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by Gifford & Elizabeth Pinchot
As everybody knows, large organizations today face challenges of increasing complexity.
Change is happening faster, everything is connecting to everything else, people and
the earth are demanding more consideration, new forms of competition are appearing,
computer systems are eliminating the need for whole levels of management˜the list
grows. How do we cope? Organizations must grow far more intelligent to deal with
so many diverse and simultaneous challenges. The breadth of the gap between what
is and what needs to be is so great that many employees more than a couple of levels
down from the top perceive their organization to be stupid.
The potential intelligence of organizations is widely distributed because the brains
are widely distributed, one per person. To be fully intelligent, an organization
must use the intelligence of its members well.
Most members of large organizations we talk with are frustrated that their wisdom˜what
they have observed and figured out˜is not being used when plans and decisions affecting
the things they know about are made from above. These people have repeatedly watched
their organization do foolish and wasteful things. They have become inured to this,
as if it were a law of nature that the designated decision-makers of organizations,
focussing as they must on "the big picture," cannot think clearly about
the smaller everyday decisions, and cannot find ways to give the people ready to
deal with more local issues the authority to address them intelligently. If, on the
other hand, managers at every level act as if it is impossible to get good decisions
out of the average employee, rules and procedures˜vital to organizational effectiveness˜will
crowd out equally vital local divergent thinking. The result of replacing the widespread
use of intelligence with the intelligence of a few decision makers is mediocre performance˜not
anarchy, but not organizational brilliance either.
Today's large hierarchical organizations fail the intelligence test in several ways:
Large organizations are not able to make good local decisions flexibly incorporating
local information, creativity and wisdom.
Therefore they respond slowly and expensively to customers' needs and to the needs
of their employees and communities, unless those needs are standard.
They tend to prevent the free flow of relevant information and intelligence across
boundaries between parts of the organization.
They devote the bulk of their people's intelligence to non-productive activities
required for political justification and advancement, rather than finding better
ways to serve their customers and their own human needs and values.
Are today's hierarchical systems, which waste the talent of those in them, the best
we can build? We doubt it. What a cosmic joke it would be if we were given so much
intelligence and potential, but because of flaws in our innate character, or because
of inherent human limitations on information processing, most of us will never use
our brains effectively at work.
Our premise is that the hooks exist in the human character to link people together
in forms many times more productive than seen in most of today's large , hierarchies.
Systems based on these capacities for high level cooperation are at work in peak
organizational experiences as well as in many tribal societies, in the "informal
organization" of most large companies, and in the free enterprise system itself.
The pitfall is reliance on the excessive structures of dominance and submission that
limit most of our social interactions and preclude intelligent human cooperation.
One kind of improvement available to organizations to coordinate more of the intelligence
of their members can be seen in the successes of total quality management systems.
The focus on quality has encouraged the formation of empowered cross-functional teams
who solve problems at the level of systems thinking; this focus has also pulled attention
off politics and on to meeting customer needs. Although the shared goal of quality
can somewhat transcend the pervasive concerns of functional turf and hierarchical
level, more basic changes in organizational theory and practice are required to fully
express and interconnect the intelligence of the organization. The basic traits of
intelligent organizations are already known; a few that are on our minds follow,
in the hopes of opening a dialog.
Clues in the system to the nature of the intelligent organization.
1) Systems thinking.
We will never build intelligent organizations if we focus our explanations on what
is wrong with the character of the people involved˜that we are innately limited with
greed or shortsightedness. Too often new people move into large organizations with
capacity for wisdom and soon fall into similar patterns of behavior, as if the system
is calling for that behavior. In excessively authoritarian structures, patterns of
relationships can take over that weigh against individual better judgement, until
attention is caught up with fighting the fires and coping with the cyclical crises
of the system. The way out of the closed circle begins with leadership˜to pull the
focus off finger-pointing and short term fixes, and towards discovering the dynamic
relationships in the organization; and then opening the systems to changes that permit
the widespread intelligence to emerge.
2) Open access to information.
The intelligent organization lives on the free and open exchange of information,
and anything which blocks information must be viewed with suspicion. Financial results
kept secret from employees guarantee that they will not play the game of improving
them with much understanding or verve. Strategic plans are doomed when they are hidden
from all but a few employees: no one else knows what they are working towards. Undervalued
intelligence is incapacitated.
3) Freedom of speech and press.
The power that allow one rank of person to silence those below them must be viewed
with the greatest of skepticism. Human beings have their limitations, and the worst
is usually displayed when they can dominate others without listening to them. Too
much power is dizzying, and the tendency to begin believing one's own press is almost
irresistible.
Societies lacking freedom of speech and press fall into layers of tyranny, each using
the tyranny they experience from above as excuse to pass it on below. Business organizations
may lack the power to imprison or kill of totalitarian societies, but managers do
have the power to silence dissent, cutting off the intelligence of diverse viewpoints.
New rules must open up the system: truth is our primary value; no opinion will be
silenced or punished; everyone has the freedom to comment. This will raise the level
of the dialog in any human system, as we see happening in the once-closed societies
of the Soviet block.
4) Multilayer autonomy.
Intelligent systems are built in layers. The most primitive intelligent systems have
a top layer of self-organizing autonomous units, and hierarchical systems below.
Our economy, for example, somewhat self-organizes at the top layers, in the open
system dance of free firms competing and cooperating to satisfy customers. The next
layer below is made up of firms of hierarchical design, each one limiting the contributions
of the layers of players below the entrepreneur, yet together outperforming those
of a command economy. Within the excessive hierarchies of this next layer, freedom
of individuals and groups to use their intelligence towards shared purposes can be
as limited as for entrepreneurs in state-controlled economies.
As civilization becomes more complex, intertwining the earth, layers of self-organizing
systems must interrelate to produce the behavior we call intelligence. Consider the
body: the intelligence to form cells is not found in the brain; rather the intelligence
to form the brain is found in each of the cells. Nor is the intelligence of the brain
found in the cells: that intelligence is an emergent property of the relationships
between cells.
5) Self-organizing systems.
An intelligent complex organization requires too many connections and too subtle
a form for any one person or committee to design. It has to be self-organizing throughout
the system. The most intelligent organizations are in constant flux, designed on
the fly to get things done by the people who are doing them. Life on earth and the
emerging global market are self-organizing: in each system the struggle for biological
or economic survival favors those who cooperate more effectively . In strongly hierarchical
organizations, it is outside the accepted routines, in the "informal organization"˜the
emerging patterns of unofficial, self-directed transactions between friends and associates˜that
much of the work gets done. Although self-organizing systems require organizing disciplines
to guide the process, as survival guides evolution or the requirement of solvency
guides business enterprise, an essential feature of self-organizing systems is freedom
of choice between alternative ways of doing things.
6) Choice rather than monopoly.
In the free enterprise system, there is choice between alternate vendors, alternate
distribution systems, alternate subcontractors, and so forth. Productive organizations
are in fact not single companies, but rather networks of companies in which almost
every connection has been chosen from alternatives. A major company can only function
because it has productive relationships with thousands of vendors who do things the
company could not do effectively by itself. The system cannot be planned by government,
but is built up from the free choices of individuals and groups which enter into
cooperative relationships.
Our society has a peculiar bias in organizational design today. In the design of
the economics of nations we believe that freedom of choice tends towards efficiency
and monopoly leads to bureaucratic waste and suppression. We laugh at the totalitarian
structure of monopolies which have constituted the bulk of the Soviet economy. We
point out that having a single electronics firm, the Ministry of Electronics, leads
to the expected consequences of monopoly: inefficiency, featherbedding, a glacial
pace of innovation, and a focus on internal politics rather than customer needs.
Yet in the design of companies we believe internal monopolies of power lead to efficiency
whereas free choice invites inefficiency. The structure of a General Motors looks
more like the organization of the Soviet economy than like the organization of the
US economy. Just as the state hierarchies are breaking apart in the Soviet Union
to make room for alternatives to choose between, organizations must contain more
alternatives, more diversity, and more freedom to choose internal paths and associations,
internal customers and vendors.
Imagine if you can a company with a highly bureaucratic legal department whose reputation
is that they delight in saying it can't be done rather than finding a way to do it.
Now imagine a courageous CEO who divides the legal department into two teams, each
to the degree possible comprised of a fair share of the existing staff with a full
range of talents and expertise. Each operating manager must shop for their legal
help, choosing for each task team A or team B. It is not hard to imagine that each
legal group would grow more responsive to the real needs of the operating companies.
When we propose this alternative organization, it is surprising how often people
say it would be too expensive, even if it might be more responsive, since you would
need two groups of each specialty˜forgetting that no additional lawyers or staff
were hired. If in some cases only one team had a necessary expert, so they retained
some monopoly, even then the threat of potential competition might keep the lid on
arrogance.
The argument for monopoly is based on a static view of efficiency, assuming identical
motivation in both cases. Choice may look less efficient, but over time the motivation
to improve can lead to far higher levels of service and productivity.
What will open our organizational systems to learning and change so we may responsibly
meet the challenges of our times? To the extent our sense of security, status and
achievement has often been based on managing others rather than leading others and
ourselves to more responsible actions, building organizations to use widespread intelligence
is difficult. The status quo itself has power over us and provides a kind of comfort,
strengthening the resistance of organizations and individuals to change even uncomfortable
circumstances. Yet we are all beginning to realize our global interdependence, so
that we see the direct link between our own welfare and the welfare of all our fellow
man and all our natural systems. Our visions of our responsibilities are expanding,
and the responsibilities of the organizations which connect us. Having thought through
one's values changes one's behavior, not only as a citizen or consumer, but also
as an employee. Organizations cannot achieve intelligence without strong ethical
character, because organizational intelligence is not stable without ethics. Misinformation,
information as power, and egoistic politics prevail in unethical attempts at intelligence,
which revert to the politics of domination. Intelligence then chokes on hierarchy.
In the industrialized nations today we see organizations led by strictly financial
objectives contracting, while those with the purpose to contribute to society as
well as their customers are expanding˜for instance, Anita Roddick's Body Shops. If
this trend continues, it promises the evolution of a freer and more collaborative
enterprise system that is less selfish and independent. The success of individualism
may relate to a hunger for community˜the next step after one has become fully adult
in the sense of independent and capable of taking care of oneself.
We have had a century of building organizations whose members were never allowed
to fully mature. Many corporate citizens never have the sense of independence and
completeness in both independent strength and interdependent community involvement
that is the normal achievement of citizens in freedom loving cultures. Just as domesticated
dogs may behave like big puppies all their lives as compared to wolves, so too many
of us have sold our dignity as adults for the steady wage. The village smithy, shoemaker,
and colonial farmer could work together effectively without submitting to much hierarchy.
Organizations which learn and apply their secrets of freedom, voluntary interdependence,
and community co-responsibility may be the first to attain higher intelligence.
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