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.