Category Archives: Organizational Design

Using Short Meetings to Stay on Track and In Touch

As companies grow and bring on more and more employees and add new hierarchical levels it becomes increasingly difficult to maintain the entrepreneurial culture and atmosphere that existed when the business was first launched and everyone worked in the same room.  Moreover, the elaborate organizational structure that emerges when the company grows is accompanied by greater risk of breakdowns in communication.  Many companies respond to these issues by scheduling lengthy meeting and retreats; however, these sessions can be costly and are often seen as unproductive.  An alternative should be considered is regularly scheduled short meetings—no more than 15 minutes—of all employees to interact and communicate on specific topics of immediate concern and value to the business.  The format can be customized to the needs of the particularly company and ideas might be gathered from the following examples:

 

  • Each participant can quickly identify his or her one or two main priorities for the day and others can then provide information to assist in accomplishing those priorities or even change their own plans if necessary to facilitate completion of what appear to be the most important projects from a company-wide perspective.  For example, if the procurement department is having trouble with a vendor the CEO or CFO may offer to get involved immediately to ensure that the supply chain is not compromised.  If the manufacturing department reports that it is having problems with certain equipment the sales group can quickly contact customers to discuss necessary changes in delivery schedules.
  • Senior managers can report on what areas they intend to focus on during the day and thus provide those reporting to them with an idea of what the current priorities might be among the company leaders.  Interestingly, this process also provides the CEO with an insight into certain attributes of the management and communications styles of the members of the executive team.  A CEO may discover that a group head is spending too much time micro-managing the work of his or her subordinates and may need to work with that person to clarify what the proper objectives should be.  A tendency of a senior manager to horde information in these meetings may also signal problems that the CEO will need to address before coordination and communications issues surface.
  • Salespersons can be required to report all new accounts, or significant new opportunities with existing accounts, so that managers and employees in other departments can mobilize quickly to provide support directly to the customer.  The key to this process is using the information provided by the salespersons to quickly reach a consensus on which accounts are most important on that particular day.  This allows everyone to shift their priorities and narrow the focus of their activities for the remainder of the day.
  • Having employees mention any significant appointments with vendors or customers, or other anticipated absences from the office, allows others who need to speak with these employees to re-arrange their own schedules to avoid conflicts with the appointments or absences.  The byproduct is more efficient communication and a reduction in the time lost waiting for someone who is otherwise occupied to respond on a particular project.  In many cases employees find that a simple five minute face-to-face conversation right after the meeting accomplishes more than a string of e-mails and voicemails that extend over the course of an entire day or even longer.
  • Rather than simply be a recital of “to do” lists, important as that may be, companies with a larger number of employees may use the meeting to disseminate information about the overall performance of the business and the specific activities of particular groups or departments.  Senior management may identify particular key performance indicators that can be updated and discussed at regular intervals.  This gives all employees a chance to feel move involved with the company’s overall direction and perhaps offer their own ideas on how performance can be improved.  The meeting can also be used as an opportunity to recognize and celebrate different employees for their activities.

In addition to meetings with all employees, the CEO may convene short daily summits with a smaller group consisting of all of the members of the senior management team solely to focus on progress against, and their activities relating to, the company’s overall strategic business plan.  The purpose of these meetings is identify what the senior managers have been doing to achieve specific quarterly and annual goals and objectives and to allow the CEO to evaluate their performance and determine whether there are any significant issues or problems that might be preventing the participants from executing the activities expected of them and their subordinates as part of the strategic plan.

 

Regardless of how the meeting is structured, time limits should be ruthlessly enforced and meetings should begin and end at the same time each day so that the exercise becomes part of the organizational culture of the company.  The focus should be on communicating, prioritizing and perhaps celebrating company performance and the utility should be obvious to all in attendance.  These meetings should not become strategy sessions; however, they should be efficient enough to mop up all the nitty-gritty issues that can get in the way of the serious brainstorming and long-term problem solving that should occur when and if a strategy meeting is convened.

Evaluating the Effectiveness of Social Networks

While simply having a reliable map of a network is valuable, it is also important to assess the performance of the network.  Hoppe and Reinelt reported on several different dimensions for evaluating network effectiveness, beginning with “connectivity”.  The purpose of social network analysis on this topic is to identify which individuals are core or peripheral members of the network; identify the points in the network where bonding and bridging are occurring; and identify the persons who appear to be the most influential within the network.  Evaluation questions relating to connectivity include:

  • Does the structure of network connectivity enable efficient sharing of information, ideas, and resources?
  • Is the network expanding and growing more interconnected over time? How far does the network reach?
  • Does the network effectively bridge clusters (e.g., sectors, communities, fields, and perspectives)? Where in the network are there unlikely alliances?
  • What changes in connectivity have resulted from explicit interventions, such as a leadership development program?

Social network analysis alone is not sufficient to fully understand all the connections that appear when a network is mapped and the data analysis should be supplemented by other research techniques, such as interviews, to get a fully picture of what persons are actually doing with one another and how and why they connect.

A second topic is “overall network health”, which focuses on various measures of network performance and calls for consideration of the following evaluation questions:

  • What is the level of trust among members in the network?
  • How diverse is the network?
  • Are people participating and exercising leadership as they are able to and would like?
  • Is the structure appropriate for the work of the network?
  • What are the power relationships within the network and how are decisions made? How well do networks manage conflicts?
  • Is the network balanced and dynamic (e.g., capable of growing more inclusive while sustaining collaboration)?
  • What changes in network health have resulted from explicit interventions, such as a leadership development program?

Hoppe and Reinelt pointed out that evaluating overall network health requires collecting and analyzing responses from a diverse group of network members in both the core and periphery parts of the network.  When conducting surveys, copies of the network maps should be distributed so that respondents can get a clear picture of what the network appears to look like and the types of connections that are present and working.

A third topic of interest is “network outcomes and impact” which can be evaluated using the following questions:

  • Is there evidence of greater coordination or collaboration among leaders?
  • Does the network promote higher levels of civic participation and engagement in each of its members?
  • Does the network make the most of scarce resources to produce desired results? Are more innovative products being developed?
  • Is the network positively influencing policy decision-making or how resources are allocated?
  • What changes in network outcomes and impact have resulted from explicit interventions, such as a leadership development program?

The best ways to gather information on network outcomes and impacts are interviews, case studies and traditional survey methods.

Source: B. Hoppe and C. Reinelt, “Social Network Analysis and the Evolution of Leadership Networks”, The Leadership Quarterly, 21 (2010), 600, 604-606.

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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.

Designing Organizational Structures for Sustainability

The alignment of organizational design and sustainability begins with the development of a sustainability strategy and accompanying goals and priorities.  In order for the sustainability strategy to be effective and successful, it must align with the structure, competencies and culture of the company.  When designing the organizational structure for sustainability, several important principles need to be considered:

  • While placement within the organizational structure is an issue, and may vary depending on the circumstances, there should generally be some form of formal sustainability function overseen by a single designated senior executive. While sustainability may be new to the company, leadership should be vested in someone who has the requisite credentials and experience working in the area.  Science and engineering backgrounds are helpful and common and it is also a significant advantage if the sustainability executive has worked inside the organization since relationships and networking will be important in establishing the initiative and understanding how to integrate sustainability into existing operational habits.
  • The sustainability initiative, and the accompanying changes to the organizational structure, must have executive sponsorship and the CEO must be a visible proponent of the sustainability vision for the company. Executive sponsorship accelerates engagement by employees and business units, but even better results can be expected if the CEO is proactive and assume personal leadership of a highly visible sustainability program.
  • Structure is driven by the specific sustainability-related commitments that are made by the board of directors and members of the senior executive team following consultation with internal and external stakeholders. Examples of sustainability-related commitment topics include climate change, waste reduction and management, resource consumption, education, human rights, community engagement and procurement (i.e., supply chain management).  Commitments should be pursued through a combination of corporate policies, sustainability policies and employee initiatives.
  • The board of directors should also signal its support of the sustainability initiative by creating a separate committee dedicated to sustainability and corporate social responsibility or designating one director to provide oversight to sustainability-related initiatives. As is the case with the CEO, board members should do more than just oversee the ideas of others and should actively initiate or drive a sustainability-related initiative.
  • As companies grow and the scope of the sustainability initiative expands, consideration should be given to creating other forms of organizational engagement such as executive sustainability advisory councils (i.e., members of the senior leadership team, including an executive sponsor, who reported to the CEO), mid-level employee sustainability councils, “green teams” and external advisory councils with representative from key external stakeholders.
  • The sustainability executive should be supported by a cross-functional advisory team with members drawn from corporate communications, operations, legal, sales and marketing, human resources and EHS. Creation of such a team provides the executive with access to divergent views from throughout the company and also facilitates sharing of best practices and regular communications across internal organizational boundaries to make sure that everyone is aware of what is being done on sustainability and that programs are properly coordinated and aligned with the company’s strategic vision and stated goals for sustainability.
  • The sustainability executive should also be supported by resources exclusively available to the sustainability function. Generally this includes managers for metrics and reporting, social programs and communications/public affairs/marketing.  Internal support for day-to-day operation and reporting allows the sustainability executive to remain focused on strategic considerations and necessary outward communications with board members, the CEO and other executives, external stakeholders and the other forms of organizational engagement mentioned above.
  • Staffing levels for sustainability-related activities are driven by a number of factors including the size and stage of development of the company, the importance of sustainability to the mission and overall strategic goals of the company, risk and industry. These factors also influence the focus of sustainability activities, which generally include a mix of environmental issues, philanthropy and community relations, governance/risk/compliance, human rights and employee relations.
  • The core responsibilities for implementing the sustainability programs should be vested in departments have close ties to stakeholders and the requisite decision-making powers with respect to issues related to the programs. Common choices include the corporate, legal or public affairs departments.
  • The leader of the sustainability initiative should have a direct reporting relationship with both the CEO and the board of directors in order to send a signal to employees and other stakeholders about the important of the initiative and provide the initiative with access to the support and resources available from high-level executives and managers in other departments.
  • An organizational structure should be selected that achieves the appropriate level of interaction with employees and creates value to the business. The optimal structure may change over time as the sustainability initiative gains traction and becomes more embedded in day-to-day operations and decisions.
  • Clear procedures regarding decision rights should be established, recognizing the integration of sustainability programs and goals often challenge existing decision rights. It is important to identify the types of decisions that will need to be made, the parties that will be involved in making those decisions and the managers who will be entrusted with implementing the decisions.
  • Sustainability performance must be integrated into day-to-day management activities and compensation programs and responsibilities, performance reviews and compensation models for all employees must be aligned with the company’s sustainability objectives in order to encourage and reward contributions to innovation and creative problem solving.
  • In order to achieve the requisite integration and employee buy-in, programs must be created to develop a basis awareness of the company’s sustainability strategy, goals and priorities, educate employees about opportunities and support employee efforts.
  • The internal structure should be aligned with the external structure that the company relies upon to engage with stakeholders since one of the most important aspects of a sustainability program is external accountability. External stakeholders need to know that their concerns and questions will be addressed and that begins with knowing how best to access the company.
  • The sustainability strategy must include both transparent goals with metrics that can be evaluated by both internal and external stakeholders and provision for reporting on the results of the sustainability programs.

Sources: H. Farr, Organizational Structure for Sustainability (July 14, 2011); Corporate Responsibility Officers Association, Structuring and Staffing Corporate Responsibility: A Guidebook (2010); A. Longsworth, H. Doran and J. Webber, “The Sustainability Executive: Profile and Progress” (PWC, September 2012); and National Association for Environmental Management, EHS & Sustainability Staffing and Structure: Benchmark Report (November 2012).

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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.


Launching and Supporting Communities of Practice

Communities of practice have joined cross-functional teams, customer- or product-focused business units and work groups as dynamic and innovative organizational forms that can be used to collect and disseminate ideas and information throughout organizations.   Wenger and Snyder defined and illustrated communities of practice as being “groups of people informally bound together by shared expertise and passion for a joint enterprise—engineers engaged in deep-water drilling, for example, consultants who specialize in strategic marketing or frontline managers in charge of check processing at a large commercial bank”.   In general, a community of practice can be viewed as a group of professionals working in a common field who come together on a relatively informal basis to gather and share information, pass on knowledge and contribute to the development of their field of expertise.  The end product of this process, which has become easier to achieve due to the development of communications technologies, is innovative solutions that can be deployed and commercialized within the formal organizations where the community members work.

While communities of practice thrive relatively autonomously on the individual passions of their members, something which cannot be artificially created or maintained, communities nonetheless need some level of support and nurturing from their organizations and should adopt certain key operational features such as the following:

  • In general, the members of a community of practice select and organize themselves based on shared passion, commitment and identification with the expertise of the membership; however, even though some of the members may already be communicating and sharing informally through social networks, it is often necessary for their organizations to establish processes that help support the formation and launch of new communities. For example, some organizations may hire consultants with experienced in identifying, designing and working with networks and communities and practice.
  • Communities are often launched through a series of initial meetings and interviews with prospective members that serve as the foundation for the development of plans for the activities of the community. At this stage it is important to reach out across organizational and geographic boundaries to broaden the scope of the community members and, at the same time, expand the various points of views that will be represented within the community.
  • Undoubtedly the members of the community will share a range of common interests; however, in order to be effective the members must define the domain of the community, taking care to be sure that it is not too broad and thus not immediately applicable to the day-to-day tasks that must be carried out in the individual practices of the members.
  • While members are drawn to communities of practice as vehicles for sharing and acquiring existing knowledge, the overall goals of the community should be to discover new knowledge and invent new practices and innovative solutions to problems encountered in practice. Communities of practice should also seek to develop a collective and strategic voice that drives change within their organizations.
  • Absence of hierarchy, with the status of each member being based on expertise and contribution to the development of leading ideas rather than any formal position or authority, is a hallmark of communities of practice; however, there must be a core or nucleus of people who assume responsibility for creating and sustaining the community’s collective memory, often with technical and administrative support provided by the organization.
  • Communities of practice should develop and rely on both formal and informal processes for building and exchanging knowledge and skills development and learning. Organizations should consider providing communities with support teams that can help with development of the communities, coordinate a regular schedule of community events such as conferences, set up and maintain community libraries and provide technical support.
  • Senior executives should be prepared to invest time and money to launch the communities and integrate them into the organization in ways that will allow them to have the most positive impact. Organizations should serious consider providing their new communities of practice with official sponsors composed of small groups of senior managers and should ensure that time spent participating in communities is acknowledged as having value to the organization.  Organizations often taken steps to recognize the efforts of community members and emphasize that participation in communities is a privilege that carries both status and obligations.
  • While members will undoubtedly enjoy exchanging information, anecdotes, tips and grievances with their colleagues, the value of their participation in the community lies in enhancing their ability to achieve both individual and collective goals should be assessed. Improvements in individual skills are relatively easy to measure; however, members also want to see that these improvements are having a positive impact on their relationship with the organization.
  • Like any initiative that calls for investment of organizational resources, it is necessary to determine the value of nurturing communities of practices. The problem, of course, is that all of the benefits of the communities are generally not observed in the communities themselves but in the actions of the members as they engage in their practices in their individual groups and teams throughout the organization.  Anecdotal evidence of the diversity and range of activities engaged in by the communities should be systematically gathered and organized into a database and published in newsletters and reports.  An organized database of evidence makes it easier to conduct analyses that can be turned into more traditional performance measures, such as quantifying savings enjoyed by the organization and/or increased revenues and identifying ways in which organizations are changing their processes and practices.
  • A community of practice should last only as long as there is interest in maintaining the group and the members believe they have something to contribute and something to learn from remaining connected. Core members of the community should monitor the level of interest and activity and ensure that if and when the community is no longer sustainable that the artifacts of the knowledge created within the community are collected, organized and stored so that they can still be accessed when necessary.

Sources: E. Wenger and W. Snyder, “Communities of Practice: The Organizational Frontier”, Harvard Business Review (January-February 2000), 139, https://hbr.org/2000/01/communities-of-practice-the-organizational-frontier; A. Griffeths and J. Petrick, “Corporate architectures for sustainability”, International Journal of Operations and Production Management, 21(12) (2001), 1573; and E. and B. Wenger-Trayner, Communities of Practice: A Brief Introduction (April 15, 2015).

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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.

How the Complete/Partial Organization Framework Can Help You Design Your Startup

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.

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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.

Designing and Managing Effective Teams

Teams and team-based organizations are a specialized form of a network organization that has gained popularity as organizations seek ways to flatten their hierarchical structures, gain more flexibility and effectively combine expertise from different functional areas to solve problems that were presented to group members as projects to be completed.  Important organizational benefits of teams include improved productivity and quality, improved quality of work life for employees, lower absenteeism and turnover, increased innovation and improved organizational adaptability and flexibility, and team management can actually become an organizational core competency that can be leveraged to achieve important strategic objectives such as accelerated new product development, efficient production and improved responsiveness to the service requirements of key customers; however, in order for senior management to achieve these benefits they need to grapple with and resolve difficult issues such as how to structure teams and select team members, how much authority and autonomy to delegate to teams, how to motivate team members, and how to make teams accountable for their actions. 

The International Center for Growth-Oriented Entrepreneurship has just released a chapter on "Team Management" from its Library of Resources for Growth-Oriented Entrepreneurs on Organizational Design which is available for free downloading and sharing by clicking here.  Some important things you need to know about technology management include the following: 

1.         Commonly mentioned categories of teams include informal teams, which are usually formed initially for social purposes among persons with a set of common concerns and interests such as improving working conditions or sharing information on specialized topics; “traditional” teams in the organizational structure such groups (e.g., “departments”) formed to oversee and operate in functional areas with a leader (i.e., a supervisor or manager) assigned by the organization who is vested with legitimate power and authority to manage the group; problem-solving teams, which are temporary groups of members drawn from different functional teams who come together to find solutions to issues and problems that cannot be resolved within the standard organizational structure;  leadership teams created at the top of the organizational hierarchy to collaborate on the development and implementation of organizational goals (i.e., development and launch of new products) and related strategies; parallel teams that supplement the normal work processes of the company and typically focus on specific activities and functions that cannot otherwise be handled effectively within the regular organizational structure (e.g., quality circles, quality improvement teams, productivity improvement groups and employee participation teams); project teams which are organized to focus on a specific activity with the stated goal of creating a one-time output within a fixed time frame; and work teams, which are cross-functional and multi-skilled groups vested with responsibility for transforming various inputs into products or services (e.g., production, administrative support, customer sales and service, and professional support).

2.         Significant barriers to the collaboration required for a team to achieve the goals for which it was established include large size, diversity and virtual participation.  For example, once the size of the team goes beyond 20 members there appears to be a natural tendency for the level of cooperation to decrease and, as such, affirmative steps must be taken to avert problems and sustain the appropriate level of collaboration as team size increases.  In addition, as team diversity—measured by the proportion of strangers on the team and the level of diversity of background and experience—increases it becomes more likely that the members would cut back on their efforts to collaborate and share knowledge.  Virtual participation allows companies to reduce and control travel and other expenses traditionally associated with face-to-face meetings; however, the greater the reliance on virtual participation the higher the likelihood that cooperation among the virtual team members will decline unless steps have been taken in advance to promote and support a collaborative culture.

3.         Researchers have identified characteristics of effective teams including clear direction and responsibilities, knowledgeable members, reasonable operating procedures, healthy interpersonal relationships, which means that each member understands and accepts the individual values of other members and embraces the diversity as a means for developing stronger and effective teams, sharing successes and failures, and strong external relationships.

4.         Organizational practices associated with effective team activities include executive support for collaborative behavior and role modeling of collaboration among members of the senior executive team; strongly embedded norms of mentoring and coaching within the organizational culture; training for managers and employees in the skills and techniques that are necessary for effective collaboration including guidance on how to build and maintain networking relationships, communications skills and conflict resolution; fostering of a sense of community within the company that encourages people to freely and happily share knowledge and information that can be used by teams to effectively pursue their goals and objectives; and management of teams by leaders who are both task- and relationship-oriented and who have been be trained on when and how tasks or relationships should be emphasized as the work of a team unfolds.

5.         Team composition and structure should not be left to chance and leaders should be mindful of certain tried and true lessons for maximizing the chances that a team will successfully achieve the goals and objectives established for it: members with specific training and background relative to the achievement of particular goals and objectives of the team and influence within their regular departments to sell the ideas of the team and access the department resources required for the team to be successful; a material subset of members with preexisting (“heritage”) relationships sufficient to create a foundation for strong collaboration, communication and information sharing; clearly defined roles and responsibilities, tied to specialized expertise, for each team member from the beginning; clear team goals, although the path to be followed to achieve those goals should be left relatively ambiguous in order to promote creativity, collaboration and sharing of ideas; good interpersonal relationships and reasonable operating procedures that promote strong communication, equal participation and shared ownership of both successes and failures arising from the team’s activities; and members with strong abilities to read the emotions of their colleagues and consider and keep track of what they feel, know and believe.

6.         Researchers have argued that teams go through several identifiable stages of development in order to reach the point where they can be effective and successful: forming, which is the initial stage during which team members first get to know one another and the group focuses on evaluating the tasks assigned to the team and establishing group rules for interacting with one another is the stage when team members become acquainted with one another; storming, which emerges once the novelty associated with formation disappears and members begin to jockey for influence over their individual roles and the entire process the team will be following to fulfill task requirements and achieve its goals; norming, which is the stage at which team members focus on identifying and implementing accepted norms and standards of performance with respect to basic yet important questions such as the expected level of quality, the meaning and importance of schedules and deadlines, attendance and participation at meeting and establishment of subgroups within the larger team; performing, which is the stage at which the team is ready to work on its assigned tasks and become productive; and adjournment, which is the point where the activities of the team end for one of several reasons: the tasks assigned to the team have been completed, one or more of the members of the team leave or a decision is made not to move forward any more with pursuit of the assigned tasks.

Google to Alphabet: An Ambitious New Conglomerate Experiment

In August 2015 Google Inc. announced a dramatic and sweeping change in its organizational structure: Google would become one of several autonomous subsidiaries of a newly-formed holding company named “Alphabet”.  The restructuring would separate, at least on paper, the company’s wildly successful search business, which was quite profitable and generated significant amounts of cash, from a handful of other initiatives focusing on ambitious and difficult problems such as developing a driverless car and life-extension technology.  While the company’s efforts outside of the search business had attracted a good deal of publicity and scrutiny, they were far from profitable and quite risky.  The company’s founders, Larry Page and Sergey Brin, argued that by putting Google and the other businesses into separate subsidiaries, and forming new subsidiaries for other businesses the company launched or acquired in the future, the operations of the entire company could be made cleaner and more accountable and they could avoid getting too “comfortable”, relying on incremental changes, and continue to pursue the revolutionary ideas that would drive the new growth areas that Alphabet needed to stay relevant.  According to Page, “Alphabet is about business prospering through strong leaders and independence”, and Page explained that each subsidiary would have a strong CEO and that the role of the founders would be to “rigorously handle capital allocation and work to make sure each business is executing well”.

Initially the portfolio of Alphabet subsidiaries would include Nest (smart homes), Fiber (affordable and super-fast Internet and cable television for consumers), Calico (life-extension technology), Google X (drones and self-driving cars), Sidewalk Labs (new technologies to improve urban life) and Google Ventures and Google Capital (early and late-stage investments) apart from the Google subsidiary itself, which would still have a sprawling mandate covering search, apps, Android, You Tube, ads, maps and technical infrastructure.  The company enjoyed a modest bump up in its market capitalization after the restructuring was announced and, not surprisingly, the move was subjected to a high level of scrutiny and analysis.  An article in The New York Times written just after the announcement of the restructuring noted that many pundits had been struck by the decision of the company’s founders to create what amounted to a “conglomerate” and set out to explore what the experiences of three well known 20th century conglomerates—Berkshire Hathaway, General Electric (“GE”) and AT&T/Bell Labs—might tell us about what could be in store for Alphabet and some of the issues that Page and Brin will likely need to address. 

Berkshire Hathaway has been guided for decades by Warren Buffett, who has made himself one of the wealthiest people in the world and turned his company into one of the most valuable in the world through a continuous stream of acquisitions of businesses in a wide array of industries and markets. While insurance is the largest sector in the Berkshire Hathaway portfolio, Buffett has also been willing to place bets on mobile homes, private jets, Heinz ketchup, Duracell batteries and aerospace parts.  One of the apparent similarities between Berkshire Hathaway and the proposed Alphabet structure is the practice, rigorously followed by Buffett, of providing management of the various businesses with broad discretion to manage day-to-day operations.  In fact, Buffett keeps only 24 employees in Berkshire Hathaway’s corporate office in Omaha to watch over businesses that employ 340,000 people worldwide.  A key difference, however, is that Berkshire Hathaway’s portfolio of businesses was carefully culled to emphasize companies that were “well established, with proven models for profitability, at favorable prices” and which were based on proven and/or reasonably projectable business models.  In fact, Buffett rarely invested in businesses that represented large bets on a particular technology.  While Page and Brin promise Buffett-like autonomy for the Alphabet subsidiaries, for now at least they will all be seeking to create products and services that do not exist and for which the markets are far from certain.  As such, Alphabet shareholders cannot expect the same sort of smooth ride that Buffett has provided to his investors, especially since nobody can credibly predict the outcome of the innovative activities the subsidiaries will be undertaking.  There is the possibility that Page and Brin will fold established businesses into future subsidiaries, as Buffett has done, but this would clearly be a radical see change from where they were at the time they announced the restructuring. 

The initial similarities between GE and Alphabet follow from the diverse range of technologies and businesses that GE has been involved with since the company was launched with the help of Thomas Edison.  GE researchers, designers, manufacturers and marketers have played an innovative and pivotal role in the development, improvement and commercialization of light bulbs, locomotives, X-ray machines, electrical appliances, radios and televisions, fiber optic cables and M.R.I. body scanners, to name just a handful of the technologies that bear the imprint of GE.  The businesses of the initial Alphabet subsidiaries—for example, search and driverless cars—are certainly as different as light bulbs and locomotives; however, for Alphabet to be able to tap into GE’s secret formula it will need to find a way to make its various business lines stronger under the Alphabet umbrella than they would be standing on their own.  GE did this by maintaining a strong organizational culture among independently operated businesses by creating and vigorously guardian linkages between the businesses and the people that worked in them that benefitted everyone.  GE was also adroit at leveraging a centralized research and development capacity to create and disseminate technologies that could be applied across a range of businesses (e.g., laser technology developed by GE researchers was used by business units active in medical devices and telecommunications).  The question for Alphabet, as posed in the article: “… is whether it becomes a centralized innovation machine or a bunch of separate projects that happen to have the same corporate parent but not much else in common. Can it make its various initiatives more than the sum of their parts?” 

AT&T/Bell Labs aligns well with Alphabet’s aspirations for successfully solving difficult and life-changing technological problems.  Just as Alphabet can reasonably expect to generate significant revenues from the Google search business, AT&T could rely on a continuous stream of cash from its position as the monopoly provider of telephone services in the US.  In 1925 AT&T set up Bell Labs as a free-standing research unit and over the next 70 years Bell Labs, using money provided by AT&T, was a preeminent center of basic research that developed technologies that were central to a wide range of inventions including the transistor, the laser, communications satellites and solar cells.  It was not always clear that AT&T shareholders benefitted significantly from the work done at Bell Labs, particularly when the work was basic research that was accessible to other companies; however, the parent company’s support of Bell Labs was not overly concerning to its shareholders as long as the profits coming from the monopoly continued to pour in.  In other words, there was plenty to go around.  The profits from Google might serve a similar purpose within Alphabet: a lot of the research in the relatively new and unknown fields occupied by the other subsidiaries is essentially “basic”.  The  founders will need to strike the appropriate balance in allocating Google-generated profits and will need to be mindful that while Google is strong in search right now there are no shortage of competitors and regulators around the world clearly have reigning in Google’s actual or perceived monopoly on their agendas. 

Google and its founders are not strangers to being compared to iconic businesses frm the past.  For example, in a December 2014 article in The New Yorker, Lemann described some parallels between the “pre-Alphabet” Google and General Motors (“GM”) in its early days.  First, both Google and GM accelerated their growth paths through aggressive acquisition of small companies that provided technology and, in the case of Google, large crowds of users that could be usefully integrated into their larger businesses.  Second, Alfred P. Stone, GM’s iconic leader from the early 1920s, foreshadowed Google’s fixation on “the user” by offering a range of styles and prices for consumers that allowed GM to tap into the subtleties of demand rather than relying on the on-color, one-style and one-price approach used by competitors such as Ford.  Third, Sloan, Page and Brin were all in agreement that they oversaw “engineering” companies.  Finally, the three men also shared a hunger for pursuing high-risk, high-reward projects that flew in the face on the demands for short-term earnings and profits that came from the investment community.  Lemann noted that Sloan actually launched a technical center that looked a lot like something one would see in Silicon Valley decades later, complete with what Sloan called “fine cafeterias”, and implemented programs that tied managerial compensation to the performance of GM stock. 

The Google to Alphabet restructuring was welcomed in many parts of the investment community as a means for achieving more transparency about the financial situation of the company’s “Hail Mary” businesses.  Presumably reporting profits and losses for each of the subsidiaries, as well as the transfers of capital between subsidiaries, will make it easier for investors to understand how the Alphabet portfolio approach is working.  Interestingly, this is another area where Page and Brin are making moves similar to those made by Sloan after he had completed his own “organization study” of GM to find ways to address financial and administrative chaos left by his predecessor.  Sloan was one of the pioneers of new organizational design techniques and decided that the best approach was to establish autonomous divisions based on “product lines” (e.g., Chevrolet, Buick, Cadillac etc.), each of which would have its own president and operating budget.  As autonomy was being disbursed among these new business units the headquarters office would, much like the parent company in the Alphabet structure, monitor performance of the divisions and take the lead in providing specialized services that all of the divisions might need at some point such as finance and research.  While the reorganization at GM did distribute large numbers of employees into different groups, Sloan remained mindful of the advantages of commonality and implemented uniform training and supervisorial programs overseen by professional managers to improve and maintain productivity and instill in all of the employees a sense that they were valued contributors to a larger endeavor that bound all of the divisions together. 

It is fair to suggest parallels and similarities between the initial visions and promises for Alphabet sketched out by Page and Brin and the positive experiences of Berkshire Hathaway, GE and AT&T/Bell Labs; however, Page and Brin will continue to face the classic tradeoffs between doing what is best in the short-term for shareholder value and making long-term bets on extremely risky innovation.  Doubling down on big ideas is not new for the company—it’s already made big investments in the businesses that will be operated in the new subsidiaries and the company’s organizational culture has always included explicit permission for employees to set aside time to work on personal projects.  But, the restructuring invariably changes the entire picture and some of the things that will be watched closely as the Alphabet experiment begins are the following: 

  • Loose supervision, lack of formality and “ship and iterate” have been mainstays of Google’s organizational culture and managerial practices since the very beginning.  All of this obviously worked very well as the core business grew and prospered; however, maintaining some semblance of order has become a higher priority and the restructuring likely represents an effort to clarify who does what and how decisions will be made.  It is imperative that the found clearly and cleanly demarcate the boundaries of the businesses and construct the links between them that will facilitate communication and tap into the value of having small groups collaborate to solve mutual problems.
  • While Alphabet enjoys substantial cash reserves built up from Google’s past successes, Google’s path remains crucial to the progress of all of the businesses until they reach a point where they can sustain themselves on their own and attract investor capital independently without the search business being offered as collateral.  Google is under a lot of pressure to keep users engaged, which means finding ways to continuously add new users, more information, new reasons to engage with Google, and new search features.  To be determined is whether or not Google will need to continue its strategy of acquiring small companies, most of which have been unprofitable or barely profitable, at obscene valuations in order to maintain the growth path of audience share and/or applications that will help keep existing users from straying.
  • While the ambitions of the founders are clearly sprawling, doubts have been raised about the company’s ability to internally develop groundbreaking new products and critics have often pointed out that the products that have been most successful for the company—Page Rank and AdWords, YouTube, Google Maps and the Android operating system—came into the fold through acquisitions.  All of this raises questions about the value that the “parent” can provide to its subsidiaries apart from cash and close attention will be paid to how delegation and autonomy is handled.  Early indications were that the founders were indeed committed to selecting strong CEOs for the subsidiaries and following the approach they took after acquiring NEST of leaving them alone to carry on with what had worked well in the past.
  • All of the letters in Alphabet, perhaps none more so than Google, will operate in a turbulent external environment that is rapidly changing and populated by competitors and stakeholders from all over the world.  Google must fend off threats to its market dominance, which is solidly but tenuously based on its intellectual property, and appears to be destined to decades of arm-wrestling with regulators.  Google cannot reasonably expect to fend off the rise of large competitors in the search area in enormous markets such as China.  One must wonder how much time the founders will have to divert their attention from the Google business.
  • While an “alphabet” implies order, the letters can be moved around to form new words and letters can be added and subtracted.  Will the founders add new areas and challenges to their list and, if so, how will those be supported and how will that impact other pieces of the structure.  Will the founders follow the path of Bell Labs and throw money at basic research to generate ideas to refresh the structure?  What will be the growth and exit strategies for each of the subsidiaries: spinoff, public offering, alliances or what?
  • A uniform culture is difficult to maintain even when employees remain in close proximity but in different buildings spread out among several locations.  While the founders see Alphabet as a noble pursuit to better many parts of our world, it will be difficult to create and maintain an Alphabet organizational culture that will provide the foundation for collaboration and communication. The burden falls heavily on the founders to make this happen.  Will that culture track the early days of Google?  Difficult to see that given that company is now much larger and those who have stayed on and become managers have graduated to middle age.  Moreover, identifiable sub-cultures will like emerge in each of the businesses in the subsidiaries.
  • Google, like many other modern companies in the technology space, lacks the social vision that bound employees to their companies for decades and organizational culture must be built in an environment in which both the company and its employees do not expect that employees will remain with the company for long and both side will do what is best for them in terms of economic efficiency.  As such, work-life balance has seemingly not been a priority at Google and the line from the Google evangelists has been that employees get to focus on things that are so interesting and meaningful that they rarely see any of it as being “work”.  Smart people come there to work with other smart people, experience what they need for themselves, and then move forward on their own.

The questions and challenges above are specific to Alphabet and its founders; however, all growth-oriented entrepreneurs should recognize a universal set of imperatives that apply regardless of the size and scope of the enterprise: striking the proper balance between autonomy and collaboration across businesses, managing formality and establishing and maintaining the “parenting value” to be provided by headquarters and the founders, maintaining a lazar focus on the core business and competitive advantage, guarding tested values and norms of the organizational culture while skillfully executing appropriate acquisitions of technologies and human resources and allowing sub-cultures to emerge and flourish, continuously scanning the external environment, making sure that the customer’s expressed needs rather than founders’ notions of how their lives should be remain the focus of product development, tracking and appreciating legitimate concerns about the social impact of the products being incubated, and forging a social contract with knowledge workers which respects and meets the needs of both sides.  

Sources for this article included J. Yarow, “Google just announced a massive overhaul of its business structure”, Business Insider (August 10, 2015); N. Irwin, “Alphabet, Viewed Through the Lens of 3 Companies”, The New York Times (August 12, 2015), B3; L. Page “G is for Google” (blog post to employees and investors at https://abc.xyz/); and N. Lemann, “When G.M. was Google”, The New Yorker (December 1, 2014), 76.