Thursday, October 2, 2014

Engineering High-Performance Organizations: Fundamental Principles Rather Than Transformative Technologies

One of the concomitants of the digital age has been the advent of the concepts of electronic commerce and virtual organizations. With cross-functional and cross-border networking becoming features of competitive and globalized corporations, organization design has entered a phase of matrix complexity. For all of this, digital technologies are seen to offer an instantaneous and elegant solution. These developments and organizational thought processes have unfortunately resulted in an unfortunate short shrift to the classical principles of organization design. Random design and expansion of organizations to meet current or short term exigencies has resulted in organizational asymmetry, as a systemic feature. Overarching global monolithic structures have resulted in structural rigidities and process impedances. Technology, while seeming to aid flexibility and strength of organizations, has unwittingly resulted in these imperfections.

The concepts of digital economy or automated factories can never eliminate brick and mortar support systems or human brain and brawn enablers. The only differentiation of the former (digital automation) is that the latter (physical humanism) is less visible  under a digital hood. The requirements of Google and Microsoft to build huge server farms for Web and Cloud support systems, of Tesla and Toyota to build giant battery farms and robotic factories and of Amazon and Flipkart to build huge product warehouses reflect different ways of doing business rather than obliterating conventional businesses. Technology makes this shift possible but cannot eliminate conventional organizational principles which remain still relevant. This blog post argues that simple engineering principles are relevant for designing and operating high performance organizations even if they are digitally enabled and globalized. Five simple engineering principles of structural design and five fundamental principles of thermodynamics and fluid dynamics are utilized to explain the hypothesis.
Structural symmetry
Symmetry is one of the important principles of engineering design. Symmetry lends stability to structures besides providing elegance. It also simplifies design itself. Symmetry goes hand in hand with standardization as an underlying enabling concept. Organizations, like buildings, gain from structural symmetry. Symmetry has both external and internal dimensions. An organization which desires national marketing coverage has to create a symmetrically designed (centre, regions, states and territories) organization to work effectively towards its objectives. Global organizations also need regionally or nationally symmetric organizations to think globally but act locally. One of the best examples of structural symmetry is Rensis Likert’s Linking Pin Organization where the overall organizational pyramid is composed of several small pyramids linked with each other from the bottom up and sideways. It reflects a principle that individuals make teams and teams make organizations.
Centre of gravity
Centre of gravity is the unique point of a body that provides stability to a structure, and even to a human body or an organization. Civil engineers take special measures to ensure that asymmetric buildings do have their centres of gravity nearer the centroid. A structurally symmetric organization automatically results in a supportive centre of gravity. If organizations have to be asymmetric for some reason it is important that the layers or components are so arranged that the organization has a centre of gravity that is well understood and experienced with an appropriate distribution of mass. Organizations find structural asymmetry a little unavoidable when venturing into sunrise technologies or unexplored regions. It is important for the original established organization to reconfigure (actually cantilever itself as an engineering concept!), to support the new initiatives but at the same time be sensitive enough to establish symmetry at the earliest opportunity (as we know, cantilevers can only support certain weight!). The slide of Tata Motors in the passenger car segment after the initial corporate driven successes has been due to a failure to create symmetry across different product lines.
Strategic symmetry
Strategy is often seen to be as unidirectional (specialized organizations) or multidirectional (diversified organizations). It is less understood that strategies of all types gain from symmetry. Hindustan Unilever in its fourth generation growth strategy created symmetry in favor of emerging markets to ensure that they would contribute an overwhelming share of the company revenues by 2020. Even qualitatively, strategy gains from conceptual clusters. Harish Manwani in his role as the COO of the company conceptualized his 4G sustainable growth model  in terms of Competitive, Consistent, Profitable and Responsible components to requisite thrust. Strategic symmetry is a key driver for structural symmetry, given that structure follows and enables strategy. Organizational scale and scope as well as symmetry need to reflect longer term goals rather than shorter term compulsions.
Future is foundation
Visionary engineers look into the ground as they envision ever-high skyscrapers; they ensure that the foundation is designed to enable vertical growth and resist seismic shocks. Organizations must lay foundations that support sky high aspirations and endure unanticipated pressures. Typically, successful CEOs design, ab initio, organizational foundations that last at least ten years of establishment and growth at each time. An approach of tinkering with the base organization as an annual exercise leads to weak joints and imperfect foundations. Structural base of an organization should not be viewed in terms of people numbers; it must be understood in terms of functional support that enables an organization to be successful as an end-to-end connected enterprise.
Talent is material
Modern structural engineering continues to develop to amazing heights because of the impressive strides in material technologies. Apart from the inherent characteristics of load bearing materials, development of superior metal and non-metal joining and bonding materials has resulted in the design and execution of high integrity structures. High integrity and strength do not mean non-moving structures. From buildings (example, the columnar structure) to automobiles (example, the chassis) well-designed flexibility promotes resilient strength.  In a similar manner, by focusing on more robust talent and developing intra-organizational collaboration as a specific set of talent attributes, organizations can cement their talent to a perfectly optimized balance of strength and flexibility.
If organizational structure is akin to a civil engineering structure, organizational processes are akin to thermodynamic and fluid dynamic processes of an entity-environmental system. Several laws and principles, ipso facto, apply to organizational principles but only five significant ones are discussed below.
Knowledge as driver
Talent, which comprises knowledge and experience, is the motive force for organizations. In fact, even experience translates itself into knowledge. Whether a device is mechanical, electrical or electronic, heat is an essential element of its operation. However sophisticated an organization is, the level of knowledge shall only be the primary driver of its operation. Like particles (and molecules) that collide in a material system but are designed to become a concentrated heat source, people talents (and egos) do collide in an organizational system. The biggest challenge of leadership is to ensure that interactions are collaborative and the cumulative knowledge of an organization is at such level that it drives the organization on its chosen path, despite competitive gradients and turns, with requisite thrust, acceleration and velocity.
Knowledge equilibrium
The zeroth law of thermodynamics states that thermal equilibrium is reached whenever bodies in different temperatures are in contact with each other. The knowledge levels of individual people in an organization determine the level of knowledge at which the knowledge equilibrium in an organization is set. If an organization inducts pedestrian talent in a large measure even the few brilliant ones would decay. A firm which faces a superior competition must appreciate that it must consciously upgrade its knowledge to ensure that it always stays at the superior knowledge gradient. Equally, it must appreciate that the rest of the competition would also work towards higher knowledge levels to achieve knowledge equilibrium with the leaders. A continuous induction or generation of knowledge is essential for the knowledge system to serve as a perpetual heat pump for organizational momentum.  
Internal energy

The total energy of a system is the kinetic energy of the system plus the potential energy of the system plus the energy transferred into the system. The competitive agility of an organization, the competitive pressures from the environment and the energy accessed by the organization determine the total energy of an organization. Like all natural processes, the human organizations have an inherent property of dissipating useful energy. However, as a synthetic form, organizations can be led and managed to an appropriate thermodynamic organizational state that minimizes wastage of energy and maximizes the total organizational energy. This stems from an appreciation of knowledge as the natural energy of a human organization rather than misconstruing authoritative power as the synthetic energy of such a system.
Pressure boosters
The simplest of the laws of fluid dynamics clearly states that fluid flow and pressure are adversely affected by the length of the piping from the supply point to the delivery point. The more complex and the more diffused an organization, the less intense the organizational processes become from the supply point to the delivery or recipient point. Given that organizations typically have goals and strategies developed at the very apex level while the ground level execution and competitive realities are discovered at the basic ground level, the mechanisms of free and effective transmission of information across the organization is a challenge. It is important that managers and leaders act as pressure boosters in an organization ensuring that the processes move seamlessly without pressure drops.
Bottlenecks as venturis 
Organizations typically have bottlenecks. In fact, inherent in the pyramid design philosophy of a typical organization is the concept of organizational bottlenecks. Typically, these occur as information has to pass through restricted bridges between subordinates and bosses, and between functions or organizational units through specified individuals. Fluid dynamics, however, illustrates the venture effect in piping whereby constrictions accelerate the flow of fluids across. It is necessary for organizational managers to view the traditional bottlenecks as opportunities to create venture effects. The pressure of knowledge accretion at source (whether at bottom frontline level or the apex leadership level) and the vacuum of knowledge seeking (again, at either points) would turn typical organizational bottlenecks into desirable venturi phenomena.
Engineering high-performance
The ten engineering principles enunciated above are relevant for multi-people organizations. Even a one person organization is a singular and natural embodiment of symmetry, intrinsic gravity, internal energy, knowledge drive and so on. As organizations are built and processes are established, it would be necessary to design them with an engineering flair as much as with behavioral approaches. Fortunately, as discussed in this blog post, creating high performance organizations is more of simple and conventional civil and mechanical engineering principles than exotic electronic and digital technologies. As long as organizations remain as human systems, the simplest of natural engineering principles would add strength, agility and sustainability to organizations. It would be appropriate to invoke some basic engineering flair for designing high-performance organizations.

Posted by Dr CB Rao on October 2, 2014    




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