The Next Organization

Factors in Structuring a Product Organization by Marty Cagan - SVPG blog

For nearly every organization that has grown beyond a very early stage startup, one of the most common, yet difficult, questions is the optimal way to split up the product work.  As soon as you have more than one product manager, or more than one interaction designer, teams face this question.  And for larger organizations, this becomes a very significant and ongoing struggle.

I try to never give a quick, general answer to this question because it is so important and also because there are so many factors that need to be considered.

In this article I wanted to enumerate the factors that I look at in coming up with my recommendation.  I have also taken this a step further and tried to prioritize these factors starting with the most critical, although I will admit that sometimes I adjust this ranking depending on the culture of the company.

1. Clear Ownership.  So much depends on empowered yet accountable product teams.  So to me the top priority always is to make sure you carve out something significant that a product team can truly own and feel empowered to make the changes necessary.  This must always be tempered with the awareness that all of the teams are interrelated at some level, so rarely do we have complete control of our resources and our product area, but we do try to maximize for this sense of ownership.

2. Alignment with User/Customer.   Please note that I’m not referring here to internal customers or stakeholders; that’s below under alignment with business units.  I’m referring here to alignment with the actual customers and users of the site or service.  You would be surprised at how far down the list this gets pushed for many companies (mostly due to the strength of the influences below) but aligning with the user and customer has very real benefits for the product and the team.

3. Alignment with Development Team.   Product managers and designers generally work with developers every day to get their product ideas built, and when the product organization is not aligned with the technology organization, the result is almost never pretty.  You see it when a Scrum team is frustrated because they have multiple product owners to deal with, or when product managers have to constantly fight for resources that keep disappearing.  The key is not to drive the product structure around the engineering teams, but rather to work together with engineering to move together into alignment.  This usually requires a little give and take.

4. Alignment with Architecture.   Related to the alignment with the development team but actually much harder is the alignment with the software architecture.  Basically, every architecture is designed around some set of objectives and the result is that some things are much easier to do than others.  There are many teams, especially those with very old code-bases, where minor things can take a disproportionately long time, and/or require changes across many different areas, and it’s usually because the team is fighting the architecture.  Modern architectures improve this characteristic, but even in the best of cases, there will be implications on the product team structure that stem from the architecture.   Again, this is a balance.  You don’t want the architecture to drive the product.  On the other hand, realize that evolving the architecture to better enable the way the team wants to work can be a very significant undertaking.

5. Alignment with Business Units.   The fact that this is last on the list will doubtless cause some grief with some business unit leaders as this is typically the highest weighted factor by most organizations, but in my view that’s often a big mistake.  There’s an old saying that if you want to know the politics of a company, just look at the web site.  The reason this is true is that so often the product organization structures around the business units (rather than the user or customer).  If the business units are organized around the user or customer then this is much less of a problem, but more often they are organized instead around other factors like function or revenue streams.  It is nice when the user, technology and business units all align, but there are often good reasons why this is not the case, and if that’s the situation you are in, I advocate aligning the product first around the user, then technology, and finally the business unit.

Notes:

- This entire discussion relates strongly to the dedicated team model and also to the development process the team is using (especially true with Scrum).  Moving to dedicated teams and using a modern process such as Scrum will force some of these issues and in most cases help considerably in the above alignment objectives.

- Realize that the optimal structure of the product organization is a moving target.  The organization’s needs should and will change over time.  It’s not like you’ll need to reorganize every few months, but revisiting your structure every year or so makes sense.

- For larger teams especially, it is very common to have one or more teams that provide common services to the other product teams.  Often we call these teams “common services” or “core services” or “platform” teams.  This is extremely high-leverage, but also among the most difficult types of product teams because of the technology, the dependencies, and the wide range of users.  Be sure to staff these common services teams with strong and technical product leaders.

Finally, realize that there is never a perfect way to structure a team – every attempt at structure of the product organization will be optimized for some things at the expense of others.  So as with most things in product, it involves trade-offs and prioritization.  Hopefully these factors will help you as you guide your organization forward.

Extract from Jack Welch's last letter to GE shareholders (2001)

I heard about this letter from a podcast and was so curious about it. Take away all the financial numbers and GE's plan to acquire Honeywell at that point, the rest is very much what any company should do. The extract is still a long read, but worth every minute of reading. It is a great sharing of GE's secrets to the world. Thanks, Jack.

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"...

We write this in a year of transition to a new team, and we would like to use this occasion to reflect on what GE is today: why it works, the values and beliefs it is built upon and how they will serve to take us to the even better days that we know lie ahead for our Company.

First, and most importantly, GE is a growth company, creating, in 2000 alone, the equivalent of an $18 billion, multi-business "company" with earnings of $2 billion. In 2000 the Company not only posted its highest revenues ever, but grew them at one of the highest rates in its history.

Second, through the rigorous pursuit of four big Company-wide initiatives—Globalization, Services, Six Sigma Quality and Digitization—we've changed not only where we work and what we sell, but how we work, think and touch our customers.

...

The initiatives are playing a critical role in changing GE, but the most significant change in GE has been its transformation into a Learning Company. Our true "core competency" today is not manufacturing or services, but the global recruiting and nurturing of the world's best people and the cultivation in them of an insatiable desire to learn, to stretch and to do things better every day. By finding, challenging and rewarding these people, by freeing them from bureaucracy, by giving them all the resources they need—and by simply getting out of their way—we have seen them make us better and better every year.

We have a Company more agile than others a fraction of our size, a high-spirited company where people are free to dream and encouraged to act and to take risks. In a culture where people act this way, every day, "big" will never mean slow.

This is all about people—"soft stuff." But values and behaviors are what produce those performance numbers, and they are the bedrock upon which we will build our future.

The rest of our letter will describe these abiding values and beliefs because they are at the heart and soul of everything we do, what we stand for, what we stand on and, most important, where we are going.

Integrity

It's the first and most important of our values. Integrity means always abiding by the law, both the letter and the spirit. But it's not just about laws; it is at the core of every relationship we have.

Inside the Company, integrity establishes the trust that is so critical to the human relationships that make our values work. With that trust, employees can take risks and believe us when we say a "miss" doesn't mean career damage.

With trust, employees can set stretch performance goals and can believe us when we promise that falling short is not a punishable offense. Integrity and trust are at the heart of the informality we cherish. There are no witnesses needed to conversations, nor the need to "put it in writing." None of that—our word is enough.

In our external dealings, with our unions and governments, we are free to represent our positions vigorously, in a constructive fashion, to agree or disagree on the issues, knowing that our integrity itself is never an issue.

A period of transition is a period of change, and some of our values will be modified to adapt to what the future brings. One will not: our commitment to integrity, which, beyond doing everything right, means always doing the right thing.

Relishing Change

We've long believed that when the rate of change inside an institution becomes slower than the rate of change outside, the end is in sight. The only question is when.

Learning to love change is an unnatural act in any century-old institution, but today we have a Company that does just that: sees change always as a source of excitement, always as opportunity, rather than as threat or crisis. We're no better prophets than anyone else, and we have difficulty predicting the exact course of change. But we don't have to predict it. What we have to do is simply jump all over it! Our moves in Europe, Mexico, Japan and the rest of Asia during the '90s were risky, richly-rewarded big swings at fast-breaking change, as was our leap into digitization, and more recently our decision to acquire Honeywell. We strive every day to always have everyone in the organization see change as a thrilling, energizing phenomenon, relished by all, because it is the oxygen of our growth.

The Customer

Bureaucracies love to focus inward. It's not that they dislike customers; they just don't find them as interesting as themselves. Today we have a Company doing its very best to fix its face on customers by focusing Six Sigma on their needs.

Key to this focus is a concept called "span," which is a measurement of operational reliability for meeting a customer request. It is the time window around the Customer Requested Delivery Date in which delivery will happen. High span shows poor capability to hit a specific date; low span

reflects great capability; and zero span is always the objective.

With span, the measurement is based on the day the customer wants the product. When the order is taken, that date becomes known to everyone, from the first person in the process receiving the castings, circuit boards or any other components from the supplier, all the way through to the service reps who stand next to the customer as the product is started up for the first time. Every single delivery to every single customer is measured and in the line of sight of everyone; and everyone in the process knows he or she is affecting the business-wide measurement of span with every action taken.

The object is to squeeze the two sides of the delivery span, days early and days late, ever closer to the center: the exact day the customer desired. Plastics has reduced its span from 50 days to 5; Aircraft Engines from 80 days to 5; Mortgage Insurance took it from 54 days to 1.

GE completed more than 2000 Six Sigma projects "at the customer, for the customer," last year. Here we took GE resources and applied them to our customers' biggest needs, using Six Sigma as a foundation. The focus has been totally inside our customer operations. The wins have been significant: improving locomotive reliability, reducing medical CT scan wait times and improving airline operations. It's not that we know all the answers but we're totally committed to finding them; and committed to externalizing all of our initiatives for the benefit of the customer. Over the long term, we believe this will differentiate GE in the eyes of the customer.

Using Size
One of the biggest mistakes large institutions can make is indulging the compulsion to "manage" their size. They become impressed with how big they are and at the same time nervous about the need to control their size, to get their arms around it. This often leads to more layers, structure and bureaucracy—and eventually stifled and frustrated people.

We see size differently. We understand its inherent limitations—on speed and on clarity of communications, among other things—and we fight every day to create the quickness and spirit of a small company. But we appreciate the one huge advantage size offers: the ability to take big swings, big risks, and to live outside the technology envelope, to live in the future. Size allows us to invest hundreds of millions of dollars in an enormously ambitious program like the GE90, the world's highest-thrust jet engine, and the "H" turbine, the world's highest-efficiency turbine generator. Size allows us to introduce at least one new product in every segment, every year, in medical diagnostics, or to spend hundreds of millions on new plastics capacity, or to continue to invest in a business during a down cycle, or to make over 100 acquisitions a year, year after year.

Our size allows us to do this knowing that we don't have to be perfect, that we can take more risks, knowing that not all will succeed. That's because our size—far from inhibiting innovation, the conventional stereotype—actually allows us to take more and bigger swings. We don't connect with every one, but the point is, our size allows us to miss a few—without missing a beat.

Annihilating Bureaucracy
We cultivate the hatred of bureaucracy in our Company and never for a moment hesitate to use that awful word "hate." Bureaucrats must be ridiculed and removed. They multiply in organizational layers and behind functional walls—which means that every day must be a battle to demolish this structure and keep the organization open, ventilated and free. Even if bureaucracy is largely exterminated, as it has been at GE, people need to be vigilant—even paranoid—because the allure of bureaucracy is part of human nature and hard to resist, and it can return in the blink of an eye. Bureaucracy frustrates people, distorts their priorities, limits their dreams and turns the face of the entire enterprise inward.

In a digitized world, the internal workings of companies will be exposed to the world, and bureaucracies will be seen by all for what they are: slow, self-absorbed, customer insensitive—even silly.

Self-Confidence, Simplicity and Speed

One leads to the other. Self-confidence is the indispensable leadership characteristic. It can come from early family life, from sports, from school success, or it can be acquired through opportunities to lead, to take business risks, to be challenged and to win. It is the obligation of every leader to give everyone the business challenges that provide opportunities to develop personal self-confidence. We see, day after day, people's lives—and not just their business lives—utterly transformed by the self-confidence born of meeting big challenges.

Self-confidence in turn allows one to communicate simply and clearly—without the business jargon, busy charts, convoluted memos and incomprehensible presentations that insecure leaders use to mask their self-doubt. Leaders who lack self-confidence use their intelligence to make things more complex. Self-confident people use it to make things simpler.

Simplicity clarifies communications and enhances the chance that everyone in the organization gets the same message. Those clear, simple messages energize people and inspire them to action; thus simplicity leads to speed, one of the key drivers of business success.

Leadership

It's about the four "E's" we've been using for years as a screen to pick our leaders. "Energy": to cope with the frenetic pace of change. "Energize": the ability to excite, to galvanize the organization and inspire it to action. "Edge": the self-confidence to make the tough calls, with "yeses" and "noes"—and very few "maybes." And "Execute": the ancient GE tradition of always delivering, never disappointing.

And it's about the four "types" that represent the way we evaluate and deal with our existing leaders. Type I: shares our values; makes the numbers—sky's the limit! Type II: doesn't share the values; doesn't make the numbers—gone. Type III: shares the values; misses the numbers—typically, another chance, or two.

None of these three are tough calls, but Type IV is the toughest call of all: the manager who doesn't share the values, but delivers the numbers; the "go-to" manager, the hammer, who delivers the bacon but does it on the backs of people, often "kissing up and kicking down" during the process. This type is the toughest to part with because organizations always want to deliver—it's in the blood—and to let someone go who gets the job done is yet another unnatural act. But we have to remove these Type IVs because they have the power, by themselves, to destroy the open, informal, trust-based culture we need to win today and tomorrow.

We made our leap forward when we began removing our Type IV managers and making it clear to the entire Company why they were asked to leave—not for the usual "personal reasons" or "to pursue other opportunities," but for not sharing our values. Until an organization develops the courage to do this, people will never have full confidence that these soft values are truly real. There are undoubtedly a few Type IVs remaining, and they must be found. They must leave the Company, because their behavior weakens the trust that more than 300,000 people have in its leadership.

Training
We've always had great advanced management training programs at GE. We also have terrific early-career programs in financial management, engineering, manufacturing, the audit staff and others. However, because of our diversity we've never had a truly early-career generic program that would develop leaders for all our functions. All of our big, Company-wide initiatives have led us down serendipitous paths, and Six Sigma has proved no exception. It has, in addition to its other benefits, now become the language of leadership. It is a reasonable guess that the next CEO of this Company, decades down the road, is probably a Six Sigma Black Belt or Master Black Belt somewhere in GE right now, or on the verge of being offered—as all our early-career (3-5 years) top 20% performers will be—a two-to-three-year Black Belt assignment. The generic nature of a Black Belt assignment, in addition to its rigorous process discipline and relentless customer focus, makes Six Sigma the perfect training for growing 21st century GE leadership.

People

Our technology, our great businesses, our reach and our resources aren't enough to make us the global best unless we always have the best people—people who are always stretching to become better. This requires rigorous discipline in evaluating, and total candor in dealing with, everyone in the organization.

In every evaluation and reward system, we break our population down into three categories: the top 20%, the high-performance middle 70% and the bottom 10%.

The top 20% must be loved, nurtured and rewarded in the soul and wallet because they are the ones who make magic happen. Losing one of these people must be held up as a leadership sin—a real failing.

The top 20% and middle 70% are not permanent labels. People move between them all the time. However, the bottom 10%, in our experience, tend to remain there. A Company that bets its future on its people must remove that lower 10%, and keep removing it every year—always raising the bar of performance and increasing the quality of its leadership.

Not removing that bottom 10% early in their careers is not only a management failure, but false kindness as well—a form of cruelty—because inevitably a new leader will come into a business and take out that bottom 10% right away, leaving them—sometimes midway through a career—stranded and having to start over somewhere else. Removing marginal performers early in their careers is doing the right thing for them; leaving them in place to settle into a career that will inevitably be terminated is not. GE leaders must not only understand the necessity to encourage, inspire and reward that top 20%, and be sure that the high-performance 70% is always energized to improve and move upward; they must develop the determination to change out, always humanely, that bottom 10%, and do it every year. That is how real meritocracies are created and thrive.

Informality

Informality is not generally seen as a particularly important cultural characteristic in most large institutions, but it is in ours. Informality is more than just being a first-name company; it's not just an absence of managers parading around the factory floor in suits, or of reserved parking spaces or other trappings of rank and status. It's deeper than that. At GE it's an atmosphere in which anyone can deliver a view, an idea, to anyone else, and it will be listened to and valued, regardless of the seniority of any party involved. Leaders today must be equally comfortable making a sales call or sitting in a boardroom—informality is an operating philosophy as well as a cultural characteristic.

One of GE's long-standing management tenets has been the belief that businesses must be, or become, number one or number two in their marketplaces. We managed by that tenet for years, and enjoyed the business success that came, over time, from implementing it. But, once again, insidious bureaucracy crept into the definition of number one or number two and began to lead management teams to define their markets more and more narrowly to assure that their business would fit the one-or-two share definition.

It took a mid-level Company management training class reporting out to us in the spring of 1995 to point out, without shyness or sugar-coating, that our cherished management idea had been taken to nonsensical levels. They told us we were missing opportunities, and limiting our growth horizons, by shrinking our definition of "the market" in order to satisfy the requirement to be number one or two.

That fresh view shocked us, and we shocked the system. At the July three-year planning review that year, leaders were asked to define their markets in such a way that their businesses would have a 10%-or-less share. Rather than the increasingly limited market opportunity that had come from this number-one or number-two definition that had once served us so well, we now had our eyes widened to the vast opportunity that lay ahead for our product and service offerings. This simple but very big change, this punch in the nose, and our willingness to see it as "the better idea," was a major factor in our acceleration to double-digit revenue growth rates in the latter half of the '90s.

GE, as a Global Learning Company, is the result, the culmination, of the values and behaviors we've described. Today, the whole world's intellect and best ideas are ours because we are "boundaryless." More than just being receptive to these ideas, we spend our days seeking them out. Years ago Toyota taught us asset management. Wal-Mart introduced us to Quick Market Intelligence. AlliedSignal and Motorola got us started on our enormous Six Sigma initiative. More recently, Trilogy, Cisco and Oracle helped us begin the digitization of GE.

In today's GE, the rewarded behavior has changed from being the exclusive originator of an idea as a vehicle for standing out among colleagues—to, more importantly, finding a better idea and eagerly sharing it across the business and the entire Company, with the intent and effect of raising the bar of performance for all of GE.

The innovation that keeps every one of our businesses—from Aircraft Engines to Medical Systems—at the leading edge of their industries occurs much more rapidly because of the technology that flows rapidly back and forth across our Company in countless streams: metallurgy from Aircraft Engines to Power Systems; digitization from Medical Systems to Industrial Systems to Capital Services; span success from Plastics to Mortgage Insurance to every other business.

The GE operating system, which we have illustrated in the pages that follow our letter, is not a bureaucratic series of reviews, budget drills, reports and dog-and-pony shows, but a regular series of sessions devoted to learning and to sharing the best ideas and practices from across the Company and around the world.

Understanding how this learning culture, this insatiable thirst for new ideas fuels and is the central agenda of this operating system, explains how businesses as diverse as Plastics, Aircraft Engines or NBC can grow faster and perform better as part of this system than they would if they were not. It's what makes GE work. It's the fabric of the learning culture. Such an operating mechanism is difficult to bring alive on paper or in a chart, but is vividly clear when one observes the ferment and sharing of ideas that are at the heart of what might look like, from an agenda, just another series of boring business meetings.

It is this passion for learning and sharing that forms the basis for the unrelenting optimism with which we view the future, and for the conviction that our greatest days lie ahead.

The GE of the future will be based on the cherished values that drive us today: mutual trust and the unending, insatiable, boundaryless thirst for the world's best ideas and best people. But the GE of the future will be a faster, bolder GE whose actions will make the Company of today appear slow and tentative by comparison, a GE whose every employee will understand that success can only come from an inextricable link to the success of our customers.

And it will be a GE that will always be, as it is today, grateful for your continuing support."

Building the Next Generation Company: Innovation, Talent, Excellence by John Chambers

While the ongoing world economic crisis has left many business leaders sweating (or worse), John Chambers is rolling up his sleeves in anticipation of an eventual recovery. After every economic challenge, he says, Cisco has come out with dramatic gains in market share. This time won’t be different, if Chambers’ bets pay off.

In the 1990s, he predicted that networks would transform the way the world works, becoming platforms for communications and other IT, and Chambers placed Cisco at the center of that transformation. Today, he envisions a Web 2.0 premised on collaboration and social networking that will similarly transfigure all business life. Since 2001, he’s been positioning Cisco to catch this massive market transition, and indeed, is “betting the company’s future on it.”

In “phase two of the Internet,” says Chambers, “Content will find me; I will not search for it.” Any device, anywhere, will be able to receive any kind of content. We will be dealing with licenses for things like music, rather than worrying about compatibility issues between our digital tools and what’s streaming through them. Web 2.0 will also bring “effective collaboration,” by which Chambers means network-enabled visual tools, which will make “working together for a common goal truly possible.” Expect much faster business processes and revved up productivity, says Chambers.

Based on Cisco’s own experience in the past several years, organizations will completely restructure around these new capabilities. Indeed, he offers up his company as a paradigm of this vision. Once a hierarchical, command and control-based organization, Cisco is now much flatter, a company running “off of social networking groups.” Councils with cross-functional responsibilities suggest and take on many more projects (from emerging markets, to video, and smart grid boards); from one to two major ventures per year, to this year’s 26 launches. The next generation company is “built around the visual.” Cisco employees do non-stop teleconferencing with collaborators around the world. The company hosts 2500 such virtual meetings per week. It also employs Webex, Wikis and blogging to move work along.

With this kind of communication and carefully managed process to match, “operations can be turned on a head,” says Chambers. It’s the recipe for market-dominating speed and scale. Chambers is “loading the pipeline” with projects that assume other companies will want what Cisco has and makes. “If we’re right, we’re developing a huge wave of revenue opportunity.” Perhaps this is one reason why he’s “an optimist on global productivity, global economy and our ability to handle the challenges.”  

Formular for inefficient collective problem solving sessions (but people still do very often)

Collective problem solving sessions, ranging from formal workshops to brainstorming meetings and online forum discussions, are often not effective. There are a few common mistakes that I saw happening again and again. Some of them are due to bad problem solving method and some others are due to lack of a systemic approach. This post will serve as a "what not to do" list with tips to make such sessions more effective applying systems thinking in problem solving.

Complex problems often require a bigger group with different views to participate into brainstorming, discussion and formulating solutions. However, many sessions go off the main topic, lots of discussions but no clear result, or worse, create/deepen conflicts and force compromise. These often lead to pessimism about collective problem solving and lead to using less effective mechanisms such as upper management intervention or hard sell an one-sided plan.

From my observation and experience leading sessions with widely diverse groups, here are components of a formula for unsuccessful collective problem solving:

1. No clear process of problem solving
To bring in different views effectively in a short time requires a careful design of the inquiry and problem solving process. This process is often reflected in an agenda. Having no agenda or spending not enough time to explain and reiterate where the group is in the process is prescription for random conversations while important inputs are not appropriately voiced.

Tips: Scaffolding the working session. Careful develop a detailed agenda that takes into account not only the process but also group dynamics and contribution that each group of participants can make. Make sure you have the right mix of participants to understand, explore, validate and decide. Whenever possible, synchronize the agenda in advance and make sure participants come prepared with information and thoughts. This step is as important as scaffolding before starting to build.

During the session, spend ample time to explain to participants each step and intended purpose of each step in reaching the final goals. The facilitator(s) needs to keep the flow but allow flexibility to accommodate useful conversations and changes without major deviation from the original process. Summarize results so far and clarify the following steps once in a while to make sure that participants can follow the process.

2. No upfront common understanding of the objectives, value drivers and constraints
Assuming that every participant has the same understanding about the background, especially objectives and constraints, often lead to unproductive arguments and conversations.

Tips: Define purpose and system boundary. Start off the session by asking the sponsor to set the ground and talk about the value drivers and objectives of the problem solving exercise. Explain and agree on the constraints, but at the same time make sure everyone understands why the constraints exist, just in case some of them need to be revisited later (see point 5 below).

3. Jump to solution discussion before the problem is properly understood
Sounds very simple, this is the most common mistake I observed. Under the action imperative, especially when there are many experts in the room, groups tend to start immediately discussing about solutions. In addition, to be objective and avoid conflict, participants are often request to present data related to their argument. However, participants with different mental models interpret data differently, resulting in grid-lock arguments and conflicts.

Tips: Bring everyone to a helicopter view of the system. Build a systemic problem model visually before solution discussion. Data presented should be positioned against the appropriate part of the model. Once presented against the model, data will help not only to give a detail picture, but also to develop and verify the model of the problem. This is like taking people out from their local views to a helicopter view of the whole problem. Once the system is properly understood (and optimally documented visually), the solutions normally emerge naturally.

4. No clear view of the outcomes
Discussions often are divergent and take long to go to conclusion, sometimes still not good enough to be used in the next steps when participants have no clear view of the desired outcomes. Words are normally NOT enough.

Tips: Visualize and build the outcomes as the discussion goes. Visualize and discuss early in the session how the outcomes should look like. Design the process so that each step will help to move the group closer to the outcome. Result-based conversation are more productive, and visualization of each step toward the outcome will help participants appreciate the progress much more.

5. Try to solve problem at the wrong level/area and avoid to solve problem at a different level/area
Many issues that people try to solve are only symptoms of problems somewhere else. For example, process exceptions in many cases are created by breakdown in related processes or wrong organization structure. Trying to accommodate the process exceptions will not make the problem go away, even make it more difficult later to address the root cause.

Sometimes, recognizing that the problem needs to be addressed elsewhere, narrowly-defined boundaries, rigid deadline and lack of upper-management support, the team still create a quick-fix and avoid the root cause.

Tips: Solve the problem of different systems at the same time. While examining the problem in the current context, it is important to put the system of inquiry in a bigger perspective. Bring people with broader view and responsibilities to the process. Diagnose the other related or incorporating (i.e. mother) systems, take not only functional but also structural view of the problem. Once problems elsewhere are identified, come up with careful analysis of dependencies and plan to initiate problem solving at different levels and locations in parallel. Contingency planning is important to make this happen without compromising, breaking the deadline or exploding the scope of the project.

After all, collective problem solving involving different views and functions requires a lot of preparation, thoughts and skills that most people think. Inadequate attention to these often result in frustrations, conflicts, compromise, and create/reinforce boundaries and cylos. The tips presented here are a starting point to think about a more effective process.

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, after my favorite soccer team, Croatian, lost its match in Euro 2008.

 

Balancing control and trust in fast-growing entrepreneurial companies

Fast-growing entrepreneurial companies often face a daunting task of maintaining autonomy while continuously improving the structure and controlling mechanism. As business environment in and out side company is normally not clearly defined, a rigid structure and control system will limit the future of company. The answer is a good balance between a flexible control system that emphasizes cohesion and deliberate plan to grow trust.

Nothing is like being a part of a fast-growing entrepreneurial company, exciting, ambitious and still chaotic. Growing out the first period, there is a strong sense of satisfaction with empowerment, without which, the company would not be this successful. Many people, especially management still remember the days when everyone knows everyone else, did everything and still worked as one.

However, the company has changed with many new generations of people joining, management simply don't have visibility into everything anymore. Management team is challenged by the enormous amount of works and has to rely on trust to give autonomy to units. Without autonomy, the company runs the risk of limiting its future, or even slowing down and doom. Trust is difficult when there are many new people, and when most of the management are working in new capacity than they had been doing before.

On the other hand, management starts to be under pressure from new stakeholders to reduce the risk of losing control of the organization, which they are fully responsible for. Growing the company through the initial days, management often has fear that employing too much control will destroy "the magic" and hamper the growth. In other words, management often finds it difficult to make a compromise between trust and control. In fact, management has no choice, though, but combine these two seemingly contrary measures of reducing risks while managing a bigger complexity.

This post presents a set of recommendations to strike this balance. The measures pointed out below are applicable to the whole company or its autonomous unit. It is still worthwhile to note that application should varies with situation of the company/unit. If most of the people identify themselves well with company, there should be less control necessary. If people have low commitment and there are high potential gains from deviant behavior, control is more important.

The measures proposed included a flexible and lean control system with deliberate trust growing plan. In addition, coordination, negotiation and monitoring are important to reduce the drawbacks of control and to avoid too much interference that harms trust building efforts.

Flexible Control System

Traditionally, companies immediately establish the formal structure with effort to define tasks, authorities and information flows. An issue with clearly-defined structure is silo thinking that reduces collaboration.  A thorough exercise like this requires a lot of effort and a large part may not valid for long in a changing environment like in fast-growing entrepreneurial companies, anyway.

Managerial cybernetic sheds new light into the concept for structure, that is a better fit for entrepreneurial company. It is stable relations that allow people and other resources to operate together as a totality define structure. The organisation's structure is thus viewed as a network of stable 'real life' on-going communications, or organisational processes, and not as static formal reporting relations. Objects, such as communication devices or information systems, thus constitute an organisation’s structure.

Fast-growing entrepreneurial companies should focus on understanding, establishing and modifying these stable communication relationships, which happens directly by conversations or indirectly through coordinate actions as an outcome of sharing a context or culture, among its units and roles.

In addition, these companies should spend time together with their units to define and agree on the coherence boundaries. These are guidelines to make sure identity of the company, company's operational direction and synergy with other units of the same company are taken into consideration in unit's decision and operations.

Fast-growing entrepreneurial companies also need to tune their incentive system. The system should encourage collaboration, tight compensation to level of support (e.g. service quality) to other parts of organization, or support achievement of whole organization.

Leadership development and training are effective measures, though less often thought of as mechanisms to ensure compliance and coherence. These help enhance management community, create sense of direction and involve key members from unit management to development of strategy and policies.

Finally, these companies should also facilitate sharing with new generations by reviewing resource allocation agreement more often, recognizing contribution and seniority but emphasizing growth of the company or unit as a whole.

Coordination, Negotiation and Monitoring

Why and how companies should be prepared for technology proliferation, even of the one they helped to create

No time in history before, technology is changing at the pace we are experiencing now. As the world is connected, network effect accelerates technology adoption and drives proliferation and commoditization very quickly. Once technology is everywhere, it is no longer a tool, but becomes the state of the environment that organizations operate on. Technology however is becoming embedded in our lives and therefore changes human behaviors. These fundamental shifts demand organizations not only to learn how to use technology, but to adapt to new environment and behaviors. The question therefore is not "how to use the technology", but "what my organization should be" given technology is the environment.

Let's look at a couple of examples to see how the fundamental shifts happen and change the rule of the game.

Just more than 10 years back, when doing commerce on the Internet was still very rare, most companies were trying to learn how to use it. The dotcom bubble motivated massive number of fiber optic cables to be laid, which literary commoditized the bandwidth. Enabling financial services flowering and quickly became readily available with minimal cost. Application vendors also made online transaction a standard part of their offerings, sometimes even free. For companies, the word eCommerce seems to disappear. However, companies had to go through a phase of redefining themselves given that the majority of their suppliers, customers and competitors now have the ability to do business using the net. Making it worst, many customers are getting used to it, thereby changing their purchasing behavior and refuse to do business otherwise.

Let's use government as another case. Governments within about one of two decades years back started to bring more PC into their business. The idea at the beginning was to automate their administrative works. However, as PCs and network are available at most of the citizens and organizations they are dealing with, the purpose of eGovernment changed. It's now how government should operate when parties they are dealing with are using and gradually demanding using PCs and network in their transactions. Peer pressure from governments in the same groups is another force to drive this change. Unfortunately, many didn't understand this and spent their money investing into technology without rethinking the way they organize and work. The disaster of the CP 112 program in Vietnam is one painful example of this.

The third example is different in the sense that it's about the company that created the "technology" itself. Founded in 1994, Monster.com was the first Internet job board. Since then, the company has grown to 75 million resumes on file and covers now 36 countries in the world. The new industry was so successful that it even increased the job changing wave in the United States, according to Stevenson's "The Impact of the Internet on Worker Flows" report. The concept and especially behavior changed leading to implementation of Internet recruiting solution in large companies themselves. More importantly, companies have to pay more attention to recruiting and retaining their talents to survive the new wave.

Seeing the big picture to be effective in complex environments

Complex environments present a very different situation, where causal relationship is often not clear. This environment however very different from the focused and simplified situations we are familiar with in classical academic, books and teachings. As the result, efforts to improve efficiency in the wrong place lead to reduction in effectiveness. Looking at the big picture and defer judgment can help.

In a previous post, I discussed the examples of when efficiency is the opposite of effectiveness. The most important reason why this happens is broken link between cause and effect. In teaching environments, books and talks, to be able to convey the method and tactics, the background settings are condensed into relevant facts. Frameworks and simulations make it worse by creating an impression that results can be directly identified and related to actions. Meanwhile, people are rarely taught of how to collect the most important facts and link them together in real life. As the result, there is a prevalent misconception that causes and outcomes are obvious and appear close to each other. People tend to fix somewhere close to where the problem becomes evident. When paying attention to short-term events, human is often concluded as the main problem. Many don't know how to find the right "button" distance in time or place in systems to solve the problem. This is also a reason why many MBAs are bad managers in increasingly complex market and corporation environments.

How to make Social Networking work for Service Organizations

While Social Networking is getting into daily discussions everywhere, social network analysis is gaining acceptance as an effective organizational tool. However, there is still scattered knowledge about how to bring these two seemingly related issues together in organizations. This post summarizes and points out some new ways service organizations can capitalize on these trends to address new challenges.

Major challenges to service organizations
Today's service organizations are facing high demand for knowledge-intensive works. However, ever changing knowledge and skills in the service areas require organizations to maintain current business while learning and unlearning at an unprecedented pace. It is only efficient if organization members can together create and learn from their colleagues. In another word, service organizations need to retain talents and be learning organizations to be competitive in the long run.

This great challenge is complicated by the fact that service organization's workforce is often distributed in time and location. By the nature of service business, a part of the workforce is spending significant time on site, or working in time shifts. Many large organizations have branches in many locations, sometimes countries and regions. As works are getting more complex and demand becoming unpredictable, many organizations choose to employ contractors to gain access to skills and at the same time maintaining a certain number of employees for the stable part of the workload. Together with flextime, remote working and outsourcing, these factors make traditional learning and information exchanging methods ineffective.

Systems thinking - effectiveness vs. efficiency

Inspired by a discussion with John Beckford, I wrote this on the airplane to Palo Alto.

It's human natural psychology to improve the way we do things to achieve more. However, trying to work only where the symptoms are visible often times does not bring effectiveness, even when the efficiency is improved. Why? Because any object, being or process does not exist alone by itself, and thus the symptoms need to be analyzed in its relationship to related objects in the system.

Let's take a couple of examples of how efficiency means the opposite of effectiveness.

I have a couple of friends who felt that they didn't have time to do everything they wanted. Feeling time management issues, they tried to improve their productivity while getting more works in order to force themselves "to be more efficient". The problem however got worse and they felt even more under the pressure. What's happening here? My friends are good at getting more works, and actually spent more time to improve their skills of getting more works. As the result, they had no time to slow down and think about how they can improve their execution skills, their real bottleneck.

Did your people turn bad, or you have an organizational problem?

At work, there are many problems that normally are attributed to people while they actually originate from organization. Examples are employee’s burnout due to lack of organizational respect as pointed out in “More than Job Demands or Personality, Lack of Organizational Respect Fuels Employee Burnout”, and low management effectiveness as well as coordination issues in growing company as described in “Growing pains”.

In the first example, because the common sense is to “conceptualize burnout as stemming from the job or the individual, rather than the organization, "the 'problem' from a managerial perspective is the person." The article also points out that this issue will spread as “when team members see someone else on the team being treated unfairly, they alter their own perceptions of the fairness of the team.”