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What happens when we make savage cuts to an organization?

A window on the Cliffs by tostao_meravigliao via FlickrWhat happens when a boss walks into a room and says, we have to make cuts?

Our obvious response is emotional. We are angry. We are scared. We are threatened. We are determined not to get hurt.

But what happens to the organization?

Yesterday, Patrick Butler blogged on the Guardian’s Joe Public blog about the chances that the budget cuts would lead to innovation and creativity. I responded there and have edited my comments below.

My comments about the impact on the organization itself are based on experience and interpreted through lens of the principles of organizational design.  My conclusions are counter-intuitive.  That is, they are not the most obvious things we might think of.  There are good reasons for us expecting organizations to behave differently to what they do but I  won’t go into those reasons here. For the curious, they are to do with hegemony, reification and other similar concepts.  Let me say here that I am not making a prediction about what will happen in the public service in the UK.  I am simply describing what I have seen elsewhere and what might be worth thinking about.

My observations are three fold which may seem contradictory but are not.

  • There are unlimited depths to our creativity
  • The organization will be turned inside out but the leadership won’t acknowledge what they have done and will spend considerable resources covering up what they have done
  • Employees will put their efforts into developing autonomous careers and ‘business units’.

These outcome can be avoided but simply choosing the route of cuts suggests we may see these or similarly dysfunctional effects.  The superiors in an organization are responsible for resourcing an organization.  When they duck this responsibility, the game has begun

We have unlimited depths to our creativity

It is true that the individuals in any job know a multitude of better ways of doing a job.  I could find solid research evidence but let’s just say for now that tt is more than our ‘jobsworth’ to tell anyone.  Bosses don’t take kindly to being out shone. A wise employee does the boss’ way; even if that way is expensive, silly and possibly stupid.

The organization will be turned inside out

In my experience, when cut kick in, people do generate alternative ways of working, because they can.  They know what they are doing.

The difficult that arises is that the boss has now done him (or her) self out of a job.  In a hierarchical organization, it is the boss’ job, to find resources and to supply greater know-how.

When the know-how and resources come from below, the difference between ranks becomes redundant and the chain of command has to acknowledge that leadership is also bottom-up.

This challenge is not often acknowledged and this will be sad consequence. ‘Bosses’ will spend more and more resources having conferences to ‘problem solve’, meeting stakeholders to try to re-assert legitimacy,  and staging confrontations with employees over perceived ‘insubordination’ (by which they mean their sense of inadequacy because the leadership is coming from below), etc.  They will swell their ranks with more managers, experts and consultants (that has already happened in some parts of the public service.)

Ultimately the leadership begins to live in the Pink Floyd or was it U2 world where they watch themselves on closed circuit TV and they are genuinely surprised by reality on the odd occasion they encounter it.

Employees will put their efforts into autonomous careers

At the bottom levels, innovation is now at the discretion of the members of the organization and the key is in the word discretion.

Ordinary employees may be carrying the organization and its mission even to the point of paying their own salaries and part of the organization’s overheads. This may be seem extreme but I’ve seen it more than once and I’ve seen it in the UK.

Employees may also decide to match the effort they put in with their pay. A consultant coined a saying about salaries in Africa. The annual salary may vary a lot. The hourly salary does not.

Many people develop second careers (it seems that has already begun among British police). Businesses are run from work. Businesses are run outside work.  Second houses are another career. Living abroad and arbitraging costs is another version.

In the UK, I’ve seen some online sites and plenty of workplace business models where work is sub-contracted indicating huge rents in the price charged to the customer. Employees don’t take long to work that out the system of rents for themselves and to find ways of owning the outfit which supplies the contractors.

Is the breakdown of organizational legitimacy inevitable?

Depressing? Possibly corrupt?

The key (and the game) is the legitimacy of the organization. In hierarchical organizations, the raison d’etre of rank is to manage and dispense resources and know-how.

When the ‘bosses’ make the statement that they do not have resources to run the organization, both the organization and the managers lose legitimacy.

The organization could, of course, reorganize both its purpose and the way it organizes to execute its purpose.   This is rare though.  After all, if this re-direction was on the cards, it would have taken place to prempt the cuts and the challenge to the managers’ legitimacy.  A much more likely out come is the expenditure of vast sums shoring up the appearance of  managerial legitimacy while the operational business develops a like and mind (many minds) of its own.

It will be good to see leadership that rejuvenates organizations and in the end, what happens is what happens.  This is not science. This is life. What happens is what we decide to do together. And we make our decisions iteratively.  You decide.  I decide.  You revise.  and so on.

Right now, everyone is waiting for the bosses to make the first move. I hope this move is not “tell us what to do”.  I hope even more it is not “do the same work with less resources”.  Either of these moves  is game-over – at least for the hierarchy.

Then a new game begins of what will replace what we once had.  That is another story.

Published in Business & Communities

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