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Holacracy: Circles within Circles


HolacracyFor hundreds of years, there has been little to challenge traditional hierarchies for their ability to organise at scale. Holacracy is doing just that.

It’s a form of Adhocracy, which we covered in an earlier article. But, whilst we are way past ‘peak adhocracy’, it seems that holacracy is is thriving.

Holacracy is a modern attempt to reform traditional hierarchies. It keeps the aspect of senior level overviews and subordinate focus. But it gives a far greater autonomy to individuals, and a more substantial decision authority to small teams at the focus of operations and change.

Continue reading Holacracy: Circles within Circles

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Henry Mintzberg 2: Management Thinker

This is our 250th weekly Management Pocketblog.
We’re looking forward to the next 250!

In last week’s blog, we started our exploration of Henry Mintzberg, Gadfly Generalist. In this second blog, I want to examine two other aspects of his work: the way organisations are structured, and how they think strategically. But first, I feel the need to add in, gratuitously, another of Mintzberg’s more memorable quotes.

Mintzberg Delayering

Mintzberg on The Structure of Organisations

Mintzberg has visited this topic twice: in his 1979 book, The Structuring of Organisations, and then again, in 1989, in Mintzberg on Management. His earlier work identified five archetypical organisational structures or types, which he later revised to six.

  • Entrepreneurial Organisations are small, informal, with loose allocation of roles, but frequently strong leadership from a single chief executive.
  • Machine Organisations are excellent at repetitive tasks like manufacturing, placing efficiency of process at their heart, and formalising everything.
  • Diversified Organisations create a central administrative function to serve a range of operating units that are more or less autonomous. The degree of autonomy seems to vary in cycles with the current cycle creating a high degree of centralisation. See the earlier article, Kenichi Ohmae: Irrational Strategy.
  • Professional Organisations might also be called knowldege organisations. They use the skills and knowledge of their highly trained workforce to deliver fairly standardised services.
  • Innovative Organisations are flexible, informal and multi-disciplinary, allowing them to adapt and innovate. Mintzberg saw these as increasingly succeeding over competitors in the future.
  • Missionary Organisations have a clear mission that provides the basis for strategic choices and the motivation for employees.

Mintzberg on Adhocracy

I am going to make more of this than it may strictly deserve, as it is just one of very many topics on which Mintzberg writes. But it is one that interests me, especially with the emergence in recent years of the concept of holacracy, which seems a natural successor.

The term was, I think, first coined by Warren Bennis and then taken up and popularised by Alvin Toffler in his book, Future Shock. An adhocracy is a way of governing an organisation, not through formal structures, but through informal networks in which individuals take on the roles that are needed at the time. Such organisations are fluid and undocumented and unstructured knowledge has a high value.

Mintzberg developed these ideas, advocating small scale, temporary organisations coming together within the larger whole, to deliver a project, or one product or service, or to serve one customer. He saw two models:

The Operational Adhocracy, which works on behalf of it clients, like service businesses such as consulting

The Administrative Adhocracy, which comes together to serve its parent organisation.

Both of these models are excellent at creating adaptability and reacting to changes in circumstance. Consequently, both are poor at strategy building, because members have little investment in the adhocracy’s long-term development.

Mintzberg on Organisational Strategy

Mintzberg has made several influential contributions to thinking about organisational strategy too. His most notable influence has been, like Ohmae, to advocate non-linear, creative thinking over formulaic, analysis-driven strategy development. Once again (see last week) Mintzberg’s HBR article on the subject is very widely read and, once again, the enterprising reader could find a copy notwithstanding HBR’s copyright if you chose to. His books on the subject include: Rise and Fall of Strategic Planning (1994), The Strategy Process (1996), Strategy Safari (1998), and Strategy Bites Back (2004). Many of these are in revised editions and remain valuable today.

He sees three major pitfalls in traditional strategy making and rejects any assertions that our volatile, uncertain times are anything special – try telling that to people in Stalingrad during the Second World War, he says. All people at all times have seen their world as complex and uncertain.

Mintzberg’s three pitfalls are:

  1. Assuming that we can predict discontinuities. We tend to assume, implicitly, that the future will flow from the past and that changes will arise from trends. This is a theme that Nassim Nicholas Taleb has recently made his own, with his best selling book, The Black Swan.
  2. Planners are often detached, in the ivory planning towers, from daily realities. They are focused on the hard data and its analysis and miss out on the soft information that would alert them to big shifts. This says that operational managers need to be highly engaged in any strategic work.
  3. A belief that formal strategy development can follow a linear process. Instead, he argues, creative, divergent thinking is needed, which can make links outside of the logic-chain, subverting established categories and dogmas.

So, to end this exploration of Mintzberg’s thinking, one last, telling quote.

‘The real challenge in creating strategy lies in detecting the subtle discontinuities that may undermine a business in the future. And for that there is no technique, no program, just a sharp mind in touch with the situation.’

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I am a little loath to include a book on the process and tools of strategy, but it is a good book and I have included it alongside others on creative thinking!

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Henri Fayol: Planning and Administration

Henri Fayol is the daddy.

Henri FayolThere is no other way of putting it: so much of what we take for granted in the way modern organisations are run can be attributed to him.

As a highly successful business manager, he turned around the mining company for which he worked in senior roles for 36 years.

In comparison to FW Taylor, a close contemporary, his contribution was huge.  While Taylor saw managers as mere overseers, Fayol raised them to a professional status and gave them an agenda, a curriculum, and a set of guiding principles.

His ‘functional principles’ of management set out the things we take for granted today:

  • making annual and 10-year plans… and implementing them
  • Using organisation charts to communicate an orderly management structure
  • Sticking to the chain of command
  • Co-ordinating management activities through regular meetings of department heads
  • Getting recruitment and training right

‘And what departments?’ you ask.  In his writing, Fayol described six  business functions:

  1. technical – engineering and production
  2. commercial – sales and procurement
  3. financial – capital management
  4. accounting – cost accounting, stock management, reporting
  5. security – protecting people and assets
  6. management – planning, organising, co-ordinating

He also identified six functions of management:

  1. Forecasting
  2. Planning
  3. Organising
  4. Commanding
  5. Co-ordinating
    (commanding and co-ordinating are sometimes conflated to ‘leading’)
  6. Controlling

Short Biography

Born in 1841 in Istanbul (where his father was a civil engineer) to French parents, Fayol trained as a mining engineer and was employed at the French iron and steel business, Comentry-Fourchamboult-Decazeville. In 1872, he was appointed the director of a group of mines and he became managing director of the company in 1888.  He retained the post until he retired in 1918. sadly, it was only in 1949, when his 1909 book, General and Industrial Management, was published in English, that he gained the recognition he deserved.

His Big Idea

As if the three lists at the top of the blogs were not enough, Fayol’s fourteen principles of management set the tone for business administration for over 100 years, to the present day.

  1. Division of work . Work should be divided among individuals and groups to focus effort and attention on each part of a task. Specialisation allows workers to become more expert and thus more productive.
  2. Authority. Managers have the authority to give orders, but that right also implies responsibilities.
  3. Discipline. Employees must obey and respect the rules and their managers, as long as managers respect the need for sound leadership.
  4. Unity of command. A clear chain of command, in which every employee should receive orders from only one superior (oh don’t we just miss that one, in our modern matrix organisations!)
  5. Unity of direction. Every set of organizational activities needs the same objective and to be directed by one manager using one plan (nice if you can get it).
  6. Subordination of individual interests to the general interest. The good of the organisation is paramount – and then workers must work for their team (sounds like the US Marines – god, country, corps, family, self – Hooah).
  7. Remuneration. Workers must be paid a fair wage for their services.
  8. Centralisation. The degree of centralisation or decentralised should be determined for each situation.
  9. Scalar chain. The line of authority runs from top management to the workers.  this is the scalar chain, and communications should follow it. However, if following the chain creates delays, communications across the organisation should be used, providing everyone is kept informed.
  10. Order. This principle is concerned with systematic arrangement of men, machine, material etc. to minimise waste of time and duplication of stock (reminds me of the 5S methodology).
  11. Equity. Managers should be kind and fair to employees (John Stacy Adams would have approved).
  12. Stability of tenure. High employee turnover is inefficient. Management and staffing should be stable, and managers should plan to fill vacancies.
  13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort (this was Theory Y well ahead of McGregor… even employee empowerment and Corporate Kinetics).
  14. Esprit de corps. Promoting team spirit is a role of managers.  It builds harmony and unity within the organisation.

It would be naive to ignore the many critiques of Fayol’s writing, but it would also be churlish not to credit him with massive strides in understanding, documenting and promoting the discipline of management.  If you are a manager, you need at least to acknowledge his contribution to what you do everyday.

Will his ideas last, as we move fully into the 21st century of ad-hocracy and holacracy? Who knows; but I for one am prepared to predict that managers will be working substantially to his agenda for the rest of my working life.

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