Greg Satell
June 08, 2015
In 1904, the great sociologist Max Weber visited the United States. As Moises
Naim describes in The End of Power, travelling around the vast country for
three months, he believed that it represented the last time in the
long-lasting history of mankind that so favourable conditions for a free and
grand development will exist.
Yet while Weber saw vast potential and boundless opportunities, he also noticed
problems. The massive productive capacity that the industrial revolution had
brought about was spinning out of control. Weber saw that traditional and
charismatic leadership would have to give way to a more bureaucratic and
rational model.
Most of today s organizations were built on Weber s principles. So much so that
we see them as the way things work and forget that bureaucracies were once
innovations too. Today, we live in a time of transformation every bit as
colossal as what Weber saw a century ago: a shift from hierarchical to
networked organizations. Here s what you need to know.
1. If it can fit on an org chart, it s not a network.
Before Weber s bureaucracies became predominant, most enterprises were fairly
organic. People shared the work, helped out where they could and all pitched in
to get the job done. At the end of the day, they went home and then came back
the next morning, ready to tackle a new job, which was often different than the
day before.
Yet the increase in scale that the industrial revolution brought about resulted
in a difference in the kind of work that was to done. Jobs would be broken down
into small, specific tasks and be governed by a system of hierarchy, authority
and responsibility. This required a more formal form of organization in which
roles and responsibilities were clearly defined.
As business became more complex, these rigid structures grew increasingly
untenable and so management theorists began to look for another way matrixed
organizations. In addition to the hard lines of responsibility and authority,
dotted lines were used to denote cross-functional authorities and
responsibilities.
Yet before long, it became clear that matrixed organizations also had problems.
Despite the often mind-numbing complexity of matrixed organization charts, they
still could not match the complexity of the marketplace. So matrices, in a
sense, led to the worst of both worlds, a cumbersome organizational structure
and the inability to adapt to fast changing contexts.
The truth is that networks are informal structures. If it can fit on a
traditional org chart, it s not a network.
2. Silos themselves aren t the issue.
The term network is often misconstrued. In management circles, it is often
used to mean an organic, unfathomable, amorphous structure, but really a
network is just any system of nodes connected by links. So, in that sense, any
organizational structure is a network, even a formal org chart.
For functional purposes, networks have two salient characteristics: clustering
and path length. Clustering refers to the degree to which a network is made up
of tightly knit groups while path lengths is a measure of distance the average
number of links separating any two nodes in the network.
We often hear about the need to break down silos to create a networked
organization, but this too is a misnomer. Silos are functional groups and they
need a high degree of clustering to work effectively and efficiently. The real
problem in most organizations is that path lengths are too great and
information travels too slowly, resulting in a failure to adapt.
The most efficient networks are small-world networks, which have the almost
magical combination of high clustering and short path lengths. So silos aren t
the issue high clustering promotes effective collaboration the trick is to
connect the silos together effectively.
3. Small-world networks form naturally, if they re allowed to.
The idea that clusters of close-knit teams can somehow increase the flow of
information on their own, simply through shorter social distances, seems
unlikely. Yet actually, small-world networks often form naturally, without
design or complex organizational engineering.
In fact, in their initial paper describing the phenomenon, Duncan Watts and
Steven Strogatz found the neural network of a roundworm, the power grid of the
western United States, and the working relationships of film actors all
followed the small-world network pattern. It takes effort to design a
traditional organization, but small-world networks form naturally.
The reason why these types of networks are so pervasive in nature is that it
takes a relatively small number of random connections to drastically bring down
social distance. Over time, most systems will tend to become small worlds if
they are left uninhibited. So why do truly networked organizations seem so hard
to create?
The unfortunate, but obvious answer is that traditional organizations actively
discourage connectivity. They favor strict operational alignment within
specific functional areas while doing little to foster links between them.
4. Networked doesn t mean flat.
The latest management craze is flat, leaderless organizations. Much has been
made about Zappos recent efforts with holacracy, but as Tim Kastelle recently
explained, the jury is still out whether the effort and those like it will be
ultimately successful. My own feeling is that flat structures will work for
some cultures, but not others.
The important thing is that an organization does not have to be flat to be
networked. In his new book, Team of Teams, General Stanley McChrystal explains
how he drastically reinvented how his forces operated, but didn t changed the
formal structure. The changes mainly had to do with informal structure,
communication and forging a shared purpose.
General McChrystal s Special Forces command was still hierarchical and
clustered into small operating groups. What changed is how they were
interconnected. Rather than a collection of units, they became a synchronized
organization that acted as one.
So what really needs to change is not how we describe our organizations, but
the role of leaders within them. Whereas before, it was the role of managers to
direct work, in a connected age we need to instil passion and purpose around a
shared mission. The networking, if encouraged and not inhibited, will take care
of itself.
Greg Satell is a U.S.-based business consultant. You can find his blog at
Digital Tonto and follow him on Twitter @DigitalTonto.