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CHAPTER 14

Networked intelligence

Structures that liberate minds

Culture sets the context for networked intelligence, shared direction, superior team collaboration and the thinking of great ideas that lead to sustainable innovations. Structure helps people organise, share and leverage intelligence, skills and energy. It is also responsible for the ‘velocity’ of the enterprise, its ability to respond and coordinate responses to meet unexpected requirements. It is no good having a culture that encourages people to do their best when there are no mechanisms to network their ideas, support them financially/emotionally, help beat a path to the market and seize the moment. While it is not necessarily true that good structures will assist a BBE, poor structures seriously hamper collective intelligence, action and speed and there are a lot of them around. Philosophically speaking, we see structure as a necessary but not sufficient condition for a BBE. Our conversations with the CIPD suggest that we will need to become much smarter at organisation design.

HR as organisation architects

As HR have a declining influence on the mechanics of HR, they will create greater value as people who help design good jobs, good structures and cultures in their role as Organisation Developers. This will mean they are involved at the outset of new product/market ventures to help the enterprise design the organisation needed to maximise business opportunities. There is a massive opportunity to turn round disengagement and disconnection in the workplace, much of which relates to the question of trust and the psychological contract.

Peter Cheese – CEO, CIPD, Personal interview

Here we examine structural strategies that liberate corporate corpuscles and collective synapses. Organisation structure is itself a wicked problem with no perfect solutions to the dilemmas inherent in trying to find mathematical answers to complex biological problems. Many good and great people have agonised for decades over attempts to find an ideal way to structure an enterprise. Therefore, we begin with six key questions for further dialogue:

Organisation structure should of course follow the enterprise structure in any rational view of the world. But rationality ignores biology and, in any case, there is no point in setting up an organisation structure that is hampered by the humans that must inhabit it. At best we can organise our enterprises according to the best blend of what head, heart and soul allow. We can expect improvements to the fit between structure and strategy in a world informed by greater levels of rationality, but only if we submit ourselves to the mixture of what machines can offer in terms of analytics, guided by an agreed set of values from the owners of a given BBE. So we may eventually approach Chandler’s vision in the Man-Machine age.

In the last 50 years, business academics and managers have proposed and tried various reforms to the basic idea of Max Weber’s concept of machine bureaucracy, typified by the structure of large entities such as the United Nations, The US Senate and UK Government. Weber’s idea of bureaucracy has been corrupted over time, but in its purest form was about a number of worthy things such as recruitment based on merit, strict hierarchy, clear rules and protocols, impersonal authority, lack of politics and so on. Humans, of course, polluted Weber’s concept and bureaucracy is now seen to be about politics, sex scandals and red tape in organisational life. One of the more popular reforms has been the idea of matrix working, which involves having more than one boss, the need to juggle and a focus on task and project management, which is a feature of many gig economy jobs these days. Matrix management was seen as a way of freeing enterprises from the traditional structures of machine bureaucracies, by installing what is essentially a horizontal strategy, getting people to work in teams across the enterprise built around projects across the value chain, rather than in functional silos. I was part of an early experiment in matrix working in the 1980s, some years before the term had been coined. For some reason I had two pharmacists as my bosses, one of whom worked mornings and the other afternoons. Yet my work was project-based in the sense that I would have 5–7 main goals, which I would pursue over many weeks, sometimes months at a time. I must confess a certain degree of naughtiness crept in at times, or what we might now call moral hazard. If I did not like one of the projects from the morning boss I would say I was busy with the afternoon boss’s work and vice versa. Now I am sure none of you reading this would confess to such appalling practices but I would not mind betting you have on occasion decided to do the thing you preferred doing over the thing you had to do in life?

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When you scale this relatively simple situation to a network structure with transient leaders and a multiplicity of masters the matter becomes complicated. As a portfolio worker I regularly juggle 4–5 projects at a time, although I must adopt a different approach to my customers from the one I used as a young man. Rather than delaying any one project, I must work through peaks and troughs to keep my customers satisfied, since they all expect me to treat their project as the priority. In extreme circumstances it is better to refuse to take work on or at least to refer it to others in my network organisation, rather than to attempt to fit too much into too little time. This is at least some proof of growth and learning with maturity on my part!

However, it is clear that some people like, and even need, bureaucracy and rigid structure in their lives. I am aware that some people find it extremely troublesome to work in the gig economy with no assurances of an income or the ability to plan over the long range as a result of such employment practices. Professor Charles Handy’s notion of a ‘stability zone’, explained in his book Understanding Organisations, is a durable concept that leaders must bear in mind when designing structures that enable people to bring their heads, hearts and souls to work. Each and every one of us would do well to think clearly about what lies at our root or stability zone and seek to protect that which allows us to adapt and flex in our daily lives. For some it will be family, for others geography, others some kind of passion that drives us.

Most company structures evolve from what they currently have and there are no magic recipes for structure. Bureaucracies often move slowly, managers become ‘desk jockeys’ and get stuck in a role and in a rut. Matrix management can be a recipe for overload and the tyranny of too many bosses if not executed properly. Enterprises often move from one structure to another without a clear rationale, perhaps in response to the latest fashion. In such circumstances, it is no surprise that each structural rearrangement often fails to address the particular ills that it was designed to cure. Structure is indeed a wicked problem and it helps to get back to fundamentals. If we are to design a BBE that is agile as well as successful, it helps to consider what fundamental engines of organisation improvement are. Arguably a BBE is a thinking organism and a doing machine. If we see these domains of activity over time, i.e. the past, present and the future, we can map out a number of functions that an effective structure might enable (see Table 14.1).

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Some enterprises split the ‘brain/thinking’ parts from the ‘brawn/doing’ parts as a design principle. The academic parts of a university are essentially a thinking function, while the administrators are seen as the doing function although some academics have to endure teaching, which is essentially a doing function and one that externalises its work to the world and thus makes it accessible to all. If our university example were composed solely of thinkers, it would never deliver anything to the market. So it is also with many other ‘professional’ services enterprises.

We also have to solve the tendency for unhealthy competition to become a by-product of organisational structure. Some years ago pharmaceutical giant GSK split their R&D into a number of profit centres in order to gain from healthy competition. These centres compete for funding from the corporate parent and with external R&D agencies. They also pay for shared services. Like most things in business, the degree to which it succeeds will largely depend on how GSK implements the structural, cultural and capability changes that will be needed to make the idea work in practice. Since this is a fundamental structural shift, it will also be impossible to observe the effects of the change for some years to come.

This example also illustrates the problem of size with respect to innovation. Structuring a small innovative company is different from a large institution. The problems are different, not any better or worse. Small companies often lack all the resources they need whereas large institutions have the problem of coordinating the resources they do possess. Communications is a central issue. Putting this into a domestic context, a square table is quite sufficient to get good communication if you are inviting four people to dinner, but a round one is necessary if you want similar results from eight people. Beyond eight people, we need even more ingenious approaches to maintain good communications. In business, various observers believe that 100–150 employees is a magic number beyond which a sense of community breaks down. It seems that GSK is trying to preserve the benefits of size with the flexibility of a small institution.

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Our robotics firm q-bot has a network structure, sourcing its needs from specialists rather than building a large organisation. This enables it to be agile. Although the company is in the ‘Brain Based Economy’ it employs some good old-fashioned management tools to ensure its products are fully grounded. For example q-bot uses incremental systematic development via market research rather than intuitive leaps of faith as its main source of input for design. It remains to see how they will structure themselves as they grow the enterprise.

Through history, we have lurched through fads and fashions regarding what to outsource and what to keep in house. Pharmaceuticals became quite obsessed with outsourcing everything in last few decades, even going so far as to outsource their inventive capacity via R&D activity. In the Fourth Industrial Revolution a key question is can you contain intellectual property leakage? Or will ideas about patent protection be overtaken by the speed of innovation through knowledge?

Size does matter. Dunbar’s number suggests that the maximum number of humans that co-exist is around the magic number of 150, yet most enterprises exceed this number many times. While we can probably buck the trend of Dunbar’s number in business through intelligent use of communication and collaboration devices, ultimately biology is bigger than big data. Our need to commune in tribes is a basic human instinct and we ignore it at our peril. BBEs are also Heart- and Soul-Based Enterprises and the smart leader makes sure that team members know enough about each other to profit from that knowledge as we explored in Dialogue II.

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There are two related questions here. The question of the relationship between structure/order and creativity/freedom. Also the vexed question of measurement in a world where we can measure everything and must therefore make good decisions about what matters most. We have already discussed the notion that measurement should be ‘necessary and sufficient’ in an age when we can measure almost anything. The question is not ‘can we measure it?’ any more. It is ‘should we measure it?’

Aside from that, creativity needs structure. Structure needs creativity. I believe they are essential bedfellows. Too much of either and your enterprise ossifies either through endless deliberation (structure) or unfinished business (creativity). As someone who consults widely on creativity, people sometimes find it strange when I advocate greater levels of structure in a business in order to harvest greater levels of innovation and vice versa in enterprises that are wound too tightly. A case in point is an enterprise that produces data analytics and intelligent software for a variety of high-tech industries, which realises that it needs creative ideas to develop their business:

Our staff are very pedantic and quick to point out flaws in ideas, so, rather than expanding and exploring a suggestion, they tend to shut it down.

Anon

Every structure provides certain benefits but introduces a number of compromises. When people talk about structure, they are talking about a variety of potentially competing elements. These include the use of structure for efficient delivery of customer requirements, a functional structure that optimises resources internally and lets people know ‘where they are in relation to others’, a learning structure that enables knowledge, skills and wisdom to flow and be multiplied, and a career structure that allows people to feel valued for their contribution and progress within the company, etc.

Inevitably, structure is both a rational and emotional issue, since it must serve the head, heart and soul of the enterprise. This point is not always well understood by the ‘professionals’ in this field, who are mostly concerned with questions of reward, grade and fitting ‘pegs’ into ‘holes’. As a rule, they are also only concerned with two-dimensional representations of structure and operate from a rationalist perspective, failing to notice that it is the ‘music’, i.e. the relationships, harmony and collaborations between individuals and groups, that produces enterprise value rather than the individual ‘notes’. We therefore turn next to the world of biology to look for structural insights with applications to the world of economics and business.

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The Man-Machine bio-interface

Biological structures also require biological behaviours to make them work. We must master complexity and multiple relationships. As things become more complex in the world of work, humans have a tendency to match the complexity by adding layers of complex process and procedure, when exactly the opposite is usually needed. I have previously talked about how insects are smarter at dealing with inherent complexity than humans although it is fair to say that many insects are ‘single purpose’ beings. For example, termites build the human equivalent of cities without Microsoft Project, a decision tree or a Gantt chart. As far as we know they use pheromones to communicate, for example to find food, reproduce, etc. Some use vibration to signal alarm, by bashing heads together rhythmically.

Bees also coordinate complex affairs and build hives comprised of honeycombs of rhombic dodecahedrons of precise mathematics without attending maths lessons, using blueprints, training programmes, Six Sigma beehive building courses, etc. Pappus observed that bees have a certain geometrical forethought: “The bees have wisely selected for their structure that which contains most angles, suspecting indeed that it could hold more honey than either of the other two.”

The average beehive comprises 50 000–100 000 individual bees, significantly more than Dunbar’s number of 150. Bees differ from humans in so far as their colonies have flat structures and therefore significantly more order than human systems. They have a single boss and a few specialised roles: workers; drones. They are thought to communicate either through waggle dancing or smell rather than the multiplicity of methods humans use. Time and time again, the insight comes through that if you want to do complex things, keep your organisation as simple as possible. We regularly break Dunbar’s number on social media these days, having many thousands of friends in some cases, although at best many of these will be merely acquaintances. Even in this field, we only succeed if we apply some structure on these networks, perhaps sorting people into groups such as sporting friends, music lovers, lovers, close personal friends, close impersonal friends, acquaintances, stalkers and so on.

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In Leading Innovation, Creativity and Enterprise, I point out that no single bee wants to become Senior Vice President of Pollination (SVPP), CEO (Chief Ecology Officer) or Director of HRM (Honey Resource Management). Bees do not have marketing, HR, IT or corporate governance departments or extensive compliance divisions requiring every flower to be checked for PC (Pollen Coefficient). They do not use Gmail for communication, preferring Bmail. Frivolity aside, by contrast, humans have not yet managed to make flat organisation structures work as well as bees. We simply must be able to do better than bees with all of our supposed intelligence. What structural lessons then can we learn from the synthesis of biology and mathematics to improve enterprise structures?

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My role as a CEO is to shake things up, to make sure we don’t atrophy. As soon as an enterprise atrophies, as soon as something becomes a career path, you lose that sense of flux and excitement that makes the enterprise a great place to work.

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Synthesis

Strategy is no longer about long-range planning. Rather it is about setting out a direction of travel, keeping your corporate receptors open and being quick enough to respond to life’s opportunities along the journey.

Improvisation is a core skill for leaders in a disruptive world. We can learn about improvisation from textbooks but it is much easier to learn from deliberate practice. A rich arena of practice is that of improvisation excellence from the world of the arts, especially in music, where we can observe overt behaviour in teams.

Many taken-for-granted ‘sacred cows’ in business must be slain in order to succeed in a VUCA world. These include: the idea that being first to market is not the only strategy for success; the need for coopetition rather than competition in a connected world; the notion of strategic drift and a strategy; and the need for rapid learning, unlearning and relearning to develop an agile enterprise.

BBEs need supremely good HR strategies and practices to engage their people. This includes a culture of meaningful participation and one that encourages people to bring their heads, hearts and souls to work.

Biology beats computers when it comes to organisational design. That said we would do well to learn from the discipline of the digital logical world when designing our enterprises. We will have the opportunity to do both in the future and reach a point of convergence between what Chandler predicted in 1962 and reality, that structure should follow strategy.

We have all the potential in the world to do better at designing our workplaces if we think carefully about enterprise designs that engage people’s heads, hearts and souls.