heller, 2000).
Strong Organizational Culture -- As expressed in the book Built-To-Last, we should build a cult-like-culture that says, “this company is a family, the information is important but you, the employees, are special and can be trusted with all the information (maybe the only ones in the world who can).” We will treat all information as company sensitive yet all employees as worthy to be trusted. As in the early years of Saturn, each employee will be “dipped into the culture” and, as explained in the book Built-To-Last, this will not be a great place to work for those who cannot buy into the culture.
The Ring Of Overhead Functions:
To keep the cost down, one must keep the overhead cost down. The ring around the corporate management ball in the middle of Exhibit 1 represents overhead type functions. We want all overhead type functions to charge directly to the division or project for which the work is being performed using activity-based costing systems. Exhibit 3 shows the ring of overhead in more graphical detail.
Exhibit 3, Ring of Overhead
The small circles shown on the overhead ring represent people performing work directly for a division, project and/or corporate management. The overhead ring will also cover most of the cases where corporate-type functions are performed (like internal and external audits) or those things that cover more than one division or project.
The Divisions And Projects:
The different shapes surrounding the center ball (in
Exhibit 1) represent the different divisional organizations or projects being
managed. Each division will stay small and is custom designed by those people
serving the customer through that division. The underlying principle here is
based on Peter Drucker’s assumption, there is no one right way to organize and
there is no one right way to lead people. Who better to understand what that
means for a particular organization than those doing the work for a specific
customer. If all of the divisions within the organization look and act alike, it
may be a symptom of fitting the job to the organization instead of the
organization to the job.
Exhibit 4, Project Structures
The main point here is to keep small divisions. We want decentralized decisions and broad leaders who can handle many different types of issues. With the smaller divisions we will be able to focus more on the products and processes instead of the politics and personal kingdoms. We want the focus to be on what needs to be done, not on how to build a department. The smaller and more empowered the projects and divisions are, the quicker we can respond to change. (Dessler, 1995) Exhibit 4 graphically shows a project structure.
The “cluster of grapes” looking shapes at the bottom
of Exhibit 1 (details shown in Exhibit 5) represent the virtual work force. Like
a plumber we need from time to time in our house, there are people that we need
from time to time in our business. These people have the skills we occasionally
need but are not part of our desired core competencies -- not part of what we
strive to be world class in. Divisional teams and leaders follow the corporate
rules when hiring temporary staff and do not have to obtain the signatures of
higher-level managers. This virtual concept will also be expanded to push us
into the world of the Internet and electronic commerce. For example, we could
obtain editorial support from locations we have never visited and from people we
have never met in person.
Exhibit 5, Virtual Workforce
This is a potentially difficult cultural issue, for, to make the temporary workforce feel valued and part of the staff is important to high productivity and morale.
The personnel pool is a database. Like a matrix organization, divisions and project teams will select people to work on their projects and processes as needed. However, unlike a matrix organization there will be no functional managers. Our personnel pool is virtual in nature and is nothing more than a database of people without a manager. All people resources (including top-level executives and owners) will be included in the database along with continuously updated resume-type details explaining strengths, education, training, availability and other relevant information for each individual.
Exhibit 6, Employee/Personnel Pool
We will only hire people who will fit into the pool of employees’ concept. We are looking for competent people we can make into superstars -- not below average people we can make competent. This pool is represented by the large ball at the top of the Exhibit and will be the invisible organizational structure in which everyone is an equal member.
The company in the above example does not grasp the complete picture. If you don’t invest in your people you are not investing in your company. A service company’s only asset is its people. Think of it as preventative maintenance. Even in large product companies like Microsoft, the people are the assets. Break up the people and the stock has no value.
Replace Job Security with Self-Security. The role of personnel development becomes “personal” development. In each case it is the responsibility of the individual to commit to a program that makes them more marketable and useable by the company. It is to everyone’s benefit to make the pool of personnel more valuable by helping them and by funding them to become smarter, happier, more skilled, more experienced, better marketers, better leaders and generally more empowered. In the words of Bill Gates, “We won’t guarantee a job for life, but we will guarantee you will be more valuable and marketable if you ever leave.”
This “quick to the trigger” layoff policy is a shortsighted one. A layoff is a liquidation of valuable assets the same as selling equipment, land, facilities or inventories. (Likert, 1961/1987) The difference is, the human asset is harder to replace. It may take more money than it is worth in the cost of recruiting, training, familiarization, lost capability, community good will, employee motivation and development knowledge. Another hidden cost is all the facility configuration and corporate knowledge that is lost. When replacing people there will be no guarantees that the work will be done as well. In the case of the company I worked for, it took a year before someone could learn the system well enough to bring in significant work.
Exhibit 7, Staffing
The personnel will be paid differently than ever before. We will pay each person based on an average. What is the average pay for a person based on like skills and experience in a specific region of the country? You may make more going someplace else and you may make less going someplace else. The difference comes in the ability of the person to affect their income based on profit.
The pitch goes like this, “you are guaranteed an average salary and based on your own performance you could theoretically double your salary with bonuses and gainsharing plans.”
For helping to make the company more profitable, the benefits to the average employee will be far greater than ever before. These bonus plans will be well communicated and documented to the point where people can actually understand how a dollar of profit is distributed to their paycheck.
The bonus formula may be similar to this:
Human resource people will be charged with the responsibility of helping advise and plan the individual employee’s development. The roles of the HR people are to:
With the pool concept we hope to build a company culture not a departmental us-against-them mentality. Also, we hope to create a more realistic division of work, eliminating the phrase “that’s not my job,” and replacing it with “everything is my job.” These efforts should help eliminate Peter Senge’s “Organizational Learning Disability” of “I am my position” and help to build a systems approach to personal mastery.
Parent Daughter Relationships:
In Exhibit 1 three unique structures were shown next to boxes titled Major Customers 1, 2, and 3. These boxes are… you guessed it… “Major Customers” or groups of customers. They are so significant that daughter organizations could (one-day) spin-off making entirely new organizations dedicated to serving only those groups of customers or to sell a specific product or service, much like a company sponsored franchise ( See Exhibit 8). This is a good thing. We are trying to build a network of businesses in alliance (kind of like the United States) not just one super-size organization that moves slowly and is ineffective in a volatile economic or high tech market. We want the growing parts to grow as effectively and as efficiently as possible not to be weighted down by dragging dead or dying organizational white elephants. At the same time, we want the dying organizational units to die as painlessly as possible. If the company decides to keep the unit from dying using the company funds, it should be a planned effort and not an automatic one. Remember, we have an employee pool structure so the loss of employees is not the issue.
Exhibit 8, The Daughter Organizations
If it is best for the entire company, those divisions that pull in different directions could be allowed to create a new and separate, yet affiliated, company with a new and separate direction. The hope is that by doing this we can create greater profits, a strong family of businesses and greater influence with our management principles. If you’re interested in power for power’s sake, try a different structure. If however, you want to maximize profits, good quality work, employee motivation, building something bigger than yourself and your ability to control, this may be one way to go.
A future organizational Structure in Action.
Old Bios: Craig A. Stevens has worked as a consultant with every possible level of worker and management and with over 100 different organizations. Mr. Stevens has experienced a wide variety of organizational environments including: health care, hotel/motel/restaurant, retail, manufacturing, education, agriculture, government, and services of all kinds, from extremely high technology to virtually no technology, in about 25 different states. Currently, Mr. Stevens teaches at Vanderbilt University in Nashville, Tennessee; is an Organizational Development Coordinator for NASA; a corporate trainer/consultant for the American Management Association International (AMA); a partner in the consulting firm of Westbrook Stevens; is assisting in the development of 5 start-ups and co-authors an executive management column for Ag-Knowledge Magazine. He hopes to soon complete his dissertation for a Ph.D. in Engineering Management at the University of Alabama in Huntsville. He received his MS (1985) and BS (1983) from the University of Tennessee in Knoxville in Engineering Management and Industrial Engineering
Allen Gentry has 23 years of work experience and is currently a manager of Production Process Support at the Tennessee Valley Authority. He is responsible for processes and methods for maintenance, preventive maintenance, work management, and records management. He has developed standard policies and practices used at the fossil group and operating group levels. He got his BS in Mechanical Engineering from Tennessee Technological University and is working on a MS in Engineering Management from the University of Alabama in Huntsville.