It is easy to see digital as a collection of specific technologies such as mobile, social media, cloud, big data, analytics, sensors, 3D printing, etc. The individual organizational impact of these technologies appears relatively slight. However, in combination, these technologies transform the organization.
One of those transformations is in the areas of performance management and organizational structure – leading to the situation where organizational relevance will shift from the scope of responsibilities to the scale of results you deliver.
Scope of Responsibilities
Responsibility provides one measure of organizational importance. The size of your organization, its budget, and its reporting relationships communicate organizational importance from the inside out. The logic goes that bigger is more important.
People, budget, spend, etc. as proxies for importance can work when your organization is a black box with little transparency within the company, much less with customers. This makes measuring and assigning contribution a political rather than operational discussion.
If you have ever been in a goal setting, metrics defining or budgeting session, you know what I mean – it is largely a political discussion.
Equating importance with responsibilities incents executive behavior that accumulates corporate rigidity as executives vie to create even larger organizations, accumulate responsibilities, build the proverbial kingdom, etc. These are all things that tend to ossify an organization, making it less agile and more resistant to change at a time when organizations want to raise their agility and responsiveness.
Digital exacerbates responsibility rigor mortis when used as a tool for greater oversight and control driving the company by looking out the rear view mirror
. This is different from digital as the technology for transparency or decision and execution support. That is the path of digital substitution where executives seek to do the ‘same old stuff’ with new technology.
Fortunately new technologies do more than deliver things faster and cheaper, they can also change the way you do things and those differences transform what is important and what becomes less important.
Scope of Results
Organizations consist of people. People see themselves and the world in terms of relationships and responsibilities. This fuels responsibility as a means of keeping score and assigning resources. Responsibility rules so long as the relationship between what people do and the value they create remains opaque and cumbersome.
Past attempts to make these connections meaningful can be cumbersome and complex. Economic value added (EVA), activity based costing (ABC), beyond budgeting or bottom up budgeting practices represent application of results theory that too often was ahead of the technology available to make the idea actionable. Digital technology changes this as analytics, big data, operational platforms, mobility, etc. change the economics and dynamics of results tracking. This provides the information and connectedness to move toward a results based organization.
Results drive revenue and earnings. Results prove the reason the organization exists. While many organizations measure results it plays less of a role in assigning resources and organizing those resources. The squeaky wheel gets the grease or the gold in these situations. The result is a ‘good management penalty’
where resources flow to people with problems rather than those generating value with the resources they have.
The Morning Star Company
offers an example of a capital and process intensive company that embodies results as a means to drive the organization. They call it self-management, but it’s essentially orientating the organization around results rather than responsibilities. WL Gore offers another example. Both companies are subjects of extensive case studies, mostly concentrating on their unique company cultures as the basis for their results orientation. While culture plays a critical role, digital technology is lowering the cultural, economic and operational costs of orientating the organization around results.
Tradition and transaction economics held that information should be centralized and distributed as a means of coordination. The tradition extends back to Alfred P. Sloan establishing multiple divisions with finance as coordinator. This approach worked for more than 100 years in large part because operational information was expensive to collect and manage. Both aspects are changing in the digital world, in part based on the success of the prior model and in part in response to demands for greater agility and responsiveness.
Digital changes company culture and orientation as it raises the intensity of operational information while extending connections across the company. The combination of social media, analytics and mobility enable leaders to push information out to the edge. CEMEX offers an example with its “Shift”
initiative enlisting more than 18,000 of its associates to improve the company. This indicates that the potential for radical organizational change is more reality than a rallying cry.
Results trumping responsibility redefines the role of middle management
challenging it to move from an administrative to execution stance. It also changes the relationship between the center and the edge of the organization, which is the subject of another blog post.
The ‘truth’ of results is self evident in the digital future
Results matter. That is the simple truth that digital makes easier to access and act upon. Early leaders in this area relied on establishing a unique culture to achieve greater meritocracy based on results. While digital technology can create new layers of organizational surveillance and suppression, they are also powerful forces for recognizing actual rather than perceived performance.
Past attempts to place results over responsibilities have too often reinforced rather than revolutionized the organization as they have concentrated at the top of the organization. That will not change overnight, but as digital democratizes information, reduces its cost of acquisition and management, increases its reach and socialization, the distinction becomes more apparent building the forces for organizational reform.