Organisational Awareness: a critical capability for the business

Written by

Sergio Caredda

Posted on

April 5, 2020

Edited on

June 16, 2020

Definition of Organisational Awareness

The term “Organisational Awareness” is used in different contexts with different meanings. A quite notable one refers to one of the primers that Daniel Goleman attributes to Emotional Intelligence. There are cases where this is defined instead as an individual skill, either in broader terms for students, or as a specific part of a competency model (for example the NIH one or the Canada one). In this article, I will try to explore Organisational Awareness as a capability of the organisation (which will also be reflected at the individual level). For this reason, let me formulate an initial definition based on the way this skill is defined in the accounting world.

Organisational Awareness is the capability of perceiving and understanding the different components of an organisation, both through its formal elements as well as through the informal patterns that emerge in the organisation. It also includes the understanding of political, social, and economic issues affecting the organisation and its environment.

Why is it important

Organisational Awareness is a critical capability for any organisation. It is a form of consciousness that the organisation develops as it continually adapts to the reality of its Business, the changes imposed by innovation and competition, the evolution of its external environment. It is a vital capability because let’s face it, most of the dimensions we have recognised in the Organisational Evolution Framework do not come from formal design effort, but are instead the result of a process of Emergence.

The Concept of Emergence

Fig.1: Signs of Emergent Organisation Component: Culture. New Yorker Cartoon. Source: Bob Sutton (Sutton, 2016)

The concept of Emergence gets many usages recently in many domains (emergent technology, emergent strategy, emergent design), often understanding the meaning of “revealing a new aspect of something“. I will, however, use a more process-oriented definition, based on the work of sociologist Christian Smith who provided the following description:

“Emergence refers to the process of constituting a new entity with its particular characteristics through the interactive combination of other, different entities that are necessary to create the new entity but that do not contain the characteristics present in the new entity. ” (Smith, 2011)

In Smith’s work, the concept of Emergence is linked to four conditions:

First, “two or more entities that exist at a “lower” level interact or combine” (Smith, 2011). In organisational terms, this is when two or more people (or other organisations) decide to collaborate and build an enterprise.
Second, “that interaction or combination serves as the basis of some new, real entity that has an existence at a “higher” level” (Smith, 2011). Again, the typical example is people forming a company, identified as a way to achieve something more than what a single individual could.
Third, “the existence of the new higher-level entity is fully dependent upon the two or more lower-level entities interacting or combining, as they could not exist without doing so” (Smith, 2011). Translated: the organisation only lives thanks to its “founding fathers”.
Fourth, “the new higher-level entity nevertheless possesses characteristic qualities (e.g. structures, qualities, capacities, textures, mechanisms) that cannot be reduced to those of the lower-level entities that gave rise to the new entity possessing them” (Smith, 2011). This is precisely the aspect I’m looking for: the process by which the organisation assumes its specific identity and uniqueness as an Emergent Organisation.

“When these four things happen, Emergence has happened. The whole is more than the sum of its parts. (Smith, 2011)

Philosophically we could say that Organisations are temporal entities that are occasions of experience (Whitehead, 1929). We can, therefore, move from a general concept to a more specific one. Organisational Emergence (Wikipedia Contributors, 2019a) involves those activities and events that are undertaken before an organisation becomes an organisation (Edelman, 2008). This is the “in creation” period of the lifecycle of an organisation. The individuals who undertake purposeful actions to construct an organisation based on their vision are called “nascent entrepreneurs” (Aldrich, 1999). During Emergence, these people bring together resources and engage in activities that will eventually distinguish the Business as an entity that is separated from the individuals that built it (Carter, Gartner and Reynolds, 1996). A particularly interesting point of view on the Emergent Organisation is the link of it with communication, especially from the interplay of conversation and text. (Taylor and Van Every, 1999)

The Emergent Organisation

Emergence Theory has been very much linked to the concept of Start-Ups. Professor Jerome Katz from St. Louis University has been studying the way entrepreneurs build organisations for many years. In 1989 he published an article together with William B. Gartner where he proposes a framework that explains Organisational Emergence (Katz and Gartner, 1988). In it, the authors outline four basic properties of Emergent Organisations. These properties are as follows:

Intentionality—the purposeful effort involved in organisation emergence. Organisations are created by individuals acting purposefully, and therefore it is the entrepreneurs’ intentions that lead to activities engaged in organisation creation.
Resources—the tangible building blocks of an organisation. They include human and financial capital, property, and equipment, as well as personal funds, time, and experience. Resources are used, combined, and coordinated into the production activities of the new organisation. Several pieces of research have shown that different configurations of resources influence further firms success, an element that needs to be considered through the analysis of emergent organisations.
Boundary—the creation of protected or formalised areas in which Emergence occurs. It is the “space” where the organisation has some control over the resources in its environment. Boundaries can be determined by social relations, time, legal and formal contracts, and physical and spatial considerations. Early boundary-defining actions include deciding on which people to hire, how jobs are structured, and how new members interact with each other, including how they interact with people outside the organisation. In the early phases of organisational evolution, organisational structures, practices, and boundaries vary widely but tend to be informal and fluid.
Exchange—the crossing of boundaries to either secure inputs (e.g., resources) or outputs of the organisation. The pattern of trade usually involves resources or inputs that are transformed into outputs. Exchanges are inherent in the social contract: employees or participants in the organisation agree to perform specific work in exchange for pay, rights, or privileges. Resources are acquired through an exchange process while goods and services are produced and exchanged across boundaries of the organisation.

All of these properties are not independent one from the other, but rather live in the form of interrelation. And these four elements help understand not only how an organisation gets formed, but also how it develops over time in the initial stages. In a nutshell, there is already a body of knowledge that explores and investigates the Emergent Organisation and the way it performs. However, my analysis wants to focus more on the Emergence of organisational structure elements.

The Organisational Awareness Lifecycle

There are many theories and approaches to the way organisations develop over time. They go under the concept of Organisational Life Cycle (Wikipedia Contributors, 2019b). The issue is that, in most cases, they borrow their approach from Biology and focus their modelling on the performance of the organisation over time. However, organisational performance does not always link to the levels of Organisational Awareness, especially in the short term.

By observing many organisations, I believe we can trace two main stages in which organisational elements get formed, with various degree of Organisational Awareness. Each stage is then split into several phases, each outlining a different way in which organisational are dealt with within the organisation. These stages are not necessarily sequential, as they are heavily influenced by the level of Organisational Awareness that the company develops. I call this Organisational Awareness Lifecycle, an element to consider to better understand the Organisation Evolution Framework.

Fig. 2: Organisational Awareness Lifecycle.

Emergent Design

The first stage is pretty much connected to the concept we have seen of Emergent Organisation. Organisational elements are the result of a process of Emergent Design, which is often unconscious. Still, it reflects the definition of Emergence we used before. Let’s see the specific steps more in detail.

Entrepreneurial Phase. The organisation is here modelled against its founder(s). She takes most decisions and gives energetic imprinting on the critical organisational attributes of Purpose and Culture. The Business Model is defined more by the actions taken then by a formal definition. All other elements exist in the relationship of the individuals that create the organisation. Boundaries are still being established. In a young, small company, the organisational structure is very fluid – “everyone does a bit of everything just to get things done”. (Hayden Bomberger, 2014)
Contamination Phase. If the organisation business grows, the entrepreneur will need to start delegating more of its decision making process to key people in the organisation. Recruiting becomes a vital process at this moment when people are hired for their attitude and “fit” rather than for their specific role. As many organisational processes are not yet present, many new managers will bring in their models from previous experiences. Artefacts like Job Descriptions, Policies, Process maps start appearing usually based on external contamination, especially for the areas that outside the scope of the core entrepreneurial idea. In this phase, “informal relationships and communications create more work and significant inefficiencies” (Hayden Bomberger, 2014). This is the moment when Culture gets diluted as some patterns will not reflect the inspiration of the nascent entrepreneurs anymore.
Bureaucratic Phase. If the organisation business continues to grow, roles in the organisation will start to grow, and the division of tasks and responsibilities becomes an issue. Something one employee used to do is not clearly moved from that employee to the new hire, creating confusion and redundancy (Hayden Bomberger, 2014). It is the moment when existing roles start thinking in terms of “self-preservation”. It is bureaucracy in the original sense used by Max Weber that takes shape, with a strong focus on task execution. It is precisely in this phase that some elements of what we consider Organisation Design start appearing. Organisation Charts, Strategy Documents, Process Definitions… these often emerge from the work of individual managers or workgroups acting of task-focused problems.

Many organisations never exit this state of Emergent Design perspective. Why? The reason stands in the soul itself of the Bureaucratic spirit: as Max Weber had described it, this is a phase that is strongly governed by a rational-legal mindset. All activities are focused solely on the execution of tasks. In this stage, typically “the best you can be is a perfect imitation of those who came before you” as Warren Bennis said (Sutton, 2016). The elements that are needed for an Organisation Design are put in place only as required. Nobody questions this aspect because the organisation is most efficient at this stage, and most elements exist simply because they exist elsewhere. There are Organisation Charts, Budgets, Strategy Documents, even an old Purpose hanging on the wall. I guess you recognise these elements on many existing companies. An easy “acid test” to verify at which stage we are is to talk with managers and HR professionals about their knowledge of the organisation. What you will discover immediately is a shallow and unevenly distributed level of Organisational Awareness. Which notably extends also to the nearby disciplines of Change Management and Organisational Development.

Intentional Design

This is precisely the moment in a new stage start, that of Intentional Design: here, the organisation starts to intentionally design at least part of its organisation. Organisational Awareness is now needed to support the process and produce value. Based on my experience of observing several organisations, we can identify three stages:

Compliance Phase. It is not uncommon to see that many companies start reflecting on their organisation design as a result of a legal obligation or a compliance issue. An example is offered by the ISO-9001 certification. When applied mainly to SMEs, it forced them for the first time, to identify their organisation structure, producing some of the elements that we would recognise as Business Model, Operating Model or Organisation Model. Organisational Awareness increases either through specialist roles or the usage of external consultants. The success of this phase is very much linked to the capability of those governing it to demonstrate the Business Value related to Organisation Design activities.
Experimentation Phase. This phase is marked by the experimentation of new models within the organisation. It can be the application of new ways of working, the reaction to external market difficulties, a restructuring. Whatever the need, the organisation approaches an organisation redesign endeavour experimenting a design process in at least part of the organisation. The success of the organisational experiment is in direct correlation with the level of Organisational Awareness that the organisation reaches as a whole. This is a crucial element: there’s plenty of companies that are failing to implement Agile models because there is not enough organisational Awareness. The vast proportions of the organisation must understand Organisational concepts to be successful. Which is why I believe that Change Management should always take into consideration this aspect when considering the impact of reorgs.
Consistency Phase. This is the most mature phase in terms of Organisational Awareness and is reached when the concepts of Organisation Design exit the specialised view, and are appropriately spread across the organisation. These companies reach a high level of Consistency as all components of Org Design are aligned (although, as we have seen, there is the need to some degree of misalignment to nurture innovation).

You can easily recognise a firm that has achieved Consistency. Looking at separate details of their operations, you can identify the red-thread that links them together. Reward Policies are aligned to the Operating Model, and Strategic Objectives are cascaded, the Organisation Model is coherent with the Business the company operates in. All have been Intentionally Designed to support the execution of the organisation Purpose and Strategy.

Note: Increased Levels of Organisational Awareness do not necessarily correspond to more mature or innovative organisational models. A company in its nascent state can develop a very advanced organisation model without necessarily being self-conscious of this. However, if Organisational Awareness is not stimulated and expanded, the simple act of growing in size will push the organisation to create more conservative and traditional models. Stages and Phases are also not sequential, as many organisations can move forward (and sometimes backwards) through these.

Individual Competency or Organisational Capability?

I have been referring to Organisational Awareness as a capability that the organisation needs to develop. Why? Because in my view, it is very much an element that allows a company to build its unique DNA, and ultimately can constitute a competitive advantage.

Let’s see this through an example, which links us to the question that started this long article. Is it truly more natural to start an organisation with a full-fledged Intentional Organisation Design model, as opposed to an organisation where design emerges? The answer might be counterintuitive, as many researchers found out that emergent design is more effective. If we recognise that emergent design consistently produces the most robust results, why are implementations of predetermined structures so prevalent in large organisations? (Kaufmann, 2019)

The answer lies precisely in the capability I mentioned above. As you increase Organisational Awareness, you also increase the metabolic rate of your company to embed change in its organisation components. Should the Market steer the organisation at this stage? For some yes, “through market pull, focus on value creation and relentlessly remove org debt that is preventing customer outcomes” (Spurlin, 2019). Starting where you become a vital factor, together with the core capability is its ability to learn and adapt (Kaufmann, 2019) continuously

Which brings us down to the concept of Organisational Awareness also as an individual competence. I know, I have excluded this initially in my definition, but simply because I see this as a part of the whole.

Let’s start with a consideration: to become a leader at any level in this world, we need to be able to manoeuvre the complex human networks and patterns of influence, values, emotions and power that make up our organisation’s operating system (Leto, 2018). I find this an excellent definition of why we need to equip our Leaders and Managers with Organisational Awareness.

Goleman defines this as The ability to read the currents of organisational life, build decision networks and navigating politics (Goleman, 2000). A leader with organisational Awareness uses “his or her understanding of the nature of the relationships, hierarchies, and decision-making processes to communicate more effectively” (Pitagorsky, 2017). It is about the ability to integrate intuitive knowledge of how the organisation thinks and feels into the decision at hand (Leto, 2018)

Organisational Awareness means having the ability to read a group’s emotional currents and power relationships and identify influencers, networks, and dynamics within the organisation (Goleman et al., 2017). Which brings us back also to the importance of Collaboration and Networking.

What could be considered “organizational attention deficit” has symptoms such as missing data that leads to bad decisions, getting too little attention in the marketplace, and not devoting enough attention to where it should go. Well-focused leaders operate well at three levels. They have an internal awareness of factors that go beyond the usual key performance indicators (such as emotional climate and people’s collective enthusiasm). They understand how the organization relates to others, from suppliers to competitors to the key operators in its ecological niche. Finally, they understand the larger systems in which the organization exists—everything from the economy and technological shifts to social trends and relevant political forces.
Daniel Goleman (Goleman, 2018)

Conclusion

I think it is clear that we should all strive to develop as much Organisational Awareness as possible. It might not be comfortable at the beginning, due to the complexity of how our organisations act today. We live in nested evolving systems (Huston, 2017) which might make the focus difficult. But the reality is not: we are asking people to simply understand the Business they are in, the roles they play, and how the organisation works. We are asking managers to manage, and ask HR professionals to think much more of the organisation performance rather than solely on the individuals.

And you? What do you think about your Organisational Awareness Levels?