End for authoritarian leaders: Experts have found the optimal organization of a company

Departments, sections and not least leaders, who think they know everything, must disappear.

Originally published in Shifter, January 4, 2019

- Traditionally, a strong leader should have the answers to all questions. If the leader does not have the answer, it is perceived as a sign of weakness and indicates that the leader should start searching for something else to do. Now, the strongest leader is the one who asks the best questions, says John Hagel, founder of Deloitte’s Center for The Edge.

He is also co-chair of the World Economic Forum's "The Future of Platforms and Systems" council and author of a number of bestsellers on how to succeed in the new business, including "The Power of Pull".

We meet him on the top floor of Deloitte's Oslo office, where he drops by a few days before returning to Silicon Valley. The internal, but independent research center identifies business opportunities that top executives should be addressing but are not yet on their agenda, and provides advice based on studies of companies around the world.

The strength of groups

One of the center’s most important findings from their research should cause major upheavals for the vast majority of established companies, not least those who are concerned with the hierarchy of order. The case studies show that companies that succeed in a modern business all share a common trait: The power to stay ahead lies in small workgroups, not in a model consisting of one top management department and a network of departments led by middle managers.

- Small working groups can quickly adopt working methods that contribute to a completely different speed and better results, says Hagel.

The research shows that the ideal is to work in units of three to 15 people, and to sit closely together on a daily basis.

The necessary trust

It is about facilitating faster learning in a faster world.
- The reason why these workgroups achieve such good results is that the members know each other extremely well and have great confidence in the others in the group. If a group becomes too big, the bonds between the employees loosen and the trust weakens.

Hagel predicts that the companies who will succeed are those who have a network of such workgroups. The groups communicate and learn from each other, but the most important learning occurs within each group. To facilitate trust between employees, the leaders must also show their own vulnerability.

Productive friction

- The positive thing about being a small group is that people know and trust each other, but it can also be quite devastating if one or two in the group are not pulling in the right direction.

- It is important to have a common goal that everyone is working towards. If you do not want to reach that goal, you are done. It is like a filtering mechanism where you every day must show that this goal is the most important thing for you.

- Won’t this result in fierce discussions and small battles about the road ahead?

- Yes, and something else we have seen in the case studies is what we call "productive friction". The members of a well-functioning group will constantly challenge each other, because they strive for better results. But it happens with respect, where no one pulls each other down.

The working groups are result-oriented, and the groups themselves choose how they can best achieve the goals.

Asian edge

In the research from The Center for the Edge, several Asian companies perform very well.

- You argue that some Chinese companies master these new ways of working. But in the Chinese model, is it not important to have a strong leader?

- In the public apparatus and state-owned companies, there is often such a hierarchy. But in the innovation environments it is completely different, Hagel points out.

He believes that this is partly because for a long time, Chinese entrepreneurs had little access to investment capital. Companies became accustomed to asking for help to survive and develop. They created a large ecosystem of partners they could collaborate with, recognizing that their scarcity of resources meant that they could not do everything themselves.

Sharing culture

Hagel points out that Nordic companies have a more horizontal structure than one finds in countries such as the United Kingdom and the United States. But most companies still remain in the traditional departmental structure and do not exploit the potential power of a broad network of partners. He refers to how the Chinese company Li & Fung mobilizes fifteen thousand companies in their ecosystem around the world that they mobilize to serve the needs of Western apparel designers, which allows the company to quickly turn around when the fashion picture changes.

According to Hagel, companies need to define their goal, and then seek experts and networks that can help them reach that goal.

- Start small and evolve. It is important that the collaboration is in everyone's interest and that everyone can learn something from working together.

- The companies may fear revealing their secrets?

- The old-fashioned way for companies was to create proprietary technologies that they did not share with anyone. But in this fast-changing world, whatever you know today will be outdated tomorrow. So it is therefore better to join large networks where knowledge is shared in the context of deep trust-based relationships and a shared desire to improve performance, so you can learn faster.

Too many projects

One final point John Hagel likes to highlight is how companies tend to have too many balls in the air. He finds that managers try to tackle uncertainty by pursuing a great variety of new initiatives at once.

- The biggest buzzword today is to be "agile". There is a widespread belief that as you long as you respond to what is happening in the market, you are doing well. The big challenge is that there is so much going on, that if you are to respond to everything, you will have too many things to do. Even the largest companies spread their resources too thinly.

Having a lot of new initiatives can also give a false feeling of complacency.

- If there is something that does not work, you always have 50 other projects.

The problem is that these 50 others also do not have the conditions to succeed. Hagel challenges leaders to dare to make choices, make assessments, and focus on fewer areas. When asked if it is not difficult to know which projects to invest in at a time when the changes are so rapid, he points out that there are several technologies that we know will have an impact the coming years. There are also some major societal changes that will continue, for example demographic changes and the age wave in the Western world.

- Focus on what you know. Do not try to be too detailed. And make sure that the choices you make have consequences.

Hagel points out the importance of aligning around a shared view of a very big and inspiring long-term opportunity for the institution that can help to provide a sense of direction and focus. However, he adds, it is equally important to align around 2-3 initiatives, that can be pursued in the next 6-12 months, and that have the greatest potential to accelerate movement towards the longer-term opportunity.

Read more about the “Zoom Out/Zoom In” approach to strategy.

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