I admit that describing, and distinguishing between, “complete” and “partial” organizations seems a bit esoteric; however, I believe that sustainable entrepreneurs can and should use the five elements of the framework of complete and partial organization proposed by Ahrne and Brunsson (i.e., membership, hierarchy, rules, monitoring and sanctions) to create guidelines for relationships with initial employees—skills and anticipated contributions, behaviors, property rights, communications, authority, standards and rewards—and generate ideas for accessing and integrating valuable knowledge and other support from outside their organizations.
Ahrne and Brunsson’s framework provides sustainable entrepreneurs with reference points for some of the priority issues that need to consider when launching and organizing their businesses. As a practical matter, the five elements in the framework raise the following issues and questions for the founders and other leaders of the company:
- What is to be the preferred “identity” of the company and what skills and personal characteristics among the executives, managers, employees and contractors of the company will be needed in order to achieve that identity? There is arguably no more important task for the founders than making sure that the composition of the company’s “membership” is aligned with its business and social purposes.
- What formal and informal rules will be needed in order for the company to perform its activities smoothly and for managers and employees to understand their scope of authority and to whom they are accountable? In spite of the talk about, and popularity of, “flat organizations”, some degree of hierarchy will emerge in every company; however, the process can be managed to some degree by paying careful attention to how each new member of the company fits into the hierarchy that already exists and the structure that the founders have in mind for the future.
- Sustainable entrepreneurship often involves an explicit or implicit promise to “break all the rules” or “throw the old rules out”; however, companies will not be effective in the long run in achieving their economic and social goals without some guidelines for organizing their day-to-day activities. As they ponder some of the questions posed above, particularly what type of identify they hope to create for their businesses, founders should create a simple set of standards that can be explained to new members and continuously referred to as a source of guidance for expected and responsible behavior.
- While monitoring in larger organizations is often focused on compliance, the founders of a new company should be more concerned with monitoring as a communications and feedback tool. While the founders are certainly interested in making sure that their initial standards for behavior are being observed, the launch phase is an important time for the founders to proactively seeking feedback from members on what is working and not working and collecting ideas from the members as to how best to organize the company.
- While their web of standards will generally be relatively modest, founders must nonetheless consider appropriate incentives and rewards for following and achieving those standards and consider and explain the consequences of failing to fulfill the standards. When the company is very small, the founders can and should personally discuss rewards and negative sanctions with each new member as part of the process of explaining the specific role that they member is expected to have in developing the company’s skills and pursuing the company’s initial economic, technological and social milestones.
It is important to remember that while an organization is “complete” because the founders, as the organizers, have the ability to draw upon on all five elements as they design their companies, there are no hard and fast rules as to the extent to which each of the elements are deployed and/or the overall balance of the elements in the organization design and, in fact, the mix can and should change as the company evolves and new organizational tasks and priorities are identified. All of this suggests that while companies may eventually need or want formal and legalistic contracts with their employees that cover various aspects of the employment relationship, including an understanding of ownership rights in the company’s intellectual property, the wiser course for the first few weeks or months should be a clear and simple exchange of expectations regarding skills and contributions (i.e., where the new member “fits” into the organization today and in the future), behaviors, property rights, communications, authority, standards and rewards that gets the relationship and the company moving forward in the desired direction.
Ahrne and Brunsson’s conceptualization of a “partial” organization is also important for the founders as they search for important organizational building blocks that can be integrated into their new companies quickly without a significant drain on what is typically a limited base of resources. For example, while founders are often criticized for relying too much on credentials from a small group of educational institutions as a condition for employment, certain degrees do serve as a valuable requirement for membership in new companies and thus reduce the search costs and risks associated with building the initial team. In fact, efforts of insurgents to break the grip of universities on providing employees with the desired technical skills to new companies depend heavily on their ability to produce graduates who can meet the standards set by employers. If they cannot succeed, as has been the case with many of the “hack schools” and “coding boot camps” launched to meet the strong demand for software developers with promises of turning students in IT professionals in just six to eight weeks, founders will ignore them in their searches for new talent.
Founders can also seek reputational advantages, and often much needed financial support, through business competitions and incubator and accelerator programs organized by others. These competitions and programs allow the founders to continue to operate independently; however, they provide access to advice, facilities, investors and strategic partners that are invaluable during the early stages of a new company. Being accepted to one of the programs, or achieving success in a competition, sends a sign out into the new company’s external environment that it is to be taken seriously. At the same time, however, the founders will need to be prepared to sacrifice some degree of autonomy by agreeing to the covenants imposed on them as a condition of the support. Some of these covenants make it more difficult for the companies to change course as quickly as they might like, but others (i.e., developing and implementing procedures for protecting intellectual property rights) should be done in any case and the affiliation with the competition or program serves as a reasonable and important standard for the company. Competitions and programs also facilitate stakeholder engagement as many of them require the companies that they accept to participate in conferences and other events that bring them in contact with parties that may be interested in other types of partial organizations such as joint ventures or informal groups that share information on emerging technologies that the competitions and programs have identified in the criteria they have used for selection.
Another way that partial organization appears within fledgling companies is through the adoption, or more often adaptation, of guidelines and principles promulgated by respected external standards setting organizations. For example, sustainable entrepreneurs may embrace broadly defined principles such as the United Nations Global Compact and/or use “size appropriate” versions of ISO 26000 to establish basic and simple rules and procedures to integrate social responsibility into the day-to-day activities of their companies. The advantages of this approach include not having to go through a certification process as a condition to “standards membership”; however, founders must understand that most of the standards are intended to be “universal” and thus require customization to the needs and activities of their specific businesses. In addition, standards are of little value unless there is some accountability and founders must invest time and effort in developing internal monitoring and auditing processes. Another thing to consider is that while standards can be selected and adopted by founders on their own, the better way is to engage the company’s stakeholders in the process. This can be another drain on the founders’ energies; however, engaging with employees and customers not only makes the standards more valuable and realistic but also contributes to the success and integrity of the company’s business development plans.
Finally, founders, as well as the initial members of their new companies, can tap into alternative organizational structures, such as communities of practice, to collect new ideas from outside their companies that can be quickly disseminated and implemented internally. While there is an understandable tendency within new companies to avoid sharing new products or technologies with actual or potential competitors, communities of practice provide opportunities for skills development that small firms cannot offer due to their limited resources. Communities of practice can be used to solve problems that inevitably crop up during the development of the first product or service and are perhaps most valuable as vehicles for developing standards of practice for the new company. Founders should proactively encourage engagement in communities of practice by their employees, but care should be taken to instruct employees about the need for caution in exchanging information that might compromise the company’s proprietary rights in technologies and ideas.
Sources: G. Ahrne and N. Brunsson, “Organization outside organizations: The significance of partial organization”, Organization, 18(1) (2011), 83; and A. Rasche, F. de Bakker and J. Moon, “Complete and Partial Organizing in Corporate Social Responsibility”, Journal of Business Ethics, 115 (July 2013), 651, 652-653.
Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project and more materials on organizational design are available from the Project by clicking here.