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Psst, there’s potential for disruption in organization design

Reviewed: Organisation Design: Re-defining Complex Systems

orgdesigncoverWhile Nicolay Worren explains that his new book is intended for MBA students and executives, one can’t escape the thought that much of the learning it offers could be useful to a much larger audience. In fact, it might even be inspiring to those confronted by the complex dynamics and ambiguity in modern business design, and hoping for tools to manage that growing complexity. After all, the book’s stated purpose is to promote approaches to organization design that are focused, current, rigorous and pragmatic. In other words, its aim is to bring science to a business where it has been lacking. Organisation Design: Re-defining Complex Systems achieves that, especially with its bold introduction of Axiomatic Design.

The thing about an open scientific approach, however, is that it potentially puts organization design thinking into the minds of any employee at the very time when the structure of agile companies are flattening and employees are having more say in the design of their own work.  As the author points out, research shows “successful firms pushed decision making down the organization, achieved fast, easy and abundant sharing of information, and encouraged creativity and learning among employees.” With this book, organization design is no longer a dark art where corporate witch doctors follow arcane recipes to satisfy only a few privileged stakeholders at the top. Today, organizations are increasingly collaborative systems and, to work most effectively, employees need to understand their role in the system holistically and to act accordingly.

The book is a model of a clear-headed, systems approach in its very layout. Each chapter begins with a bullet-point overview to establish the need for what is about to be discussed. This orientation to salient needs reflects the one thing of primary importance in designing every role and activity in an organization: its purpose. If you’re unclear, for instance, how a role’s purpose supports corporate strategy (i.e. you’re not asking the right questions), you’ll never get the right solution.

While this disciplined orientation to satisfying functional requirements is not exactly new, what is new is the methodology for achieving it. Axiomatic Design, invented by Professor Nam P. Suh (MIT and KAIST universities), is emerging as a formidable tool for managing complexity. A.D. has been applied very successfully in the world of engineering and product design but this seems to be the first book advocating its application to organization design.

Axiomatic Design comprises four design stages: strategic needs, functional requirements, design parameters, and process variables. The magic of Axiomatic Design is in the way design processes zig zag back and forth to ensure coherence between each stage. In fact, as Worren points out, this coherence-checking between design and the strategy it is intended to serve, can have the effect of requiring changes in strategy—it’s a two way street.

According to Axiomatic Design, complexity is a function of coupling or interdependency. In fact, Axiom Number One is called the Independence Axiom which states “Maintain the independence of functional requirements.” For example, an employee will be more prone to make errors when there is ambiguity about who he or she reports to. While there may, in fact, be justifiable reasons for structural ambiguity, those reasons need to be assessed methodically. Here, Worren makes a distinction between necessary complexity and unnecessary complexity.

Normally, it is best to remove all complexity i.e. coupling of ambiguous or conflicting functions. Sometimes, though, complexity can be beneficial, for example, when it enables solutions impossible by any other means or when the ability to deal with complexity is a competitive advantage. With that in mind, the design exercise becomes, first, to root out unnecessary complexity and then to manage or mitigate the risks of the necessary complexity.

To assess where coupling occurs in organization design, a Design Structure Matrix is used to graph the overlaps. At the highest, most superficial level, these matrices can be very easy to understand and work with. Although Worren doesn’t go much deeper than that, the experience of Axiomatic Design as it’s applied to product design promises much more. When design analysis drills down into finer detail and greater scope, the matrix maps can become extremely dense. But that is also where patterns begin to emerge that can point to major systemic changes being required.

To date, most organization design has been based on simple economics models. That is, you pay for someone to perform whatever function you demand and that’s it. In competitive businesses today, that won’t work anymore; employee relationships are becoming as complex as the jobs they are performing. High quality employees demand autonomy and empowerment so that they have a say in the design and performance of their roles. They demand the resources they need to master their roles. And they want clearly defined roles.

The costs of not moving to complexity management in organization design are huge. First, as an organization grows, the number of interactions within the organization grows. For the most part, this is unnecessary complexity that comes with increasingly onerous coordination costs. Every relationship or process handoff is a potential problem that needs to be escalated to management.

In addition to lower performance, the other problem with ambiguity in the workplace is unethical behavior. As the author describes in cases such as Enron, Arthur Anderson and other business disasters, the source of trouble was in ambiguous policies and roles. The reason or excuse for these painful failures was the fog of complexity.

With transparent sharing of knowledge and social learning in well-designed organizations today, it’s hard to imagine empowered employees allowing such situations to develop. Where it will happen, however, is in an organization structure where there isn’t that sense of clarity and transparency, where employees feel inclined to say “it’s not my job, it’s not my problem.”

The greatest hope that shines through in Organization Design: Re-defining Complex Systems is in the promise of greater agility. Using these tools for complexity management and designing employee roles that are more entrepreneurial, organization design becomes dynamic and ongoing. Instead of being forced into a panicky reinvention whenever it’s confronted by market changes, an organization designed top to bottom for managing complexity has the resilience to adapt more readily. That’s a clear-cut edge over competitors burdened with traditional organization structures. In fact, if done right, it could be disruptive.

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