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Up the organization

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This article originally appeared in the Experts Exchange newsletter of November 29, 2005. The final paragraph has been updated slightly to fit this format.

A recent study by Strategy& (formerly Booz Allen Hamilton) says that most organizations are unhealthy with respect to how they adapt to a changing environment. The study is based on responses from about 50,000 people, most of them respondents to a brief online survey.

A while back, gregoryyoung wrote a column for this newsletter that talked about what he called "anti-patterns" -- "...well-documented and commonly-made mistake[s] for which there are known solutions." Greg's article dealt primarily with larger organizations, but what is apparently the case is that the same issues that afflict larger organizations also show up in smaller ones.

The hypothesis behind the study is old news; Max Weber, the German sociologist, wrote in the 1920s that organizations become both oligarchical and conservative, both of which are impediments to fundamental (or even incidental) change. What makes the Strategy& study interesting is that first, it statistically demonstrates its thesis (as opposed to using anecdotal data), and second, it suggests that the anti-change behavior of organizations is detrimental to their self-interest.

But what makes one really sit up and take notice is this: "The ability to execute, like health, is not something you can hire or mandate. It is inherent, embedded in the organization's "genes," and expressed in the thousands of individual decisions and actions that collectively constitute and define firm performance. The first step in resolving execution breakdowns is to understand how these inherent traits of an organization influence and, in some ways, even determine how each individual thinks and acts on the job. That behavior is what drives results."

In other words, it's not enough to simply prepare a mission statement, or require adherence to a set of processes or standards; from top to bottom, the relationship of the individual to others in the organization and to the whole of the organization matters. More to the point, the perception of how the individual views his relationship with others and the organization can determine not only how well the individual will function within the organization, but indeed, whether the organization will become, to use Strategy&'s term, "marginalized."

Some of the points made along the way are priceless; for example, "...our most salient finding is a very simple and sobering one: Most organizations, by their own employees' admission, are sick." It's hardly surprising to find that a good percentage of the sample universe would think that there are things that need fixing; what's remarkable is that half of the people who took the survey feel that way. More remarkable is the implied opinion that they're powerless (or think they're powerless) to do anything about it.

So what makes an organization unhealthy?

First, individuals aren't clear on what their decision rights are. In other words, they don't know if something is their responsibility or not, and rather than take the chance that they're wrong by making a decision, they'll leave it for someone whose responsibility they're certain it is. Organizations without clear decision rights are also characterized by a lot of second-guessing.

Second, unhealthy organizations are characterized by a lack of free-flowing information required for making good decisions. In other words, "I'm scared to death that I'm making a decision without knowing all of the relevent information." Just as importantly, individuals don't understand the context of their decisions; the reason behind telling a customer that he can't have his sausage with breakfast could be that the sausage didn't get ordered (which means the bacon is fine) or that the walk-in refrigerator broke down (which means one should consider eating toast). It might not be the server's job to tell the customer the details, but it certainly should be someone's job to tell the server.

Third, the bigger an organization is, the more likely it is to be unhealthy. This one is almost self-evident; there's a good reason that Windows Vista has taken so long to develop, and will take another year before it actually gets sold to anyone. It's also the same reason that a good number of people don't see any compelling reason to purchase Microsoft's new operating systems -- which just marginalizes Microsoft even more than its slow decision-making processes with respect to the development of a new operating system. It's a lot easier to turn a canoe than it is to turn a yacht, but compare either to a battleship.

Finally, upper management is clueless as to an organization's health. Okay, that's a bit of an exaggeration, but what is true is that upper managers generally seem to think their organziations are more healthy than they really are. "... it becomes clear," the study says, "that not only is senior management out of touch with the rest of the organization, but they don't know what they don't know." Part of that, one suspects, is that upper managers are frequently insulated from the rank and file; but another part is that upper managers only pay lip service to the first two issues raised.

Take the survey and let us know if you think it's actually accurate.
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Expert Comment

by:lherrou
Good article, got my YES vote. But, for part 2, how about some ideas on what to do to help an unhealthy organization :/
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Expert Comment

by:WaterStreet
Nice article.  Voted yes above
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Author Comment

by:Eric AKA Netminder
That's a thought, though there are some tricky parts. Like a lightbulb in California, an organization has to WANT to change -- and most don't.

For one thing, there's little incentive for management to change what is working for management. If you've been working for XYZBigCompany Inc. for thirty years and have worked your way up to where you have a dozen or so junior executives who each supervise two dozen people who do whatever they do, and you have your nice house, your stock options and bonuses, and your key to the executive washroom, why would you want to rock the boat?

And more to the point of the article, those junior execs (who are on their way up OR have, as Mr Peter observed, risen to the level at which they are no longer on the list of people who will be promoted) aren't going to rock the boat much either.

Unfortunately, it seems as though the only way to help an organization is to have something truly catastrophic happen to it -- and I'm not even sure that will help. I've seen companies go bankrupt, but when they have emerged, their behavior is not really significantly different from what it had been before. Take GM: yeah, they unloaded a couple of lines that weren't selling many cars, but is their corporate behavior really any different than it was before the market crashed and gas prices went through the roof? I don't think so.

Yahoo may have a dynamic new CEO -- but the only way for her to change the corporate culture there will be to do almost wholesale Yahoocide. She can have a short term impact -- fire a few people, cut a few costs here and there, and make the deal with Microsoft -- but that still doesn't solve the unhealthy part of the company: that for years, it hasn't had any discernible direction or focus.

That's the genius of Steve Jobs, for example. He has tremendous focus and charisma -- so the people who work for Apple have all swallowed the red pill. He's also been ahead of the curve long enough that he has only come up with a few stinkers. But let him go two or three years without any significant new devices or software, and you'll start to see the rumbling. But the problem will be that no matter who might eventually take over at Apple, that person WON'T be Steve Jobs, the catalytic element of Apple's corporate DNA. Apple will survive Jobs' eventual absence -- but I'd be surprised if it was the same company that just hit an all time high today.

And there's no solution; the people who have seen such tremendous success with Jobs at the helm (the board of directors and upper management) won't quite know what to do with themselves without him -- so they'll be afraid to pull the trigger, especially if the things they DO roll out don't have the same success that the iPhone and iPod and Mac OS X has had.

Their genes are what they are. What will generally happen is that in the absence of the genetic makeup to embrace change, they eventually wind up merging with someone else or even just closing up shop.

That doesn't bother me much though. For every one of those unhealthy outfits that goes the way of the dinosaur, there will be hundreds ready to fill the void -- and some of them will already be genetically bound for the same fate, while others will thrive. I think it has to do with the outlook of the original management more than anything, and on who they hire and how they approach doing business.

I'll see what I can come up with though. Thanks, lherrou! More work!

ep
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Author Comment

by:Eric AKA Netminder
Waterstreet,

The email has come through, so I presume they'll show up within a day or so. I never look at my points, though... *laughing*

ep
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