2013-05-21, Nerijus Celkonas

Self-organizing business - a nice illusion?

Self-organizing business - a nice illusion?

We’ve been observing a phenomenon that worries the corporate world. Disruptive innovations and startup-like, lean, agile organization structures cause concern to the business whales. Yahoo, Dell, Microsoft, Nokia – the newest stories on how billion dollar companies can find themselves hanging off the cliff‘s edge.

We’ve all heard a phrase that a big organization is like a tanker - in order to turn it, you’d have to start 30 km ahead, when a small vessel’s direction can be changed in a minute. Let’s compare a corporation and a small-scale entrepreneur and their differences. Let’s speed up the growth of a small business and turn it into a corporation – we’ll see the paradigm of change.

The business’ beginning is a desire to change something, a businessman working alone doesn‘t have qualities typical to corporations. There‘s no managing, as there‘s no employees, no budgets, as gut feeling is used, no control, as there‘s no task delegation, no decision dilemma or conflicts of interests, as neurons „settle“ among themselves quicker when they‘re in one head, and so on and on. Now it‘s quite difficult to tell exactly how hierarchic management structures formed after the Industrial Revolution – was it because of Charles Darwin‘s postulates – but the first thought that comes to a businessman‘s mind, when the organization has to grow, is its structure. Hierarchic, flat or team-based are schemes only. Traditionally „the brain“ (the idea‘s author) is put on top and then the roots are formed (departments, subdivisions). In order to manage the ones „below“, a two-lane highway is needed – task and control. This way a budget and rule-based „corporate tanker“ is born.  The more branches from top to bottom – the longer any decision takes. The modern management methodology is itself the result of this – decisions are and must be taken „upstairs“ only, or, what‘s even worse, in each separate department and then presented for “upper” approval. All of this is connected with budgets and finances, which are the mirror of a company‘s success. Individual‘s self-centeredness and distrust in others create such management structures, which become their own hostages. You don‘t need budgets and rules, your bosses need them to evaluate and control you based on how well you adhere and keep to them. Even though, 2/3 of all budgets aren‘t carried out and they become an illusion of control only. It‘s even worse when managers force keeping to the budget without paying attention to market changes – in this case the „tanker“ goes one way and the clients – the other.

Niels Pflaeging – a critic of the traditional carrot/whip management methodology, who also compares it to the autocratic ruling in Soviet Union, which can’t be acceptable in a Democracy. “Business, markets and societies have changed, but the principles, methods and concepts of organizational leadership haven’t, by and large. Rigid and erratic performance management processes like planning, budgeting, project management, fixed-target setting, individual employee appraisal, and so-called “pay for performance”-pay, combined with autocratic decision-making and micro-management from the top – these techniques from the industrial age are still widely established standards.” (by the way June 4, workshop in Vilnius by Niels Pflaeging do not miss a chance).

Self-centeredness encouraged by short-term success elevates one individual above others and supplies him/her with powers to command the “tanker”. Subordination, punishment and motivational instruments force others to submit to the “leader” of the time.

Is it possible for organizations to work more effectively without central management elements, as it’s done by small animal parties (termites, birds and fish)?

According to Gareth Morgan, one exciting theory emerging from the study of termite behavior is that work in the termite colony reflects a self organizing process where order emerges "out of chaos." While the nest always has a familiar pattern, it is infinitely variable in terms of detailed form. It is impossible to predict the detailed structure in advance, because it emerges as a result of the scattered pattern of droppings. This is what makes the construction process so different from that of human beings. The "masterpiece" evolves from random, chaotic activities guided by what seems to be an overall sense of purpose and direction, but in an open-ended manner.

 We have in this view of termite behavior a splendid image for rethinking many aspects of the leadership process in human organizations. For example, it suggests that effective leadership or change management may not have to be based on a detailed strategic plan. It may not be something that has to be imposed. It may be something that can emerge and take form in a self-organizing, evolutionary way.

 They have "plans" but they don't implement plans and are not constrained by plans. They are people who know where they would like to go. But they do not always know the route by which they're going to get there! In this positive, expansive and free-ranging interpretation of termite-like behavior, I believe there's an important message for people who wish to undertake leadership roles in turbulent times.

 If we can clearly see that one individual’s speed, decisions and flexibility is more effective than the “traditional” management, the question arises – how should organizations grow while maintaining the effectiveness? Can the uncontrolled management methodology based on chaos (only with purpose and direction) reach goals?

What’s more effective – indicate the goal to fly south to the flock of birds, or give each one of them a task and control it? And that’s not even considering the cost of control and taking for granted, that each individual is right and doesn’t start pointing north instead of south.

 Let’s look at the activities of a live organism. If the brain would have to indicate each cell how to act and would also control the activities, how would this hierarchic structure function? The brain indicates a general goal and course, while the cells have their own code programmed by evolution and know how and when they should act.

 Organization scale process is like organic growth: once a cell reaches maturity, it has to split. Total organizations can grow, therefore, by creating a constellation of similar sub-organizations, each operating autonomously. A typical example for, an organization behaving as complex adaptive organization is Wikipedia - collaborated and managed by a loosely organized management structure, composed of a complex mix of human–computer interactions.

 If tasks, control, specialization, responsibility, motivation, money are consequences of “old school of management”, and trust in an individual, goal and course indication is the new management methodology, then the change must come from the bottom of the ladder.  If this assumption is correct, traditional management system is bound for revolution from within. But isn’t it confirmed by the recent events: the Arab spring or social initiatives for the “bottoms” and their involvement in State management processes?


For those who would like to explore more please visit sites below or read book by Melanie Mitchell, Complexity.  Check Gareth Morgan personal site and watch Niels Pflaeging a 25-minute video talk about "Why Management is Dispensable". Or white papers: Organize for Complexity (63 pages). Turn your Company Outside-In! (77 pages). Org Physics – Explained (18 pages). Making Performance Work (45 pages). 


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