Fast-growing and larger firms today are facing unprecedented volatility and uncertainty. Worse, the imperative to innovate and exploit new opportunities in digital is where disruption and unpredictability is highest. The rate of change and uncertainty that digital has unleashed today puts those companies following centuries-old management practices at greatest risk.
Management practices and organizational structures of the industrial age (still taught in many of our business schools today) approach the design of the organization as a machine.
Setting context – Why the “machine” made sense in the 19th century
Employees as widgets
The evolution of industry required consistency and repeatability at the level of the assembly line. Employees were new arrivals to the industrial workplace (often with mainly agricultural skills), and were seen as interchangeable plug-and-play widgets. If a person left or was fired, they were simply replaced with the next widget-person.
Many managers needed to control workers
Companies believed that there needed to be a high ratio of managers to workers in order to maintain control over employee work practices, a management style commonly called “Command and Control.” This style of leadership focuses on standards, procedures and output statistics. Managers focus on controlling details such as schedules, output, and budgets, which today we call “micromanaging.” These practices are unfortunately still alive and even embedded in practices like Six Sigma, TQM, and business process reengineering.
Separation of knowledge and power between workers and managers
Knowledge distribution in industrial age organizations has upper level executives knowing everything, middle guys knowing less, and those at the bottom knowing nothing. A worker at the bottom didn’t need to know what was going on anywhere outside their immediate job, they just needed to screw on a bolt.
A machine is exactly the sum of its parts
A machine is assembled from parts. The parts may affect each other in a linear fashion (a problem upstream may affect a function downstream), but parts function more or less independently. If a part breaks, it is replaced.
Machines function optimally only in the conditions in which they were created
Having an organization that functions as a machine is dangerous. A machine is built based on conditions experienced at the time of its creation. In these conditions, a machine will do X functions it was designed to do. However, as we know, conditions are ALWAYS changing. So a machine designed for specific conditions is instantly obsolete, because machines don’t know how to evolve.
The development process of the machine age is LINEAR
Linear product and software development processes still dominate today’s digital companies. Waterfall, for example, is one that is linear and eerily the same as those used in the late 1800s. Persisting in a flawed belief that creative work can be subject to the same “laws” of physical manufacturing, today’s digital initiatives operate under oppressive bureaucratic burdens that destroy any chance for agility and creativity to flourish. In an attempt to “fix” this problem, well-intentioned efforts to create new process and management frameworks that amplify and scale proven agile teaming models like SAFe (http://scaledagileframework.com/) and IBM’s DASD (http://urly.fi/jr8) repeat the same flawed use of hierarchy and linear flow.
The “organization as machine” philosophy has become fundamentally flawed in today’s knowledge age, especially in the digital environment.
In the next article, we’ll discuss how in the knowledge economy, organizations must perform as part of a market ecosystem.