Lead in a internet-mediated global world

Organizational structure in our times

@benjaminellis, @audio and I had a spirited discussion yesterday on organizational structure.

@benjamellis was exploring mesh models ~ a full p2p model in a small team.

Classic functional organizations and Henri Fayol

@audio was advancing an argument that management theorists will recognize as being a cluster of principles articulated by Henri Fayol at the turn of the century.

Manages have authority (delegated from their managers).  They set a single, unified direction.   The principle of unity of command says they receive orders from one person only (so as to avoid confusion) and they are disciplined.  They decided what to do by reference to those commands.

These are the principles of classical functional organizations and they are a good place to start in organizing anything.  Even in a family wedding, its helpful to let “one person be in charge”.  We might be able to do a slightly better job than that person, on one or more aspects of the organization.  But we get a better result overall  if we pull together instead of in different directions.

Divisional organizations and market led companies

Functional organizational structures run out of steam when we move from simple product lines and simple markets to  complex technologies and complex markets.

The car industry illustrates this point.

Ford made any car provided it was black.  Standardised, cheap and one car for everyone.  The functional model works well.

GM (yes that one) revolutionized the market by making “a car for any purse.”  They began to differentiate the market and from there the divisional structure was born.  The market leads, so to speak, and the essence of the staff and managerial function is to integrate the responses to the different markets and find efficiencies.

Matrix organizations and multiplex leadership

Toyota blew a giant hole in this model.  They began to make customized and inexpensive cars.  They have short production runs. They change lines and retool quickly.  How do they do it?

In short, they cede control.  Workers have the power to stop the assembly line.  They do.  Workers have the power to change the pace of the line.  They do.  It is called kan ban.  Workers are capable of controlling quality and doing the work studies to improve productivity.  They do.  It is standard every day work based on statistics only Honors students learn in the West.

Suppliers have access to Toyota’s production statistics and have Toyota’s loyalty in return.  It feels it should be the opposite doesn’t it?  Remember loyalty breeds loyalty.  Let the big guy be loyal first.

The net effect are better cars, less waste, lower prices, more competitive company.

Local modularization, globalization and the internet

Life has moved on from Toyota, who we know are struggling as well in the downturn.  Our model for organizational structure now is local modularization.  It sounds like lego and it is.

Think Boeing.  They used to make planes.  Think of the specs for one plane.  A giant document.

Well the specs for the 787 (that is behind schedule) is all of 20 pages long. 20 pages to design on giant plane.

How did they manage this feat of simplification?   Well,. it seems they concentrate only on the interlinkages between modules.  They don’t have to design the parts.  They only have to contract to buy parts that will perform a certain function in relation to other parts.

These systems are hard to grasp when they are new.  Take another example from a British industry.  Rolls Royce makes engines.  It takes 10’s of 1000’s of manhours to design an engine and no one, no one, has an overall plan to make the engine happen.  Now if only I could find the link to the Cambridge researcher who documents this magical process.  I know where to find it though.  I’ll get it.

Commander’s Intent or Adding Boundaries to a System

I’ll leave you with an excerpt from a commentary on Obama’s statement on Afghanistan.  An unhappy soldier is asking for the Commander’s Intentthe mission. The one line sentence that explains the group’s goal.  This is very similar to Fayol’s unitary command.

My contention is this. Every system requires individuals and jobs where the purpose is to state the purpose – clearly and concisely.  There are many psychological, organizational and logistical reasons why this is important.

First, lets just look at a good example.   And then lets separate two things.  Distinguish arrogating the right to decide the content from articulating the group intent clearly.

‘3rd Platoon will ensure the delivery of 18 loads of class XII equipment to FOB Oscar, and safely return to base with all personnel and equipment accounted for.’

I could comment more. For now, I’ll repeat my contention.  It is a very important competency to be able to state clearly and concisely what our group will contribute and that competency will become more important in multiplexed leadership.

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We are getting whooped by people who use ‘pull’ management? Why don’t we?

Management hasn’t changed a lot in the last 100 years.  And what has changed, changed a long time ago – 50 years ago.  If your company hasn’t caught up, this is what you need to know!

‘Push’ management

In the olden days, or in a NZ meat-packing plant for example, the assembly line dictates the pace.  A carcass arrives.  A worker cuts off the relevant part, rinses the knife in water, and repeats.  Each cycle takes less than 30 seconds. The carcasses keep coming.  That is ‘push’ management.

Work is pushed at us. Adverts are pushed at us. As the poet said in The Charge of the Light Brigade – Ours is to do and die.  Ours is not to wonder why.

‘Pull’ management

Toyota perfected “pull” manufacturing ages ago.   There are three terms that you want to know.   (The New Yorker has just written an excellent case study which you may want to bookmark if you are in management education.)

  • The andon allows a worker to stop the assembly line whenever they think it is necessary.
  • The kanban is their signal that they need more parts.
  • And kaizen means continuous improvements which are driven by them.

All-in-all, pull manufacturing moves the engine of improvement from managers to workers.

Why have we been so slow to implement ‘pull’ management?

If ‘pull’ management works so well, why don’t we copy Toyota?

Simply, we because the only way to get the advantage of the system is to do it.  And that means trusting in our workers and their ability to drive quality.

And it that works so well, why don’t we trust our workers in the west?  What is it about our system that we don’t trust the people who work for us?

Or is the truth that we know that they cannot trust us?