Organizational Design, The Code of the Organizational Operating System
I think of corporate structure like the operating systems of our PCs or mobile devices. We have a central operating system that enables apps. The type of operating system will be the first point of what we can and cannot do. Think Apple vs. Android/PC. Then if the operating system is slow or has flaws it will affect every app within that particular system.
The board and CEO/top-team are the coders of the operating system. They will choose to code it as closed or open. They will decide how much integration is allowed. Will it be an open, democratic code? Will it be a closed, highly proprietary commanding code that will require a small team allowing only certain integration? I believe closed corporate systems are at a higher risk to competitive forces because they are not taking advantage of the wisdom of all of the end users – employees and customers – to help them predict future forces and set scenarios that help them be ahead of the game. Regularly listening to the employees and customers, using different methods, will help the coders of the OS stay on top of negative forces and identify positive innovations to begin to build in. So many companies say they are agile and transparent, but fundamentally, look at how they’ve coded their corporate OS to determine if their word meets their actions.
One CEO mentioned to me that the leaders promoting the servant leadership, integrated/democratic way of running the business were naive. This person said they did not know how business is run. However, as the authors of Questioning Corporate Hierarchy illustrate, the power-centered focus of command and control is simply a pattern of common practice and not a proven method. While this code of command and power work, it is not the code that will elevate the enterprise. 
Corporate programs and processes are akin to the app. Often businesses will want to add in a training or certain methods like open book management, lean, six sigma, etc. and these are generally great, but they are the app, not the OS. The app can accentuate the flaws or advantages of the OS. It becomes a symbiotic relationship, if the OS is weak, the apps will be weak. If the OS is healthy the apps are more likely to run well. I am a trainer and staunch proponent of the methods of situational leadership. However, when the training is installed in a closed corporation, it will be effective at improving a small group of ambitious managers who can see beyond their current role and current corporation. When the training is installed in an open OS, it is effective at systemic improvement creating the critical alignment of work to company priorities, employees get what they need to be not only effective but transformational, and the desire for consumer and organizational vitality is at the center of thinking. Open book management is similar – it can absolutely improve a department or functional team, but may seem disingenuous when the practitioners begin to face a closed force at the top of the company or administrative service center.
I’m convinced this is why so many programs fail. While change management is certainly part of it, the more critical path to success is the integration with the OS. Not simply does the top team support the effort, but does it align with how the company is coded? After you select the app, there is the effectiveness of the app. Does it enure value to the user? The user in the business sense may be the customer, marketplace, employees, business processes, etc. But the app should be useful. If you are open and innovative, perhaps you don’t know the outcome precisely, but you know the general direction and you go in to test mode. We do this regularly in personal life – you try a new music app, don’t like it and try another. You find your favorite and it will be moved to your home screen! It works. It delivers damn good value!
For example, if you are implementing a lean approach, but it is too rigid and fails to blend with your innovation program it may cause a systemic failure. The company becomes incredibly efficient in the now, but slack allowing space for innovation is rigidly regarded as waste and you fail to compete in the future. This is not a lean management failure, it is a failure of integration into the OS. It is the discipline of alignment with the business needs, in a holistic sense, and how can this tool help us achieve it? Never let the needs of a function trump the needs of the OS. Efficient silos are not the goal. A prosperous company accomplishing its mission and purpose in the style set forth by the values is. You may be able to learn from certain apps and build your own with just the right blend to find efficiency with space for the new. Again, rigidity and a closed system build a compliance attitude where employees simply follow the dictated path. An open system creates an ownership attitude where people are adaptive and will integrate efforts to maximize the benefit to the business.
The corporate hierarchy and the flow of behaviors and attitudes from the structure is the code of the OS. If the corporate hierarchy is highly reliant on a hero you have a crucial weakness. If the board of directors is responsible for the performance of the CEO the board should, of course, ensure that the CEO is delivering current value but also building for future value. But, how he or she is doing that is critical. Is the system built autocratically around one person or a small group? This is a critical flaw. The closed system will be efficient in the near term, but will not be effective in the future as the forces of the marketplace and broad economy face the business. This should be a considerable concern if the business is being built to serve the future consumer, employee, and community. If the business is being built for acquisition, this closed, efficient system is sensible. This is a transactional leadership organizational system. Likely better at reaction than it is at being proactive.
In most employee owned companies there is the democratizing of the economics of the company. The employees will share in the risks and rewards of the entrepreneurial experience. This economic code is part of the OS. The other very valuable piece is democratizing the social system. In this shift, the employees are regarded as shareholders. As part of the OS code, a more open management system is added. The performance of the OS is not only the CEO but also how the board evaluates the effectiveness and how the CEO runs the top team and how the openness is cascaded through the company. Don’t misunderstand this to be a laisse-faire management style. It isn’t. It is highly disciplined and requires strong leadership. Strong leadership does not mean centralization of power. Strong leadership means distributing the power and decision making sensibly. Strong leadership means high levels of meaningful communication. This top team will be focused on using the voice of the worker-shareholder-stakeholder and the voice of the customer to curate choices available to them and deciding who the best decision makers will be for a particular situation. The top leadership team runs the company not as a burdensome big ship-tanker that takes forever to turn, but as a flock of birds or school of fish with rapid, frequent signals that enable a shift in a second. The oxygen of this system is trust. When trust is high, change can be fast.
The bottom line here is the organizational design or coding of the OS is critical. In an open system when both the economic and social system are democratized together in the beginning, the effectiveness of the total system will be stronger longer. The fortitude, responsibility, and perseverance of the employee contributors all depend on this well run and maintained OS.
To help kick-start the opening of the social system – click here for a worksheet to begin the calibration.
Consider – control and power are the spoon. It is a transient state focused on short-termism. The powerful state is to integrate. There is no management, there is no labor, there is we. Certainly, there are different jobs with different spans of focus and specialization, but they integrate together to build a corporate system and network with long-term vitality. (Common – I still love the first Matrix – For my Gen-Xer friends.)
