Chapter 4

Humanocracy

(Gary Hamel and Michele Zanini 2020)

Symptoms of Structural Deficiency

- Decision making is delayed or lacking quality - Organization cannot meet changing needs - Employee performance declines, needs are not meet - Too much conflict

Vertical Linkages Devices

- Hierarchical Referral (chain of command) - Rules and Plans - Vertical Information Systems (periodic reports, written information)

Horizontal Organization Designed for Learning

- Horizontal structure is dominant - Shared tasks, empowerment - Relaxed hierarchy, few rules - Horizontal communication, face-to-face - Many teams and task forces - Decentralized decision making are all characteristics of a:

Vertical Linkages Devices

- Information Systems (employees sharing knowledge) - Direct Contact between managers or employees affected by a problem. - Task Forces (when linkage involves several departments, a more complex device such as a task force is required).

Vertical Organization Designed for Effeciency

- Specialized tasks - Strict hierarchy, many rules - Vertical communication and reporting systems - Few teams, task forces, or integrators - Centralized decision making these are all characteristics of a:

Strengths of Matrix Structure

- achieves coordination necessary to meet dual demands from customers - flexible sharing of human resources - suited to complex decisions & frequent changes in unstable environment - provides opportunity for both functional & product skill development - best in medium-sized organizations with multiple products

Weaknesses of a Matrix Structure

- causes participants to experience dual authority; frustrating & confusing - means participants need good interpersonal skills & extensive training - time consuming; frequent meetings & conflict-resolution sessions - won't work unless participants understand & adopt collegial rather than vertical-type relationships - requires great effort to maintain power balance

Weaknesses of a Divisional Structure

- eliminates economies of scale - leads to poor coordination - eliminates in-depth competence & technical specialization - makes integration & standardization difficult

Strengths of a Divisional Structure

- suited to fast change in unstable environment - leads to customer satisfaction because product responsibility & contact points are clear - involves high coordination across functions - allows units to adapt to differences in products, regions, customers - best in large organizations with several products - decentralizes decision making

Strengths of the Virtual Network Structure

1) Enables even small organizations to obtain talent and resources worldwide 2) Gives a company immediate scale and reach without huge investments in factories, equipment, or distribution facilities 3) Enables the organization to be highly flexible and responsive to changing needs 4) Reduces administrative overhead costs

Weaknesses of the Horizontal Structure

1. Determining core processes is difficult and time consuming 2. Requires changes in culture, job design, management philosophy, and information and reward systems 3. Traditional managers may balk when they have to give up power and authority 4. Requires significant training of employees to work effectively in a horizontal team environment 5. Can limit in-depth skill development

Weaknesses of Holacracy Team Structure

1. Determining individual and team responsibilities is time consuming 2. Requires changes in management philosophy and culture 3. Traditional managers may balk when they have to give up power and authority 4. Requires significant training of employees in social skills 5. Can limit in-depth skill development in a specific function

Weaknesses of the Virtual Network Structure

1. Managers do not have hands-on control over many activities and employees 2. Requires a great deal of time to manage relationships and potential conflicts with contract partners 3. There is a risk of organizational failure if a partner fails to deliver or goes out of business 4. Employee loyalty and organizational culture might be weak because employees feel they can be replaced by contract services

Three Components of Organizational Structure

1. Organizational structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors. 2. Organizational Structure identifies the grouping together of individuals into departments and of departments into the total organization. 3. Organization structure includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments.

Strengths of Holacracy Team Structure

1. Promotes a focus on teamwork and collaboration 2. Promotes rapid, innovative responses to customer needs 3. Each employee has a broader view of the organization's purpose 4. Decisions are made close to the work 5. Improves employee growth via sharing responsibility, making decisions, and being accountable for outcomes

Strengths of a Horizontal Structure

1. Promotes flexibility and rapid response to changes in customer needs 2. Directs the attention of everyone toward the production and delivery of value to the customer 3. Each employee has a broader view of organizational goals 4. Promotes a focus on teamwork and collaboration 5. Improves quality of life for employees by offering them the opportunity to share responsibility, make decisions, and be accountable for outcome

Characteristics of a Horizontal Struture

1. Structure is created around cross-functional core processes rather than tasks, functions, or geography. No boundaries between departments. 2. Self directed teams are the basis of organizational design and performance. 3. Process owners have responsibility for each core process in its entirety. 4. People on the team are given the skills, tools, motivation, and authority to make decisions central to the team's performance. 5. Teams have freedom to think creatively and respond flexibly to challenges.

Holacracy

A design trend toward self-management reflects a fundamental mind-shift in the way human organizations and management are viewed. Self-management goes beyond contemporary ideas such as employee empowerment, flatter organizations, distributed decision making, elimination of bureaucratic red tape, and pushing authority lower in the hierarchy. Complete self-management includes all these ideas, and even more. The traditional management functions of planning, organizing, staffing, and controlling are assigned to all employees. There are no managers to perform these management functions. All organization members are personally responsible for planning their own work, coordinating their actions with others, developing their own personal relationships, acquiring needed resources, and taking corrective action with respect to other members as needed.

Full-Time Integrator

A position or department created solely for the purpose of coordination. I.e. product/project manager, program manager, or brand manager. Does not report to one of the functional departments being coordinated. Located outside the departments.

Conditions for the Matrix

Condition 1: Pressure exists to share scarce resources across product lines. Condition 2: Environmental pressure exists for two or more critical outputs, such as for in-depth technical knowledge (functional structure) and frequent new products (divisional structure). Condition 3: The environment domain of the organization is both complex and unstable.

Departmental Grouping Options

Functional grouping, Divisional grouping, Multifocused grouping, Horizontal grouping, Virtual network grouping

Boundaryless Organizational

Organizations that learn to permeate their boundaries so that they can be more flexible and responsive to their stakeholders. They are also able to generate good ideas as they are nimble in structure. (Jack Welch coined in the late 1980s)

Virtual Network Structure

Sometimes called a modular structure, the firm subcontracts most of its major functions or processes to separate companies and coordinates their activities from a small headquarters organization

Virtual Cross-Functional Teams

Teams comprising individuals from different functions who are separated in space and time as well.

Functional Matrix

The functional bosses have primary authority and the project or product managers simply coordinate product activities.

Multifocused Grouping

a grouping in which an organization embraces two or more structural grouping alternatives simultaneously. Often called the matrix design.

Horizontal Grouping

a grouping in which employees are organized around core work processes, the end-to-end work, information, and material flows that provide value directly to customers.

Departmental Grouping

a grouping in which employees share a common supervisor and common resources, are jointly responsible for performance, and tend to identify and collaborate with one another.

Divisional Grouping

a grouping in which people are organized according to what the organization produces. I.e. Toothpaste department (includes Marketing, Manufacturing, Sales)

Virtual Network Grouping

a loosely connected cluster of separate components.

Hybrid Structures

combines characteristics of various approaches tailored to specific strategic needs. Most companies combine characteristics of functional, divisional, geographic, horizontal, or network structures to take advantage of the strengths of various structures and avoid some of the weaknesses.

Decentralized

decision-making authority is pushed down to lower organizational levels.

Task Force

effective horizontal linkage device for temporary issues. Solve problems by direct horizontal coordination and reduce the information load on the vertical hierarchy. Typically disbanded after their tasks are accomplished.

Liaison Role

located in one department but has the responsibility for communicating and achieving coordination with another department

Virtual Team

made up of organizationally or geographically dispersed members who are linked primarily through advanced information and communication technologies.

Teams

permanent task forces, often used in conjunction with a full-time integrator.

Functional Grouping

places together employees who perform similar functions or work processes or who bring similar knowledge and skills to bear. I.e. Marketing dept., Engineering dept., etc.

Centralized

problems and decisions are funneled to top levels of the hierarchy for resolution.

Relational Coordination

refers to "frequent, timely, problem-solving communication carried out through [employee] relationships of shared goals, shared knowledge, and mutual respect." Part of the very fabric and culture of an organization.

Process

refers to an organized group of related tasks and activities that work together to transform inputs into outputs that create value for customers.

Horizontal Information Linkages

refers to the amount of communication and coordination horizontally across organizational departments.

Linkage

the extent of communication and coordination among organizational elements.

Product Matrix

the project or product managers have primary authority and functional managers simply assign technical personnel to projects and provide advisory expertise as needed.

Re-engineering (business process re-engineering)

the redesign of a vertical organization along its horizontal workflows and processes.

Outsourcing

to contract out certain corporate functions, such as manufacturing, information technology, or credit processing to other companies.

Vertical Linkages

used to coordinate activities between the top and bottom of an organization and are designed primarily for control of the organization.