‘Cool’ organizational forms are older than you think
Ard-Pieter de Man, Dean Sioo
Much has been going on in the world of new organizational forms lately. After many years in which the business unit was the dominant form of organizing, one new organizational form after another is introduced. The buzzwords are self-organization, platforms, Holacracy and multidimensional. Some managers have an almost religious belief that all these new forms are for the better; others are terrified to leave the tried and tested forms behind. History may help to understand what is going on. For that reason I developed this figure, that presents a historical overview that shows how different organizational forms have evolved.
The core idea is that the business unit fitted very well with the industrial society in which information was an expensive resource. In the information society the costs of information have declined drastically, enabling the development of new organizational forms. At the same time organizations started to produce information based products like apps and games. These products require other production processes and therefore also other organizational forms. The starting point of the figure is 1923: the year of the first full-blown implementation of the business unit in General Motors. Obviously much happened before 1923 and there are many forces influencing the emergence of new organizational forms, but for painting a general picture I hope this choice suffices.
Some common characteristics of new organizational forms are directly related to the new possibilities created by information technology:
- From units to processes. In the past organizations tried to organize themselves as much as possible in self-contained units that optimized their own internal processes. Recent organizational forms on the other hand try to break through the units in order to optimize companywide processes. Information plays an important role in this because information flows used to be tied to units (will a unit make its targets?), whereas nowadays information has become available on a process level. That makes it possible to ask the question whether processes serve the client optimally. And if not, information about where the problems lie can be shared quickly in the organization to remedy the problem.
- Internal and external become intertwined. In the industrial society the internal organization was strictly separated from the external organization. In the course of the 1990s however firm boundaries have become permeable. In new organizational forms the internal and the external have become intertwined. That is why the horizontal line changes from solid into dotted. Improved information systems enable this process as they make it possible to track what belongs to whom, to share information across organizational boundaries cheaply and effectively and to keep track of the sometimes dozens of collaborations a company has.
- Everybody becomes a manager. It is popular to say that management is dead, but the reality is that in new organizational forms everybody becomes a manager. Supported by IT, all employees become involved in management tasks like planning, assigning jobs, monitoring or governance. Hence, new organizational forms do not spell the demise of management, but its final victory: everybody manages. This is possible because collecting, interpreting and sharing information has become cheap. When the business unit was developed the managerial hierarchy was the most effective way to get information to the right place in the fastest way.
Much can be said about the history of organizational forms that we can benefit from. This blog only scratches the surface. At Sioo we continue to monitor changes in organizations and we help managers and consultants discover how they can make use of them.