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Running 21st-century organisations with 20th-century structures

Nov 03, 2007 Business Daily, Management

“…Almost all of today’s companies, from the mediocre to the superlative, were built primarily to mobilise labour and capital, not the intangible assets that generate profit per employee. Trying to run a 21st-century company with organisational models designed for the 20th limits how well it can perform and creates massive, unnecessary, and unproductive complexity, which frustrates workers and wastes money.

…Today’s companies must redesign themselves to remove unproductive complexity.”

Lowell L. Bryan & Claudia I. Joyce, The McKinsey Quarterly (2007 No 2)

Those who run companies consider many, many issues in great depth – but they almost never consider the design of their organisation. Most of us work in ‘vertical’ silos; some are forced to work in ‘horizontal’ processes; and those who have really sinned are given the ‘matrix’ structure in which to while away the hours.

Bryan and Joyce, organisational design specialists, seek to put that right. They point out that the structures we unhappily live in today were designed for a bygone era: an era in which capital was scarce and physical assets were the most important thing on the balance sheet. In this environment, returns to capital had to be maximised, which required command-and-control hierarchies. In those good old days, we were suspicious of creativity and focused on tangibles.

The fact that our structures are wrong manifests itself in the form of many symptoms. Thick silo walls; confusing matrix structures; little cross-fertilisation of ideas; suspicion and mistrust; many ‘camps’; high burnout and high turnover; and e-mail overload that results in too much irrelevant, unimportant work being done. Those are all signs of malaise that most of us working in corporate Kenya have encountered.

Today, assert the authors, we live in a different world. The thing that’s scarce now is talent. The old era of an all-knowing visionary leader surrounded by hundreds of drones and grunts is over. Great CEOs of today know this to be a fact: they can’t do it alone, and they can’t do it with a sub-standard team. A CEO needs a highly charged, highly motivated, highly talented team around. And those teams need a structure to work in that suits them – not the owners of capital.

Talent in turn generates intangible assets. Today, land, plant, equipment and stocks have faded into the background. Intangibles like brands, unique skills, intellectual property and relationship networks have taken centre-stage. And so we must design our organisations to allow those assets to grow and to deliver a stream of profits.

What would such an organisation look like? For one thing, it would be designed to cater for self-motivating teams. For another, it would celebrate creativity rather than stifle it. The fundamental difference would be this: organisations would seek to create an environment which nurtures passion. A top CEO told me recently that he routinely sees his employees looking bored to tears, surfing the web, never smiling. Passing by church one evening, he saw some of the same people dancing and clapping with great spirit and unbridled joy!

How do I capture even some of that passion at the workplace, he mused?

Part of the answer may lie in organisational design. An organisational structure is not just a box; its shape actually moulds the culture that exists within it. Ask yourself whether your structure is fit for what you’re trying to achieve in the 21st century.

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