This document discusses the need for organizations to become smarter in order to adapt to today's complex world. It argues that traditional hierarchical organizational structures are designed for stability, not innovation and change. Large organizations in particular tend to become less productive and engage employees less as they grow due to increased complexity and bureaucracy. The document proposes that organizations can become smarter by combining hierarchy with open social networks to improve knowledge sharing, adopting a leadership style focused on trust and empowerment over control, and simplifying processes and structures. If organizations make these changes successfully, it could lead to improved performance, innovation and engaged employees.

1. Building smarter
organizations
Gordon Vala-Webb
#smartorg
@dynamicadaptatn February 2013

2. Our agenda
1. Do we need smarter organizations?
2. Designed for the “old” world
3. The response so far
4. Bigger cities are smarter, the work is
smarter – but not organizations?
5. Why are large organizations not smarter?
6. What can we do?
7. If we get it right . . .
www.DynamicAdaptation.com Slide 2

3. Who am I?
I help leaders improve their
business results by
transforming how their
people collaborate, innovate
and share
www.DynamicAdaptation.com
Previously KM Director:
• PwC Canada
• Gov’t agency
Global lead (design / value)
PwC social network
www.DynamicAdaptation.com Slide 3

4. Do we need smarter organizations?
(Drucker, Dilbert and Debs)
www.DynamicAdaptation.com Slide 4

5. Drucker
“Most of what
we call
management
consists of
making it
difficult for
people to get
their work
done”
www.DynamicAdaptation.com Slide 5

6. The Dilbert index . . . most workers could not care
less about their work
71% Of American workers are
"not engaged" or "actively disengaged“
in their work
www.DynamicAdaptation.com Slide 6

7. What would Debs think?
Sickness absence, presenteeism and labour
turnover costs – for example - the UK
economy yearly
£26bn
Source: UK Foresight Project on Mental Capital and Wellbeing
http://www.guardian.co.uk/money/2011/jul/15/happiness-work-why-counts
www.DynamicAdaptation.com Slide 7

8. A comparison?
Large
Sheep organizations
Slow ?
Follow the flock ?
Not fun ?
Can’t fly ?
www.DynamicAdaptation.com Slide 8

9. Designed for the “old” world
www.DynamicAdaptation.com Slide 9

10. Our organizations were designed for the “old” –
easier - world
Old world New world
Stable Complex
Repeatable processes Discontinuity
Authoritative knowledge Ambiguous
Adapted from Kent Greenes, “Knowledge Leadership, KMWorld 2011
www.DynamicAdaptation.com Slide 10

11. They used hierarchy – great for repeatability,
planning and control but terrible for innovation
KM strategy in a box
www.DynamicAdaptation.com KM WorldSlide 11

12. And in the “new” world the pressure to be
innovative is mounting
. . .Global hyper-competition
. . .Power shifting from West to East
. . .Climate change
. . .Slow growth
. . .Youth unemployment
. . .Public sector fiscal crises
www.DynamicAdaptation.com Slide 12

13. If we don’t get it right - in extreme cases - extinction!
Image source http://stevedenning.typepad.com/steve_denning/2011/01/is-the-problem-with-capitalism-that-people-try-to-fix-it.html
www.DynamicAdaptation.com Slide 13

14. The response so far
www.DynamicAdaptation.com Slide 14

15. The response so far . . . control culture
Source http://www.independentaudit.com/growth-strategy-means-we-need-a-stricter-control-culture/
:
www.DynamicAdaptation.com Slide 15

16. The response so far . . . Belt tightening
• Exhortations “do more with less”
• Cost controls
• Business process re-engineering
• Mergers / acquisitions
• Offshoring
• Remote working
www.DynamicAdaptation.com Slide 16

17. Bigger cities are smarter, the work is
smarter – but not organizations?
www.DynamicAdaptation.com Slide 17

18. For cities, bigger is better
With each doubling of
city population, each
inhabitant is, on
average, 15 percent
wealthier, 15 percent
more productive, 15
percent more
innovative, and 15
percent more likely to be
victimized by violent
crime
www.DynamicAdaptation.com Source: http://www.pnas.org/content/104/17/7301.full Slide 18

19. At the same time, work has been getting “smarter”
Source: http://cdn.dupress.com/wp-content/uploads/2012/10/Screen-Shot-2012-10-01-at-9.20.13-PM.png?2b7236
www.DynamicAdaptation.com Slide 19

20. “Smart” work now makes up 41% (and growing) of
jobs in the US
https://www.mckinseyquarterly.com/Preparing_for_a_new_era_of_knowledge_work_3034?srid=520
www.DynamicAdaptation.com Slide 20

21. But larger companies aren’t smarter (like cities)
Cities – get smarter
Companies
- don’t or
get less
smart
Power rules – city versus companies
Source: http://kallokain.blogspot.ca/2012/11/why-cities-live-and-companies-die.html
www.DynamicAdaptation.com Slide 21

22. In fact, average productivity drops by 25% for
each order-of-magnitude increase
In companies with
over 1,000
employees, the
average productivity
of an employee drops
by more than ¼ for
each order-of-
magnitude increase
www.DynamicAdaptation.com Slide 22
Source: http://www.cybaea.net/Blogs/Data/Employee-productivity-as-function-of-number-of-workers-revisited.html

23. Why are large organizations not
smarter?
www.DynamicAdaptation.com Slide 23

24. Three reasons larger organizations are not
smarter
1) The Maze-trix
2) Mind the complexity gap
3) Old think
www.DynamicAdaptation.com Slide 24

25. 1) The maze-trix: silos increase efficiency within a
unit but create boundaries that make co-ordinating
across difficult
Big
Cheese
Assistant
2nd Level 2nd Level 2nd Level
Cheese Cheese Cheese
www.DynamicAdaptation.com Slide 25

26. Maze-trix - responsibility matrix
Source: http://www.independentaudit.com/global-responsibility-matrix/
www.DynamicAdaptation.com Slide 26

27. An maze-trix example - approving a contract
change request at an aerospace company
Source: http://www.bain.com/publications/articles/the-focused-company.aspx
www.DynamicAdaptation.com Slide 27

28. Symptoms of the maze-trix
• Exponential growth of decision points
• Unclear reporting lines
• Meeting overload
• Email overload We need to schedule a
meeting
• Slow information flows
To plan for the meeting
• Lack of “complete picture”
To discuss why we have
• Decision paralysis so many meetings
http://www.zazzle.ca/i_need_to_schedule_a_meetingto_plan_the_meeting
_mug-168219332576188320
www.DynamicAdaptation.com Slide 28

29. 2) Mind the complexity gap: Being bigger means
more bureaucracy – and that demotivates people
so higher-performing staff tend to leave
Complexity
Mgmt
& rules
% of highly engaged /
performing staff
Adapted from: “Netflix Culture” http://www.slideshare.net/reed2001/culture-1798664#text-version
www.DynamicAdaptation.com Slide 29

30. Mind the complexity gap – it kills
www.DynamicAdaptation.com Source: http://paimeiitguy.wordpress.com/2009/05/24/jim-collins-in-the-news/ Slide 30

31. Symptoms of the complexity gap
• Increasing bureaucracy and formality
• Inefficient / over-engineered internal
processes
• Decrease in % of high performers
• Decrease in % of engaged or highly
engaged staff
• Wait times for internal services
www.DynamicAdaptation.com Slide 31

32. 3) Old think: hierarchy is in our corporate blood
“U.S. corporations are historically
imprinted with a hierarchical model—
you develop something at
headquarters, you scale it, and then
you diffuse it.”
Rakesh Khurana
Harvard Business School
http://www.strategy-business.com/article/00164?pg=all
www.DynamicAdaptation.com Slide 32

33. Old think = control culture
Concentration of power
equals abuse of power . . Such
concentrations are blood clots
in the circulatory system of
society. . . The circulation of
wealth, resources, and,
especially, ideas, is blocked. In
a healthy system, information
flows are unimpeded by clots
of power or the sclerosis of
hierarchy.
Philip Slater
The Chrysalis Effect
www.DynamicAdaptation.com Slide 33

34. Old think versus new think: key elements
Old think New think
Control culture Integrative culture
People as thinking People as feeling animals
animals that feel that think
External reward Internal reward
Selfish Connected
Brain is fixed Brain is plastic
www.DynamicAdaptation.com Slide 34

35. Symptoms of “old think”
• Leadership by command and broadcast
• “SMART” performance goals
• Monetary rewards
• Fault-finding
• Low trust
http://c15056394.r94.cf2.rackcdn.com/MITSMR-Deloitte-Social-Business-What-Are-Companies-Really-Doing-Spring-2012.pdf
www.DynamicAdaptation.com Slide 35

36. What can we do?
www.DynamicAdaptation.com Slide 36

37. It can be done . . .
“30% of the top
banks we studied
were able to
improve their
efficiency while
maintaining
healthy growth”
Source: http://www.europeanbusinessreview.com/?p=6500
www.DynamicAdaptation.com Slide 37

38. . . . By combining hierarchy and networks
1. Leadership renewal
2. A new organizational
bicycle
3. Simplicity
www.DynamicAdaptation.com Slide 38

39. 1) Leadership renewal – essential elements
“The soft stuff is
• Reject the “control” culture the hard stuff”
Jack Welch
• Establish shared goals
• Connect through conversation
• Embrace emergence
• Transparency in decision making
• Build trust
• Learn to use social media
• Authentic selves (Empathy versus egotism)
www.DynamicAdaptation.com Slide 39

40. 2) A new organizational bicycle – social networking
“A bicycle makes man the most efficient mover on the earth.
A computer is a bicycle for our mind.” Wilson Miner
www.DynamicAdaptation.com Slide 40

41. The old bicycle doesn’t work very well
Emailed
Knowledge
www.DynamicAdaptation.com Slide 41

42. The new bicycle - social networking platforms
With emails . . . With social networking . .
. . . information, ideas and
questions become isolated - they
only go to the people who received
the message
. . . trying to have a conversation is
really hard
. . . it becomes a guessing game
when working on a document
together (“who made what
changes to which version?”)
. . . the information disappears
over time so that anyone joining
the conversation late has a hard
time coming up to speed
Source: http://www.pwc.com.ar/es_AR/ar/publicaciones-por-industria/assets/transforming-collaboration-with-social-tools.pdf
www.DynamicAdaptation.com 42

43. The new bicycle will enhance idea and knowledge
flows by moving from closed / push to open / pull
Email Social platform
Closed (one to few) Open (many to many)
Push Pull (subscription)
Inside Outside
Ephemeral Persistent
Broadcast User-generated
“We shape our tools, and thereafter our tools shape us.”
Marshall McLuhan
www.DynamicAdaptation.com Slide 43

44. Idea and knowledge flows have to across both
internal and external boundaries
Outside
Near-side
Inside
www.DynamicAdaptation.com 44

45. Note: Some issues will need to be addressed
Training
Intellectual
Regulatory property
requirements leakage
Records
management Security
Privacy /
Reputation Risks Confidentiality
$
www.DynamicAdaptation.com 45

46. 3) Simplicity –drivers of complexity
Source: Addressing general and administrative (G&A) complexity The next frontier in cost-cutting
www.DynamicAdaptation.com Slide 46

47. Simplicity: Its not that simple but organizations
need to work to reduce their complexity
Manage down their complexity:
• Products
• Processes
• Organizational capabilities
• Information architecture
www.DynamicAdaptation.com Slide 47

48. If we get it right . . .
www.DynamicAdaptation.com Slide 48

49. If we get it wrong . . . extinction!
“It’s not the strongest of the
species that survives, nor
the most intelligent, but the
one most responsive to
change.”
Charles Darwin
www.DynamicAdaptation.com Slide 49

50. If we get it right . . .
www.DynamicAdaptation.com Slide 50
Source: http://www.slideshare.net/dhinchcliffe/enterprise-20-summit-2012-closing-keynote

51. If we get it right . . .
Google’s share price
www.DynamicAdaptation.com Slide 51

52. Thank you and tell me what you think
Gordon (at) DynamicAdaptation.com
www.DynamicAdaptation.com
Twitter: @dynamicadaptatn
This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of the information contained
in this publication, and, to the extent permitted by law, Gordon Vala-Webb and Dynamic
Adaptation does not accept or assume any liability, responsibility or duty of care for any
consequences of you or anyone else acting, or refraining to act, in reliance on the information
contained in this publication or for any decision based on it.
Slide 52
© 2013 Gordon Vala-Webb. All rights reserved.