The third session at the 2019 Global Drucker Forum in Vienna on “Ecosystem Insights – Rethinking the Organisation” offers early signs. Five ecosystems with creativity, platforms, and a network at their core offer a filter that separates the signals from the noise. Ecosystems stretch beyond the boundaries of traditional organisations and force leaders to adapt management to fit it to the needs of the specific context. This offers the opportunity to rethink management and organisation beyond tradition.

Drucker Forum 2019

This article is one in the “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems” taking place on November 21 & 22, 2019 in Vienna, Austria.
#GPDF19 #ecosystems

Traditional management, invented early last Century based on the negative assumption about people with command and control as its dominant principles, delivers what it was designed for: Efficiency and exploitation. It is obvious, people got lost in management science and practice.

Ecosystems require a more open, innovation-oriented approach to structure, capabilities, systems, culture, change, and leadership. Digital is the trigger: Digital forces flattened companies. Teams, collaboration, and networks are the themes that emerge.

Have we reached the point where positive assumptions about people drives management?

Structure: Creativity unfolds when power leaves the room

Pixar Animation Studios has a perfect structure filter: Film making is the ultimate of freedom in creativity. Creativity is problem solving and a group effort. New ideas come through co-creation. To bring out the best in people, one has to remove power from the room: Sometimes magic happens when Ego leaves the room.

Terra Numerata maintains a platform that connects partners in consulting that was designed on the creativity argument. Co-design engages the diverse knowledge of people and offers its stakeholders more than they would have if they would operate alone.

Klöckner is a company that combines digital of the traditional with an open systems platform. As such, it invites clients and competitors to collaborate on that platform. Traditional hierarchy and connectedness coexist with communications as the means to return agility to large organisations.

With this, creativity, co-creation, and communications shape ecosystem structures rather than traditional hierarchy and power systems.

Capabilities: Start with self-responsibility as the mindset

At Pixar, good practice is contrary to the dominant control mind-set: It starts with the assumption that everyone wants to do well. People want to grow. As a consequence, there is no need for leaders to motivate.

For Tencent it is important to free people to focus on what they do best. Self-responsibility is the foundation for motivation and purpose its means.

Tupperware connects women with party holders as their ecosystem. The business model empowers women economically. It brings them confidence, connectedness, influence and economic value as otherwise they would not trust themselves.

Finally, people are seen what they are: self-responsible individuals.

Systems: Remove the fear with a design for people

For Pixar, removing fear is the answer of how to get full engagement from people in a way where leadership and systems need to establish a safe place to be: Does the least powerful person feel safe to talk? Normal values, expectations and words do not matter; it’s the action that matters. The challenge with systems is that we don’t recognise the things we don’t see. We overvalue the things we see. Systems need a design that balances the invisible with the tangible.

May I add: Design systems for the people that use them to do work.

Culture: Team, collaboration, and ownership

The Terra Numerata ecosystem model is built on transparency, trust, and collaboration. Klöckner uses collaboration tools to connect people in virtual groups that solve problems and create new ideas. At Tupperware, peer presentations encourage support and help with teams. People need to feel ownership of the company and their work. At Pixar, people have a vested interest in each other’s success. They help each other.

It takes the right systems and connected leadership to create that kind of a collaborative culture.

Change: Change systems not people

When Disney acquired Pixar, it was important to keep the studios separate. This required high confidence in the depth of management. A couple of rules were introduced to share, borrow, steal without going through traditional channels. A merger would have slowed things down. It was important to adapt systems but keep people separate.

When growth hit Tencent with the need to transform into a social network company, systems were slow due to approvals and cross-unit collaboration. To get around that, it created an ecosystem platform, broke up into 20 units, empowered small teams, reengineered bonus systems, and revenue sharing.

It obvious, changing systems is what alters the behaviours, decisions, and actions of people.

Leadership: Develop leaders and diversity

It is a general management job to develop leaders. And when it comes to leadership, the needs of people are most critical. Moreover, diversity is essential in ecosystems: As a leader, I have experience, but there are experiences that I don’t have. Accept that there are experiences that we don’t see.

Have people made it back into management?

Julian Birkinsaw who summarised the Global Drucker Forum as follows: “There are no new management ideas under the sun. What has changed is the practice of management.“

Here is what I have learned from the session: The thinking has definitely passed the tipping point to agile that separates us from the bureaucratic past. 21st Century organisations are at the cross-roads: remain stuck in power & hierarchy or turn thinking into action and create value through network relationships and people-centric leadership. The signals are strong that we have overcome traditional management based on the negative assumptions so we can put people back into management theory and practice.

About the Author:

Lukas Michel is CEO of Agility Insights AG, Switzerland, founder of the AGILITYINSIGHTS.NET, and author of 2 books “The Performance Triangle” and “Management Design”.

This article is one in the Drucker Forum “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems”, which took place on November 21-22, 2019 in Vienna, Austria #GPDF19 #ecosystems

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Richard Straub in his starter article for this year’s Global Peter Drucker Forum, What Management Needs to Become in an Era of Ecosystems made some excellent observations.

Straub correctly, in our view, suggested that the ecosystems are not new quoting numerous theorists whose ideas were shaped primarily during the last century. However, we suggest that organizational ecosystems have always existed and just given a name in the last 50 or so years.

What has changed since the end of the last century is the speed at which conditions change primarily due to advancements in technology; the internet, AI, social media, and more. Traditional measures like profits, market share, ROI, stock price, etc. are outcomes from innovative ideas generated by people within the ecosystem.

Drucker Forum 2019

This article is one in the “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems” taking place on November 21 & 22, 2019 in Vienna, Austria.
#GPDF19 #ecosystems

Rapid response to change requires executives to first identify and understand the underlying conditions within the ecosystem that enable people, who power the ecosystem, to generate innovative ideas with desirable outcomes. Senior executives frequently say that “people are our most valuable asset” but how does the CEO know what is going on in the minds of people operating within the ecosystem? In order to avoid an expensive and aimless wandering from consultant to consultant CEOs should take a diagnostic approach to evaluating the ecosystem. Think of it as a doctor. We suspect, you would not have much confidence in the doctor’s diagnosis if the doctor started prescribing pills before taking your blood pressure or listening to your heart, yet, this is exactly what business executives do when diagnosing the culture and people within the ecosystem.

Over the past two decades we have observed that top tier companies have strong foundations in responsiveness, alignment, capabilities, motivation, and cleverness which we believe are the underlying people-centric conditions for success. The trick for executives in diagnosing interferences or viruses within the ecosystem is to ask the “right” questions…. like a doctor. Here are some starter questions;

• Responsiveness – Is the organization flexible and able to react to changes in the environment?
• Alignment – Is the direction of the organization clear? Does the structure fit the strategy? Is it shared broadly and are employees aligned to support the strategies?
• Capabilities – Does the organization have the competencies and skills needed to deliver on promises?
• Motivation – Are employees throughout the organization inspired to perform above and beyond expectations?
• Cleverness – Are employees empowered to be creative and use their creativity to meet expectations or demands from clients or customers within boundaries that do not stifle creativity?

If you don’t ask the right questions, you won’t get the right answer. Begin by asking these questions throughout your ecosystem then use the “5-why’s” approach to find out what ails your organization. Then you can take targeted action to eliminate the virus. Executives will not know where the answers will take them but the people within the ecosystem instinctively know what management must do so ask … and ask … and ask … then LISTEN!

About the Authors:

Herb Nold is professor of business administration at Polk State College in Winter Haven/Lakeland, Florida and has authored numerous research papers and a book chapter on the subject of organizational culture, change, and agility.

Lukas Michel is CEO of Agility Insights AG, Switzerland, founder of the AGILITYINSIGHTS.NET, and author of 2 books “The Performance Triangle” and “Management Design”.

This article is one in the Drucker Forum “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems”, taking place on November 21-22, 2019 in Vienna, Austria #GPDF19 #ecosystems

David Hurst’s article, then positioned management as a means to cultivate prosperity. He ends by quoting Clay Christensen ‘Management is the most noble of professions if practiced well’ suggesting management as an occupation that helps others learn, grow, take responsibility and contribute to team success. This is more about good management. And the scientific evidence is overwhelming: good management matters!

But how do we know? As a manager, I would be interested in finding my own response or at least have some questions that help me understand.

What if we could measure management to determine whether managers have done the job to cultivate an organization which has the capacity to capture new challenges, is able to change its focus, and can innovate, grow and create prosperity? It would elevate the conversation about management to describe management as a distinct capability and producing competitive advantage in organizations!

How? Here are some options and a suggestion of how to get to the ‘know’.

Measuring managerial performance is simple. Take ROE, growth, or any other output measure that you like. It offers clarity on performance related to what you measure. Is it inclusive? No, but it measures what you have decided to measure.

Managerial effectiveness is no different. Simple measure like ROA are adequate to judge whether managerial action results in something productive. But, this does not provide any understanding of management.

ROM (Return on Management) offers measurement of individual managerial efficiency based on a personal investment in attention, time and energy. This approach, development by Robert Simons and Antonio Dávila ‘How High Is Your Return on Management?’ offers many practices managers can apply to increase their individual efficiency. But this is not about assessing management as an organizational capability either.

This leaves us with quality. Stakeholders can be asked for their opinion. But this would require an infrastructure to collect responses.

The quality and process movements have provided us with rigid ways of measuring, among many operational things, managerial quality. My concern: Do we want management as a capability to be measured by a detailed set of metrics that have been derived from the heritage of past successes in a comparably stable economy. As a leader, I would not want to be constrained by metrics from the past.

Today’s world is dynamic. Unexpected events disrupt what we do and we struggle to create a better world. Unlike the dynamic context we now operate in, management, invented in the early 20^th century for a comparably stable environment, is little changed. We believe that it is time to transform management to be the ultimate capability and technology for the 21^st century. But for this, management needs a different design –a design with agile features for a dynamic context. As such, management may as well be one of the few remaining competitive advantages.

The building blocks of any competitive advantage are the capabilities that organizations build from their resources. Why then not look at management as the capability that enables distinct competitive capabilities? By doing so, management turns itself into a competitive advantage. The dynamic capabilities literatures suggest ‘capability assessments’ as a means to better understand how well capabilities perform in a dynamic setting.

Hence, we now combine the idea of assessing capabilities with a well know concept. Looking at management as a competitive advantage opens the opportunity for a different kind of assessment. The VRIN criteria (initially proposed by Barney 1991, with his extensions to VRIO) offer the ultimate test for a capability to count as a competitive advantage: Valuable. Rare. Inimitable. Nonsubstitutable. VRIO then adds organization to the idea. So, why not apply this concept to management?

Here is an application (somewhat loosely interpreted the concepts), and a test for management with 5 questions:

• Valuable? Does your management create value and get work done? Does it support people to get work done and create value?
• Rare? Does your management have a design that is unique, meaning organization and context specific?
• Inimitable? Is your management hard to copy?
• Nonsubsitutable? Is there no alternative to your management?
• Organization? Is your management practice deeply embedded in your organization’s policies and procedures?

Valuable: Does management create value? In every organization, management is performed through some sort of an operating system. Rules, routines, and tools help managers and people to get work done. A ‘virus’ free operating system has the potential to unlock the talent and promote meaningful work. Does your operating perform do what it was intended for?

Rare: Does your operating system meet the needs of your context and organization? Every organization is unique. Every context is different. Your operating system needs to fit your specific challenges and those challenges, accepted by your leaders and the organization.

Inimitable: Is your management and your operating system hard to copy? The harder the unique management approach is to copy the higher is its competitive advantage. As such, it turns into a distinctive organizational capability.

Nonsubstitutable: Is there no alternative to management? Do members of the organization have no alternatives to applying (and no way to short-cut) management by using the specific operating system? We all know managers and employees that have their own way of doing things – deviating from standard operating procedures with short-cuts. Accepting such behavior is destructive for every organization’s culture as it undermines the unique characteristics of its operating system. The better the operating system supports its users to apply good management, the more it creates a unique competitive advantage for the organization.

Organization: Are your routines, rules and tools deeply embedded in the organization’s governance system and culture? The deeper the operating system is rooted in unique ways of how decisions are made, how performance is delivered, and how behaviors are demonstrated, the more it creates a competitive advantage.

These are intended to serve as observation points to focus leaders’ awareness on the need to design, development and implementation good management.

David Hurst, in his blog, clearly pointed out that ‘prosperity and inclusive growth are wicked problems’. Simple answers are not the solution to higher complexity and a dynamic environment. Answering these 5 questions regularly increases the understanding of how to transform management into a distinct competitive advantage. Good management, in return, ‘makes the most of human potential – the inclusive way to higher prosperity’.

About the author:

Lukas Michel is CEO of the AGILITYINSIGHTS.NET and author of Management Design and The Performance Triangle (Both LID Publishing, 2015 and 2013).

This blog summarizes ‘Measuring Management: Motivations, Concerns, and a Way Forward’. Download at www.agilityinsights.com.

During the past 25 years, the speed of change has accelerated and employee engagement has dropped. For most businesses, the managerial context has fundamentally changed from the way we have become accustomed to doing business. Moreover, fresh technologies, mobile talent, and globalization have demanded dynamic capabilities comprising people-centric management and leadership with a high ability to act for agile, fast and robust organizational responses.

The 2014 Global Drucker Forum concluded that ‘The Great Transformation’ is on its way. The management of people has returned to the center of the business landscape. There was not one speaker that did not emphasize the need of a more people-centric approach. Engagement, self-responsibility and purpose were among the features outlined in great detail. It was felt that Peter Drucker’s people-centric approach, with a different image of human mankind and the rich heritage in past centuries of European Humanism, finally finds its way into management practice. It is viewed as the solution to superior innovation and growth.

We need the transformation not because of a sudden need for soft skills or to cater solely to the needs of Generation Y. We need it because of new knowledge work with outcomes that cannot be easily controlled nor commanded. The different nature of knowledge work calls for an update of the firm’s ‘operating system’. Most corporations still operate on an operating system ‘Windows 3.11’ while the world uses iOS and Android: ‘new work’ calls for very different ways to collaborate, communicate, interact and get work done.

In addition to bringing people into the center, transformation calls for management with a higher agility to act to better cope with a dynamic environment: early sensing of opportunities, fast decisions and flexible responses are needed paired with the ability to withstand external shocks. Speed, agility and resilience are the managerial and organization capabilities needed to enable the new way to operate.

Many recipes, tips and practices of the past are unsuited to guide the businesses of the future. Some speakers at the forum argued that most traditional management tools and routines have produced unintended consequences or have fallen by the wayside entirely. Organizations built for the new way to operate have new capabilities in place that simultaneously help people to perform at their peak and facilitate speed, agility and resilience. They have designed their toolbox for both their talent and to cope with the challenges of a dynamic environment.

The new toolbox promotes features such as a stronger engagement, diversity, collaboration, collective intelligence, delegated decision-making, flexible work hours, communities, access to networks, knowledge building, transparency, open culture, mobile work and more -a Swiss pocket knife with many tools for different purposes.

Democracy promotes many of these capabilities. Why then not organize corporations as democracies?

Democracy is defined by the “power” of “people”. It is a rather demanding call that requires ultimate respect when used in politics and even more so when it is related to work and corporations. Subsidiarity is one of the principles of democracy: it demands autonomy, self-organization, participation and collective decision-making.

Peter Drucker once said “In the knowledge era, every employee is an executive”. This implies autonomous action and an image of human mankind based on a deep sense of self-responsibility. Self-organization needs skills and time –it implies leadership!

In the purest sense, democratic decision-making in firms requires management participation, financial ownership and social participation. Practical examples demonstrate different ways to participate and different forms of ownership. However, participation by itself does not automatically warrant a superior leadership culture.

Democracy means that more people are involved in decision-making; decisions are made by voting or require consensus. But the swarm is not always right. Recent research is clear: just having a group of smart people does not necessarily lead to better than individuals decisions. Moreover, voting does not always lead to better outcomes.

Leaders in favor of democratic decision-making may now ask: is it suited for big or small decisions? The response is clear. It is primarily for the big decisions. Why otherwise would one want to benefit from collective intelligence? Small decisions don’t require democratic decision-making procedures. Leaving democracy to small decisions is faking democracy. This then leads to the questions of what CEO decisions are: Strategy? Alignment? People? Reputation? They are all big decisions and are in conflict with democratic decision-making. This leaves the combination of democratic approaches and leadership in charge through consensus decision-making. Consensus is known to lead to superior innovation.

Does democracy humanize work? A closer look at ‘people-centric’ requirements leads to Timothy Gallwey’s ‘Inner Game’ principles of work with awareness, choice and trust as the levers of superior learning and performance. The ‘Inner Game’ demands self-responsibility to be valued as the most important determinant of motivation. It represents the capacity with which individuals deal with the challenges of the ’Outer Game’. For an entrepreneur and leader, this means creating a work environment that unlocks the potential of its talent.

Such a work environment humanizes work. This, however, requires enabling management more than democratic procedures -management with an operating environment for better navigation in a turbulent environment.

In comparison, only visible results of early adopters of ‘democratic organizations’ will indicate whether democracy truly humanizes work.

As a Swiss, I have learned that a well-functioning direct democracy is an ongoing construction site. The same holds for the operating system of corporations. Their toolbox and capabilities need to be reinvented over and over to meet the changing needs of people and the environment. Large legacy organizations struggle with their path dependency and the fact that this means changes on running the “machine”.

The debate around democratization of work is a controversial conversation –it may have the potential to add to the question of what superior management means and what it requires. Democratic capabilities and tools have the potential of bringing humans back to work to enable organizations better deal with the challenges of a dynamic environment. But they are not the only solution to a better working life and better companies.

About the Author:

Lukas Michel, Author, Speaker, Mentor – www.AgilityInsights.com

In the West it has been our enduring crisis: an overleveraged financial economy, huge debts and imbalances, increasing inequalities, and resistant high unemployment rates. At the same time we see stock markets at all-time highs and CEOs earning obscene  amounts of money. This is what Henry Mintzberg is referring to and what is threatening to undermine our basic institutions like democracy, market economy, rule of law, and civil society.

A different global society

Additionally, the crisis in the West together with Asia’s and specifically China’s positive economic track record has led to the replacement of the liberal democratic nation state as the role model for the global society by the state capitalistic system.

In fact, the new model is a combination of state-capitalism – where the state is seen as an important actor in the otherwise corporate world – and shareholder value thinking – where the purpose of a business to make money is seen as an overall good for society – which is highly attractive for elites everywhere in the world. Authoritarian regimes, together with an oligarchic private ownership, patriarchic societies, the rule of elites instead of law, and an oppressed civil society, are again in advance. This has resulted in the rise of an unprecedented rich ruling class from China to Russia, Saudi Arabia to Brazil, and Nigeria to Angola.

Hence, the West’s self-inflicted crisis is also backfiring on it from the outside its boundaries and a different form of global society is emerging.

Economic and social crisis inside, less influence and reduced power in the rest of the world, what can the West do to not destroy its basic institutions?

Assuming that the emerging global society is a self-organizing social system, solutions along the political left-right scheme become meaningless. No single government or multinational corporation has enough power to control the system. It is the interplay of decisions and actions taken by governments, supra-national institutions, civil society organizations, national and multinational companies and the like which is shaping the future of our planet.

Looking for high-level parameters capable of influencing the global society, Peter Drucker has given us a hint. Long ago he realized that knowledge societies are societies of organizations with the single organization as a key element. And behind each of these interdependent organizations are people whose practice is put to work by an “operating system”. And this, of course, is …

… the Art of Management.

While the choice of the management system is independent of the type or the activities of an organization, it is a value-decision that articulates fundamental principles, ideas and values of what we think an organization and hence society is all about.

With the global triumph of mainstream management thinking, principles center almost solely along financial values and financial engineering. To overcome its implicit logic of “winner takes all” we need a managerial operating system, which helps managers to deal with the increasing volatility, uncertainty, complexity and ambiguity of our emerging global society.

We think such a system can only be based on an appreciation of the individual and a sustainable use of our planet.

A European Humanistic Management Movement

Europe has come a long way to arrive at its “humanistic worldview”. From ancient Greece to the Renaissance, the Enlightenment, the Protestant Reformation right up to the modern peace project called the European Union. European Humanism with Kant and Rousseau brought forward the concept of self-responsibility as the human trait that determines motivation and meaning.

The appreciation of the self-responsible individual as a manager, employee, customer or any other stakeholder is the solution for a higher ability of organizations to act in a turbulent environment.

Only a people-centered management based on humanistic values allows drawing on the ingenuity and creativity of the human beings.

In any organization values are articulated as operational principles, which guide its decisions and actions. For a European Humanistic Management Movement we think the following constituting principles can be put forward:

1. The raison-d’être of any organization is value creation for society (public value) and not maximizing the value of the own organization.
2. The operating system and toolbox, guiding decisions and actions, follow systems and design thinking rather than a pre-dominant financial focus.
3. Organizations shall be adapted to people rather than people to organizations.
4. Configuring everyone’s toolbox to cope with the challenges of a dynamic environment is an ongoing management task.

Values, routines and tools constitute the operating system of an organization. As such, the modern toolbox has a design where principles allow for choice, routines raise the awareness for what matters most, tools help people to remain focused on creating public value and leadership interactions build trust. It is this toolbox that simultaneously caters to the humanistic values and at the same time to addresses the challenges of a turbulent environment.

With this, the choice on the right design of the operating system becomes one of the most important leadership decisions and at the same time it is the central “lever” for shaping the global society. The self-responsible individual is incompatible with a pure shareholder-value driven approach, but is needed to cope with challenges of an emerging global society and disruptions of new technologies.

Executives of private and public organizations have the power to transform the operating system of their organizations as a badly needed evolution to prevent yet another revolution. This can help rebalance society in ways to promote value for the common good and not to further undermine the basic institutions of democracy, market economy, rule of law, and civil society.

About the authors: 

Hans Stoisser, entrepreneur, management consultant and author with a longtime experience in emerging countries. His book “Der Schwarze Tiger – was wir von Afrika lernen können” will be published in September (Kösel Verlag).

Lukas Michel, author of the two books The Performance Triangle and Management Design, mentor for executive teams and associate of the European Drucker Society.

Organizations around the globe in all sectors continue a trend of increasing size and complexity that began over 100 years ago with the business strategies of the likes of Carnegie and Rockefeller. New and emerging technologies for communication and data sharing have accelerated this process in recent decades. We view this process as a natural and inevitable occurrence due, if for no other reason, to simple economics. Expenses will rise through time in many ways that management cannot prevent no matter how much they try. Those pesky employees always seem to want and expect raises, healthcare expenses increase, rents go up every year according to contracts, governments seem to want a greater piece of the action, and the list goes on and on. If top line revenues remain constant and expenses increase due to any or all of these sources the squeeze point becomes the bottom line. These are simple economic realities which force executives to constantly look for ways to increase the top line and keep their jobs.

There are, of course, any number of ways to increase the top line some of which include expanding market share in current markets, expanding into new markets, and introducing new products or services using an almost endless list of strategies. This is inevitable yet many, if not most, executives continue running very large enterprises using management techniques and structures developed in an industrial age which is very different from the rapidly changing, complex, business environment of the 21st Century. Argyris and Schon pointed out that the management challenges in business where there is little or very slow change is very different from those in uncertain environments. We would suggest that it would be difficult today to identify ANY businesses not in uncertain environments. If increasing complexity is a natural and unavoidable condition and that uncertainty and rapid change influence virtually every organization then what do we know for sure?

What we do know is that we don’t know what opportunities or threats will emerge or what the best way to take advantages of opportunities or respond to threats will be. We also know that whatever course of action is decided the decision must be made quickly and execution must be swift and decisive. Additionally, because of the complexity of organizations effective decision-making by one, autocratic, individual is likely a formula for failure. We also know that the overwhelming body of knowledge within an organization exists in the minds and experiences of people, particularly knowledge workers [Link 1].

The Borg – Ultimate Knowledge Collective

The “Star Trek, Next Generation” TV series introduced the ultimate evil, the Borg. The Borg society consisted of millions of individuals who were all connected mentally through a vast neural network so that the experiences of any single individual were immediately shared with the entire collective. The result was that with the power of millions of minds sensing then working on a problem, solutions were developed very quickly allowing the Borg to adapt rapidly to any threat that the intrepid crew of the Enterprise dreamed up. The ability to sense, evaluate, implement, and adapt to threats faster than our heroes made them nearly invincible. Ultimately, our heroes defeated the Borg by introducing a virus into their network disrupting their ability to sense individual experiences and apply the collective knowledge of millions of individuals to find solutions. We suggest that the most effective organizations manage complexity and uncertainty by accessing the collective knowledge of all individuals through social networks connecting a performance triangle of leadership, systems, and culture of the organization.

Viruses Disrupt the Performance Triangle

People, through collaboration, purpose, and relationships connect a performance triangle of leadership, systems, and culture and drive the organizations ability to effectively manage complex structures in rapidly changing situations. The triangle model [Link 2] emerged over a 10-year period from information gathered from over 100 business case studies involving organizations in different industries throughout the world. Statistical analysis of the results of a diagnostic survey conducted with 50 of these organizations between 2006 and 2011 established the validity of the performance triangle model and provided deep insights into the potential for dealing with the growing complexity of organizations and the barriers that keep employees from using and sharing their knowledge. The research indicated that viruses disrupt or inhibit that flow of knowledge among people that degrade the ability of the organization to sense what is happening and tap into the collective knowledge base. These viruses are insidious because they are typically unseen and undetected because they exist in the minds of individuals or groups of individuals on a mostly subconscious level. We have sat in countless meetings and observed the highest ranking individual dominate the idea pool while all others simple attend. In many organizations, we have listened closely to talk in the hallway and other places, away from earshot, to see how people distrust management and each other therefore they are unwilling to share what they know. These would be two examples of organizational viruses but the list is endless and cannot be observed without looking and listening closely through an objective electron microscope. We all know that successful managers advance within an organization because they fit in and promote the values, beliefs, and assumptions of the organization that made it successful. These highly successful managers are unlikely to detect disruptive viruses because they are themselves infected. Some successful managers observe the outward signs of these viruses and a few are able to detect viruses but truly rare are those leaders who can remain objective enough to go further and actually do something to eliminate the viruses.

Get Rid of those Nasty Viruses

After years of stalling growth, the new CEO of high-tech firm diagnosed his performance triangle to discover that the organization had inadvertently introduced viruses. Well-intentioned but flawed leadership introduced formal routines and processes that had the effect of disrupting the flow of knowledge and essentially apply brakes to the company’s growth. The systems formalities have names such as TQM, extensive process orientation, request an approval forms, and scorecards that required frequent updates. When organizations grow fast, most entrepreneurs install a leadership team and introduce professional tools and routines to cope with the growing complexity. However, much of these instruments added to the complexity with managers hiding behind processes rather than interact with people to collaborate and use their collective knowledge. “We follow rules rather than to communicate and interact” was the key realization from a diagnostic workshop with the new CEO. The cleanup was simple. He decided with his management team to rework their management system and retool the box with the perspective of (1) supporting the exchange of knowledge of their well-trained staff and (2) relating them to collaborate rather than to engage in well-intended but cumbersome routines. By simply detecting the viruses and cleaning up an infected bureaucracy, the organization returned to its growth path.

What happens if you don’t – deal with complexity by tapping into the vast reservoir of your employee’s knowledge? As the CEO of a regional utility firm confirmed, viruses creep slowly into the operating system of your firm. Unwillingly and unknowingly, they divert your attention from what truly matters and use up time that is not available to tackle the real challenges. The call for help came on a Saturday morning from his office. The first visit revealed a desk with folders full of pending issues, a closed door to his office assistant, dead silence on the executive floor during prime hours, and decisions that always migrated to the top! The diagnostic confirmed our gut-feel: tight managerial performance routines, detailed Management by Objectives tools, stifling bureaucracy, and closed-door conversations prevented any free flow of knowledge, kept employees within tight boundaries, and prevented creativity. Combined with the ongoing deregulation of the industry, the CEO faced a managerial situation that required an instant fix – on behaviors and its guiding managerial systems.

Conclusion – Become Borg-like

So, one key to effectively navigating a complex organization that is constantly becoming more and more complex in an ever changing world of uncertainty is to become more Borg-like. Nurturing neural networks to facilitate the flow of knowledge throughout the organization comprised of many individuals becomes essential for effective sense-making and to get critical information to the right people at the right time. Successful 21st Century companies will develop structures very different from industrial age command and control designs that emphasize free flow of knowledge throughout the organization. Doing this, however, requires recognition of infecting viruses that block collaboration, blur common purpose, and destroy productive relationships among people that degrade effectiveness to managing complexity. Firms with Borg-like knowledge networks, free or with reduced viruses will survive and prosper while those that cannot will fail due to the weight of their own complexity and constant threats from an uncertain environment that, like Star Fleet, will never give up and will always find a new approach to try.

About the Authors

Dr. Herb Nold, Professor of Business Administration, Polk State College, Florida, USA. Winner of the Emerald Literati Network 2013 Award for Excellence for ‘Linking Knowledge Processes with Firm Performance: Organizational Culture’ in Journal of Intellectual Capital and the 2013 International Award for Excellence for ‘Using Knowledge Processes to Improve Performance and Promote Change’ in the International Journal of Knowledge Culture, and Change Management

Lukas Michel, MD of AgilityINsights l Sphere Advisors AG, Switzerland. Author of “The Performance Triangle” and diagnostic mentor to management teams worldwide.

[Link 1: Linking knowledge processes with firm performance: organizational culture. http://www.emeraldinsight.com/journals.htm?show=abstract&articleid=17010190 ]

[Link 2: The Performance Triangle: A Diagnostic Tool to Help Leaders Translate Knowledge into Action for Higher Agility: http://ijmoc.cgpublisher.com/product/pub.258/prod.16 ]

L. Michel, “THE PERFORMANCE TRIANGLE: Diagnostic Mentoring to Manage Organizations and People for Superior Performance in Turbulent Times, LID Publishing, London, September 2013.