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4 Questions Every Business Needs To Answer

2015 October 14
by Greg Satell

When Alfred Sloan conceived the modern corporation at General Motors, he based it on hierarchical military organizations.  Companies were split into divisions, each with their own leadership.  Authority flowed downwards and your rank determined your responsibility.

Yet lately, those top-down structures are being called into question. Brian Robertson, whose new book Holacracy offers a well thought out alternative to traditional organizations, thinks it’s time for a change and has gotten hundreds of firms to sign on.  It’s an idea that every manager should take seriously.

The problem isn’t that hierarchies have somehow become illegitimate, but that they are slow and the world has become fast. Still, recent events at Zappos show that radically transforming how your company functions is not without its pitfalls.   So perhaps instead of making the leap to an entirely new form of organization, we should think more seriously about the problem of agility itself.  Here are four questions every manager should be able to answer:

1. What’s Your Mission?

While strategy is often seen as a cerebral, rational exercise, the truth is that to a great extent your mission drives your strategy.  Management theorists have called a firm’s mission its strategic intent, because it serves as an organizing principle.  A mission is why an enterprise exists, its purpose over and above delivering a bundle of products and services.

Southwest’s mission of being the low-cost airline drives everything it does, from the planes it buys to the routes it competes on.  Google’s mission is to organize the world’s information and that helps it attract world class engineers who share its mission.  Tesla’s mission, “to accelerate the advent of sustainable transport,” transcends car manufacturing.

I’m always amazed at how few managers—much less front line employees—can articulate their company’s mission.  That’s a real problem.  For all of the talk about “empowering employees” and “pushing decision making lower down in the organization,”none of that is possible without a shared sense of mission.

One thing to keep in mind is that your mission has to differentiate you.  For example, if your stated mission is to “please customers,” then for that to be successful, you’d have to be competing with companies who intend to anger their customers.  A mission has to be a real choice, it has to eliminate potentially viable options or it’s nothing more than empty talk.

2. How Does Work Really Get Done?

Every enterprise has rules, regulations and procedures designed to promote a culture of predictability.  Employees are supposed to get to work at a certain time, fill out timesheets and requisition orders in a certain way and so on.  Every organization needs a certain amount of uniformity in order to function properly.

However, the real world rarely conforms to our expectations.  So people are often put in the position of choosing to follow procedures or to honor the mission of the enterprise. Hopefully, in your organization, people have good enough sense to work around rules when they don’t apply.

Unfortunately, this often creates a destructive organizational dichotomy between how things are supposed to get done and how things actually get done.  If these two diverge too far apart, then management loses legitimacy and trust.  Once that happens, it becomes hard for people to believe in the mission of the enterprise, even if it is well stated.

Evan Williams, a cofounder of Twitter and Medium, writes that, “one of the principles in Holacracy is to make the implicit explicit” and that is certainly important.  However, you don’t need to turn your company upside down to do that, frank and honest leadership is usually enough.

Make sure that you understand and support how work actually gets done in your organization, rather than some preconceived notion of how it “should” be done.

3. How Would Someone Sell You A Transformative Idea?

One of the greatest challenges of managing an enterprise today is that technology cycles often outpace planning cycles, so firms find themselves constantly having to adjust.  Holacracy, inspired by Agile software development, is optimized for adaptation, making these types of adjustments as a matter of course.

One of the interesting things about firms that get disrupted is how often they were aware of the idea that upended their business, but didn’t see the potential.  Walmart and Sears. Netflix and Blockbuster.  Google And Yahoo.  In each case, the market leader had a chance to invest or partner with the upstart that eventually disrupted them.

Holacracy continuously adapts through a series of “governance meetings” that reallocate roles and responsibilities.  However, that’s a significant investment in time and effort that many organizations may not want—or be able—to make.  In industries with a large number of frontline employees, like retail, it probably isn’t practical.

One way to address the problem of adaptation is to ask yourself, if someone had an idea that could transform my company, how would they sell it?  If Sam Walton came to you with a new retail concept, or Reed Hastings with a new way to rent videos, how would they get through the front door?  Who would they talk to?  How would they be received?  What if the next great entrepreneur already works for you?  Would she fare any better?

These days, every enterprise needs to develop a culture of change.  What’s yours?

4. How Do You Balance Cohesion And Diversity?

It’s become fashionable in management circles to talk about “breaking down silos” in order to improve how information flows around the enterprise. Yet we need silos, which are cohesive units that are optimized for specific tasks.  What’s more, the reorganization efforts that are supposed to break down silos invariably recreate them in different places.

What’s really important is to balance cohesion and diversity.  Without cohesion, there is no common purpose, but without diversity groupthink will set in and eventually that purpose will lose relevance.  So you need a healthy amount of both in order to be able to both operate efficiently and adapt to new information in the marketplace.

A study of Broadway plays shows why.  It found that if no one in the cast and crew had worked together before then results were poor.  However, if there were too many existing relationships, then performance suffered as well.  Traditional organizations often inspire far too much conformity and I suspect Holacracy and models like it will only exacerbate the problem.

The jury is still out on Holacracy and I expect it will evolve over time just as traditional organizations have done.  Every enterprise will have to choose its own path.  What’s clear is that the status quo is untenable, we all need to ask ourselves some hard questions and continually come up with better answers.

– Greg

A previous version of this article first appeared in Harvard Business Review.

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