- What is Organisation Design?
- Introducing the Organisation Evolution Framework
- Consistency and Intentional Design. Building the Organisation of the Future.
- Building the Intentional Organisation
- Business Models: the theory and practice
- Strategy Frameworks: The Theory and the Practice
- Organisation Models: a Reasoned List between Old and New
- Operating Models: the theory and the practice.
- Leadership Models: The Theory and the Practice
- Purpose: The Theory and the Practice
- Corporate Culture: The Theory and the Practice
- Organisation Ecosystem: The Theory and the Practice
Recent years have seen an increased number of Organisation Models appearing on the scene of management. This was primarily in response to the accelerated rhythm of change imposed by the VUCA world and often have come as the result of a crisis of an organisation. We have already encountered a few of these models around, and particularly the recently reviewed Corporate Rebels book (Minnaar and de Morree, 2020) highlights a few of these models and their success in some organisations.
With this post, I want to try to build an overview of the suggested models, which I will maintain over time as additional readings and sources of inspiration appears. Before digging deep, however, I wanted to stress one important fact. None of these models is, at this stage, attaining the status of a “leading and universally accepted model”, which means that every organisation needs to develop Organisation Design capabilities, being able to freely choose the aspects that are more consistent with the corporate strategy identified. I also wanted to trace a solid background on the definition of each element that is needed for a sound Organisation Architecture: Strategy, Business Model, Operating Model and, finally, Organisation.
What is essential is to find a model that works — one where we test structures, practices, and policies on an organisation to see what fits (Hofmann, 2016).
Change Log: after the initial publication of this post, I received a lot of great feedback and suggestions, both via Twitter and Linkedin, and am making this article a “live” experiment integrating all feedbacks.
Feb. 9th, adding Jon Ingham matrix to the “Modelling the Models” section, the Cone model, and a new section on Market-Based Models which includes Haier.
Feb. 10th – Other feedback received. Added Adhocracy, Teleocracy and Spotify Model. Corrected a few typos and added a quote at the end.
Feb. 14th – Other feedback received. Added the Entrepreneurial Ecosystem Enabling Organisation, and a reference to the Platform Design Toolkit, as well as a review of the Sociocracy model.
Feb. 21st – Added in-text reference (in Harvard style) and Full Reference List at the end of the post. Corrected a few typos. Added reference to HiveFlex model as well as to the work of Charles Handy, of which I picked three models.
Jul. 1st – Added the Triarchy Theory by Gerard Fairtlough as a classification system, as well as the two alternatives he suggested. Also, added the Responsive Organisation.
Aug. 30th – Added the Spaghetti Organisation. Few cosmetic changes and renumbering.
Sept. 14th – Added Simon Western’s Organizational Forms, the Fractal Organisation, Humanocracy and The Netflix Model. Reviewed chapter structure.
Traditional Organisation Models
This list includes the more conventional organisation models we are more used to know. I refer to these here because in any case many of the aspects of these models are still relevant also for today’s organisation. For example, although hierarchy is widely being considered inefficient (Morgan, 2015), appropriate levels do even exist in many of the new organisation models. The problem often is not in the model per se, but in how these models are implemented.
Line Organisation Model
The Line Model is a straightforward hierarchical structure that could have the CEO over the Operations Director and the Sales Director. These two are lateral equivalents, meaning they don’t respond to each other but have the same level of influence in the company’s structure. Under each would be designated department managers each with their team. In a line organisation, a supervisor exercises direct control over a subordinate, and the authority flows from the top-most position to the lowest. It’s the model typically adopted by the military and somehow is seen as the oldest organisational model. It is often referred to as a synonym of a military organisation or scalar-type organisation.
Functional Organisation Model
It is also a hierarchical model that looks similar to the Line model except that instead of adopting a simple authority element to create the organisation, a competency element is used. Typically we would have a Finance Department, an IT Department, a Marketing department and so on. Work is, therefore divided into sub-sectors according to the type of work done. Specialisation becomes an important value of this model, which then requires an ample dose of collaboration to execute tasks, which are often involving parties of multiple functions.
The Line and Staff Model
It is also a hierarchical model, that however intends to mitigate some of the shortcomings of the Functional Organisation Model, by creating differentiating roles of “Line Management” and “Staff”. The latter has a specialised advisory role to the Line Manager, who still maintains authority, but will now have the possibility to have support in attaining its goals.
This model ensures the simplicity of direct authority, joined with the flexibility given by having specialized roles in the organisation.
It is a model that is more dynamic and is often chosen by companies that work in projects (for example construction companies). They require more flexibility, and are typically organised around pockets of resources that are generally held by Function, but then assigned to one project at a time, through the leadership of a Project manager. For example, a software development company might have teams of coders, developers, testers, QA specialists, business analysts. These would be assigned then to a Project Team for a specific assignment or product creation.
As companies grow, a new model becomes relevant, as it is used to help the organisation scale. It is typically used in conjunction with the other models mentioned above and below and consists of creating substructures in a company to ensure more focused management. The subdivision usually takes place according to the following work areas:
- Target groups/markets
- Regions/sales areas
“Divisions” are therefore created, each of them having its specific organisational model applied.
It is one of the most dynamic models that are traditionally applied by the organisation. Typically roles here have two reporting lines, one that is aligned to the Function they belong to (like in the Functional Model) which is responsible for the competency part, and one to the Line Manager who is responsible for the results. There are multiple ways by which a company can organise its structure (division, markets etc.), but the result is always similar: a dual reporting line.
An example can be a Country Manager, who is responsible for the performance of an entire market. He will be the Line Manager to an HR Manager of the Country and a Finance Manager of the country. These, however, would have a dual reporting line into the CHRO and CFO.
The concept of Network Organisation has been defined in various steps, already since the mid of the Eighties (Hixon, 1989). I’m mentioning it here in the “Traditional” model section because there has been consistent literature about the importance of networks, although there is not really one “pure” model. In many ways, the nearest consolidated form of Networking organisation is the Project-Based Model we have already seen, although true networks have wider impacts. Often, Network organisational concepts are linked to Ambidexterity, especially as Organisational Network Analysis has started showing the existence of informal organisation patterns. The key principle here is that Collaboration takes a stance over formal authority and responsibility (Hansen, 2009).
The concept of Adhocracy was coined by Warren Bennis in his 1968 book The Temporary Society (Bennis and Slater, 1968), and later popularized in the Seventies by the work of Alvin Toffler and particularly his book Future Schock (Toffler, 1970). It has however been expanded as a real organisation model by Henry Mintzberg (Mintzberg, 1981). He opposed it to the traditional bureaucratic structures, as being a complex and dynamic organisation, often using the example of the Film industry to deliver the example of its key characteristics. Adhocracy is characterized by an adaptive, creative and flexible integrative behaviour based on non-permanence and spontaneity. It is believed that these characteristics allow adhocracy to respond faster than traditional bureaucratic organizations while being more open to new ideas. The word is still used in many ways to indicate a traditional organisation that has built in some flexibility (Birkinshaw and Ridderstråle, 2015).
The Netflix Model
A “pure” Netflix organisation model does not really exist, as Netflix implements a pretty traditional functional structure and hierarchical organisation. However, while reading No Rules Rules there is a lot of focus on a dispersed decision-making model that is pretty unique.
I’ve therefore decided to list it here as a way to shows that also a traditional organisation model can be “tweaked” to adapt to a fast-moving scenario and a high performance organisation. The two elements that help building this pretty unique aspect are The Informed Captain, by which any leader at any level of the organisation can take a decision, sign a contract or whatever, as long as they are the most informed person on the matter. This works thanks to the second principle Leading with Context, a concept of servant leadership by which leaders are asked not to control and approve decision, but rather give all possible context to ensure the correct decisions are taken by the informed person.
The book represents this model through the picture of a Tree rather than that of a tradition pyramid, with the idea that the top levels, starting from the CEO, are there to “support” rather than “direct”. Not an official illustration of an organisation chart of the sort, but a diffused perception by Netflix employees.
A new proposal: Helix Organisation
It’s a model proposed by McKinsey in an article dated October 2019 and is a take to try to solve some of the issues posed by the more traditional Matrix Model. The model works by separating people-leadership tasks from day-to-day business leadership and can help organisations strike a better balance between centralisation and decentralisation. It moves away from dotted and solid line reporting distinctions, which often create tensions, and creates two parallel lines of accountability: Capabilities Management and Value-Creation management (De Smet, Kleinman and Weerda, 2019).
Different Adoption Models
I have used above a classification of the models that focuses entirely on the organisational aspects of Authority and Responsibility. However, organisations are living organisms, and their actual organisational model adoption will vary greatly, often picking and choosing different elements from each model. It also often reflect the varying maturity of the different areas of the company, the strategic focus on some products and markets, the experimentation in some domains, the adoption of different ways of working.
The Triarchy Theory
In 2007 Gerard Fairtlough published a work called The Three Ways of Getting Things Done, where he proposes a theory of organisational forms based on providing alternatives to the cultural dominance of Hierarchy (Fairtlough, 2007). He suggests that in reality, that can be three (and only three) ways of “Getting Things Done” that he lists as:
- Hierarchy is defined as the domain of single rule, following Hobbes teaching.
- Heterarchy means ‘multiple rule’, a balance of powers rather than the single rule of Hierarchy. It is a much less familiar term than Hierarchy, although the general idea of shared rule has been around for a very long time. Examples of this form are partnerships in law, accountancy and consulting firms where partners have the same equal status.
- Responsible Autonomy instead develops when an individual or a group has the autonomy to decide what to do but is accountable for the outcome of the decision. It might be called ‘no rule’, or rather, no external rule. Examples of this form are scientific research teams, but also fund managers in some investments firms.
The interesting concept of his work is that none of the models is necessarily superior to the other. We have become more tuned to the hierarchy for a number of reasons, including biological predisposition and cultural hegemony. But both other models provide suitable alternatives in many situations. Moreover, these models never exist in their pure form, and organisations are in reality plastic as they adapt to the needs of the situations. Which is why many organisations might still be following a hierarchy as the main model, but they will often have research and project teams adopting a heterarchy, and responsible autonomy in pockets of the organisation.
As such the Triarchy Theory is not an organisation model per se, but rather a way to analyse and check how different organisation models get their “stuff done” internally. A way to probably help understand how the different models truly work, and which I hope to start using in the future, providing a different way to truly work.
Simon Western’s Organisational Forms
In his book Leadership: a Critical Text, Simon Western introduces a framework to understand Leadership based on four discourses. Each of these discourses develops, according to the author, a different Organisational Form, based on the relationship between Leaders and Followers.
The framework is interesting, as it shows the possible organisational evolution across the different discourses, moving froma traditional hierarchical model, to a more flat one, to a team based leadership and finally to a distributed model. These models (like the discourses) do not necessarily exist in a “pure” form, but it is interesting to notice how the organisation evolution we are tracking down into this long article, is very much aligned to this conceptual framework.
New Human Centric Organisation Models
Here the “models” I have been able to intercept through my readings. To a certain extent, they tend all to challenge the traditional hierarchical organisational structures, often challenging the role of (middle) management, as well as some artefacts that are more typical of bureaucracies. They also tend to focus more on the Individuals, normally by focusing on key values that intend to give more support to the individual contribution.
These are listed in alphabetical order, as I could not find a real way to list them otherwise.
The concept of Adaptive Organisation is not new: in 1985 Alvin and Heidi Toffler published their book titled The Adaptive Corporation (Toffler and Shapiro, 1985), in which they theorised that organisations need to do something different to survive acceleration compared to the past. Capgemini has developed a model of Adaptive Organisation, which radically alternates different organisational models, all team-based, to the various stages of the Product Lifecycle (Cramer, 2019). Toffler Associates has recently done additional research (full report available here) and is suggesting a model heavily based on the empowerment of bottom-up change, by way of:
- Creation of Self-Directed Teams
- Bridging of the stovepipes through Employee Engagement
- Creating Venues where employees can practice Adaptive Thinking (Toffler Associates, 2008)
As such, we can state that the Adaptive organisation is instead a set of principles rather than a full-fledged organisation model. On top of this Stelio Verzera published an Adaptive Organization Design Manifesto (Verzera, 2018) in 2018, which focuses on a way of intending Organisation Design work, rather than focusing on a specific model.
AEquacy (D’Alessio and Petti, 2018) is a model that removes any element of hierarchy (even between roles and circles, not just between individuals) from self-management. It is defined as an “Operating System” that removes hierarchy entirely, basing itself on a radial network of coordinated, hierarchy-free, self-organising teams. This approach is based on the research of Giovanna D’Alessio and Stefano Petti, published in the book under the same title.
The model works out of a Framework of Operating principles: it requires an Enabling Context that allows self-organising teams to work in full autonomy. Supporting Values are necessary relating to trust, Accountability and Continuous Learning. Smart Systems are expected to be in place to enable radical simplicity and peer feedback loops. Finally, there needs to be a focus on Individual and Team Mastery.
The concept of Ambidextrous Organisation (also defined as Dual Operating System (Sharp, 2015)) has multiple sources and multiple angles, and essentially refers to the idea that two (at least) organisational models can coexist in an organisation. Many argue that two models are actually needed to be able to support the need for stability on one side (defined as Exploitative Business), and the power to innovate on the other (defined as Exploratory Business). A key article on this appeared in 2004 on HBR (O’Reilly III and Tushman, 2016) and has since dominated a lot of discussions on what really is the best operating model (Stanford, 2019).
In many ways this model focuses on creating two operating systems in the organisation: one hierarchical, linked to the “management” part of operations, and the second instead focused on a “networking” structure. Many contributions go towards this model, for example as they focus on embedding Agile practices in traditional organisations (Graves, 2011).
B Corporation is not a prescriptive organisational model, but a certification standard for companies that meet the highest standards of verified social and environmental performance, public transparency and legal accountability. It aims at assessing the positive impact of a corporation holistically. As such, they propose a purposeful Omni-stakeholder vision of business as a force for good, which also takes into consideration a new way of intending relationship with their employees. Recent research has shown that organisational changes in most of these companies have focused more on the external reputational elements, hower there is a high percentage of companies holding the B Corporation certificate, that have experimented with New Organisation Models (Villela, Bulgacov and Morgan, 2019).
Beta Codex is a model developed by Niels Pflaeging (Niels Pflaeging, 2014) and is based on the work of the Beyond Budgeting Round Table. It is based on 12 laws for organizing in today’s beta world :
- Team autonomy: Connectedness with purpose, not dependency
- Federalization: Integration into cells, not division into silos
- Leaderships: Self-organization, not management
- All-around success: Comprehensive fitness, not mono-maximization
- Transparency: Flow intelligence, not power obstruction
- Market orientation: Relative Targets, not top-down prescription
- Conditional income: Participation, not incentives
- Presence of mind: Preparation, not planned economy
- Rhythm: Tact & groove, not fiscal-year orientation
- Mastery-based decision: Consequence, not bureaucracy
- Resource discipline: Expedience, not status-orientation
- Flow coordination: Value-creation dynamics, not static allocations
Beyond Budgeting is a philosophy that is focused primarily on the Budgeting process, and in general, on the way organisations Perform. Fostered by the Beyond Budgeting Roundtable (BBRT), we can state that today it advocates for an adaptive management model and philosophy rooted in purpose, shared values, autonomy, transparency, directional and flexible planning. We have already seen how the principles can get implemented with different models in reality in the book by Bjarte Bogsnes Implementing Beyond Budgeting (Bjarte Bogsnes, 2016).
Deliberately Developmental Organisation
The concept is based on the book Everyone’s Culture by Robert Kegan and Lisa Lahey (which still tops my Top 25 Books of Management List), which lists several characteristics of what is defined as DDOs. In short, these are organisations that become an incubator for people development. They tie in profits to the development of their people and thus align their internal organisational model to the purpose of further developing people. Total Transparency is required, as well as the willingness to experiment and learn. Values become a strong factor for being able to participate in the company’s culture (Kegan and Laskow Lahey, 2016). Beyond the companies described in the book, others have experimented with the characteristics of the DDOs, with strong learnings (Lefebrvre, 2017).
The concept of the Exponential Organisation comes from the book by the same title of Salim Ismail, in which the author makes the case that these organisations can expand to substantial sizes because of the usage of modern techniques not available to their peers (Ismail, Malone and Diamandis, 2014).
The model proposed looks at several Attributes for the organisation; in particular, they look outwardly by practising SCALE and inwardly by practising IDEAS.
Essentially the model suggests the coexistence of Left Brain and Right Brain practices across the organisation.
How does this affect the organisation? According to the book, there are between 40 and 60 ExOs around the world that deliver extraordinary results. And they all synthesise the successful embedment of different organisational styles, all able to scale the edges (Diana, 2015). Deloitte and Singularity University have put together some design principles to drive this form of success (Deloitte Insights et al., 2015).
The associations of Fractals to organisation design has come up several times. The basic idea sees Fractals as a way to overcome the top-down logic of the traditional hierarchy. The first notion of this came from the work of Janna Ray, which has written several articles on the topic, and has worked with a few companies trying to enable a “Fractal” organisation design.
“The qualities of a fractal organization include shared purpose and values that create pattern integrity; universal participation in ideas and solutions for continuous improvement; decision making at functional levels; leadership devoted to employee development as a source of intellectual capital; and competition energy directed outward instead of inward. In fractal organizations, resource allocation is based upon desired outcomes and information is shared efficiently through daily interactions and regular conversations, which generate ideas and enable economical development and delivery of products and services.” (Raye, 2014)
The concept of Fractal Organisation was already presented in 2008 in a book that connected it to the application of the Viable System Model. (Hoverstadt, 2008)
We find Fractal Design patterns also in Sociocracy 3.0. It also exists as a management Theory, linked to organisational storytelling.
Holacracy (Robertson, 2015) is probably the most famous of the alternative organisational models based on self-managing teams. There has been much buzz mainly because of Zappos, one of the major companies that had implemented Holacracy has now largely abandoned it (Groth, 2020).
Holacracy is primarily based on the definition of roles through a specific focus on purpose, domains and accountabilities. A Governance Process is set for decisions through appropriate Circles constituted of multiple roles. Operational roles are then clearly defined. A such, Holacracy is a pretty heavily organised model. There is the necessity to establish rules and operating mechanisms to make it work and is very structured; it requires an organisational effort to implement. Transparency is the key enabler of the model, which seems to work for many organisations, but didn’t for others.
If the goal is to destructure yourself, probably this is not the best tool currently, although many of its principles are essential for any implementation of flat organisational models.
Gary Hamel and Michele Zanini have detailed the concept of Humanocracy in a much-awaited book. Rather than suggesting a specific alternative model, the book focuses on the “deconstruction” of bureaucracy as a way of organising and managing work. Despite not presenting a specific model, they, however, introduce an organising principle that is worth mentioning, illustrated in the following diagram.
If in traditional Bureaucracy the organising principle is set by the instituion, which then “exploits” individuals to achieve an output, the concept of Humanocracy puts the individual as the “organising principle”, that is able to achieve an impact through the institution.
As such this becomes a framework that reconginsed validity for many of the human-centric organisation models listed here.
Management 3.0 (Appelo, 2011) is a management model rather than an organisational one, that predicts “Better management with fewer managers”. It’s based on the books of Jurgen Appelo and his initial attempt to expand agile principles beyond software development. Many of its beliefs are shared with other of the organisational models presented here, but in this case, it takes a much more pragmatic approach and tries to solve the question of what should each manager do. It is heavily based on Systems Thinking, looking at Performance as the result of the entire system, and not of the sole individual. It looks at 5 Management Principles:
- Delight everybody
- Improve everything
- Engage People
- Managing the system, not the people
The concept of Open Organisation descends directly from Open Source, and has a primary example in GitHub and RedHat. The proponents of this concept mention that organisations practicing open concepts (Stewart, 2015), have achieved:
- Greater agility, as members are more capable of working toward goals in unison and with shared vision;
- Faster innovation, as ideas from both inside and outside the organization receive more equitable consideration and rapid experimentation, and;
- Increased engagement, as members clearly see connections between their particular activities and an organization’s overarching values, mission, and spirit.
Five characteristics have been identified as key to create the required Openness:
A maturity model exists exactly looking at the above elements and several resources are provided by RedHat.
The Responsive Org Manifesto lists a number of tensions that exists today in a less predictable environment, and states that Responsive Organisations should be build to thrive be balancing these tensions:
More Predictable <-> Less Predictable
Profit <-> Purpose
Hierarchies <-> Networks
Controlling <-> Empowering
Planning <-> Experimentation
Privacy <-> Transparency
The manifesto acts as a shared common platform for practitioners to align, creating a set of holistic principles. It does not suggest only one sole model of organisation.
An interesting resource to access is the EducationElements Responsive Org Playbook.
The Semco model is based on the work that Brazilian CEO Ricardo Semler started implementing in Semco beginning with the mid of the eighties (Semler, 1995). It is a heavily democratised model that he labelled “Democratic Management”. It is a model that promotes trust, creativity and accountability, heavily focused on self-management and diffused decision making.
The model focuses on Five Principles and Fifteen pillars; all focused on creating Impact, improving Performance, yet stimulating Happiness.
Sociocracy & Sociocracy 3.0
The concept of Sociocracy dates back to 1851 and has been the source of inspiration for Holacracy. It was initially intended as a solution to enable a real democracy, thus having a broader view that only organisation design.
The original ideas are still pursued by the Sociocracy For All movement, a non-profit that is looking to expand the concept to different fields of human action, including organisation. The model, despite not being focused solely on organisation, can also be used as an organisation recommendation (Bozzoni, 2019), with practical applications.
More focused on specific org design is the Sociocracy 3.0 movement exists and constitutes a practical guide for evolving agile and resilient organisations.
The model works through Seven Principles focused on equivalence, harmony and continuous improvement. A Practical Guide exists which lists all patterns that the method wants to focus on, which range from Meeting practices to Building Organisations, to Organising WOrk.
What is interesting about this model is that it is free and open source.
The concept of a Teal Organisation (Laloux, 2015) derives from Fredric Laloux book Reinventing Organisations (Laloux, 2014). In his book, the author refers to several organisations he has been studying, as leaping a new “coloured” stage in organisational development: Teal. In this stage, organisations are characterised by self-management, wholeness and evolutionary purpose.
The discussion about what exactly are the characteristics of these organisations is still open, and there is a great wiki that collects much information. The critical point is if what Laloux observed is a real new organisational model, or rather a different way to interact (Appelo, 2016). I discuss this in extent in my Review’s of Laloux Book.
The Theory U is a theory of learning and management developed by Professor Otto Scharmer to nurture specific leadership capacities and to design social systems through listening, awareness, attention and consciousness (Scharmer, 2009). We have already mentioned this model as I spoke about Listening, as I referred to it as not just an individual skill, but rather as a capability to be developed through Organisation Design. Whatever the organisation design that we choose, Theory U provides an excellent method to embed a continuous improvement cycle, capable of constantly moving between the hard and soft sides of behaviours.
World Blu / Organisational Democracy
World Blu, Freedom at Work is a model organised around ten principles of organisational democracy based on Freedom. Founded by Traci Fenton, it looks at three elements needed to build a thriving organisation: a freedom-centred mindset, a freedom-centred leadership and a freedom-centred design. Freedom is seen as opposed to Fear and links a lot to the Emotional intelligence concepts developed over the last decades.
A strong basis for this model can be found in Lynda Gratton’s book The Democratic Enterprise (Gratton, 2004).
The Cone Model
Cone is a future-of-work focused software development and consulting firm, that seeks to create the best of both worlds by turning large companies into networks of autonomous company-like teams. By creating an internal currency to act as a safe placeholder for one US Dollar (or any external currency) and performing bookkeeping on a team level, we can harness the power of incentives, feedback loops, value signals, and heterogeneity inside of a company. The results are intended to be unbounded scalability, mitigated risk of disruption, and rapid, emergent, and constant innovation. I came to know this model through an article by Robert Solomon appeared on Consensys Media. This model tries to address some of the specific limits for example of Holacracy. The idea to use internal “seed money” to fund projects and departments in the organisation is really interesting, essentially building a view of an investment (rather than budget) based model (Solomon, 2020).
A model originally developed by Dean Tucker, an engineer and Boeing veteran turned into consultant, that built a Center for Teleocracy (of which I have not found traces anymore…) based on the theory of his book published in 2008 and titled Using the Power of Purpose: How to Overcome Bureaucracy and Achieve Extraordinary Business Success! (Tucker, 2008)
Teleocracy is a management system based on a sense of clear purpose, as the only way to engage individuals to stay with the organisation. The purpose of a company is built on a bedrock foundation of meaning, instantiated in the form of three separate statements: a purpose statement, a values statement and a vision statement. The purpose statement articulates why the enterprise exists in the first place (what is its raison d’être?). The values statement describes how the people in the company are expected to treat all stakeholders, not just customers and suppliers. Finally, the vision statement describes a desired future state, something to which all employees can aspire.
Organizational Teleocracy encourages self-organizing teams, open-book management (where employees can read and understand financial statements, and see the impact of their activities on the bottom line), employees as a high-priority class of enterprise stakeholders, novel compensation schemas, and statistically sound, time-based performance measures that trigger conversations where employees are free to tell each other the truth. Teleocracy is designed to address the deep-seated need of people to experience meaning and purpose in their work, somehow anticipating the concepts of Simon Sinek (Sinek, 2013).
The Spotify Model
I received many comments on the need to also add the so-called “Spotify Model” into this list. I have resisted this fact initially because the model that Spotify has implemented is very specific to its engineering culture (of which you can find the two excellent videos here and here). It is true that the model is now being used by several companies in their scaling of Agile Practices. It essentially boils down to the creation of a “Tribe Structure” to cluster the “Squads” or Scrum teams, and the development of Chapters and Guilds to what extends as the elements of collaboration needed across squads and tribes (Ageling, 2019).
The problem is that Spotify has moved forward from the model originally presented, as it continues its development. Some companies (notably ING) are successfully adopting the model, while others have encountered issues. Why? Because, as we will see later, it’s impossible to just “copy” one or more parts of a specific model. Chapters and Guilds, after all, are not dissimilar from the old concepts of Centers of Excellence and Communities of Practice. But the issue is that the Tribes structure de-facto takes quickly the role of a hierarchy, that destroys the core idea of the model itself autonomous squads (Kamer, 2019).
The “Spotify Model” is victim of a bandwagon effect. The same happened with Agile and Scrum. Before you know it uninformed people create a Frankenstein monster out of it. And this is where it starts to derail.Willem-Jan Ageling, You want to adopt the “Spotify Model”? I don’t think it means what you think it means!’ (Ageling, 2019)
HiveFlex is a set of principles and a methodology that, in the intention of its proponents, aims at striking “the right balance with our deepest human needs, the natural world and the planet to which we all belong”. The model proposes “a set of first-principles to design, guide and regenerate viable, resilient and healthy organizations and social-ecological systems”, which fall under the name of HiveFlex Compass.
The identified principles are:
- Divergence and Innovation
- Interdependence and Stewardship
- Convergence and Coherence
- Self-integration and evolution.
The model is built on a holistic experience, trying to apply insights and knowledge from Complex Adaptive Systems theory, and other related disciplines in social systems such as anthropology, sociology, psychology, economy, cybernetics, urbanism, biology, and ecology.
The work of Charles Handy
Charles Handy is an Irish author and management thinker that has mixed deep philosophical concepts and organisation design ideas in his work. In many ways he has anticipated some of the more recent trends of creating “holistic” views of the organisations, and has identified and developed some models that are worth mentioning, especially as he’s been one of the first of looking in-depth at the evolving role of the worker, as well as the concept itself of a “federal organisation” (Handy, 1989).
The Shamrock Organisation
The Shamrock Organisation, proposed by management author Charles Handy (Handy, 1989), is a useful model for businesses in the creative industries and other industry sectors. This model is organised of three parts (that the author defines “leafs”):
- Firstly there is a small core of permanent key employees who keep the company operating and developing.
- Secondly is the ‘contractual fringe’, ie subcontractors who are engaged as needed and paid by results.
- Thirdly, the flexible workforce, often casual and/or part-time employees who are taken on as and when needed.
Using slightly different terms, this shamrock model could be described as “core staff plus project workers plus external subcontractors” (Parrish, 2006). In some ways, this model, which came from the observation of current creative industries, anticipates some of the trends we have seen in terms of different types of workforce.
The Triple I
Triple I stands for Information, Intelligence and Ideas, as Handy had identified these as the three structural elements more valuable for the future.
In such organisations, the demands on personnel management are large. Handy explained: “the wise organisation already knows that their smart people are not to be easily defined as workers or as managers but as individuals, as specialists, as professionals or executives, or as leaders (the older terms of manager and worker are dropping out of use), and that both they and the organisation also need to be obsessed with the pursuit of learning if they are going to keep up with the pace of change.” (Handy, 1989)
The “Knowledge Worker” concept is brought to the extreme value here. As well as the system of consistency that is needed to support those three elements. Handy eventually foresees that organisations that are not able to manage (also through appropriate leadership) the value creation mechanisms of the Three I, will eventually fail as organisations.
The same author envisioned a new type of organisation (Handy, 1999) that he defined Membership Communities. His logic is that in order to hold people to an organisation that can no longer promise them a job for life, companies have to offer some other form of continuity and sense of belonging. To do this, he suggests, companies have to imbue members with certain rights.
What he is advocating in fact is some notion of the federal organisation, built on the principle of subsidiarity. This places a large degree of trust in its core professionals and other knowledge workers.
Under Handy’s membership community model, the centre is kept small and its primary purpose is to be “in charge of the future.” Only if the organisation is severely threatened does decision-making power revert to the centre. This allows the company to react quickly in a crisis. The rest of the time, decision making is highly decentralised. Definitely there is a lot of similarities with some of the more Human Centric organisation models we have seen.
Redthread Research has also recently issued a report under the title Responsive Organizations: Designing for Volatility and Change. It looked at what characteristics had the organisations that were more quickly to adapt. The research found out that Respect, Distributed Authority, Transparency and Trust were the key features of this cluster of organisations (Johnson and Garr, 2020).
The report does not necessarily suggest a defined organisational model, but the elements it advocates seem to be suggesting a specific set of organisational arrangements to be needed to achieve the necessary “adaptability” to external changes.
The Spaghetti organisation
The concept of Spaghetti Organisation refers to an experiment run in danish hearing-aids producer Oticon by tits CEO, lars Kolind, in the 1990s. It refers to a flat, loosely coupled, project-based organization characterized by ambiguous job boundaries and extensive delegation of task and project responsibilities to autonomous teams.
In his concept of the perfect corporate organisation, Kolind placed the interaction, collaboration, and connectivity of people, customers, suppliers, and ideas at the company’s heart. Kolind called it “a spaghetti organisation of rich strands in a chaotic network”. The key characteristics of a spaghetti organisation are choice (staff initiate projects and assemble teams; individuals invited to join a project can decline); multiple roles (the project approach creates multi-disciplined individuals); and transparency (knowledge is shared throughout the organisation). The idea is to have an organization that is knowledge-based and driven by market forces.
Kolind got his inspiration for this new model from his deep involvement in the scouting movement, from where he tried to capture the spirit and volunteer drive.
Probably the model was implemented ahead of its time, and not fully in the organisation, because it was abandoned in 1996. However it has driven a large number of authors to explore parts of that model. Some elements however were implemented, like a largely innovative design of the offices without attributed desks, and a substantially paperless way of operating.
Market Based Models
In recent years new forms of organisations have also started to appear, that are more focused on the interaction with the Market or the Environment. I am listing these models separately, as one of the common characteristics of these models is that it is sometimes difficult to identify the boundaries of the organisation. These become somewhat “fluid”: the separation of the elements that we would normally attribute to one organisation from the other (funding, employees, shareholders etc.) become a lot less identifiable.
We have already mentioned the Network organisation, but I have listed that under the chapter of Traditional Models because examples of network-based models have been existing since the eighties, and often within clear organisational boundaries.
The Platform Organisation
We also have mentioned another concept that is interesting, that of the Open Source Organisation. Open Source Software has been, especially with Linux, one of the first example of a “platform” organisation. There is a core element that becomes an attractor for different types of individuals and organisations, and especially the concept of value creation changes (in the open software concept the Intellectual Property around the Software is “open”).
Another innovative example of Platform organisations is those formed around marketplaces. Amazon is a prime example of this, although it is difficult to say that organisations are really fluid here. Probably the crowdfunding platforms are a better example of what I mention.
In many ways, it seems the next iteration is that of looking at organisations that form an Ecosystem. We have already mentioned in the past the model suggested by Ulrich et al of a Market-Oriented Ecosystem (Yeung and Ulrich, 2019). But more space is needed to examine this in more detail.
Around the concept of Platforms, there is a very active community. I wanted to particularly point out to the Platform Design Toolkit, which highlights the need to think in terms of Design also for Platforms, as these challenge traditional Business Models. It introduces the concept of Platformization (Cicero, 2018). As it provides an opportunity to create scalable collaboration agreements, powered by narratives, technologies, and shared languages. Essentially meaning a new way to combine Business Model, Strategy and Operating Model.
Haier Rendanheyi Model
Probably the most known existing intentionally design model is the last iteration of Zhang Ruimin, Haier’s CEO, vision of an innovative organisation. What’s striking about the experience of Haier, has been its adoption and innovation of business models in the course of its relatively short existence. Corporate Rebels has done an interesting piece on this, and talks in detail about it also in their book.
The model is called RenDanHeYi. Literally, “Ren” refers to each employee, “Dan” refers to the needs of each user, and “HeYi” refers to the connection between each employee and the needs of each user.
With the RenDanHeYi model, we truly enter the network age. But the network aspect is not even the most important. What is more important is that we no longer try to delegate to, or ‘empower’, employees.Zhang Ruimin (Corporate Rebels, 2018)
It’s now time for every employee to be his or her own boss.
So, with the RenDanHeYi model, we move away from being like an empire (with a traditional, closed pyramid) to be more like a rain forest (with an open networked platform). Every empire will eventually collapse. A rain forest, on the other hand, can be sustained.
The model is based on the creation of Microenterprises within the larger organisation (Boyd, 2019). If in its initial phase this would be still happening within the perimeter of Haier, today many of the organisations themselves act also with other actors in the market. Organisations sell HR services to the other entities, but these are free to choose if to go to the open market. This way Haier exploits perfectly the way a Platform organised, but in a more integrated and intentional way. And today can be seen as the bridge between a platform and a true ecosystem (which is the next step vision of Zhang Ruimin).
Entrepreneurial Ecosystem Enabling Organization (EEEO)
Some have defined the Haier case as an Entrepreneurial Ecosystem Enabling Organization (EEEO). A truly interesting concept, based on the Microenterprise as an organisational unit, and Shared Service Platforms coordinating some of the activities, and creating internal “markets” (Cicero, 2019).
In this concept, the model works thanks to three organisational functions:
- the process of architecting: processes, functions, and contributions that help architecture and consistency emerge. This process ensures the organization as a whole has coordination and consistency, and that creative entropy is relatively limited in a constructive way.
- the process of enterprising relates with how the organization expands to capture and nurture new value creation processes, it deals with experimenting with new products, services and relationships between the user/ecosystem and the organization, it deals with how the organization “explores the new”.
- the process of enabling relates with how the organization in its various forms provides individual and units with support services — or just rules, practices and customs — that contribute to ease development through focusing on specific activities, instead of covering and replacing common functions
All existing in the Haaier model, but that can be further applied also in another organisation, and consitutes definitely an interesting new alternative to be investigated further.
Decentralized Autonomous Organisation
A Decentralised Autonomous Organisation (DAO) is probably the first technology-based organisation model (Voshmgir, 2019). It relies on Blockchain technology and essentially is based on the idea that the technology can provide a ledger to track all financial interaction and regulatory structures, allowing the creation of an autonomous network of different stakeholders. I think that here we are also expanding the definition of what an organisation is, its early application in the Ethereum Network displays an interesting concept, but needs to be further expanded.
In any case, in a market dominated by exchange of data, it is critical to embed “smart” networks technology to enable trusted relationships: Blockchain can become thus an active element of future ecosystems.
Modelling the Models
What I have been missing so far is a taxonomy that can navigate all the different models, something that can help understand the key differences of each models in a standardized way. I found two possible solutions so far, that I shortly illustrate here.
Corporate Rebels’ Four Organisation Models of the Future
Joost Minnaar of Corporate Rebels is in the process of creating a Taxonomy of what he defines as “Middle-Manager-Less-Organisation” (MMLOs) as part of his PhD thesis. He recently published an article that anticipates the results of his work, and that clusters the models they have been researching into four quadrants. He identified two “problems” that exist in organising MMLOs: what are their Building Blocks (so how do they organize “vertically”)? And how do they organize their Interactions? These two are used as “axes” for the model (see Figure 16) (Minnaar and Corporate Rebels, 2019).
I like the clustering drivers identified, but I am a bit suspicious of the naming of the quadrants. Although Culture has for sure an important influence in the way that organisations structure themselves, labelling the models as belonging to a specific continent seems to be misleading. Plus there is another aspect that is correctly identified in the article, but is missing in the matrix: how do you establish the Strategy (Minnaar and Corporate Rebels, 2019b)?
The research of Joost is not finished, and am sure it will receive some further feedback and be revised.
Jacob Morgan’s Five Types of Organisation Structures
Jacob Morgan (Morgan, 2014) has created a classification of organisation structures based on 5 archetypes of models.
Hierarchical organisations correspond to what I have also listed as Traditional Models in this post.
Flatter Organisations refer to the experiments done by some companies to remove some levels of hierarchies, however, these attempts have often failed to consolidate in replicable models.
Flat organisations correspond broadly to the models where middle management layers have been eliminated. The examples that Morgan uses are the same used by Laloux in his Teal organisation.
Flatarchies are hybrid models. Examples used are of companies that have been studied for their dual operating models, however, Morgan does not capture the ambidexterity part.
Holacratic is essentially Holocracy and the variations of the model.
I mention this study because it is widely used, however, it is a simple description of groupings and does not really help in understanding the models or helping in picking one.
Jon Ingham Orientation / Motivation Model
Jon Ingham has introduced a model in his book “The Social Organisation” (Ingham, 2017), which looks at finding the best way of explaining the differences and similarities between functions, horizontal teams, communities and networks. He names this Orientation / Motivation Model, referring to the two axes that create the matrix.
Through this model Ingham, despite not providing a full taxonomy, manages to explain why certain organisation reach hybrid models, that he defines Melds.
These are similar to the Ambidextrous organisation that we have mentioned, although often there is not necessarily an intentional creation process. In some “buckets” of the organisation, alternative models exist to cope with specific needs (like innovation).
This model is helpful in reading the difference between teams, networks and communities, as often there is a lack of understanding on how these play within an organisation.
Emanuele Quintarelli’s Human Organisation Model
The model developed by Emanuele Quintarelli and illustrated in Figure 18 is a very interesting alternative. It is based on the research and extrapolation of the key ideas of many of the models illustrated, and essentially presents a series of directional duplets “from….to…” that allows to classify and evaluate each and every model (Quintarelli, 2018b).
There are three levels that are explored:
- Organization – The common organizational structure that cuts across each unit, office and team
- Team – The dynamics that apply within and to each team
- Individual – The role and support offered to each individual
The model above can have multiple uses. The author used it, for example, to evaluate Holacracy as a model (Quintarelli, 2018a).
I found this model interesting for another aspect though: it can serve as a “checklist” of the items we want to prioritise for our own organisation. It then allows to identify the most critical levers we need to implement, prioritizing the right initiative for each aspect.
Choosing the right Organisation Model
I genuinely think that the future will lie in a responsive operating model that fits the purpose of an organisation and can support its strategy. We have seen how many companies have been able to adapt their work over time. GitHub experimented with a “bossless workplace” (Mittelman, 2016), discovered it didn’t work for them and tried another way. Medium experimented with Holacracy, and it failed, but they haven’t abandoned the reason why they experimented with it (Rayner, 2016).
The truth is that there is not a Right Model. Exactly like the traditional model never existed as templates to be applied out of a textbook, Organisation Design is about stitching together the elements that are needed the most (Stanford, 2014). And remembering that Organisation Design is an endless effort of continuous improvement. I will probably spend more time in the coming future to examine models that can help frame the right questions (Goold and Campbell, 2002) (Like the Viable System Model (Espejo and Gill, 2011)).
Stop trying to borrow wisdom and think for yourself. Face your difficulties and think and think and think and solve your problems yourself. Suffering and difficulties provide opportunities to become better. Success is never giving up.Taiichi Ohno (Dignan, 2019)
What creates complications today is that many of the concepts of the Human Centric Organisation models, come with a Trade Mark on top, including certification for consultants and royalties to be paid. This stifles the models and often does not allow for the required flexibility in the implementation.
In any case, knowing these models is critical to be able to establish real alternatives on how to build your organisation. I have explored this topic further when speaking of Intentional Design.
Organisation Model within the Organisation Evolution Framework
I’ve recently introduced a Visual Framework that allows visualising all essential building blocks of Organisation Design. Here below the representation of Organisation Model with its definition and the Critical Element that derives from it: Capabilities.
It is defined as Work that is done across the Operating Model to ensure the Strategic targets are achieved.
Introducing the Organisation Evolution Framework
Visual representation of Organisation Design building blocks and their dynamic relationships.
Now released in Version 2, open for feedback.
So the question is, what is the profile of your ideal organisation?
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Cover Photo by Vlad Hilitanu on Unsplash