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Strategy Talk: Can the Latest Organizational Innovations Really Help Us?

Evaluate new management approaches, such as holacracy and agile, based on how they can improve clarity and collaboration at your company.

Dear Ken,

As head of HR, I’ve been searching for something to help our organization run more smoothly. Reading about ideas such as holacracy and the agile approach makes me wonder whether we are missing the boat on a critical organizational innovation. But are these just old dogs dressed up in millennial clothing? Can these new approaches really help us?

—Skeptical Baby Boomer



Dear Skeptical,

Organizational innovations are never everything they are cracked up to be, but they usually have a nugget or two that can help. The trick is to separate the wheat from the chaff, and that can be a challenge when a new approach is surrounded by hype. Start with the fundamentals of what makes an organization run smoothly, and use that to zero in on where or why your organization is not working as well as it could. This in turn will help you spot the aspects of an organizational innovation that could be most helpful to your particular situation, which you can then cherry-pick and benefit from without having to turn your organization upside down.

Theories on what makes an organization work effectively abound, for example, fostering engagement and empowerment, sharpening accountability and authority, enhancing autonomy and alignment, cultivating shared purpose and goals, and increasing transparency and openness. But two determinants of organizational effectiveness stand above the rest: clarity and collaboration. These are the corporate ligaments that make teams more than the sum of their members and organizations more than their teams.

Clarity means that every individual (frontline employees, board directors, and everyone in between) and every team (product, customer, functional, and regional units; executive and operating committees; boards and their subcommittees; sales groups; task forces; and the list goes on) knows what they are supposed to be doing and why. Collaboration means that individuals and teams are engaging with those who can improve their work and with those whose work they can help improve.

Systemic clarity and collaboration enable you to have sharp lines of accountability and to coordinate across internal boundaries without excessive, overly formal processes. The combination of clarity and collaboration helps everyone see who is responsible for doing what and where the company’s strengths and weaknesses lie. Where there’s good clarity and collaboration, people feel highly engaged, empowered, accountable, and autonomous because they don’t have to wait to be told what to do. And they aren’t burdened by processes designed to fix the lack of coordination that occurs when clarity and collaboration go AWOL.

Moreover, research (for example, in Harvard professor Heidi K. Gardner’s recent book Smart Collaboration) has shown that good collaboration increases employee productivity, forges loyalty, reduces attrition, and strengthens recruiting. All these benefits of clarity and collaboration make your organization more effective at adapting to market changes, while also achieving the performance that gives you the license and wherewithal to evolve.

On the flip side, lack of clarity and collaboration makes you and your team hesitant to decide and act; breeds “make-work” for yourself, your team, and other teams; produces actions that create headaches for others; and leads to both over- and under-delegation. It also promotes groupthink; stunts creativity; keeps hidden where the company’s expertise, skills, and capabilities reside; and suboptimizes customer solutions and service.

Bad meetings are both the perpetrator and the victim of lack of clarity and collaboration; so are bloated bureaucracies and coordination snafus. Constant, unnecessary firefighting is a symptom of poor clarity and collaboration; so are turf protecting, tribal warfare, and matrices that don’t work. Without clarity and collaboration, companies gravitate to top-down command and soul-destroying control.

Bad meetings are both the perpetrator and the victim of lack of clarity and collaboration; so are bloated bureaucracies and coordination snafus.

This brings us back to your question about whether the latest organizational innovations could help you make your organization work better. The answer is: Yes, because they likely contain some ideas that can help you improve clarity and collaboration, and you don’t have to turn your organization inside out to benefit from them.

Take holacracy, a system of organizing around “circles” — self-organizing teams of six to eight individuals assigned a domain and accountability by their parent circle. Zappos, which announced in 2013 that it would adopt holacracy, has since set up 500 such circles, and each one has an articulated purpose statement that is posted online for everyone in the company to see and even comment on. This enhances clarity and fosters collaboration because every individual in a circle (team) knows why it exists and what it’s supposed to be doing, and every circle can see how its purpose could be supported by other circles, and vice versa. But you don’t have to adopt holacracy wholesale to introduce the standard of every team in your organization having a clearly written statement of its purpose.

Spotify is attempting another kind of organizational innovation, which is to apply the principles and processes of agile software development to an entire organization at scale. But you don’t have to do that in order to benefit from a number of ideas Spotify has implemented. For example, many people at Spotify are “player-coaches,” meaning they lead one “squad” (Spotify’s term for scrum teams) while playing on another. This improves collaboration because as a leader you see firsthand how your squad benefits from collaboration and who’s good at it, so that as a player you are a better, more willing collaborator yourself.

Another example from Spotify is “fail walls” that make every squad’s successes and failures as visible as possible. This promotes both clarity and collaboration, because by knowing what has and hasn’t worked, people understand better what they should be doing to help their team and other teams succeed. A third idea is Spotify’s mantra of “be autonomous, but don’t suboptimize” — which you can’t do very well unless you are clear on what you are supposed to be doing and unless you collaborate.

There will always be a constant stream of serious attempts at organizational innovation. Today’s holacracy and agile management were yesterday’s business process reengineering and centers of excellence. And there’s already talk of tomorrow, in the form of flash organizations and the use of blockchain technology to innovate how organizations form and work. You should learn as much as you can about each approach, because you’ll likely find an idea or two that will help your organization work better — without the need for a major transformation and all the risk that entails.

Ken Favaro

Ken Favaro is a contributing editor of strategy+business and the lead principal of act2, which provides independent counsel to executive leaders, teams, and boards.

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