Realize an agile company
Dividing the organization up into effectors can increase the speed at which the organization responds and adapts. Effectors are flexible, autonomous and market-oriented teams that act as a unit. In their purest form such effectors can be seen as small organizations within the large organization, often responsible for one or more processes. However, they frequently use the organization’s common infrastructure and its standards and values. These people are very motivated and collaborative.
Various principles to pave the way for an adaptive organization
The first principle, that of ‘minimize coupling, maximize cohesion’ is very well known in the world of software development and ensures optimal maintainability, traceability, visibility and reusability of components. We can apply the same principle to greatly increase an organization’s adaptability and its extension capacity. The second principle – developed by computer manufacturer HP – makes use of the first principle and consists of four steps: simplify, standardize, modularize and integrate. The third principle deals with pivoting the organization, with a back, middle and front office.
More coherence and better integration
All three principles illustrate what creating an adaptive organization is about: more coherence and better integration through the use of modern technology and other tools and skills. This might sound a bit odd because one might think that integrating various parts means that they are more closely linked thus making changes more difficult, however the contrary is true!
Integration creates a new dimension in the organization (not a new department or staff service!), which actually watches over the coherence between all different parts and therefore can establish change in a highly focussed manner.
Minimize coupling, maximize cohesion
Minimal coupling can be identified and analyzed by looking at how much information people, processes and units exchange and at what speed and frequency. The cohesion can be determined using scenarios, such as: a minor adjustment in the order processing process; changing the name and logo of the organization; implementing the corporate governance code (e.g. Sarbanes Oxley), or launching a new product or service.
Try to achieve solid coherence within a single effector
The same question is relevant for all scenarios: do we need to adjust different parts of the organization or is just changing one part sufficient? Ultimately, organizations should try to achieve minimal interaction between effectors and solid coherence within a single effector. This may lead to a situation sketch as shown in the figure below.
Figure: the principle of minimal coupling and maximal cohesion ensures little interaction between effectors and a lot of interaction within effectors. It reduces the number of effectors because some take over the tasks of others.
When an organization chooses the form of the left side of the figure, a function change of one effector will require informing and instructing an average of four other effectors, whereas on the right side of the picture this average is slightly more than one.
The organization’s flexibility and agility both improve hugely
In theory this means that the organization’s flexibility and agility both improve hugely, allowing for much quicker response to important events in the environment or within business processes.
Reengineering the Corporation
In his book ‘Reengineering the Corporation’, Michael Hammer describes the symptoms organizations and business processes exhibit if they do not (yet) operate according to the principle of minimal coupling and maximal cohesion (Hammer, 1995):
- a lot of information exchange, data redundancy and retyping of data (cause: random fragmentation of a business process);
- high stock levels and buffers (cause: processes cannot cope with uncertainty);
- many monitoring activities (cause: process fragmentation and failing to trust systems or each other);
- rework and iteration (cause: indirect and/or non-functioning feedback in the value chain);
- a high degree of complexity, exceptions and special cases (cause: insufficient basic design of the business process).
Discover which business processes are eligible for restructuring
Hammer tells us that such broken processes in fact help organizations to discover which business processes are eligible for restructuring. We must try to achieve this through better integration of processes and systems. This prevents:
- Contradiction: department A and department B say different things.
- Incompleteness: department A says something while department B also needs to say something.
- Vagueness: department A refers the customer to department B
- Waiting time: the customer has to wait unnecessarily long due to inefficient processes or because schedules do not match demands or other process steps.
- Lack of clarity: the customer is being kept in the dark about the progress.
- Duplication: the customer has to supply the same information repeatedly.
Many of these problems are due to malfunctions in the Business Intelligence cycle (the cycle of the Intelligent organization). Duplicate data often still exists (registration) or response is insufficient or lacking. In some cases, past events are not processed properly, causing policies and schedules to fail or goals not to be achieved.
Information exchange needs to improve greatly
The heart of the matter is that both collaboration and information exchange between the various parts of an organization needs to improve greatly. We need to know from each other what we do, what we want and how and when we do and want things. To achieve this, it is necessary to integrate at several levels in several areas and that requires changing both the organizational structure and culture.
Creating smart and flexible effectors
It is thus necessary to structure, simplify and integrate the organization both thoroughly and logically. This creates well-integrated effectors, who can communicate and collaborate with one another more effectively. Creating an adaptive organization based on the above principle can take place in a certain order or using a specific procedure:
Limit the number of types of tools that an effector may use. For example the decision to restrict the wide choice of lease car makes. For example: as of today the choice is either Volvo or Audi. It is important to realize that such withdrawals may cause production processes to falter or even come to a halt. For that reason it is wise to have partners in reserve.
Formalize and standardize the exchange of data and information between business processes, partners in the chain and applications. Everything is done using the same language within the same structure and, if possible, in the same format. A good example of this is the exchange of financial figures according to the International Financial Reporting Standard (IFRS), which requires that figures are reported in a specific format and in line with the so-called definition library.
Organize all the activities of an organization following the principle of ‘minimal coupling and maximal coherence’. This facilitates maintenance and allows for functions to be used and reused for a variety of purposes. By keeping the number of effectors as small as possible, we can create combinations of effectors, which can quickly respond to changing customer needs.
All the simplified, standardized and modularized effectors must integrate in a business process environment in which the organization – and its partners – can operate both adaptively and efficiently.
Do not create bureaucracy
When we follow this basic procedure – step 2 in particular – we must be careful not to create bureaucracy and formalize and standardize everything and anything including functions that are hardly used in the daily processes. This will not lead to greater efficiency. A pragmatic approach is required in order for the procedure to actually contribute to our ability to respond quickly. We always need to ask ourselves: can we indeed – if the occasion arises – adapt faster as an organization, unit, chain or branch, if we do this and what is the added value? In any case, the above procedure is not something we can apply half-heartedly.
The digital world
The agility process is most effective in organizations that make intensive use of information and knowledge and digitally. The digital world – contrary to the real world – makes re-usage possible. Organizations that need to physically work to add value can also organize themselves using the above principle. After all, in this day and age all organizations deal with lots of information and knowledge.
Create a shift from the physical to the virtual world
The trick is to create a shift from the physical to the virtual through intelligent use of (BI) technology. A hospital for example, can enhance its flexibility by allowing surgeons to carry out simple, but specialized operations remotely, using state of the art virtual reality technology. That same hospital could also use technology to transfer certain information and knowledge to other functions within the organization enabling physicians to focus on the more complex operations.