People; Organisational Structures: The Company The Contradiction

TRIMILLENNIUM MANAGEMENT :ORGANISATION
The Company The Contradiction

By Arun Maira

The advent of the millennium is a great marketing opportunity. DeBeers is even promoting a millennium series of diamonds. What would be different in a diamond in the new millennium? People should be skeptical about the novelty of anything offered as a new version for the millennium. Even if the millennium model is novel, is there a need for one? Let us ask at the outset, why do we need a new way of organising businesses in the New Millennium?

A fundamental change is taking place. The first is the lowering of political and trade barriers between countries. Between 1989 and 1997, foreign direct investment increased twice as fast as international trade, thus interconnecting the world even more strongly. The second force is the rapid deployment of new information and communication technologies. Between 1985 and 1996, the number of cross-border telephone calls increased from 3.2 billion to 20.2 billion. While their number continues to increase, the use of the Net has also increased by orders of magnitude and will continue to do so over the next 2 decades. The result of these 2 forces is a proliferation of the number of connections across traditional boundaries. Now, imagine the world as a large system within which the connections are increasing by orders of magnitude. Graham's Law says that when the number of connections in a system doubles, the number of possible outcomes quadruples. Which explains why the unpredictability of what may emerge in the world of business has increased in magnitude and will increase even more.

This profound change renders concepts of management that have served us well so far inappropriate. Thus far, the formulation of knowledge has been based on the concepts of forecasting and clear direction-setting. The forecast and direction are then translated into plans with measures and controls. Thereafter the company is structured to suit the strategy, with resources aligned to plans. Organisations are constructed on the principles of dedicated resources and a hierarchy of controls. The dedication of resources creates efficiency. The hierarchy of control enables coordination from some central point, which keeps the organisation on track. The underlying metaphor is that of the organisation as a machine designed to produce a specified output.

This concept has served businesses well. It can work when forecasts can be relied upon. And it may continue to work well in sectors that can be isolated enough from the rest of the world to be unaffected by the exponential power of Graham's Law. However, for most companies in India, this cannot any longer be so.

The organisation-form that is now required must fulfill some contradictory requirements. On the one hand, it must possess the flexibility to change easily as the environment changes in unexpected ways. It must be able to produce innovations in products and services and, when necessary, change its form to suit those services. The need to change the basic business model is the challenge that the emergence of e-business has created. On the other hand, companies must operate even more efficiently. For most businesses, the market continues to demand good business performance, quarter after quarter. So the organisation must be designed for both efficiency and innovation.

Efficiency requires a reduction in variability, and discipline. Whereas innovation requires freedom to experiment and vary established processes. So how can an organisation be designed to fulfill these contradictory requirements? A search of the business world for examples of a new form of organisation suited to the new context reveals little. To find the principles on which the 21st Century organisation will be built we have to look elsewhere.

Living systems must change themselves as they adapt to changes in environment. Therefore, it is worthwhile to examine the principles by which living systems, such as biological species and ecological systems, organise themselves. This research can provide the insights we need for the design of business organisations that will survive and thrive in the new millennium. In the past few years, scientists from many fields have been studying a class of systems called complex adaptive systems, that include living systems, to understand how they operate.

By examining complex adaptive systems, we find four important principles that apply specifically to the design of business and social organisations. These principles are also validated by research into companies in several industries that have demonstrated an ability to sustain high performance by innovation. The 4 principles are:

Create and maintain permeable boundaries in the extended organisation.
Manage cross-boundary processes with minimal critical rules.
Deploy a flexible resource architecture.
And align member's aspirations while choosing direction and developing strategy.

These over-arching architectural principles are applied by adjusting the tuning knobs of the organisation. The tuning knobs, or design variables, are the levers with which managers adjust the culture of the organisation. These are the nature of the glue they use to keep the parts of the organisation aligned. This could be alignment around vision and values, supervision, standardisation; the distribution of decision-rights; the choice of performance-management measures; the means of influencing behaviour of the members; and the capabilities of the members, especially leaders, throughout the organisation.

Indian companies could lead the world in the emerging technology of the new ways to organise businesses. This technology does not require new hardware or capital resources. It needs the development of a company's humanware and software. This is an area where we are not handicapped. We can-and must-take the lead in the development of the new form of organisation to overtake the performance of companies elsewhere.

The principles underlying the new form of the organisation are known. We have most of the tools, as well as the structure of the implementation process. What is now required is for several organisations to apply these early lessons to produce results for themselves and, while doing so, to deepen their own understanding of the new form of organisation that will now be required in the New Millennium.

Arun Maira is the Chairman of the Boston Consulting Group (India)

Issue Contents Write to us Subscriptions Syndication