Hi there. I'm a Partner at Undercurrent, where I lead a team focused on helping ambitious organizations operate in ways that are beneficial to all their users.


Team Effectiveness

  1. The productive output of the team (that is, its product, service, or decision) meets or exceeds the standards of quantity, quality, and timeliness of the team’s clients–the people who receive, review, and/or use the output. It is clients whose views count, not those of team members, except in those relatively rare cases when the team is the client of its own work.
  2. The social processes the team uses in carrying out the work enhance members’ capability to work together interdependently in the future. We define as effective only teams that are more capable as performing units when a piece of work is finished than they were when it was begun (Hackman, 1987, 1990, 2002; Hackman & Wageman, 2005).
  3. The group experience contributes positively to the learning and well-being of individual team members, rather than frustrating, alienating, or de-skilling them.

We’re in the middle of taking a fun team-effectiveness survey right now, based on some of the work in this paper by Ruth Wageman, J. Richard Hackman, and Erin V. Lehman. They offer the above criteria for team effectiveness, which I’ll translate out of academese below:

  1. High-quality output, as judged by the team’s customers
  2. More capable as a team than when they started working together
  3. Makes significant positive contributions to the lives of the individuals on the team

Good stuff. Use it!

Organizing even over Org Design

A lot of what we do these days at Undercurrent falls under the “Organizational Design” banner.

But that banner falls short by failing to align with one of my most strongly held beliefs: that nobody can design an organization that’s good enough, that fulfills on enough of our success factors, that accounts completely enough for the complex world we inhabit.

We might be able to design things – websites, tables, aircraft engines. We cannot design organizations.

Instead, we must continually organize. So instead of “Organizational Design”, I’d offer that the right approach for this era is “Organizing.”

Organizing prioritizes the following strategies:

Legitimacy over perfection

Learning over clarity

Starting with work over starting with people

Teams over roles over souls

Disposability over permanence

Amazon’s Fulfillment Centers

There are about 300 Pickers at this facility. They are managed by two managers. Pickers find the cubby they’re assigned to look for, scan its barcode, and then find the item within that cubby that they’re supposed to pick. They scan the item’s barcode, and drop the item into their bin. If a picker finds a broken item, they put it in a red bin at the end of the aisle, where QC can find and fix/dispose of it. If a picker finds an item that’s not in its proper cubby (e.g. on the ground), they put it in a blue “amnesty” bin, where QC can pick it up and return it to its proper location.

Awesome notes here from Spencer and Jason, two of my colleagues that recently visited an Amazon Fulfillment Center. Lots of good intel about their ways of working and general ethic.

Read more: Amazon’s Fulfillment Centers

Flattening

Via CV Harquail’s awesome Twitter feed, I found this gem: “The Flattened Firm: NOT AS ADVERTISED.” [PDF] I’d call it a must-read. TLDR version below. Everyone talks about *flat* structures being great. But “flat” is often synonymous with “more centralized control by fewer people.”

Basic premise: because technology (and other factors), firms were able to flatten, putting more managers under the direct control of a senior leader. The study looked primarily at the C-suite, but the principle of more span per leader and less depth in general cascades all the way through modern organizations.

flattening firms 1

“Our main insight from the interviews is that flattening is not about delegation of decision making to subordinates and a hands-off role for the CEO. In fact, the most consistent message from the CEOs was that they had changed the structure of their executive team and broadened their span of control to “get closer to the businesses. They or their predecessors had eliminated the COO position in pursuit of more control, more oversight, and more involvement in business operations and decisions, not less.”

flattening firms 2

flattening firms 3

…and with quantitative rigor.

So, what can we conclude about “the flattened firm”? According to our
research, it has fewer levels and broader spans of control. Division managers are closer to the top and have more performance-based pay. However, the top team consists of more and higher-paid functional managers making corporate-wide decisions. Also, the senior executive group is led by a CEO who is more involved, not less. The flattened firm also appears to rely on more coordination among the top team and a different role for the CEO. The evidence is at odds with simply pushing decisions down. Flattening at the top is a complex phenomenon that in the end looks more like centralization. At the same time, standard classifications of “centralization” or “decentralization” are too simple to explain the flattening phenomenon. Our research shows that, in fact, firms are doing both. While our evidence is at odds with simply pushing decisions down, it seems crucial to consider different types of decisions and activities and how they vary by level in the hierarchy.

This is in line with our hypothesis on org-change discovery processes – that the most valuable question to ask is, “What decisions can you make by yourself?”

For example, division managers may “be the boss” for decisions that are closer to what customers/segments to target, what prices to charge, and what competitors to monitor. In contrast, more “staff-related” decisions around shared resources—such as managing the corporate brand, implementing a corporate-wide lean manufacturing process, or auditing and control of administrative functions such as finance, legal, and human resources—may be made at the top. To better understand these issues, it is necessary to get detailed information on decision making at different levels and across functions.

At Undercurrent, we are advocating for a different thing: pushing decision-making power out to the edges of the organization. This doesn’t happen just by cutting the marzipan layer out of the organization, but rather through a set of connected actions – adding new technical talent; creating clear lines of domain and ownership; eliminating functional management in favor of functional alignment…and some other experimental stuff that we’re still working on.

Conditions for a Team

One, is the group a real team, with clear boundaries, interdependence among members, and at least moderate stability of membership over time? Two, does the team have a compelling direction, a purpose that is clear, challenging, and consequential–and that focusses on the ends to be achieved rather than the means the team must use in pursuing them? Three, does the team’s structure–its task, composition, and core norms of conduct–enable rather than impede teamwork? Four, does the team’s social system context provide the resources and support that members need to carry out their collective work? And five, is competent coaching available to help members get over rough spots and take advantage of emerging opportunities, and is such coaching provided at times in the team life cycle when members are most ready to receive and use it?

Not too dissimilar from the Spotify diagnostics. Great, wiggly phrasing, too. Via Stowe.

Read more: Conditions for a Team

Nine to one

The first five years of the twenty-first century saw a renewed wave of innovation and investment, this time less focused on computer hardware and more focused on a diversified set of applications and process innovations. For instance…CVS found that their prescription drug ordering process was a source of customer frustration, so they redesigned and simplified it. By embedding the steps in an enterprise-wide software system, they were able to replicate the drug ordering process in over four thousand locations, dramatically boosting customer satisfaction and ultimately profits. CVS was not atypical. In a statistical analysis of over six hundred firms that Erik [Brynjolfsson] did with Lorin Hitt, he found it takes an average five to seven years before full productivity benefits of computers are visible in the productivity of the firms making the investments. This reflects the time and effort required to make the other complementary investments that bring a computerization effort success. In fact, for every dollar of investment in computer hardware, companies need to invest up to another nine dollars in software, training, and business process redesign.

I think the bolded bit is a pretty intuitive point, but it’s worth noting that most of this investment happens either in individual functions (like IT, legal, etc. – shared services) or at the edges of the organization. The decision-making portions of legacy organizations – central management – have largely missed this boat. Yes, they’re using technology to do some of their work: their communications, document exchange, and analysis processes are computerized. Unfortunately, their decision-making processes, governance, and change management methods haven’t made any progress out of PPT slides.

From pp. 104-105 of The Second Machine Age.

The Inflexible Org

Yet even short-sighted or embarrassed managers should react when the threat from upstart technologies becomes clear. They do not, economists reckon, because of organisational rigidities. Ms Henderson suggests firms can be seen as giant information-processing organisations that evolve a structure and personnel to fit their respective business. Information on sales or production is efficiently filtered to decision-makers, who can then direct new research. When new technologies are no more than tweaks to old ones, this set-up is a competitive advantage. When innovations are more radical, however, the old networks are a hindrance.

This (and the papers linked here) are *everything*. I’ll be writing more on this later, but in general, everything we’re working toward today is the ability for an organization to be flexible even as they are orderly.

Read more: Pardon the disruption

New Governance Models

I am not the first person to worry about the joint-stock company. Adam Smith, founder of modern economics, argued: “Negligence and profusion . . . must always prevail, more or less, in the management of the affairs of such a company.” His concern is over what we call the “agency problem” – the difficulty of monitoring management. Others complain that companies behave like psychopaths: a company aiming at maximising shareholder value might conclude it would be profitable – and so perhaps even its duty – to pollute the air and water if allowed to do so. It might also use its resources to obstruct an appropriate regulatory response to such (mis)behaviour.

I *very much* enjoyed this article from the FT.

The point: the core structures undergirding public companies are broken, as they push companies away from any real purpose, and toward an abstract one – shareholder value – over which they all compete.

Prof Mayer’s suggested solution is what he calls a “trust company”, one with explicit values and a board designed to oversee them. He justifies such a radical switch with his scepticism about the feasibility and effectiveness of regulation. Less radical would be to encourage companies to consider divergent structures of control. One might be to vest voting rights in shares whose ownership can be transferred only after a holding period of years, not hours. In that way, control would be married to commitment. One could also vest limited control rights in some groups of workers. Yet this is not to argue that committed long-term ownership is always preferable. Family control, for example, has both weaknesses and strengths.

The right way to approach governance is to recognise the big trade-offs in managing and governing these complex, vital and long-lived institutions. We should let 100 governance flowers bloom. But the canonical academic model of the past few decades will rarely be the best.

Preach!

Read more: Opportunist shareholders must embrace commitment

Handelsbanken: Responsive Banking

Handelsbanken is different in many ways. It has developed a model that provides a blueprint for other banks emerging from the financial crisis and seeking ways to regain customers’ trust and profitable growth.

Its first point of difference is that it has embraced the Swedish “church-spire principle” – meaning each branch manager is given total autonomy to decide how to deal with clients in the vicinity. Most of these managers, such as Anthony Fogden in St Albans, are bankers with decades of experience in a local area. Unlike other UK lenders – where decisions are handed down from head office to branch managers whom customers rarely see – Handelsbanken allows its bosses to decide on loans and interest rates.

There are no call centres. Customers in St Albans are given Mr Fogden’s mobile phone number and call it when they have questions – even at weekends. The bank does not advertise in the UK – relying on word of mouth to win clients – and has no national offers. The terms of all products are tailored to suit each customer. Anders Bouvin, UK chief executive, says his role is not to tell Mr Fogden what to do but “to support him by providing the infrastructure he needs”.

Case study alert: pushing autonomy close-to-customer is good for everyone. The FT article linked below and quoted above highlights the growth of Handelsbanken, a Swedish bank, in the UK.

Read more: UK account holders flock to Swedish bank’s ‘church spire’

Bank as Platform, Banking as Verb

Mobile Money also offers the latest example in a larger story of how brick-and-mortar continues to fade into the banking background for some consumers. “Banking is a verb rather than a noun,” says Barbella. “It’s a shift that we are starting to see. …Go where it’s most convenient for me. …I may have a cell account but not a banking account so I go there. … If I have both: do I move one to another?”

I like this perspective. First: banks of the future will be platforms for banking across multiple interfaces, and will handle the stuff that stays difficult after the industry fully accepts digital (see this article about Deutsche Bank for more). Second: start downmarket, move upstream.

Read more: Bancorp Bank Exec Sees T-Mobile Deal as Springboard to Masses