What happens when rigid structures are set in place to manage fluid situations?
The concept of hierarchies is as old as human civilisation itself. In any tribe, there is a pecking order, a boss, a lesser boss. There is deference to age, wisdom, experience, title, salary, suit. This rigid hierarchy was applied to early businesses too and has served corporations well since the first industrial revolution.
The company manager sat at the top of a pyramid with a set of senior staff responsible for each business function. They, in turn, had their mini-empires of staff, structured in pyramids which represented the hierarchy of decision-making and communication. These function-specific silos were constructed to serve the primary purpose of management in those days: control. Organisations of a certain size threatened to become unwieldy if allowed to operate without a rigorous structure and lines of control. Workers delegated decisions upwards, and lines of responsibility were cast in stone. Many companies saw the military as the perfect example of how to ensure that an organisation ran according to plan. That is why we still have military terms such as “Officer” in some job titles.
The need for governance was immediately clear. Corporations required oversight from a group of people who knew enough about the business but were sufficiently removed from its daily operations to make unbiased decisions and to set a strategy that would be for the long-term benefit of the organisation’s shareholders. The duties of board members were described in legislation, and the relationship between board and management became enshrined – solidified, immovable, fixed.
As the second, third and the fourth industrial revolutions took place, the speed of change accelerated beyond anything experienced before. Communication became more fluid. Opportunity lay not in formal planning but in exploiting fleeting confluences of circumstance. Planning and control became less important than carefully considered action that resulted from rapid, real-time communication across various layers of the organisation and between people with the necessary skills rather than the highest rank. The military approach to “defending the bastion against onslaughts from competitors” gave way to concepts such as “frenemies” and “co-opetition”.
The hierarchies changed shape. They became flatter, and the notion of a network started taking hold. A network with its multiple nodes allows for more efficient communication and decision-making. A network defies hierarchy and promotes nimble movement. The opportunity could take any range of shapes and success depended on how different networks could collaborate with each other. While collaboration was taking place and while networks in different companies were humming one aspect remained static and immovable: the company’s governance.
Still rigidly structured to manage a hierarchy the board is becoming a dinosaur in the fourth industrial revolution if it insists on setting the strategy and approving the actions of the organisation on a microscopic level.
Network of networks
“What has developed,” says Malcolm Fraser, Executive Director of The Collaborative, “is a network of inter-connected networks that morphs constantly.” Where interoperability, virtualisation, decentralisation and modularity become the pillars of business, the overwhelming need is for a responsive organisation with a responsive governing structure. Collaborative networks form, thrive, deliver rewards to all involved and then fade over a short time span. The governance structures that were initially set up when the business had a more predictable format seem irrelevant now.
“What we need is empathetic governance,” says Fraser. “We need boards that are attuned to the flexibility in the environment and can understand the need for design thinking in the organisation. While collaborative teams in the organisation empathise, define, ideate, prototype and test products as well as relationships, the Board needs to follow a similar approach to remain flexible and valuable.” For the organisation to succeed executives will require fluid action and rapid thought without a rigid governance structure.
To find out more about Digital Transformation and Collaborative Innovation watch Malcolm Fraser’s webinar here. You can also download his PowerPoint slides here.
Malcolm works as a Collaborative Entrepreneur, acting as the catalyst for forming multi-party collaborations across organisational boundaries to ‘join-up’ organisations, identify solutions to problems and support sustainable social and economic growth for all.
This work is based on his international development experience gained from operating in over 30 countries where he has worked with technologists, local communities and scientists to build collaborative programmes and their associated governance models in partnership with local/regional governments, the World Bank, Asia Development Bank and global networks of innovation centres.