The Organization of the Future - What Will It Look Like?
Many books and articles have documented the relationship between organizational structure and the ability of a company to produce results and to grow.
Decades ago, Harvard's Alfred D. Chandler in his classic book Strategy and Structure demonstrated strategy precedes structure.
Briefly stated, an organization must first determine its strategy (what-to-do) and then develop a tactical (how-to-do) plan for the work to be done. This includes work assignments, deadlines for performance, budgets and more.
The right organizational structure must be in place to administer the selected strategy. The right structure does not guarantee results. But the wrong structure, said Peter F. Drucker "aborts results and smothers even the best-directed efforts."
Every kind of organization needs to continuously reevaluate its basic structure. No organization is destined to live forever. Embarrassing non-results are in many instances directly related to an organization's basic structure.
With all the changes now happening with respect to analytics, technology, AI, the new machine age and the like, it's now a necessity to rethink or radically redesign organizational structures to remain an effective competitor.
This article by Jim Champy–one of the most respected business thinkers in the world whose books have sold millions—cuts to the core of the organizational redesign issue with insights, advice and cautions you'll want to heed.
The last serious book on organizational design, The Organization of the Future, was published by The Drucker Foundation in 1997. Peter wrote the introduction, and I had the honor of writing the first chapter, Preparing for Organizational Change.
Prior to the Drucker book, the classic on the subject was Peters and Waterman’s In Search of Excellence, published in 1982. That book has some sound management theory but has been criticized.
Most examples used in the book to illustrate excellence are companies that no longer exist. Those companies have either gone out of business or have been acquired.
Their disappearance proves a profound point: very few organizations are designed to last. In fact, many of the so called “unicorn” ventures (start-ups valued at over a billion dollars) have been designed to sell, not last.
Today, a learning organization should be asking hard questions about the sustainability of its enterprise: what will it take to survive this period of business disruption and technology advancement and what must change in the organization’s design to thrive?
The “Excellence” Model
Peters and Waterman argued an organization had seven elements that must be supportive of each other: culture, structure, strategy, skills, staff, systems and managerial style. This way of thinking became dominant in the 1980’s and ‘90’s, helped by the consulting firm, McKinsey & Company, that spread the word to its clients.
There is still a lot of validity about thinking of organizations in this way, but today, I would focus on process, structure, technology and people.
Designing a robust and sustainable organization begins by asking four questions:
- On Process: What are the key processes required to survive and thrive? Even a learning organization can't change everything at once.
- On Structure: What kind of structure will enable changes and the successful implementation of new technologies? We're getting close to the end of the hierarchical, bureaucratic organization.
- On Technology, Itself: Who in the organization is accountable for technology innovations and their implementation? Technology has a history of costing a lot and not delivering much value.
- And on People: Is our challenge of change a matter of culture, behavior, or skills? As Drucker wrote in his introduction to the Foundation’s book, “The organization is, above all, social.” It’s “purpose must therefore be to make the strength of people effective and their weaknesses irrelevant.”
There is great competitive value in having a unique organization. The answers to these questions will help a learning organization acquire that uniqueness and get you to the future.
A business process is a collection of tasks, that when intelligently sequenced and designed, delivers value-hopefully to the customer. The importance of process was the subject of the Reengineering book Mike Hammer and I published in 1992.
When companies focus on process redesign, they look for opportunities to improve quality and reduce cost and cycle time. But today, it’s important to step back and ask what are the most important processes in our company and how can we make them competitively distinctive? The answer will vary, depending on your business.
For commodity retailers, the most important process may be “order fulfillment.” For companies in “fashion,” it may be “product design.” For manufacturing companies it may be “supply chain management.” For pharmaceutical companies, it may be “research and development” and “FDA approval.”
Simply put, what’s the work you need to be really good at and where must you invest resources to thrive? Again from Drucker, “The purpose of the organization is to get the work done.”
The Future Structure
I have long been an advocate of structuring companies by key processes like those above, not strictly by traditional disciplines like finance, marketing, manufacturing and sales. Or if you must maintain a discipline orientation, have your organization chart reflect the key processes within those disciplines.
Organizations that are discipline-dominant often take on a tribal character, with disciplines arguing they are each more important than others. Process-focused organizations are output-focused, always looking at ways to improve what they deliver to customers.
Increasingly, processes will be embedded in information technologies that companies buy or license. This will increase as machine learning and artificial intelligence advance-replacing, for better or worse, the human resource in many work processes. Truck drivers are now predicted to disappear as autonomous vehicles take to the road, and AI cloud based solutions will infiltrate call centers.
It's painful to think of people as replaceable, but work processes as we know them today will be increasingly replaced by intelligent technologies. I envision the future structure of organizations to be a technology platform, managing the flow and availability of information across the company, on which a combination of business processes and disciplines sit.
The organization starts to look like a collection of process LEGO’s that can be changed and replaced over time. The relationship of those processes will be unique to a company’s work.
To many, this may not be an appetizing model, but it’s where technology is taking us. Intelligent technologies will not take over the world, but they will raise the questions about people: where will they be important and what will be their required skills?
(It’s interesting to note an argument made in The Organization of the Future book that companies should be structured around capabilities, where capabilities are defined as “core competencies, focusing on the technological expertise resident within the firm.” Whether processes or capabilities are the dominant structural unit, you can start to see that technology will soon drive structure-not strategy!)
As machine learning and artificial intelligence advance, information technology will become even more important. If you are a “digital native,” adapting to new technologies will not be difficult, but for most learning organizations, managing information technology will be a challenge.
The history of large, complex systems has not been good, although the techniques broadly known as “agile” have helped companies better manage IT development.
Large intelligent systems will more likely be bought or licensed, rather than be developed “in house”. But the history of buying and installing large systems has also had mixed results.
Just look at the way doctors have experienced the systems that manage electronic healthcare records.
In November of 2018, the brilliant physician thought-leader, Atul Gawande, wrote in a New Yorker article: “Something’s gone terribly wrong. Doctors are among the most technology-avid people in society, computerization has simplified tasks in many industries. Yet somehow we’ve reached a point where people in the medical profession actively, viscerally, volubly, hate their computers.”
From my perspective, what’s gone wrong is that clinicians abandoned the accountability for managing key information technologies to people in IT. What the future demands is people who manage key work processes also be accountable for decision-making and managing the application of information technology.
The person known in most organizations as the Chief Information Officer (CIO) should focus on the technology and communications infrastrastructure.For learning organizations, this will require process managers to acquire a new set of skills.
Is It Culture, Behaviors or Skills?
Whether you're redesigning a process or the structure of your whole organization, the question always arises as to whether culture is getting in the way and has to change. Drucker always argued that a company’s culture was to hard to change, and we should not waste time trying to do it. I resisted this perspective for a long time, but I now agree.
Culture is about what people value. This might change as their work changes. You can change what people think by changing what they do-but that takes time.
And if there is a problem with culture, it likely comes from the top of the organization Those changes mean changing people at the top, and takes leadership from the organization's board; we've seen that recently at places like Uber and WeWork.
Behaviors, on the other hand, may be easier to change. But I now believe that companies have spent too much time focused on culture, and it’s time to put resources into developing new skills. That’s what technology is demanding. Learning organizations have to get out of the fantasy of changing cultures and into the hard stuff of real learning and skills development.
Is This All Too Radical?
There are times when I ask: Will these changes really happen in most companies? But then I ask: If I were starting a new company with a “clean sheet of paper,” would it look anything like the company I now have? The answer is clearly, No! For a learning organization, it’s time to move to the future.
Come to our virtual conference L&D Leadership in a Time Of Great Change & learn from Jim why process-centered organizational structures are now needed to more effectively compete on analytics, maximize the changes technology now enables, save millions of dollars on possible result-less training & design the right kind of training programs to truly make the organization capable of turning the new corporate agenda into operating reality.