Take off with a smart(er) organization – organizing from the outside in!

During Easter I had been reading the book “Cell Structure Design” by Niels Pfläging and Silke Hermann. This inspired me to take up some of the thoughts expressed there and to deepen them in this blog. In my opinion, these thoughts are particularly relevant in the context of the Corona crisis, as the virus has shown how badly enterprises are prepared for such a crisis and how quickly they can fall into an existential crisis. At the same time, however, it has become apparent that strong stimuli for new services can emanate from individual employees in the company, e.g. by converting classroom seminars into online learning events. Or the production of life-saving protective equipment instead of vehicle accessories. Therefore, companies should once again be thought and driven more by the market, and not from “within”.

Traditionally, organizations are hierarchically structured, functionally separated and oriented towards self-defined goals and plans. Employees arrange themselves in the organizational workflows and subordinate themselves in the organizational hierarchy. Standardised job descriptions (narrowly) limit individual tasks and areas of responsibility, superiors provide instructions and usually take decisions with appropriate authority. However, the organisation itself is often so busy with this itself that developments in the markets are missed, customers do not feel they are being taken care of and internal power struggles prevent them from seeing what is really important. Crises, such as the one currently triggered by the corona virus, are a good time to break with this form of organisation and set off for new shores.

The purpose of all organizations is to create value, be it a profit-oriented company or a charity, a public administration or a start-up. Therefore, the first questions to be asked are in what context the organisation operates, what are the key stakeholders and what value the organisation can add to them. In order to deliver this value, the organisation relies on teams that operate close to the market, understand the expectations of the stakeholders and are able to deliver appropriate services. These teams, which operate on the “periphery” of the company, are supported by teams inside, the center. The important thing is that the center does not exercise power but serves, e.g. through accounting or IT services. Instead of a pyramidal organization, this arrangement creates a “peach” organization. This organisation thus lives from a consistent decentralisation, a coupling of the different spheres (market-periphery-centre) and self-organisation of the cells, i.e. the different teams.

Ideally, teams should not consist of more than 7 people and should cover all the necessary skills required to add value or provide services. Teams can be formed temporarily around projects or programmes and then dissolved at the end, or they can be responsible for specific market segments in a longer-term functional role. Pfläging and Hermann argue that externally set performance benchmarks and metrics are counterproductive for self-organization , but rather relational scales and performance benchmarks set by the team itself lead to high performance. Of course, this should not lead to competition between the teams of an organisation, but on the contrary, cooperation in the sense of mutual support and learning should be encouraged. Individual team members often change from one team to another, which also creates a close network.

The transformation of a conventional organization into such a new design is a major undertaking that must be supported by everyone and results in serious changes of the organizational structure, processes and culture. Especially those managers who rely on power and influence will be affected by this change and should therefore be especially prepared for the new organization. Experience shows that in such an organization, unprecedented forces can be unleashed within a short period of time, leading to more innovative solutions, customer satisfaction and employee commitment. If other stakeholder groups, such as shareholders and society as a whole with their expectations, are also taken into account, then the turn-around is likely to be successful.

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Author: Reinhard Wagner, CEO of Tiba Managementberatung

 

 

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