Based on the Complexity Theory, we do know, that resilience in organizations is one of the determining factors of the 21st century for the success of an organization. Traditionally, most organizations are designed for the success of each individual function or department. Such an organizational design helps individually each function or department to be successful. It rarely helps the whole organization moving forward.
When it comes to budgeting processes in such a design for example, each department plans and acts based on their individual needs and baseline. Let's say, the C-Level allocates a certain budget to the HR department. They have to work within this budget. The activities within this budget are often not necessarily planned towards the best for the organization, but rather to keep the department / function relevant towards the C-Level. Budget activities are not planned based on what is needed for the organization, but purely only because it is available. Functions & Departments are working in silos to achieve their individual goals instead of working towards the best of the organization.
Based on Frederick W. Taylor's book "The Principles of Scientific Management" of 1911, organizations worldwide traditionally believe in the division of the nature of work. The thinkers (directors, who designed the process), controllers (managers, who understand the process and can ensure, it works) and doers (workers, who are executing the process) need to be separated from each other, so they can focus on their individual work.
Spoken in business terms, 1911 happened in a world of risk (complicated world). In a world of risk, we can mathematically address the risks and work out solutions.
This is, where "Taylorism" works well. Risk can be assessed by the Thinkers, implemented by the doers and controlled (and slightly changed) by the Controllers. Today, most organizations follow (mostly totally unconsciously) the patterns of Taylorism. And why not? The success of many of the biggest companies ever existing (Ford, General Motors, Standard Oil company) is based on the concepts of Taylorism.
Business-wise, 1911 was complicated. But politically and socially, 1911 was also a year we started to see change: First countries were starting to be organized more democratically and less autocratically. First movements for socialist societies offered different world views on everything the world knew before. The existing tensions on the European continent would soon explode into the biggest war the world has seen until then. And even the consequence of the war in the Treaty of Versailles and the German Weimar Republic was handled with the understanding of a view on risk.
Whereas manufacturing just started through thanks to Taylorism, it was not how the world worked anymore. A multi-party country like Germany invited far too many actors into their parliament, which increased complexity by magnitudes. The German Reichstag was not built for resilience, but rather by the understanding, that a few thinkers would be able to design the life of a mass of workers. This might be one of the reasons, why the first German republic failed and led to World War 2.
We know since about 100 years, that the way companies and/or organizations work, is not a mirror on how societies work. Changes in Politics, Society, Culture and Technology have changed the world. Today, we do not live in a world of risk, which needs to be managed. Today, we live in a world, which needs to be explored. Remember, the complex adaptive system: Knowledge over one part of the system does not give you necessarily knowledge over the system as a whole.
Adaptive and therefore Resilient / Agile organizations therefore know how to build organizations differently. Based on the following 7 principles, they understand organizations as a complex adaptive system, which does not need to be controlled, but rather a structure / construct, in which the system can work on the adaptation itself:
Cross-functional, self-organized & competent teams.
Iterative AND incremental value delivery.
Feedback & continuous improvement.
Value-driven planning cycles.
A clear, visible vision.
Management as Facilitation of the system; not as Expert.
Similar to a complex adaptive system, Melvin Conway understood the adaptive nature of an organization, when he formulated the law named after him:
Any organization that designs a system (defined broadly) will produce a design whose structure is a copy of the organization's communication structure.
Conway was a computer programmer, so this law was designed based on what he learned from his computer programming projects. While being a joke initially, this following comic seems to have a grain of truth in there:
Adaptive organizations understand the Conway's law and take it as an advantage for how they design their organizations. With the understanding of Conway's law and complex adaptive systems, we do know, that while we design organizations with boxes and connectors, the real structure of an organization is based on how people interact with each other and communicate with each other. Building organizations based on how their members interact, therefore, seems more important than designing power structures.
In the end, an organization is in its game to make money. They only make money, if they provide a product & service, which helps their customers to avoid pain or to generate joy. Understanding the customer and the value delivery to the customer is, what we call effectiveness. Building the right value for solving a customer's problem or to generating new sources of joy is the value organizations want to achieve.
One key element to achieve that, are so-called value streams. A value stream is a journey of related activities, which help to deliver more value and improved products or services to the clients. At the end of a value stream is always a customer value. At semdi solutions, for example, one of our value streams is to increase organizational effectiveness. For us, it is therefore important, that with an understanding of complexity, designing adaptive & customer-centric organizations and a lean service & product development, we can generate higher value to our clients.
If we follow our first principle of agile organizations for cross-functional, self-organizing and competent teams, then we do understand, that - to achieve the value of a value stream - we need more functions than just one. Organizing organizations around functions and departments as in the part does seem counter-intuitive. Nevertheless. the more specialized the function (e.g. Accounting), the more we need to ensure to follow certain practices which ensure the alignment of all functions within the function itself. Considering the example of Accounting, such functional alignments would ensure to follow the so-called GAP (Good Accounting Practices). In Software Development it might help to ensure consistency of use of technology.
Having value stream teams to deliver value to customers on the one hand, and having functions aligned throughout teams is called a Matrix organization. Those organizations are usually (but not always) more resilient and more adaptive, as they invite for more cross-functionality and self-organization. The Engineering Culture at Spotify (Part 2) is a poster child, how an organization can be build adaptively towards such a Matrix organziation.
Beware: Do not just follow the recipe as explained in the above-mentioned videos. Remember, that even the speaker Henrik Knieberg mentions, that this is probably a mix of how the organization works today and how they want it look at the future. Adaptability is the key.
Having examples such as Spotify (and their success) is a blessing and a curse at the same time: A blessing because it invites other organizations to follow suit in developing adaptive & resilient organizations (and becoming more Agile on the way). A curse because organizations tend to follow not why other people develop a certain approach, but rather what and how they implement that approach. Organizations today tend to set their goal to become Agile and forgetting their actual goal (the product & service quality for the customer). Agile is done only to become Agile - not because it helps an organization. In our conversations with clients, therefore, it is important to stress, that effectiveness (Doing the Right Thing) is always more important than efficiency (doing the thing right). Agile is about becoming effective first (by improved decision making through higher diversity, shorter feedback cycles, iterative & incremental work results and continuous improvement). Efficiency is therefore just a consequence.