The Adaptive Organization PrincipleS

“To achieve the desired Essences we must put Principles over Practices”

Essences

Essences are the states resulting from applying practices, loyal to the principles

Practices

Practices are context aware processes, tools, workshop formats, guidance, etc.

Principles

Principles are immutable guidelines

Bodies of knowledge

Underlying theories, methods, mindsets

“Adapt what is useful, reject what is useless, and add what is specificaly your own”- Bruce Lee

The very definition of a complex system prohibits blind copying of practices. What works somewhere else does not necessarily work over here. Every organization is unique and working practices need to be discovered.

However underlying principles are immutable and guide the discovery, adaptation, and implementation of practices. It is crucial that our practices follow the principles.

Practices tell us how to do things. Principles tell us why. We need both to reach the essences of what we want to become. F.e. to reach the essence of an Empowering Leader we need practices like Delegation Levels, that implement the principle of Manage the system, not the people.

The Adaptive Organization is an interlocking system of Essences; Practices; Principles; and foundational Bodies of Knowledge.

Principles of Management & Leadership

Manage the system, not the people

In a complex environment the job of management is not to manage people directly. It is to manage, create and nurture, the system in which people work.

Create an environment in which people can thrive, where it is safe to take initiative and continuously learn. Create transparency and a clear purpose and set of values to give people a chance to align their own personal goals and values to those of the organization.

In short, it’s the manager’s new job to create an environment that supports the three fundamental psychological human needs of autonomy, competence, and relatedness.

They know better. It is ok to not know

It is a deeply entrenched belief that the leader must always know what is going on, and what to do next. He needs to be the most knowledgeable person in the group he is leading. But this actually prevents others from effectively contributing and learning.

When you expect your manager to always know, you will stop thinking for yourself. We believe it is the leader’s job to stimulate curiosity and dialog so others can come up with ideas and solutions. It takes courage and setting aside one’s ego to allow and actually guide employees to know better than the manager. It is the manager’s responsibility to help unleash the collective brainpower and creativity of people, a collective brainpower that will vastly be superior to his own. The adaptive leader does not get his position from knowing more than the people he leads, because that would seriously limit and slow down the organization’s ability to learn.

It all starts with the courage to say “I don’t know.” “I don’t know. What do you think?” “I don’t know. What would you do?”

Learning is not an add-on to work

In many organizations there is ample time to think. People feel a constant pressure to deliver. Working is seen as taking action and solving problems, not spending time thinking. But spending time on thinking, as a team or individual is extremely important for the adaptive organization. Without it our actions are based on unchallenged assumptions, we do more of the same without real learning. If we fail, we just try harder, doing the same thing. We fail to see connections between cause and effect. Time for reflection on what works and what doesn’t, is important.

In a complex system, the required skills and knowledge are volatile. We are constantly exploring new grounds. It is not so much important what you know now, but how fast you can learn new skills.

It is the managers’ job to create an environment where ‘taking time to think’ is accepted and common practice. Where continuous learning and reflection is not considered as a distraction from the actual work. It is the work!

Expand ‘we’, limit ‘they’

Most organizations create an inner environment that is full of ‘they’. A silo structure with silo managers and silo KPIs divides the organization into ‘we’ and they’. We blame others for what goes wrong.

It creates a highly political environment of departments against departments, of managers against employees. A culture of blame, fear, and mistrust.

Embrace ‘us’. By being transparant in the organization’s purpose, or actually crafting one together, everyone can choose to contribute to the bigger whole.

Create an organizational structure where people who work on the same value adding process really work together. Same goal. Same measures.

Give and ask intent, rather than give instructions and get compliance

By giving intent rather then instructions, people can actually contribute. People are invited to think. We tell them why we want to achieve something, not how.

By asking intent we establish a fair and responsible level of empowerment. By expressing his intent an employee expresses how the decision he intents to make contributes to the goals of the organization.

Giving instructions brings you compliance. The employee that expresses his intent actually owns the decisions he makes.

Genuinely care - about yourself and others

Management & leadership practices in the adaptive organization can be a big leap for managers that are used to the command & control style of leadership that is still so common. The biggest change is the move away from directly managing people to managing the system: creating the right circumstances for employees to thrive.

But be aware: if you do not genuinely mean what you say, if you do not really care about the well-being of your employees, people will look right through you. You need to really care. But you also need to be true to yourself, aka care about yourself.

There are no short cuts towards servant leadership. It is not a trick. It is a long and hard process for most organizations where a radically different style of leadership is deeply entrenched. Not everybody will be able to make the journey. This is not their fault. It’s the system’s fault.

Embrace diversity

Self-organizing teams play an important role in the adaptive organization. But even self-organizing teams can fall into the trap of groupthink, where peer pressure slowly converts once original individuals into amorphous team members that all think alike.

The same risk exists for management teams. And we all know the cases where a strong leader surrounds himself with like-minded people.

But the adaptive organization is designed to thrive in a fast paced complex environment. This means we regularly need to explore the unknown. We cannot always fall back on expertise. Instead we need creativity, out of the box thinking, and unorthodox ideas and approaches to problems.

Groupthink is the enemy of creativity. Diversity is what we need. Diverse perspectives and a culture of true dialog help us navigate the troubled waters towards fulfilling our purpose.

Diversity in age, gender, personality, and cultural background is not only socially the right thing to do, it is crucial to be able to adapt.

Make sure new hires are not converged into anonymous compliant employees within a few months. It is the managers job to create a safe environment for different opinions and insights, and a culture of true dialog where people discuss to discover better solutions than their own, versus a culture where people just try to convince each-other they have the best idea.

Principles of Strategy & Innovation

Continuously reinvent yourself

It is hard to stay relevant these days. Organizations needs to have a keen eye on new opportunities, but also be prepared to say goodbye to existing business models.

This leads to a strategy of continuous innovation: a constant flow of new business models to explore. Most opportunities will be rejected. Only some will mature. But any will eventually die in favor or more promising ones.

Let Purpose and Values Guide You

Purpose and values provide guidance for new ideas to explore. We want to cast a wide net of new ideas, however resources are always scarce. Purpose and values help keep the exploration of strategic opportunities within acceptable boundaries.

Our organizations are complex systems which means we cannot predict nor control the future. We need to explore by rapid experimentation. Purpose and Values ensure we are still in control of our company’s strategy and not at the mercy of whatever we learn, wandering in every direction.

Purpose & Values are also the glue in a highly decentralized organization. Everyone knows how to contribute to fulfilling the purpose, and values provide guidance for daily decision-making.

They are also the driver behind real engagement.

Replace strategic choices by validated assumptions

In the complex systems our organizations nowadays are, we cannot predict and control the future. As the term strategic choice assumes control we suggest replacing choices by assumptions. We cannot choose our future, we can merely discover it. This is more than just words, because many organizations might use the word assumption but threat them like facts.

We can however make assumptions that can be challenged and need to be validated. By expressing our assumptions in the form of falsifiable hypotheses we can pursue a strategy of fast learning.

A strategy based on assumptions calls for radically different tools then the ones we currently use. Forecasting tools need to be replaced by back-casting and experimentation.

Explore multiple options

As assumptions need to be validated many ideas will proof to be duds. Therefore we need to cast a wide net of ideas.

By exploring multiple options, and keeping them open longer, we can test radically different ideas and slowly converge to the most promising ones.

The ability to defer decisions to the last responsible moment gives us much more flexibility to adapt from new insights.

A low tolerance for failure and the focus on efficiency might get in the way of this, so be aware: adaptability and efficiency do not always go well together.

Don’t mind investments already made

Being adaptive means we regularly have to say goodbye to existing business models or strategic directions in favor of other more favorable ones. However it proofs to be hard for management to pull out of markets, industries, and business models, because of the investments already made.

So much money and effort has been invested that it feels like a waste to give up now. But you know what: the money is already gone. You will never get it back. You can only loose more, and in your heart you know it.

So don’t let past investments cloud your judgment on which opportunities to pursue and which to abandon. It will only make matters worse, and delay decisions that shouldn’t be delayed.

Replace Business Plans by Business Models

Static plans don’t work well in a complex environment. They require stability and predictability. In a complex environment they provide a false sense of security and control.

Replace static plans with lightweight business models. They are a model of reality, simple enough to use and validate, but not oversimplified so we loose insights. You can use models to identify risk and validate assumptions. They are dynamic and not based on the belief that we can predict and control complex reality.

Involve everyone, everywhere

Strategy formation is everyone’s job. It is neither centralized nor decentralized. It is central. Everyone is involved in strategy formation because execution of the strategy is everyone’s job, and strategy is formed by executing it and by learning from executing it.

Everyone can come up with good ideas. The collective brain power and creativity of all workers exceeds that of top management by far. So we want to unlock this brain power and creativity and use it to come up with new opportunities to explore and learn from.

Leaving strategy solely up to top management is both dangerous and foolish. Their job is to facilitate the ideation process and set constraints.

Principles of Organization Design

Optimize the whole

This principle is directly derived from one of the most important anti-patterns to adaptivity described in Systems Thinking: local optimization. Most organizations still use the over 100 years old hierarchical silo structure. Silos, with their own managers, processes and KPIs, lead to local optimization. We optimize the silo which by definition leads to sub optimization of the whole company. F.e. the sales department might optimize their process by bundeling items into larger packs and sell them by the pack, but this might inadvertently lead to problems in operations leading to longer delivery times. Still the sales department’s KPI is in the green, so they will probably not see themselves as the cause. Longer lead times leads to unhappy customers which over time leads to reduced sales. The company as a whole suffers, yet we fail to see the connection between cause and effect because of the locally optimized structure.

The solution is to optimize the whole. But what is the whole? The entire company? This would lead to just one massive department. Not very effective. The key is to look for the optimum whole, usually valuestreams or value propositions, and organize around that.

Cut down the silos and organize around value streams or value propositions. KPIs are set on the level of the value stream, not the the vertical silo. Representatives of all former silos need to work together to meet the targets of their value stream.

Decentralize as much as responsible

The adaptive organization is optimized for fast decision-making which calls for radical decentralization. The traditional hierarchical chain of command works well in the relatively stable predictable situations we once had. The tasks of workers did not fluctuate much so we could optimize them by specialization of labor and managers overseeing and coordinating the work.

However the world has changed. Increased complexity and past paced change means we cannot fall back on strict procedures and work descriptions. The traditional chain of command is painfully slow and leads to sub-optimal decisions.

Push the authority down to where the information is, which is usually at the periphery of the organization, the frontline workers. Together with total transparency, a clear purpose and set of values this ensures fast and optimal decision-making.

We say, decentralize as far as responsible, because there are always decisions which can best be made centrally.

Build in a necessary amount of inefficiency to become effective

“There is nothing so useless as doing efficiently that which should not be done at all.” – Peter Drucker

We hear it all the time: “[fill in the blanks] should be efficient and effective”. Both terms are used in one sentence so much one might argue most people do not know the difference anymore. Yet, not only do they have different meanings, in complex systems they are often each other’s foes.

In today’s unpredictable world we need to explore multiple options, pursue many opportunities at the same time, and experiment instead of execute a plan. All of these practices are not very efficient. Yet they are highly effective ways to find optimal solutions or the most favorable business model in a complex environment.

Efficiency thinking is deeply entrenched, yet we need to have the courage to let go of overemphasizing efficiency. We have seen many process drained from the last drop of creativity and innovative capacity because of the umpteenth ruthless Lean Six Sigma project.

We need some flesh on the bones, some level of inefficiency in order to be effective. This is a reality that is hard to swallow and often met with cynicism, but that does not make it any less true.

Foster collaborative networks

Modern organizations need to break the silos that stand in the way of cross-departmental collaboration. Collaboration needs to be able to form and reform spontaneously following the work and value added processes rather that structural borders.

Build in continuous learning & creativity

Learning and creativity needs to be a build-in property of the organization design. You can’t foster learning and creativity just by telling people to do so. Any creative mind you hire will soon be numbed if you don’t create a supportive environment.

Move shadows systems into the light

Every organization has a shadow system, a structure behind the formal structure. There’s an official way of doing things and then there is the unofficial way of getting things done. In many traditional hierarchical organizations the shadow system is quite important to speed up things because the formal bureaucracy gets in the way of effective and fast decision making.

Yet those organizations usually don’t acknowledge the shadow system and might even impose all kinds of rules and checks to suppress it and force people to follow the official path. This of course leads to an even further relying on the shadow system to get things done.

The adaptive organization moves the shadow system into the light. We don’t deny it is there or try to suppress it. We welcome it. The formal structure should be very lightweight anyway. The (former) shadow system then leads to a natural flow of information, relationships, and collaboration, which fits the characteristics of a complex system much better.

Fluidity in the allocation of talent

Fluidity in the allocation of talent* as opposed to narrowly defined functions and roles. The complex nature of our organizations and fast paced change calls for flexibility in roles and acquired skills. The skill set we need today might fundamentally change tomorrow. Same goes for the work people do. We can hardly fire everyone and hire an entire new crew every time, so we need fluidity.

In the adaptive organization we prefer flexible roles over fixed functions. A role is a set of tasks and responsibilities that need to be fulfilled. They can easily change overtime. One person can have multiple roles at the same time. People are rather free to take on roles that fit their talent as long as others agree and they take the commitment to their current role seriously.

Roles are a natural way to scale the phenomenon found at startups where everybody just does what needs to be done.

*Coined by Rita Gunther Megrath.

Organize around opportunities

Organize around opportunities is a radical different way of organizing people and resources. It starts with the realization that a sustainable competitive advantage that can be successfully defended over long periods of time does no longer exist. Instead we need to be exploring new business models all the time and at the same time pull out of existing business models in favor or more promising ones.

This means the static design of our organizations that was meant to defend a competitive advantage no longer holds. We need a much more fluid and flexible structure where people rally around new opportunities. Teams are formed as a new idea mature into scalable value propositions. Just as naturally they disband when we let a value proposition dye and move on to new opportunities within the organization.

Other relevant information