It is the time for creative destruction. Many great companies were born in recessionary times. Microsoft and Oracle in the mid 80'ies, Berkshire Hathaway in the 70'ies and Rockefeller and Carnegie a century before that. Strong established companies will go back to the drawing board the coming months and redesign their business. They should take a good look at their organization model. It is probably outdated for a world of uncertainty.
Ashish Sahni wrote in a comment to my Open Source blog: “Organizations create boundaries. There is no room for folks to choose and show initiative. Most employees just wait for an assignment, innovation is only talked about, the element of fun is missing, risk avoidance is the mantra rather than encouraging bold initiative taking attitude, reusability never even reaches beyond the drawing board. Lastly the most important element of management practice is ignored at all levels ‘Put the right people in right place with empowerment’, which eventually results in an organization with very little collaboration.” Rob van der Kooij commented: “ …The issue is the lack of innovation of enterprise design and culture. Since the industrial revolution nothing whatsoever happened there!”
Both have a point. Most organizational models are still variants of the traditional factory model with strict division of labor, specialization ad absurdum, and rigidly defined hierarchies. Primitive carrots and sticks remain the most important behavioral instruments. Despite the omnipresent, employee-sensitive Human Relations “professionals”, your boss can still fire you and determine your annual bonus. Decision-making is concentrated at the top and slow to percolate down. Markets tend to move faster than the companies serving them.
This makes the Open Source model even more intriguing. How can it be that the opposite of the factory model is so successful? Open Source teams are ad hoc organizations, without strict hierarchies or sticks and no carrots beyond peer recognition. They also tend to move faster than traditional organizations.
A quick analysis of highly innovative companies shows that they have more in common with the Open Source than the Factory model. They realized that knowledge is more valuable than physical assets and that innovation comes from all nooks and crannies of the company. Innovation bellwethers like Google and Apple have fluid organizations with multi-disciplinary teams continually creating new products and services. Google tells its employees to spend 20% of their time on company projects that personally interest them and are outside their current assignment and competency. These organizations stimulate spontaneous brainstorming sessions, rapid prototyping and, similar to Open Source organizations, they have self-governing mechanisms.
Taking a step back, these companies actually reflect pre-industrial social groups: there is a strong sense of community, alignment of individual and group interests and the team (not the leader) provides the pressure for its members to perform. In the factory model control and governance are top down, in the open source model it is bottom up. With increasingly complex and dynamic markets, the top down model is showing major cracks. Just look at what has happened to some of the largest banks in the world. While all of these companies spent hundreds of millions on risk management they failed to manage their exposure and they let trillions evaporate. Bringing responsibility and self governance down into the organization is a good way to get started to fix these organizations.
Wikipedia is a good example of how self-governance works in an open environment. Of course the concept that anyone can contribute, invites all kinds of rubbish. My kids used to run contests to see how long it would take for Wikipedia to spot the nonsense they posted and rectify it. To govern the quality of their site, Wikipedia is using extensive Patrols to watch over a class of pages and take any appropriate actions. They also have a mechanism for dispute resolution, in case of conflicting opinions. “Most patrol actions are performed by individual Wikipedians, but some are performed by bots or other tools that monitor for potential integrity breaches. Patrols focus on various pages, notice boards and feeds. Many of the well-known patrols have hundreds of users, and are directly responsible as a first line against vandalism, or other potential problems” , according to Wikipedia. The mechanisms to control the quality of content have become truly sophisticated and continue to evolve. There is no reason some of these cannot be applied to the modern organization, specifically to financial institutions.
There is indeed wisdom in the crowds; it is how you bring it out and have it rise among the clutter. The collective knowledge of all folks at the front, dealing daily with customers, probably gives you the best insight in what customers need. If you combine this with the ability of your customers to provide direct feedback on your products and services, you probably get a good pulse on quality and competitiveness. This insight, in turn, will help you improve on your products and services with the highest impact, at the lowest cost. When we launched online banking for Citibank in the mid-90s, I suggested that we would allow customers to give direct feedback on the service through a bulletin board (fashionable at that time) and vote on the features they wanted to see in the product. Marketing was against this, as it would put out our dirty laundry for all to see. When we finally did this (on a much smaller scale than I suggested), it turned out that Marketing’s assumptions about what customers want, was completely different from what customers expressed as their priorities.
Self governance and “crowd sourcing” sound like great concepts, but Erik Bouwer wonders to what extent the communities are managed by time/money restrictions, pace setting and required quality levels. It requires the company culture, values and incentive system to drive collaborative behavior. Leaders in these type of organizations act more like coaches than micro managers. They will motivate the teams to set clear objectives and have the team agree on the collaboration rules. Some simple rules like “every team member will stick to his/ her commitments, because others are dependent on it”, will go a long way. The work has to be guided by an architecture framework to parcel out the work and later assemble the final result. Deadlines need to be set and agreed, quality control should be in place and progress monitored. With other words, having a community approach doesn’t negate the need for old-fashioned project or operations management practices. But it allows for a much higher level of engagement and input from all participants than in traditional organization forms. And yes.. the coach in a business environment will need to have the authority to move things along, when necessary. So while sense of community and peer pressure and recognition play the biggest roles, there is nothing like a good stick to be waved at the right time.
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How IT facilitated humanitarism overtime.
ReplyDeleteIn 1997, when assigned by the United Nations High Commissioner for
Refugees to Guinea Conakry, one of the poorest and isolated places on
earth, I had to deal with the most serious human rights violations ever
encountered. Refugees from Sierra Leone began arriving with their limbs
hacked off by members of the Revolutionary United Front or RUF. The
scale of the atrocities committed dictated urgent action of the
international community. The challenge was to mobilise the members of
the Security Council fast and ensure the adoption of a resolution with
"teeth" rather than "feathers". The approach was revolutionary in
itself, in my perception at least.
The Head of the US Department of State, whom we had called to have a
first hand account of the situation, appeared on the scene with a
miraculous invention: A photo camera capable of storing pictures on a
floppy disk. The content of the disk (depicting victims to maiming)
could be sent as e-mail attachment across the globe most notably to all
members of the UN Security Council (UNSC). The old adage: a picture
paints a thousand words, most certainly applied in this case, with the
UNSC adopting a resolution approving the multinational task force to be
deployed in Sierra Leone to halt the disfigurement and killings.
Relief agencies have used this technology and refined it to such an
extent that video footage is beamed nowadays through mobile phones to UN
Agency heads in New York and Geneva. It helps decision makers, is
instrumental in raising funds, mobilises opinions and contributes
towards an early resolution of major problems and challenges. Evidence
is found in the fact that the world really has become a saver place.
According to UN records, in 1979, the world witnessed a total of 116
declared, active and passive wars, including civil wars. Today, that
number can be counted on the fingers of two hands. Mutatis mutandis, do
we see that the number of refugees who meet the definition anchored in
international treaties being reduced starkly from 20 million to less
than ten million in 2008.
Let us not be fooled though. Human suffering continues unabated in this
world. People who do not cross an international border who would
normally qualify for refugee status are not entitled to the same
protection as refugees and thus not counted in the statistics. Their
number is estimated at a staggering 26 Million. The difference is that,
at least we know about these numbers now, thanks to relief workers and
journalists risking their lives to tell their stories. Knowing about it
enables all of us to address the issues at hand.
In future, more people will be displaced by environmental degradation or
natural disaster. Their numbers could reach 100 million by 2050. Modern
technology helps the UN help people in need. Decision makers are
affected by pictures taken on the spot and transmitted rapidly through
the airwaves.
The "CNN" effect, well known amongst politicians and journalists is a
force to reckon with. Constituencies are affected by what they see on
the news and force their elected officials to take action. A well known
example includes the situation in Darfur. For years, two veto wielding
members of the UNSG blocked any attempt by the USA, France and the UK to
adopt a resolution aimed at putting a halt to the fighting. Reason being
that Sudan successfully used the threat of an oil embargo against
receptive Governments.
The internet brought help to the people of Darfur. Hundreds of thousands
of people across the world signed on-line petitions in support of calls
for a boycott to the Olympic Games in China in 2008. With success, I
might add because in April of this year, the UNSC finally adopted a
resolution for the deployment of the biggest peace keeping force in the
world
ever to be sent to a sovereign country. Both examples used in this log amply
show how modern technology in tandem with the cleaver use
of the internet both galvanise support to end violence but also send a
clear message that the world has changed for the better.
In 1997, when assigned by the United Nations High Commissioner for
ReplyDeleteRefugees to Guinea Conakry, one of the poorest and isolated places on
earth, I had to deal with the most serious human rights violations ever
encountered. Refugees from Sierra Leone began arriving with their limbs
hacked off by members of the Revolutionary United Front or RUF. The
scale of the atrocities committed dictated urgent action of the
international community. The challenge was to mobilise the members of
the Security Council fast and ensure the adoption of a resolution with
"teeth" rather than "feathers". The approach was revolutionary in
itself, in my perception at least.
The Head of the US Department of State, whom we had called to have a
first hand account of the situation, appeared on the scene with a
miraculous invention: A photo camera capable of storing pictures on a
floppy disk. The content of the disk (depicting victims to maiming)
could be sent as e-mail attachment across the globe most notably to all
members of the UN Security Council (UNSC). The old adage: a picture
paints a thousand words, most certainly applied in this case, with the
UNSC adopting a resolution approving the multinational task force to be
deployed in Sierra Leone to halt the disfigurement and killings.
Relief agencies have used this technology and refined it to such an
extent that video footage is beamed nowadays through mobile phones to UN
Agency heads in New York and Geneva. It helps decision makers, is
instrumental in raising funds, mobilises opinions and contributes
towards an early resolution of major problems and challenges. Evidence
is found in the fact that the world really has become a saver place.
According to UN records, in 1979, the world witnessed a total of 116
declared, active and passive wars, including civil wars. Today, that
number can be counted on the fingers of two hands. Mutatis mutandis, do
we see that the number of refugees who meet the definition anchored in
international treaties being reduced starkly from 20 million to less
than ten million in 2008.
Let us not be fooled though. Human suffering continues unabated in this
world. People who do not cross an international border who would
normally qualify for refugee status are not entitled to the same
protection as refugees and thus not counted in the statistics. Their
number is estimated at a staggering 26 Million. The difference is that,
at least we know about these numbers now, thanks to relief workers and
journalists risking their lives to tell their stories. Knowing about it
enables all of us to address the issues at hand.
In future, more people will be displaced by environmental degradation or
natural disaster. Their numbers could reach 100 million by 2050. Modern
technology helps the UN help people in need. Decision makers are
affected by pictures taken on the spot and transmitted rapidly through
the airwaves.
The "CNN" effect, well known amongst politicians and journalists is a
force to reckon with. Constituencies are affected by what they see on
the news and force their elected officials to take action. A well known
example includes the situation in Darfur. For years, two veto wielding
members of the UNSG blocked any attempt by the USA, France and the UK to
adopt a resolution aimed at putting a halt to the fighting. Reason being
that Sudan successfully used the threat of an oil embargo against
receptive Governments.
The internet brought help to the people of Darfur. Hundreds of thousands
of people across the world signed on-line petitions in support of calls
for a boycott to the Olympic Games in China in 2008. With success, I
might add because in April of this year, the UNSC finally adopted a
resolution for the deployment of the biggest peace keeping force in the
world
ever to be sent to a sovereign country. Both examples used ithis log amply
show how modern technology in tandem with the cleaver use
of the internet both galvanise support to end violence but also send a
clear message that the world has changed for the better.
It would seem that one of the root issues holding back the creation of more collaborative organizations is a risk management behavior that has reached absurd proportions -- in all functions of the enterprise.
ReplyDeleteLet's start with Human Resources. How many performance evaluations have we been required to write that ask us to evaluate someone's performance on 20 dimensions and a 10 point scale. Does it really matter if someone is an 8 or a 9 on some dimension or another?
On the one hand yes, and the other no. We still are required by our HR department to fill out these forms as they have a significant impact on someone's compensation. But, do they really provide any help? No. We provide better feedback by telling someone that something works or it doesn't work...direct, honest feedback over a glass of wine is going to have a more significant impact on behavior than a calculated score from an absurdly complicated evaluation form. Yet, the risk managers in HR require this evaluation in order to provide some sort of quantitative analysis of someone's performance.
Procurement is no better. How many 1000's of RFP's have been written by procurement departments to ensure that a procurement process is fairly evaluated only to make a decision based on a numerically scored qualitative dimension? Too many.
These are two aspects of "command and control" structures inherent in far too many large organizations that are designed to manage some element of risk. And the worst part, they don't work! We still end up firing someone for reasons that have little connection to their performance scores and select software based on an RFP response that bears little indication of their ability to perform.
We need to leverage management techniques that support people making sound judgement and not just provide the documentation to support some decision in hindsight (how many risk managers saw the meltdown in these markets? not many).
It is the time for more than creative destruction. We need to look through our organizations and throw into the bin the countless practices that have been put in place to mindlessly managage risk.
Completely agree. Management practices that foster trust through transperancy and meeting commitments can lead to better collaboration and reduced need for risk management. Specifically practices which eliminate asymmetric information (Akerlof, Spence and Stiglitz Nobel Prize 2001) for e.g.:
ReplyDelete1. Fixed price/ T&M v/s Shared Benefits - build own, operate and transfer (BOOT)
2. Constant employees feedback and self improvement opportunities ala Toyota Culture (Liker et. al) or Rypple
3. RFPs which transperantely demonstrate competence and commitment - how much skin do you have in the game - can go a long way in creating the one team ideal we all hope to achieve.
4. When processes are transperant, calls are returned, emails are responded and hiring decisions do not take 6 months with no conclusion, collaboration will grow.