Agile Illustrated - Sample #2
5 Major Changes Coming to the PMP Exam

Organizational Structures that Support Faster Innovation and Evolution

Organizational agility is the ability of an enterprise to change direction, realign and succeed in volatile, uncertain business environments. It requires sensing emerging trends and actively listening to customer requests, then acting on this information and making the changes required to position the organization for where it needs to be in the future.

Small organizations can change direction quickly because they have fewer people or processes to change. Most medium to large-scale organizations have considerable mindset inertia in the form of strategies, multi-year plans, in-flight programs, and projects, etc. When fundamental change is required, it can be difficult to turn these large elements that have gathered their own momentum through the day-to-day behaviors of staff.

Momentum is mass in motion. Think of a thousand people all moving toward a common goal—and their organizational structures and processes to get there. Now imagine the goal has shifted; we want to get to somewhere else. We need to shift all those minds - and likely much of the org structure and processes, this is a bigger ask requiring more energy.

The Efficiency vs. Adaptability Trade-off
There is a growing trend. As rates of change increase, organizations are trading off efficiency for adaptability. Large-scale processes, specialized resources, and large batch sizes are optimized for maximum efficiency (the lowest cost per widget, the highest productivity rates per worker). From a cost-per-unit perspective, it’s hard to beat the scale, hierarchies, and specialization that are the lifeblood of efficient systems.

Unfortunately, optimizing for efficiency decreases adaptability. A huge stamping press used for producing car door shells is great for fast, cheap output until someone wants a new car door design. Likewise, organizations created to optimize efficiency have a similar structure and process momentum toward a single fixed goal. This momentum is an obstacle if that goal moves or becomes a collection of separate moving goals.

The Diversity and Evolution of Organizations
Fortunately, because there are no fixed ways of structuring a company (or operating one), we can learn from all the forms that have been tried and been successful—along with those that failed, too.

Throughout history and alive today, we can find examples of organizations that exhibit varying degrees of structure/efficiency versus flexibility/adaptability. We have a rich gene pool of organizational diversity to study.

Looking at organizations that do well in times of uncertainty can help us determine what qualities are required to thrive in high rates of uncertainty and complexity. Of course, we need to be careful with this natural selection approach, as good companies fail for a variety of reasons. But there are useful lessons and trends to observe.

An Autonomy Spectrum
In the book Reinventing Organizations, Frederic Laloux describes the evolution of organizations from primitive gangs ruled by fear, to sophisticated organizations that distribute power and decision making to local branches. The book is a fascinating read that assigns colors to each level of evolution and discusses many different attributes.

However, for this article, I just want to focus on the structure/efficiency vs flexibility/adaptability element.

Red Org

Red Organizations
The most basic organizations impose pyramid-shaped command-and-control structures around the “Who?”, “What?” and “How?” aspects of work. Strict organizations like the Mafia or Catholic Church have a lot of structure around the who—only certain people get to make some decisions, and it is not questioned. Likewise, there is hierarchical control over what gets done and how it is done.

Amber Org

Amber Organizations
The next level of evolution describes most traditional organizations. Here there is some flexibility on the who. Anyone should be able to rise to a position of power, but there is still a pyramid structure controlling what should be done—and standards and process for exactly how it should be achieved.

Examples include government agencies and charter schools.

Orange Org

Orange Organizations
Orange organization make up the bulk of modern, profit-oriented enterprises. There is still a pyramid structure and control on what the company is focusing on, but freedom on how the results are obtained. Now people are empowered and encouraged to solve problems and achieve results.

Examples include banks and retail organizations.

Green Org

Green Organizations
These are today’s modern organizations that encourage empowered teams. Within traditional pyramid structures, there is as much freedom as possible with whowhat and how goals are accomplished. People are supported to own, define and improve how they work, so they improve not only the product, but the production process in which they work.

Examples include Southwest Airlines, and W.L. Gore and Associates.

Teal Org

Teal Organizations
Teal organizations break free from the pyramid structure and instead behave more like towns or organisms. Rather than try to funnel decision making and policy through a single hub, they spin-off and give authority to local groups. So local branches define new products, hire people, decide on pay rates, etc. Freed from a central, governing body, they are more autonomous and flexible.

Examples include Buurtzorg Nursing and Morningstar.

Laloux is careful to explain that this evolutionary progression is not necessarily from bad to good, or from worst to best. Instead, they just reflect different levels of consciousness and values within the organization. Also, different levels can exist within the same organization, nested like Russian dolls. For instance, a predominantly green organization can have an amber or red department within it where things are still very fixed with little flexibility.

From Control and Efficiency to Autonomy and Adaptation

Org Agility Spectrum

The model is useful for showing the progression from a control and efficiency focus to one of autonomy and adaptation. In high-change environments, having a single hub for decision making slows the process down. Shoals of fish can change direction, split or merge to avoid prey in an instant. They do not take orders from a single source. Moving decision-making powers to those navigating improves responsiveness—but may lose out on efficiency and economies of scale.

Organizations looking to improve their agility can examine where they are on the autonomy spectrum and determine what the next logical step for them would be if they want to be more adaptable (but potentially less efficient.) It is a trade-off; there is no single best organizational structure; it depends on the environment in which you operate.

Some organizations spin-off start-ups to explore new product streams. These start-ups can be nimbler and operate unencumbered from the large pyramid structures and processes of the parent. Other organizations use Skunk Works groups to explore new ideas. Again, free from some of the normal scrutiny and controls that aim for efficiency, these insulated groups can innovate quicker.

Please Innovate While We Micromanage You!
Organizations that demand innovation in highly controlled environments designed for process efficiency are likely in for a rude awakening. Organizations seem either structured for efficiency with strict controls on the who, what and how; or structured for flexibility, innovation, and adaptation.

Much has changed since Laloux first published Reinventing Organizations in 2014 and many of the organizations he featured have gone on to evolve yet newer structures. However, the efficiency-adaptability spectrum remains a useful tool for understanding the type of organization we work in and for discussing the characteristics and challenges associated with organizational agility.

[This article first appeared on projectmanagement.com Here]

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