Next Generation Organizations: Distributed Authority

Reflecting on my years as a leader in large corporations as well as start-ups, the most profound cultural difference between the two work environments is trust.  Early stage companies trust their employees; bigger businesses do not. 

Start-ups assume the best in their people.  Founders and leaders freely give away power and control. They have faith in their teams’ judgment and provide means to empower individuals.  As a result, their work teams are highly engaged risk-takers, iterating quickly and adapting to changing markets.

Large firms see the worst in people.  The structures, policies and compliance procedures demonstrate their lack of trust.  Vertical hierarchies, approval processes and sign-offs sap their speed and creative spirit.

Organizational trust is fundamental to collaboration and continuous innovation. 

To foster trust, next generation organizations such as a Collaborarchy™ operate with 

Distributed Authority.

Authority is a right.  In a business context, authority centers on the right to make decisions about product strategy or marketing tactics, verdicts on hiring and firing staff, spending company resources or resolving customer problems.

In traditional hierarchical organizations, titles define authority.  Those at the top have the power.  Making decisions in this vertical structure requires an information exchange between those with situational knowledge and those with authority.  This constant up and down the ladder creates bottlenecks and organizational friction.

In advanced organizations, decision-making rights are granted to those closest to the problem.  Management trusts the wisdom of team members, believing the staff will act in the best interest of the company and it’s customers. By distributing authority, leaders put power in the hands of those best positioned to find the right solution.  This permission speeds decisions so companies can be nimble and outflank competitors.

Clarity of decision-making authority is essential, especially at high growth businesses.  In a Decision-making framework I use with clients, Leaders classify decision situations as Strategic or Tactical.  Categories of decisions can include hiring/compensation, budgets, key company initiatives, product development, etc.  From there, teams or individuals are granted authority over decisions in these realms.

Posting this matrix publicly ensures domains of responsibility are clear.  With mutual understanding of boundaries and expectations, confusion and frustration among staff teams is minimized.

How we make decisions is as important as who pulls trigger.  The decision-making process has several distinct stages from problem identification and information gathering through evaluation of options.  Oftentimes, these activities are conducted simultaneously or worse, in the wrong order.  Many of us choose an option first and then gather the information needed to justify our decision.

Effective teams conduct a methodical decision-making process to ensure wise choices.  Getting the process right upfront saves time and rework down the line.  During the information gathering stage, they reach out to all constituents (including customers) for input.  When riffing through possible solutions, they actively seek divergent ideas and consult the skeptics as well as quiet members of their team.  Selection criteria are clear, defined in advance of the evaluation process and aligned with both customer interests and company Core Values.

In organizations built for speed, the default action is to move an idea forward.  Short of a viable objection or potential harm to the business, initiatives are pushed ahead.  Release reviews and project postmortems enable the team to candidly assess the outcome, learn from mistakes and try again.  This rapid iteration process works best if autonomous teams gain cross-functional input and have the authority to make decisions.

Enlightened leaders are re-examining traditional decision-making criteria.  Most companies base decisions on KPIs.  Ideas and initiatives are assessed for their impact on revenues, units sold, production costs or profits.  These results are lagging indicators, outcomes only measuring performance.  They can answer the question “How much?” but they can’t answer the question “Why?”  Operating via KPIs puts teams in firefighting mode, always reacting to results from the past.

More progressive firms are getting ahead of the curve by focusing on Business Drivers - leading indicators producing future outcomes. Business Drivers can include customer satisfaction, repeat purchase rates, Net Promoter scores as well as staff retention and employee engagement ratings.  Operating by Business Drivers enables companies to anticipate customer needs and market trends while ensuring their teams are working at peak productivity.  Firms focused on Drivers rather than KPIs are more attuned to the end-to-end customer experience enabling them to be out front, leading change and defining the future.

In our next post, we will examine the power of transparency.

Next Generation Organizations: Autonomous, Cross-functional Teams

The most progressive leaders are experimenting with new means of sustaining their firm's innovative spirit as the business scales.  Non-traditional structures and revolutionary management paradigms keep company cultures fresh and inspiring, capable of creating the next generation of market disruptions. This organizational insurrection has its roots in the tech sector.

Life in a start-up can be both exhilarating and debilitating.  Fueled with passion, purpose and an us-against-the-world mindset, youthful teams work flat out.  Speed is everything in the race to outmaneuver the marketplace.  The relentless pace coupled with urgency to deliver creates a work environment once described to me as “The Blender”.   Some thrive in this whirlwind while others get chopped up.  

“Blender” causalities can be quickly forgotten in a quest to move forward.  Turnover is part of the game.  New teammates, expanding roles, office moves and milestone celebrations became typical in the start-up space. 

In this fevered landscape, workplace basics are often overlooked.  Inexperienced leaders deal with the needs of a growing staff on the fly or not at all.  Without a clear plan, even young companies can fall back into traditional office structures.  Command-and-control hierarchies, functionally based teams, and approval/compliance policies crop up unexpectedly.  Soon the accompanying organizational friction grinds innovation to a halt and revenue growth falters.

Navigating a business through such a tenuous stage of the company’s lifecycle is a challenge for Founders and start-up leaders.  By testing new structural models and entrusting their staff with more autonomy and authority, pioneering firms are transforming the workplace and enabling their teams to thrive. 

A Collaborarchy™ is new organizational paradigm for sustaining innovation.  When integrated together, the five dynamics of this model facilitate the collaboration, connection and engagement needed to scale a high growth business. 

 

The development of autonomous, cross-functional teams is a good place to start. 

These self-directed groups are not waiting for assignments from above.  Aligned with the Purpose, Mission and Values of the firm, teams are setting their own course.  Successful units leverage the collective wisdom of all team members – holding to the tenet that nobody is smarter than everybody.  

Collaboration is fluid because team discussions are not dominated by a few and decisions are not railroaded into action.  The quality of conversations with one another is paramount.  With the proper meeting protocol, all team members can feel safe to participate in stand-ups or weekly gatherings knowing their input is both respected and valued.  

Management trusts the judgment of the team and empowers them to solve customer problems, prioritize projects and resolve conflict.  In return, the team must be diligent and disciplined when appropriating funds and allocating scarce resources.

With autonomy comes accountability.  Each group takes ownership for delivering on their promises to customers, management and teammates.  Visibility into the team’s progress is critical.  Each unit defines their metrics and milestones and posts reports publicly on their advancement toward goals. And there is no finger pointing if they come up short.  Being on the hook is the price one pays for autonomy.

The design and structure of teams is area of potential stagnation, fertile ground for bureaucracy to sprout.  Teams often form naturally around traditional functional lines.  Working with peers in our own field feels comfortable, a safe haven in an intense workplace.

Here’s the problem: functional teams are not in the best interest of the customer.  These team structures are internally focused.  Their daily agenda is functionally directed not customer driven.  

Resistance to changing functional teams is high.  Before defending the status quo, consider asking your customers' perspective.  See how many would organize your firm by functions or departments rather than an end-to-end customer experience. If the customer is truly our boss, then we will structure our teams around their needs first. 

Many firms use customer-centric Project Teams to tackle high priority initiatives or critical deliverables.  They experience the speed and agility possible with a broader base of input and collective thinking.  

Cross-functional teams start with a customer-oriented Purpose, a common mission that inspires the group to serve the needs of their customer set above all else.  Team decisions are based on fulfilling this Purpose.  The team's day-to-day interactions need the perspectives of those speaking regularly with customers (i.e. Customer Service, Biz Dev, Acct. Development, Marketing, and Operations) as well as Product, Engineering and Tech.  While team members can call on the expertise of their functional colleagues, collaborating with a more diverse group enables them to serve the customer best.  

Inspired by a customer mission and empowered to tap the collective creativity of all team members, autonomous, cross-functional teams can continually deliver innovation as a business scales. 

In the next post, we will address another key organizational dynamic: Distributed Authority.

The Insurrection: New Organizational Paradigms

An insurrection has begun! 

Traditional workplace structures are under attack.  Conventional hierarchies and command and control models are being ditched.  Progressive young companies are experimenting with fresh organizational paradigms designed to foster collaboration, agility and speed.  The next generation has arrived!!

So what is the genesis of this workplace transformation?  How will these new frameworks help high growth businesses sustain their pioneering cultures as they scale?

As start-ups reach their Transition Stage, rapid staff increases can spawn structure, processes and procedures.  Cross-departmental bottlenecks and approval chains generate organizational friction, which grinds innovation to a halt.

To stem the tide of bureaucracy, Founders and start-up leaders can look for its roots.

In his book Reinventing Organizations, Frederic Laloux reviews the history of organizations from the earliest tribal cultures to today’s robotic corporations. Hierarchies are designed for efficiency and optimization - systematized people machines built to deliver the highest return for investors.  With the past as a good proxy for the future, these classic structures rely on highly predictive planning and precise execution to achieve budget targets. 

In the bureaucratic model, the “thinkers” are separated from the “doers”.  The most intelligent sit at the top developing strategy, handing down assignments and commanding their team.  The sole responsibility of the “doers” is to implement these directives.  Thus authority is limited and information is tightly controlled.  Employees are considered untrustworthy and communicated with on a need-to-know basis.   Internal compliance protects the company from the staff’s “selfish” intentions.

We are all familiar with bureaucratic side effects; political maneuvering and power plays, silos, turf battles, lack of authenticity and finger-pointing.  Staff engagement is low and innovation stagnates.

These 20^th century designs falter in our current technology driven, networked economies where the future is impossible to predict.  With market uncertainty nullifying planning, these lumbering hierarchies are rendered clumsy and ineffective.  

Today’s young firms are creating flatter, more flexible workplaces.  Speed is king.  Innovation outweighs efficiency.  Progress trumps perfection.  Navigating uncharted waters necessitates a team of “thinkers”; aggressive risk-takers constantly experimenting, iterating and pressing forward.  

These organizations thrive in the early days.  However, when the Transition Stage dawns and the heat is turned up, they can lose their way.  Falling short of revenue targets or missing release dates raises urgency levels.  The burden to deliver more with less creates frustration and inner conflict.  If financing rounds are in play, the crucible gets even hotter.

I have witnessed winning start-ups implode, more from organizational meltdowns than competitive forces.  In stressful times, cultural norms take a back seat.  Feeling pressured, leaders become more directive.  Decision-making authority is consolidated.  Information is held close to the vest as the circle of trusted advisors gets smaller.

The staff senses the changes.  Limited transparency creates skepticism.  The loss of their autonomy is alienating to many. The best and the brightest didn’t sign up to be part of an organization shrouded in secrecy or telling them what to do.  Ping-Pong tables and office happy hours can’t mollify these concerns.  Soon, they leave

“Now What?!?”

Organizational Strength is essential for crossing this chasm. Firms that survive the Transition Stage learn to leverage the collective wisdom of the team rather than rely on the smarts of a few.  Their leaders trust their staff and give away authority. They look to inspire and enable rather than direct and control.

These thriving young businesses are testing revolutionary workplace designs to unlock the innovation of their teams and return to their high growth trajectory. 

Holocracy™ is one such groundbreaking model.  Zappos’ implementation of this manager-less structure is chronicled in the press for its successes and stumbles.   Holocracy™ requires full immersion, a complete commitment to strict governance, styles of interactions and “resolving tensions”.  

New terminology and rigid meeting protocol feels awkward and oppressive.  Months of facilitation are needed to adopt these sweeping changes.  During the introduction of Holocracy™ at Zappos, 15% of their staff quit.  15%!!

Having sat through their indoctrination training, I would equate Holocracy to organizational base-jumping – radical!! 

Not many companies can handle such extreme change.  I believe there are more natural transitions to promote teamwork, innovation and employee engagement as a business scales. 

A new organizational paradigm (I dubbed a Collaborarchy™) is founded on a set of five Cornerstones.   These concepts are not foreign.  In fact, some may already be implemented in your company.  Rather, it is the intentional integration of these ideals that transforms an organization and enables the business to scale effectively.

Autonomous, cross-functional teams tap the creativity and insights of the entire crew.  Assimilating teams that include those touching the customer daily with those designing and building products enables more rapid iteration and better learning.  Distributed authority places decisions in the hands of the people closest to the problems.  A culture of transparency elevates trust.  Compliance becomes unnecessary when information is distributed liberally.  And with everyone working as their authentic self, co-workers build faith in one another.  Peer accountability is the most reliable means to ensure promises to customers and teammates are kept.  And when Leaders act as Catalysts and Coaches rather than Commanders, their teams work with passion and purpose. 

Customizing this framework to your culture and adopting these Cornerstones at your own pace provides the best chance for success.  Staff members welcome the opportunity to participate in the process.  With an extensive feedback loop and continuous communication, your firm can internalize the changes and adjust along the way.  Iteration on an organizational model works as well as iteration on software design to determine the best workplace framework for you. 

Over the coming weeks, we will dig deeper into each of these five Cornerstones.

Scaling High Growth Businesses

The odds are low.

The chances of turning one’s idea into a thriving business are miniscule. Entrepreneurs face countless hurdles from funding to tech design to market fit to timing.  With the cash burn clock ticking, founders must cobble together a strong team, create a valuable product and generate sufficient noise to be heard above the din.

The start-up community attracts the best and the brightest.  Early stage capital flows to the sharpest innovations.  So when the formidable odds stack up against them, entrepreneurs rely heavily on ingenuity and intellectual horsepower trying to think their way out.

For a time, cleverness can be a winning strategy.  Unfortunately, outwitting the marketplace in the long run is implausible.  Consumer change is too quick, competition too vast and business too complex to stay ahead on smarts alone.  As a result, the cunning that got many start-ups through the early rounds may not carry them to profitability.

“Now What?!?”

On the climb to a viable entity, companies mature through multiple stages. 

Much has been written about the earliest phases of their life cycle. The hyper-growth years are exhilarating ride.  Customer adoption and funding from prominent investors provide a stamp of approval.  For many start-up founders, getting this far is the realization of their dreams.

Now comes the hard part.  Later funding rounds bring higher expectations.  Product proof and brand awareness generate stout competition.  Maintaining high growth rates on a larger base is daunting.  Genius from the top or individual heroics can’t always pull a rabbit from the hat.   

The Transition Stage can be the most challenging of all, particularly for founding leaders.  I have witnessed successful start-ups stumble as staff grows from 25 to 50 to 100 plus.

Scaling a business requires a vastly different skill set than building one.  Beyond vision, technical innovation and product design, companies at this stage require strong cultures and authentic relationships to connect with staff.  Success will be driven as much by Organizational Strength as intellectual prowess.

Make no mistake; prosperous businesses require brilliance, imagination and inventiveness.  However, future prosperity is predicated on harnessing the collective wisdom of the whole rather than the exploits of a few.   Organizational Strength is founded on the principle that nobody is smarter than everybody. Collaboration, authenticity and employee engagement are the fulcrums to reach the next level.

Navigating this evolution is tricky.

In the Family Stage, employees are deeply connected. They share a common purpose as well as a desk or office.  Organizations are flat, enabling a highly collaborative workplace.  

Spread thin across multiple functions, the staff is given plenty of autonomy and decision-making authority. Feeling truly valued, teams are highly engaged and thriving. 

Success means growth.  Growth brings more people with diverse personalities often spread across multiple locations.  New customers types demand attention and resources from legacy clients.  Communication and teamwork is not so simple anymore. Conflicts arise.  While everyone is trying to do the right thing, it can feel like chaos is taking hold.

To maintain order, basic structures are established.  Titles are handed out, some for external purposes, others to keep key people on board.  Hierarchy follows.  Larger work groups form naturally along functional lines.  Team leads are anointed. Strapped for time, Engineering, Marketing, Product and Operations groups become more insular.  Silos are born.  Prioritization and decision-making becomes cumbersome without clear procedures.  More structure and processes sprout.  Rules are written and approvals required.  Compliance ensues.

Nobody invites the evils of bureaucracy.  The underpinnings start innocently.  Soon the tide of hierarchy and systemization wreaks havoc on company culture and alienates the team. This organizational friction stymies innovation.  Growth falters. 

“Now What?!?”

In the coming weeks, we will examine advanced strategies to tackle the confounding Transition Stage.  We will explore the nature of Organizational Strength, a means to best leverage the entire team rather than rely on a few individuals at the top.  Progressive companies are tapping this power with the next generation of organizational structures and tactics. 

A Collaborarchy™(as I like to call it) is the assimilation of concepts to boost collaboration, connectedness and employee engagement at any stage of a company’s lifecycle.  In this approach, young firms can stay true to their core values and culture while migrating to more organic processes for distributing authority and aligning teams.  Founders become Catalysts and Coaches rather than commanders.  The proper balance of autonomy and accountability can be created to attract and retain the best talent while enabling the organization to flourish.

The outcome is lightning quick businesses, flexible enough to anticipate customer needs while fostering rapid innovation. Companies with Organizational Strength can weather the storms of the marketplace and scale effectively to accelerate growth and profitability.