UK: SECRETS OF CYCLE-DEFYING, ADAPTIVE ORGANISATIONS.

UK: SECRETS OF CYCLE-DEFYING, ADAPTIVE ORGANISATIONS. - Although the methodologies of managerial researchers have quite different starting points, it's already possible to discern some of the traits of the self-rejuvenating, cycle-defying, adaptive organ

by
Last Updated: 31 Aug 2010

Although the methodologies of managerial researchers have quite different starting points, it's already possible to discern some of the traits of the self-rejuvenating, cycle-defying, adaptive organisation. For instance:

- Profits and assets. In the long term the companies which yield the highest returns do not put profits first. 'Profit is not the proper end and aim of management - it is what makes all of the proper ends and aims possible,' sums up David Packard, quoted by Porras and Collins. So what is it that permits companies to put themselves and their continued existence first - above profits, assets and the claims of shareholders?

- The answer seems to be a fervent, almost cult-like organising principle or ideology, which performs two mirror-image functions: first, as a rallying call for the faithful and second - just as important - to repel unbelievers. De Geus notes that 'living' companies are highly selective about whom they admit to full membership, rejecting unsuitable entrants like a virus. That means having a very clear idea about what 'we' stand for. Counter-intuitively, however, the core beliefs themselves are not a common set of 'politically correct' or 'progressive' principles. They vary hugely: so that a manager who loved working for Hanson would undoubtedly hate to work for Shell, and vice versa. It is the authenticity of the belief that is the common feature, not the content: 'The critical issue is not whether a company has the "right" core ideology or a "likeable" core ideology but rather whether it has a core ideology - likeable or not - that gives guidance to people inside that company.'

- Long-lived companies are led in a different way from comparators. Because of the strengths of their beliefs, they don't need charismatic, high-profile leaders to show the way. Hands up those who can name the chairmen of Shell or 3M ... In a further blow to the myth of great managers, the primacy of continuity means that to a striking degree such companies create their own leaders rather than the other way round. In over 1,700 years of corporate history of their 18 companies, Porras and Collins found just four cases where an outsider had been brought in as chief executive. The extreme case is GE, whose CEO Jack Welch is one of the most hyped executives in the world today. But so were his four immediate predecessors - like Welch, each one home grown. Conclude the authors: 'To have a Welch-calibre CEO is impressive. To have a century of Welch-calibre CEOs all grown from inside - well, that is one key reason why GE is a visionary company.'

- In 'living' companies, power structures are often decentred. Shell is a federation, in which the national companies delegate 'reserve powers' to the centre, which in any case (like Unilever) is split between the UK and the Netherlands. They never vote, so they have to agree. Mitsui re-constituted itself after the war without a centre at all. Stora was historically made up of at least 12 smelters, who again had to agree together. Visa has a centre, but not with conventional power; the Internet has neither centre nor anything resembling a power structure. Offers de Geus: 'A powerful CEO may be very bad for a living organisation.'

Distributed structures like these have the inherent advantage of system resilience in the case of local failure. More important, rather than imposing change from the top, they allow creative decision-making and incremental change to bubble up from the bottom. 'Concentration of power is a reduction of corporate intelligence,' believes de Geus. 'Decision-making is learning, and learning is a means of moving from one place to another.' Moving from one place to another, of course, is another name for evolution, and it is in the ability to evolve at the margins that the surviving, rejuvenating companies most closely match the self-organising systems simulated in the computers of the Santa Fe researchers.

The locus classicus of purposeful (as opposed to random) corporate evolution may be 3M. Founded in 1902, 3M began life as a mine and saved itself from premature extinction by branching rapidly into abrasives. Impressed by its early vulnerability, its founders systematically set about reducing 3M's dependence on both individual products and themselves. Through such means as allowing employers to devote a proportion of their time to their own projects and insisting that divisions generate 25% (now 30%) of sales revenues from products introduced in the last five years, 3M has turned itself into the nearest approximation of a self-perpetuating, self-mutating organisation - the classic case of a company as its own most impressive creation. At the last count 3M had over 40 product divisions and 60,000 products - with countless more in the pipeline. Each one, points out Stopford, is an infinitesimal part of the company's future: 'One hundred little experiments are better than one big one: a company creates new resources with both success and failure.'

Find this article useful?

Get more great articles like this in your inbox every lunchtime