Part 5, the conclusion of "Communicate, Collaborate, Coordinate, Decide: How IT Achieves Strategic Leadership," our article in Cutter IT Journal, November '08
Part 4 is here.
Part 3 is here.
Part 2 is here.
Part 1 is here.
Decisions: Making and Communicating Them
Network models also show the topology of the organization as a whole. The dance between centralization and decentralization plays out in the dynamics of organizational
design and redesign as strategy changes to meet the ongoing rush of
events. Today, in particularly uncertain times, adaptive strategies are
more likely to succeed than “stay the course” approaches rooted in the
slower Industrial Era.
By analyzing network maps of the organization, IT can identify and clarify the real leadership positions from the bottom up and the
“edge in,” bringing attention to critical hotspots. These “hub”
leadership positions are the highest-potential/highest-risk jobs in the
organizational
network — positions that are typically overloaded and underresourced.
By providing such information to leaders at all levels, IT expands
everyone’s idea of leadership and how to improve it — knowledge that is at once visionary-strategic and practical-tactical.
Leaders make decisions and then communicate them.
They depend on their organizational hierarchies to gather information,
formulate options, offer recommendations, and make final decisions.
Then leaders turn around and use the formal reporting lines as their primary
conduits for distributing the official goals, strategies, policies,
procedures, and other messages from the top. These directives
eventually land in the laps of line managers who lead staff teams.
Organizations swing between decision making, a comparatively
complex process, and “decision telling,” which depends on
communication. Hierarchies need to accommodate both — the capacity for
making high-complexity decisions and communicating them along the
shortest possible paths.
This brings us to the two opposing principles inherent in organizational structure:
-
Centralizing to optimize communications. Organizations
do this by increasing manager reporting spans and decreasing the number
of levels in the organization. Fewer levels indicate shorter
communication paths from top to bottom.
-
Decentralizing for complex decision making. Smaller
manager spans, meaning that managers have fewer people reporting to
them, increase the number of organizational levels from top to bottom.
More complex designs like these allow the organization to engage more
specialties and devote time to deeper analysis before making complex
decisions.
The
dynamic of local optimization of communicating and decision making
carves a hierarchical landscape that is high in some places, low in
others. Many-tiered mountains of small decision-making teams optimized
for complexity are scattered through low-elevation plains of large
teams transmitting strategies, standards, and procedures. The local
organizational design and appropriate balance of the tension between
centralization and decentralization depend on which concerns are paramount at any moment.6
Overall,
organizations need to accommodate added decision-making capability
while becoming even smarter about communicating. How do they do this?
The answer lies in how they mix the ingredients of size, manager span, and number of top-to-bottom levels in different parts of the organization. Where communication is the dominant need, as it is in sales groups, manager reporting
spans and teams are often larger, which reduces the path between senior
and operating levels. Where decision making is paramount, as it is in
research, there are apt to be more departments with smaller teams,
which increases the path from top to bottom.
This is a critical consideration at a time when organizational
change, redesign, and, yes, downsizing are hitting thousands of
businesses, institutions, and agencies. The standing prescription for
redesign today is to flatten the organization. This is a poor general
rule. In some cases, flattening the organization may produce nothing
more than an enhanced ability to communicate truly poor decisions.
People
rarely call for more complexity within their organizations as a means
of coping with an increasingly complex world beyond their own four
walls. They should. A basic tenet of systems science is W. Ross Ashby’s
“Law of Requisite Variety,” which essentially says that a system’s
internal complexity must at least match that of its external
environment. In practice, this means that greater diversity — of
people, viewpoints, skills, disciplines, and the like — can generate
more innovation and faster adaptation than can homogeneous teams. While
there is likely some upper limit of diminishing
returns here, it’s instructive for organizations to ponder this
reality, especially as regards the advantages introduced by working
virtually, which radically increases access to diversity.
Organizing for Communication
Management
teams of solid-line reporting relationships are ideal vehicles for
communication. Such teams are two-level organizations, with a manager
and his or her direct reports just one link apart. Communication distance doesn’t get closer than one degree, whether in networks
of family, friends, or coworkers. Every manager in the hierarchy has a
one-degree team, a star-shaped cluster of closely related positions.
The whole hierarchy is an interlocked set of one-degree management
teams beginning at the top and reaching all the way to the bottom,
regardless of whether or not any particular small group sees itself as
a team.
From the executive perspective, messages stream down the hierarchy of reporting links in a progressively articulated tree akin to any wide-area communication system.
In cable television transmission networks, for example, signals cascade
from the “head end” (Level 1) through high-capacity trunk lines (Level
2) into lower-capacity branches (Level 3) and feeder lines (Level 4),
finally “dropping” a thin wire to your home (Level 5). By
analogy, the CEO is the head-end source of signal and content, with
managers in between repeating and amplifying the source transmissions,
ultimately dropping the messages at the “homes” of the staff.
Organizing for Making Decisions
In
Western culture, our primary tool for tackling complex problems is
analysis. “Breaking down” the problem divides something complicated
into smaller, more comprehensible parts that may in turn be broken down
further. In organizational structure, this problem-solving approach
reveals itself in the propensity to differentiate and create more
levels.
An
organization tends to decrease manager span and increase levels when
complexity increases and more decisions need to be made. Here, the
hierarchy acts like a giant decision tree, a method used by operations
researchers to analyze complex choices. At the highest level (Level 1
for our purposes here) is the final decision to be made (e.g.,
allocation of resources among major projects), with branches (Level 2)
to each of the major option areas. Operations researchers map out
successive levels of branching and analysis within each option until
they have calculated all alternatives and values. The more complex the
choice, the more decision branches they need to map.
Each team and team of teams must design itself to fit its basic mission. In simple terms, this is the recipe:
- To
communicate better, make the organization’s structure flatter (i.e.,
reduce the number of levels and enlarge the size of the teams).
- To make better decisions, make the organization’s structure deeper (i.e., increase the number of levels and reduce the size of the teams).
For larger organizations, some parts will be more centralized,
others more decentralized. No one design is best everywhere, and global
edicts to flatten and simplify may, as we suggest above, undercut the
organizational capability to cope with complexity. Indeed,
collaborative technologies that connect people in all directions horizontally
and vertically enable much faster and better communication pathways. So
today’s fast-changing organizations can in fact become more complex to
support better decisions, while also communicating faster through formal but nonhierarchical channels. The hierarchical
design tradeoff between smarter decision making and better
communication is being transformed into a “both/and” as the whole
organization becomes interconnected at every scale from the single individual to the enterprise as a whole.
In
the years and decades to come, organizations will need to morph to
accommodate the pressing needs of the moment. But they can only do so
if they can develop accurate, comprehensive mental models of
themselves. And this is where IT comes in: using innovative tools, such
as hyperbolic viewers and other network display technologies, it can
map, navigate, and analyze the whole organization as a network.
Between Order and Chaos
Networks
ripple. A small decision here plays out as major activity elsewhere in
the web. Big effects arise from many small movements. Abstractions at a
large scale become everyday local juggling acts for managers and staff
across the hierarchy.
Organizations require both order and flexibility, stability and creativity.
The structure must provide sufficient constraints to maintain integrity
and enough freedom to innovate and adapt. Sufficient sameness and commonality have to mix with requisite variety and difference.
If not, the organization will be either completely moribund or a total
madhouse. Organizations change and rewire themselves as strategies
shift and refocus, or they fail to adapt and eventually disappear.
Executives
struggle to manage these contrasting forces. They find themselves
simultaneously bringing some things to the center and pushing other
things out, simplifying
in some places and “complexifying” in others. They push for greater
collaboration over here (perhaps to better deliver services) and
greater competition over there (perhaps to control costs).
Three
core functions — IT, HR, and finance — all have data with which to
construct the basic network of how positions interconnect, in hierarchy
trees and other networks
of interdependent links. However, only IT has readily available and
reliable data on both hierarchical and nonhierarchical relationships,
including key contractors, formal teams, and patterns of inter-job/
inter-person communications (i.e., where working communication
interweaves with social networks).
IT
has its finger on the pulse of complexity. It can help the entire
organization achieve a dynamic balance between order and chaos,
providing stability while enhancing innovation. It can advocate for,
then deliver, a new generation of the four strategic capabilities that
enable people in the organization to more effectively communicate,
collaborate, coordinate, and decide.
This is a powerful foundation for organizational wisdom that IT brings to the senior table.