Growth creates complexity, and complexity kills growth.
The question is why?
The simple answer is because of the restrictive & tropophobic nature of dominant hierarchies (i.e., Bureaucracies) that most companies still have in place, where, over time and despite numerous workshops and a myriad of transformational attempts, senior management keeps moving farther and farther away from the front lines and the founder’s vision.
Companies with restrictive and tropophobic organizational structures, namely, most of the existing ones, will never have a true sense of their mission, let alone their Vision and whatever little sense may have been initially imbued by the founder will soon be lost. And yes, in today’s fast-moving markets, if you remain a bureaucracy….. you are most certainly doomed!
But what if . . . complexity were to become your best ally?
Well, the good news is that this is what most successful organizations are already doing! And, guess what? Most of them are not even aware of it! e.g., Amazon, Microsoft, Apple, Netflix.
Yes, it is a matter of transforming the weakness of complexity into a strength. However, in order to do this, senior management must be fully aware of the organizational design principles behind any organizational structure, so that every person in the organization not only comprehends and understands the organization’s fundamental purpose, i.e., the Founder’s Vision, but much more important, is fully committed to it by her/his own intrinsic conviction!
Zook & Allen state “In a database that we have of 8,000 companies, we found that only about one in nine companies in the world in the last 10 years has achieved a modest level of sustained and profitable growth. It is becoming more difficult, and the cycle times of businesses in many industries are becoming like the life cycles of fruit flies — shorter and shorter. Young companies scale ever faster, setting new records for doing that every decade and older companies can collapse much faster than we have ever seen before.”
This is part of the increasing relevant uncertainties and systems discontinuities already pointed out back in 1963 by social scientist Fred Emery.
This is further supported by Zook’s statistics “One of the most powerful statistics from our five-year study, where we visited 40 countries, is that 94% of the largest companies say that there are barriers to achieving their growth targets….and 94% of these barriers are now internal.”
These barriers are not lack of market share, market saturation, technologies impossible to have, unbeatable competitors, government regulations, or economic slowdown. They clearly state that 94% of the time these barriers are internal, and more than two-thirds of these primary reasons were related to complexity and how some companies age prematurely.
This should not be any surprise since these internal problems began to emerge and be first noticed in the 60’s, as pointed out by Fred Emery, precisely when the world’s environment began to experience increasing relevant uncertainties and systems discontinuities which rendered the bureaucratic structure no longer useful, since it was not designed for this type of environment (i.e. turbulent and uncertain) but for a competitive environment where the command-and-control approach worked beautifully.
What Zook and Allen call “the curse of the matrix organization” is simply the consequence of a growing bureaucracy. In their study, they found that most companies that got to be over $5 billion in size developed 9 to 14 layers between management and the front line!
They call this “distortions of bureaucracy,” but these are not distortions, this is exactly how bureaucratic structures are designed to work, these are simply the consequences of a growing bureaucracy where everything becomes distorted and the original founder’s Vision is lost amongst the myriad of goals and objectives.
The best measures of a company’s health are the number of elements of the founder’s mentality.
L. Brands’ Les Wexner epitomizes the founder’s mentality. Wexner was listed in a recent study as the most successful still-running CEO founder in the world. Unfortunately, with the exception of a handful of companies such as Netflix, Apple, Google, Virgin, SpaceX, only 13% of the people within most companies relate to the mission and even less to their Vision.
Is it only common sense that when people feel emotionally connected to the business, they are at least five times more likely to invest personal time, making sure they solve any given problem on the spot or find an innovative solution.
Alas! The difference between a company where everybody feels empowered by its Vision and a company where people can’t wait to go home at the end of the day.
Is it any wonder why companies that fail to see the full potential in their core also fail to grow?
The need to feel “empowered” by a common purpose or Vision is more evident with millennials as pointed out by Zook “When you look at surveys of what millennials want, right at the top is the values of the company and what it stands for and having some special purpose — usually above money and many other financial considerations.” There is no greater empowerment than that of a shared Ideal. Hence, the ever-growing importance of the founder’s Vision.
The “solution” offered by Zook and Allen is creating many “founder experiences” in a company and/or through feedback, making sure the people who are making the decisions, are the people at the frontline.
I have two problems with this “solution.”
First, if at all possible, creating many “founder experiences” would dilute the whole Vision and moral authority.
Secondly, this “solution” could only work if the right organizational structure is already in place, to begin with!
Warren Buffet wisely and intuitive has talked about the “ABCs of failure,” i.e., Arrogance, Bureaucracy, and Complacency. These three factors demonstrate beautifully the importance of the right organizational design principles, which are, in essence, the antidote for the ABCs of failure, namely, for Arrogance: Humility; for Bureaucracy: Participative Democracy/Transparency; and for Complacency: the founder’s Vision, moral authority, and Integrity!
JC Wandemberg Ph.D.
President & Founder
About the author: Dr. Wandemberg is an international consultant, professor, and analyst of economic, environmental, social, managerial, marketing, and political issues. For the past 30 years Dr. Wandemberg has collaborated with corporations, communities, and organizations to integrate sustainability through self-transformation processes and Open Systems Design Principles, thus, catalyzing a Culture of Trust, Transparency, and Integrity.