Home > Digitalizacija > Lukas Michel, Herb Nold: The Transition of Organizations

Strategy for Uncertain World

Larry Greiner’s Life Cycle Model, published in 1972, provides a widely recognized model for growth. The ‘Greiner Curve’ describes five stages (creativity, direction, delegation, coordination and collaboration).

Life Cycle Patterns

The Digital Economy

Two trends, digitalization and the changing nature of work, fundamentally alter the way we lead people and manage organizations.

Digitalization lowers information costs.

Old-school management styles dominate in a stable environment where change comes slowly.

The term VUCA was first used at the US Army War College in Carisle, to describe the military environment after the fall of the former Soviet Union and the end of the Cold War.

Too often, when control fails, traditionally trained managers create more of it.

In the VUCA world, artificially enforced methodologies become another brake to growth by slowing the decision-making process, knowledge sharing, and ultimately innovation. In ambiguous environments, delegation is more effective than personal power.

Peter Drucker, “With the knowledge age, employees become executives. They make decisions.”

The Growth Life Cycle

Business leaders should be aware of which stage their organization is in, the characteristics of the current stage and the characteristics of the next stage.

Greiner’s five life cycle stages:

  • Growth by Creativity. Entrepreneurial Organization. Crisis of Leadership.
  • Growth by Direction. Functional Organization. Crisis of Autonomy.
  • Growth by Delegation. Decentral Organization. Crisis of Control.
  • Growth by Coordination. Segment Organization. Crisis of Red tape.
  • Growth by Collaboration. Network Organization. Crisis of ?.

Most organizations do not grow at a constant pace over multiple periods. The critical task for managers is to identify the right time to begin questioning existing practices and implement new ones that work for the next stage of growth. Past patterns of behavior and structure are not helpful in getting through the next growth stage.

There are various control systems commonly in use to overcome challenges in the different phases:

  • Internal controls to free up creativity.
  • Performance indicators to clarify direction.
  • Delegation through strategy, performance plans and reports.
  • Coordination through vision, values and contribution.
  • Collaboration through mission, risks and structure.

Charles O Reilly III and Michael Tushman in 2004 HBR article talked about ‘ambidextrous’ thinking. Leaders must exploit current strengths while simultaneously leveraging core competencies to explore new opportunities to continue growing.

The managerial modes & ecosystem

Three dynamic and interconnected ecosystems frame the structural and behavioral patterns within the five life cycle stages. Understanding the characteristics of the three ecosystems: people-centric management, agile organization and dynamic operating systems.

Four operating modes:

  • Rule-based management. It works well in a stable environment where knowledge is concentrated with managers at the top. It has eight distinct features: command, procedures, targets, change, efficiency, bureaucracy, power and standards.
  • Change-based management. It dominates in highly regulated industries when volatility, uncertainty and ambiguity in the internal and external environment increase. Eight distinct features: command, procedures, targets, change, emergence, self-organization, delegation and options.
  • Engagement-based management. It is preferred by knowledge-driven organizations that operate in a stable environment. Eight distinct features: self-responsibility, teamwork, attention, capabilities, efficiency, bureaucracy, power and standards.
  • Capabilities-based management. It dominates when knowledge is widely distributed throughout the organization as complexity increases and the need for creative innovation dominates. Eight distinct features: self-responsibility, teamwork, attention, capabilities, emergence, self-organization, delegation and options.

The term ecosystem was first coined by Arthur Tansley, an English botanist, in 1935.

Three managerial ecosystems:

  • People-centric management.
  • Agile organization.
  • Dynamic operating system.

Some of the most common organizational infections are: toxic culture, flawed leadership and broken systems.

Some examples of toxic culture: unclear or vague operating procedures, business values that are not clearly linked to outcomes, cynicism, upward delegation, outdated reasons for centralized decision making, a technocratic view of decision making and lack of shares assumption.

Some examples of flawed leadership: excessive control, busyness, lack of time, disproportionate attention to detail, micromanagement, senselessness, obsessive focus on numbers, and saying one thing and then doing another.

Examples of broken systems: bureaucratic or non-existent routines, burdensome formality, faulty design, failure to revisit past decision, slow delivery of critical information that hampers decision-making, rules infected with the viruses and ineffective tools that fail to get the right information to the right people at the right time.

Mastery in management

Four people-centric levers provide a roadmap of dynamic capabilities that are needed to advance from traditional to people-centric management style, which is more effective when leading knowledge workers in a digital world.

The four inner-game principles (awareness, choice, trust and attention). They help people perform effectively, and simultaneously address the challenges of the outer game.

  • Awareness helps individuals cope with complexity.
  • Choice allows people to handle ambiguity.
  • Trust is critical when people address uncertainty.
  • Attention is necessary when people deal with volatility.

The inner game is a mental technique developed by Timothy Gallwey that enables people to cope with the outer game.

  • Purpose is the foundation for motivation and self-responsibility.
  • Relationships connect people.
  • Collaboration coordinates the work of people.
  • Learning refers to the ability to perform, innovate and grow.

The four people-centric levers:

  • How do we know with clarity?
  • How do we move in one direction?
  • How do we mobilize energy?
  • How do we maintain focus?

Know with clarity – raise awareness. Move in one direction – enable choice. Mobilize the energy – build trust. Maintain the focus – focus attention.

Agile organization

The Dynamic Performance Triangle system illustrates the complex interactions among individuals, operating systems and the work environment.

The critical capabilities of agile organizations are speed, agility and resilience.

The performance triangle is an important part of agile organization. Effective agile actions require a culture of shared beliefs, values and assumptions. Everyone must understand what is expected, how to get things done and how they are doing. Shared culture, effective leadership interactions and diagnostic controls make up the capabilities of an agile organization. We also have three levels of the environment. The individual, the operating and the work environment.

We have the X-style managers and Y-style managers. The first assume that people has little ambition and are more interested in individual goals than those of the company. The second have a more humanistic view.

Four elements of the people-centric enabling mode:

  • Awareness to understand what is going on, why and to know with clarity.
  • Choice, to move in one direction by making consistent and common-sense decisions.
  • Trust, in each other and managers, to act responsibly and mobilize the energy of the group.
  • Focus, on tasks that add value to stay on track.

Knowledge work is made up of five control elements:

  • Understand.
  • Think.
  • Act.
  • Engage.
  • Adhere.

There are three basic ways to influence what people do and how they do it:

  • Culture works like a compass that points people in the right direction.
  • Leaders directly influence people internal and external to the organization through interaction and interference.
  • Systems reflect governing strategies, mission, objectives and the like. Systems direct activity and influence people’s behavior and the decisions.

A balanced operating system creates organizational agility as the dynamic capability that enables and encourages innovation.

The five culture elements, which establish a shared mindset, include:

  • Shared understanding.
  • Shared intent.
  • Shared agenda.
  • Shared aspirations.
  • Shared norms.

Five unconscious leadership attributes:

  • Sense-making discussion.
  • Strategy conversation.
  • Performance conversation.
  • Contribution dialogue.
  • Risk dialogue.

Five characteristics of effective systems:

  • Information. To get the right knowledge to the right people at the right time.
  • Strategy. To help people align actions by thinking and moving in one direction.
  • Implementation. To help them mobilize their energy and act proactively, focused on organizational goals.
  • Beliefs. To help people become personally engaged.
  • Boundaries. To shape the limits of behavior.

Successful firms meet or exceed expectations by making performance visible, in the form of socially accepted outcomes.

In the Performance Triangle model, five attributes determine success: responsiveness – to sense opportunities and react to them; alignment – of the organization and strategy; organizational core competencies – sustainable competitive advantage; motivation – of the team to get the things done; wisdom – how the organization defines and uses its boundaries.

Elements of working environment: purpose, relationship and collaboration. Purpose is created individually and is unique for every person. It cannot be delivered, dictated or decreed by management.

Speed, agility and resilience are the three central elements of dynamic capabilities.

Mario Andretti: “If you have things under control, you simply don’t go fast enough.”

  • The individual environment comes with awareness, choice, trust and focus of attention.
  • The operating environment frames systems, leadership and culture elements.
  • The work environment is about purpose, collaboration and relationship.

The Dynamic Operating System

The four dominant operating systems. They align with the four operating modes: rules, engagement, change and enabling. They are not mutually exclusive. They are positioned in the matrix of context (between stable and dynamic) and management (between traditional and people-centric). Rules are hierarchy and power (traditional and stable). Engagement is about individual knowledge (people-centric and stable). Change is about management action (traditional and dynamic). Enabling is about learning, development and cooperation (dynamic and people-oriented).

Robert Simons developed ROM concept in 1995. Return on management.

ROM = Productive energy released/time and attention invested.

An effective operating system must yield a high ROM.

Well developed dynamic operating systems facilitate intuitive decision-making (the agile elements) and well-practiced routines (the stable elements) rather than rigid authority, decision paralysis-by-analysis or knee-jerk reaction.

The fact is that rules-based systems achieve exactly what they intend to: fulfilment of detailed objectives, and not one bit more. The engagement-based operating system is built on the assumption that people are fundamentally internally motivated. In change-based operations, it is always the manager who decides. Capabilities-based operations favor decision-making through collective wisdom.

We created a matrix that merges the key attributes of operating systems (clarity, alignment, energy and focus) with the dimensions of the Performance Triangle (systems, leadership, people, culture and success). The Leadership Scorecard has four levers combined with five systems and five leadership interactions to help develop people centric management attributes.

The Leadership Scorecard:

Know with clarityMove in one directionMobilize the energyMaintain the focusMaintain the focusManagement
InformationStrategyImplementationBeliefsBoundariesSystems
Sense-makingStrategy ConversationPerformance ConversationContribution dialogueRisk dialogueLeadership
UnderstandThinkActEngageAdherePeople
Shared understandingShared intentShared agendaShared aspirationShared normsCulture
ResponsivenessAlignmentCapabilitiesMotivationClevernessSuccess

A competitive advantage

Better management is a distinct competitive advantage. Six attributes that signal whether management qualifies as a competitive advantage: work environment, results, management, people, operating systems, toolbox.

  • Does the work environment enable people to get work done?
  • Does your organization keep promises and create value?
  • Does your management create unique value?
  • Do people use their talent to exceed expectations?
  • Is your operating system ready for VUCA?
  • Is your culture deeply embedded in the toolbox?

The Maturity Scale groups into a six-level ranking:

  • Contestants are organizations that inherited an organizational design based on operating in a stable environment.
  • Exploiters are organizations designed to exploit physical and human assets.
  • Changers are organizations designed to implement disruptive change.
  • Enablers are organizations designed to promote employee engagement in a stable environment.
  • Performers are organizations designed to be effective in a dynamic environment.
  • Pioneers are organizations designed in a way that promotes continuous evolution in response to change, but in small bites that prevent wholesale disruption.

Five Life Cycle Stages

Creativity

The creativity life cycle stage consists of entrepreneurial organizations, including start-ups. They tend to score at the enablers maturity level and operate in the engagement-based management mode. Innovation, creativity and speed are the hallmarks of entrepreneurial organizations.

As organization grows the crisis of leadership is the consequence.

The emergence of specialized functional departments provides direction to the organization from individuals with specialized technical knowledge.

Direction

The second stage in Greiner’s Growth model is ‘direction’. In the direction stage, the organization has grown beyond the creative entrepreneurial stage.

Organizations in this stage typically have pattern of results placing them at the changers maturity level with the rules-based management mode.

In the direction stage, maximizing efficiency, quality and asset utilization are central features of functional organization.

Frustration builds leading to a crisis of autonomy.

Organization moves into decentralization direction. Delegation is the normal next step.

Delegation

Decentralized structures with delegated decision-making and accountability are established.

In the delegation stage changers maturity level is reached and engagement-based management mode is used.

Independence and freedom to act represent an opportunity for people-centric managers to demonstrate their effectiveness.

Crisis of control is the trigger for moving into the next stage.

The next stage is about coordination.

Coordination

The emergence of segmented organizations with specialized functions and lines of businesses that require coordination by top management.

In this phase the crisis of red tape arises. A great deal of time is devoted to meetings, to set and review strategy, allocate resources and evaluate segment performance.

Organizations operating in the coordination life cycle stage have patterns indicating that they are at the enablers maturity level, operating in the change-based management mode.

At this stage formal systems are put in place by headquarters staff.

Collaboration

Collaboration becomes an essential capability for networked organization to distribute valuable knowledge among the many component-parts to facilitate further growth.

Organization now develops a more flexible and versatile network structure.

In this stage organizations operate at the performer maturity level and in the capabilities-based management mode.

The company has an effective people-centric environment that encourages flow and knowledge sharing with flexible operating systems that emphasizes self-responsibility.

At the collaboration stage balance is the competitive advantage that yields superior results.

The crisis of complexity resolved through collaboration leads to the crisis of sovereignty.

Four transition strategies

People first

The first growth stage transition is the move from creativity to direction. This transition requires a solution to the crisis of leadership.

To solve the crisis of leadership, enlightened management prioritize the needs of people.

The top priority of managers should be developing skills and capabilities.

The right balance between rules and people drives the creation of customer value, in line with an exploitation-type of business model.

The inner game is the technique that enables people to perform at their peak and learn quickly.

Awareness involves having access to data on what is happening. Choice is the prerequisite for responsibility. Trust generates speed and organizational agility. Focus refers to self-initiated attention to what matters most.

Solving the crisis of leadership relies on the executive’s ability to play the inner game.

People-centric management

The second transition is the move from the direction stage to the delegation stage. Delegation helps overcome the crisis of autonomy.

Control assumes that only managers have the skill and knowledge.

Self-responsibility assumes that people can think, decide and act on their own.

Procedures are detailed routines that prescribe how a specific task needs to be performed.

Teamwork is the approach to getting work done that requires creativity and responsiveness in groups.

Goals refer to the attempt to force stringent alignment using detailed performance objectives and financial incentives that are paid out when people achieve specific targets.

Attention refers to people’s ability to focus on the tasks that truly matter for them and add value to the business.

Change is the process by which organization adapt to alternations in the environment through one-time efforts.

Capabilities refers to management techniques that prove effective in dealing with a dynamic environment where opportunities and threats quickly emerge and demand a swift response.

Integrated systems allow managers to keep an eye on operations from a distance.

Information systems help managers and the team to know what is going on with clarity.

  • Information. What is going on?
  • Sense-making. What does the information mean?
  • Shared understanding. What is the team’s shared understanding?
  • Responsiveness. How does the team respond to client needs?

Strategy.

  • Strategy. What game are we playing?
  • Strategy conversation. Why are we going there?
  • Shared intent. What is our shared intent?
  • Alignment. Do the strategy and the organization fit?

Implementation systems help executives mobilize the inherent energy of the team.

  • Implementation. How does the team succeed?
  • Performance conversation. Is the team on track?
  • Shared agenda. Does the team get the right things done?
  • Capabilities. Does the team have the right capabilities to support the strategy?

The task for managers is to mobilize the collective energy of the group to get things done. People-centric principles, agile practices and dynamic systems resolve the tension between uncertainty and energy.

Beliefs and boundary systems help you and your team establish and maintain focus.

  • Beliefs and boundaries. What are our personal and organizational ambitions?
  • Contribution and risk dialogues. Do people have a firm grasp of their role and how they can contribute to meeting organizational goals?
  • Shared aspirations and norms. Do people share a strong sense of purpose?
  • Motivation and cleverness. Are people highly motivated to perform at their peak?

Learning is the catalyst for people, and the organization at scale, to stick to chosen opportunities, despite the challenges of higher volatility.

Dynamic operations

The third transition is the move from the delegation stage to the coordination stage of growth. The crisis of control emerges at the delegation stage, which inhibits continued growth to the coordination state.

Efficiency is the hallmark of traditional management.

Emergence means flexibility and anticipation.

Bureaucracy involves establishing rigorous processes with multiple levels of approval that work well in a stable context.

Self-organization relies on teams of motivated, self-responsible people with flexible routines to deal with increasing complexity.

Power and decision-making authority concentrated at the top of the hierarchy works in a stable environment where outcomes are easily determined.

Delegation and trust in self-responsible people are the keys to effectively managing in an uncertain context.

Standards as in “standard operating procedure” or work instructions, work well in a stable and clear context.

Options are needed in a time of ambiguous context.

Diagnostic systems generate information that is available where decisions are made.

It is important to note that changing culture is much more than changing individual mindset.

In successful companies in a dynamic environment, self-responsible people with delegated authority and knowledge respond to customer needs or threats.

Agile organization

The fourth transition is the move from the coordination stage to the collaborative stage of growth. The networked organization emerges at this stage.

Moving from a segmented to a networked organization requires capabilities-based management with a focus on purpose, collaboration, relationship, and learning.

Solving the red-tape crisis has four parts: shared purpose, healthy relationship, close collaboration and continuous learning.

Purpose modes are positioned based on matrix of low and high awareness and low and high energy. Low and low is purposeless meaning, high energy and low awareness is rootless purpose, high awareness and low energy is idle purpose, high and high is meaningful purpose.

Moving people toward the flow line involves the following: build awareness and nurture a productive culture and remove interference.

The first step is to help people know what is going on with clarity and find purpose in what they do.

The mindset shift to self-responsibility, the shift to skills for feedback and sense making and the shift of tools that deepen understanding.

Knowledge is the only resource that grows with use.

The second shift is for people to move in one direction and build relationships to enhance knowledge sharing.

Four relationship modes based on focus and energy matrix.

  • Arbitrary relationship: low focus, high energy.
  • Connected relationship: high focus, high energy.
  • Detached relationship: low focus, low energy.
  • Isolated relationship: high focus, low energy.

Cooperation enhances collaboration. Cooperation is facilitated by systems (rules, routines and tools) and leaders who connect people and encourage trusting interaction.

Four collaboration modes based on awareness and focus matrix:

  • Scattered collaboration: low awareness, high focus.
  • Cooperative collaboration: high awareness, high focus.
  • Random collaboration: low awareness, low focus.
  • Bureaucratic collaboration: high awareness, low focus.

The third shift focuses on people who mobilize energy and collaborate across organizational boundaries.

The fourth shift from traditional to agile management is to build an environment that promotes continuous learning and helps people focus their efforts on tasks that add value.

Managing transitions

Work on the system

There are two intervention paths to select in preparing to navigate the transitions. One represent an evolution while the other a disruption.

Disruption first alter systems to scale agility, and then develop leadership. Evolution first train leaders.

Diagnostic mentoring is a methodology for working on the system based on experiential learning and the inner-game principles. Work on the system involves five activities: understanding context, applying inner-game principles, following people-centric techniques, designing the toolbox and making the shift to work in the system to yield positive outcomes.

Three steps

Taking targeted action is the primary responsibility of top management.

Diagnostic mentoring is necessary. Monitoring tools, routine and behaviors is a risk management activity. It is about awareness, insight and learning. Raise awareness for the transition. Act on your insights on your transition. Expedite the learning about your transition.

Seven dimensions combine to assess current agile characteristics, people-centric management, dynamic capabilities and outcomes of the organization:

  • Agile organization: 11 performance triangle elements.
  • People-centric management: 10 people-centric levers plus the 20 elements of the leadership scorecard.
  • Dynamic capabilities: four dynamic levers, speed, agility, and resilience, plus elements of the leadership toolbox.
  • Outcome: performance, innovation and growth.

The executive survey offers the non-routing assessment of dynamic capabilities. The culture assessment evaluate the gaps with predetermined culture attributes. The employee survey identify faulty behaviors and flawed leadership.

Learning has three components: readiness, capabilities and opportunities.

The transition roadmap

These triggers indicate when a change in the design of leadership and systems is needed:

  • Interference and unused potential.
  • Faulty operating mode.
  • Change in context.

What do you fix first: leaders, culture or systems. First fix systems and then retrain leaders.

The wrong operating mode emerges when there is a mismatch between the dominant operating mode and the environment.

Fixed performance targets and volatility do not go together.

The performance triangle frames the capabilities of an agile organization: people, organization, work.

Six levels of fitness:

  • Work environment. Do we get work done?
  • Results. Do we deliver on promise?
  • Management. Is people-centric our principle?
  • People. Are people in the flow?
  • Operating System. Are we ready for VUCA?
  • Toolbox. Is management rooted in culture?
You may also like
Patrick Lencioni: The Five Dysfunctions of a Team
How to manage
Jo Owen: How to manage; the definitive guide to effective management
Stephan Kaiser, Max Josef Ringlstetter: Strategic Management of Professional Service Firms
Prodaja – samotni jezdeci po pokrajini strank ali uporabniki modernih orodij in zaključevalci poslov?

Leave a Reply