Meta-Design of the Organization -- Roger Martin

Breaking the Code of Change II, Rotman School of Management, August 2-3, 2000

These participant's notes were created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. These should not be viewed as official transcripts of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. These notes have been contributed by David Ing (daviding@systemicbusiness.org) at the IBM Advanced Business Institute ( http://www.ibm.com/abi).

Roger Martin

Go back into time: 1981 as a strategy consultant

Increasingly frustrated that choices don't get made.

• Keep studying over and over again.

• Choices appear to get made, then fall apart.

• Weak consensus, everyone gets nudged over the finish line, and then there's a bump in the road.

• Bad choices.

• Choices get made, but actions not timely, with a long buy-in process.

Greatest enemies of change: implementation and buy-in.

• People don't like to be "bought-in": decision already made.

Implementation:

• Ken Andrews, Concept of Corporate Strategy 1971.

• For the purpose of this book, would like to make a distinction that really isn't real: formulation and implementation.

• Was working with a bank, watching a good teller.
  • Some customers served very quickly, and then would spend the next 10 minutes schmoozing.
  • Asked why.
  • Some customers want me to be as fast as possible, and there are others who see it as social activity, and others who think she's a financial strategy.
  • Was this segmentation approach the strategy of the bank? She didn't know.
  • Where's the teller manual that says you're supposed to segment? No, she was just doing her job.
  • Lesson: If this is implementation, it's hard to distinguish it from what the executives at head office are doing.

Conclusion: Implementation is hard to find.

• It must be "choiceless doing".

• Problem: can't find it.

• Both at the front line and executive levels, making choices under constraints.

• Once there's a dichotomy between strategy and implementation, there's an issue for change.
  • People at the bottom of the hierarchy don't like choiceless doing.
  • They can punish people up the line, by withholding data.

Cascade of choices, down a hierarchy.

• Needs to work better, with information and insight going up the cascade.

Comment: Another retaliation to choiceless doing is to do only that -- work to rule.

Comment: Do executives understand what they're doing? Are they delegating?

• Executives aren't following the circle around to say that they're the problem, not the people below.

Comment from Michael Jensen: Had usually thought about decision rights than choiceless doing.

Comment from Mike Beer: All managers aren't acting as general managers, and don't allow middle managers to lead.

Comment from Russ: Management function of "what is the game plan" and coordination is necessary.

Question: When you have 125,000 people, how do you get them involved?

• Not differentiating between formulation and implementation.

Comment from Martin: Consultant is a short-circuit who can bring the information from the bottom to the top.

• Information withers away if it's not used.

Question: Different from new economy companies where the hierarchy isn't as tall.

• Don't really believe the hype that the new organizations are different -- maybe a little more information enabled.

Comment from Chris Argyris: Went to Scotland to see what Burns and Stalker called "organic". Nothing happened if everything was okay. As soon as there was a major issue, the pyramid emerged.

Question from Tom: Who is involved in the cascade? Tension between real choices and real exchanges of data, and the getting the masses of people involved.

• Sometime pegged as a corporate democrat, but all important decisions aren't appropriate at the bottom level.

  Comment from Larry: The concept of a strategic theme, e.g. Honda machine-minimum, man-maximum.

  Comment from James: Need to blow up formulation and implementation, and have choices up and down the organization.

  Comment: Is there really free will at the bottom of the hierarchy?

• Even at the bottom of the organization, they do have decision rights, but they're narrower.

• They may have different types of information, i.e. lots of customers, or the machine-tool they're using, but not the bigger picture.

Comment from Mike M.: Cognitive psychology are cheerful at giving up decision rights. Two interpretations: mechanistic and choice, and if there's choice, there's emotion. Latest in cognitive psych is the free will is an illusion.

• People at the bottom of the hierarchy are actually angry at giving up choices.

If now putting on the change lens ...

• If want to change, need to understand the status quo -- a blind spot for most change agents.
  • e.g. Hillary Clinton doesn't like the U.S. Health system, but need a lot of time to understand it.

• It is the way it is now, because of a cascade in the organization.

• Don't try to change anything unless you understand why things are the way they are now.

Comment: Understanding why things are as they are isn't so linear.

Comment: Like Michael Jensen's talk, need to uncover those hidden processes.

• Actually need to revere the status quo to find out what's happening.

• Ask: Why does doing what you're doing make lots of sense?

Are there any design principles that could be applied to this, in any case?

• Limited value as a consultant even if you get to change them now, because they'll need to change again.

• Need to be able to modify strategy more seamlessly.

• Want to be able to create organizations that can change more seamlessly?

• Is there a different way to design these cascades, so they're more change-oriented?

(Skip to end slide)

There are two parts in the meta-design:

• 1. Business system choices.

• 2. Learning capabilities design.

• Together create a way of responding to the marketplace.

Regardless of the design of an organization, challenges will arise, no strategy is perfect forever.

• Organizations will have one of two reactions:

• 1. They experience challenges as a bind: either continue with the strategy and hope, or try to make a dangerous change.
  • These are coping mechanisms, that reinforce current plans.

• 2. Experience tensions, find a creative resolution, detect and correct.

Question: Are the challenges what we described yesterday as "scary".

• It depends whether the learning capability design is in place.

Comment from Larry: Some research on "fundamental surprise". Israelis had all of the data about Egyptians, but didn't act.

Need to be open to disconfirming data, but not so far they you get off the rails.

Comment from Mike M: Make a distinction between reactiveness and responsiveness.

Comment from Larry: Figure- ground issue. Was dealing with a firm: either a partnership of equals, or one superstar.

Comment from Mike Beer: Haven't discussed time.

• That's an excuse for managers -- not enough time to think.

• Don't make reasoning explicit to others.

Comment: This is unfair. It's much more about what the executive should put the energy to think about.

• It's an excuse. Saying that you don't have enough data isn't the challenge. Shouldn't say just out of time.

Comment from Mike Beer: Should double-loop, and ask about why there's a lack of capacity, what has the executive done so that he or she doesn't have time. Tim Beckhard has suggested calendar invention 20 years ago.

Discussant -- Amy Edmondson, Harvard Business School

Ideas are too densely packed for 22 pages, need a book.

Spend time on guiding purpose, and aspirations and goals -- in Business System Design -- compelling and important.

Have included what individual human beings want and need: Learning Capabilities Design.

• We start with a non-learning LCD, which starts with avoiding embarrassment.

Business system design is organization, learning capabilities design is personal -- how does these two tie together?

Comment from David Ing: In the Sense & Respond organization, these are tied together through roles and accountabilities. The problem has been that people are not accustomed to committing, and then renegotiating when things change.

Comment from Chris Argyris: Had a conversation with Ken Andrews in 1971. You don't really separate planning and implementation? He said no, but the faculty wanted this division. So this is really the division at the Harvard Business School.

Comment from Mike Jensen: As we put models together, can the capital markets be used as a tool by managers to help the change?