July 5, 2005
Organization Evolution: The Natural Change Model for Organizational Structure in Changing Times
For Earthlings, the earth is a closed system. As a huge, impossibly complex organization, it is not operating in its own best interests. This paper examines the fundamental nature of organizations and proposes that a major paradigm shift is needed to move from the centuries-old, command-and-control mechanistic model to a new, more dynamic, self-organizing, self-renewing model based on nature itself. The rationale is presented with a description of how such organizations would form and function.
"Houston, we have a problem!"
We are all passengers on this eco-spaceship Earth as it travels into the future. It is an exceedingly complex vehicle and becoming increasingly more complicated every day. It has problems. And, as we all know, complex problems have simple, easy-to-understand, wrong answers. We had better start looking for some root causes of our problems or our vessel may literally disintegrate beneath our feet. And, given the increasing pace of change in today's world, we had better come up with some valid answers quickly.
But, first things, first-before seeking solutions, let's be certain we have accurately defined real problems, not merely symptoms.
At the time of Christ's birth there were about 300 million people on earth. It took more than 1,600 years for it to double to 600 million. As we enter the new millennium there are about 6,055 million, nearly 2 times the 1950 population, with a projected population of about 9,000 million people by 2050 (United Nations Population Division, 1998). The global village will be a crowded place and anarchy is the likely mode of interaction if we cannot find a way for global coexistence based on principles of community and civility rather than pursuit of independent, competitive self- interests. The increasing global disorder we are seeing today is only the leading edge of what will come if we do not change the way we do things. The "there ain't room enough in this town for the both of us" attitude of the Old West is reaching global proportions with global consequences unless something changes. What can change?
The earth remains stubbornly the same size and its resources are dwindling at ever-increasing rates. Some people can even remember a time when the air was clean and sex was dirty. Today, both our physical environment and our social environment are being pushed to the point of failure if current trends continue.
Environmentally: At current rates of consumption the planet's oil will be depleted in 28 years, copper in 34 years, and nickel in 59 years (Stead & Stead, 1992). At current levels of increase, CO2 levels will double in the next several years, further raising the global temperature by an estimated several degrees centigrade (Eisraa, 1995) And, if, as some studies suggest, that increase were as much as 5 degrees, whole countries would be inundated with water (Feagans, 1998; Gordon & Suzuki, 1991).
Socially: In our current global village, 20% of the people control 75% of the wealth while another 20% receive only 2% of the wealthand the gap is growing with developed nations evolving into the two-tier, haves and have-nots class system that dominates undeveloped nations. (There is no shortage of books and articles that document this phenomenon [Franks & Cook, 1995]). Eighty percent of the village population lives in substandard housing. Twenty-five percent of its women have either been raped or suffered attempted rape. Only 0.01% have computers; 70.8% are Asians or Africans. Despite the growing usage of English in business, only 8.6% of the total population speaks English; 16.5% Mandarin, 8.3% Hindi, 8.4% Spanish, 5.8% Russian, 3.7% Arabic and 206 other languages make up the remaining 50% of the people-communication is tough! (The World Village Project, 1999).
How did things get this way? Organizations are both the cause and potential cure for Earth's problems! It is organizations that leverage and amplify human ingenuity into massive mechanisms- mechanisms for controlling human behavior, for developing social institutions, particularly media and contents, that program values and beliefs, institutions that consume natural resources, institutions for the distribution of wealth, and institutions responsible for poisoning the environment. And it is not that any organizations set out to intentionally do bad things; it just sort of happened and continues to happen. We must examine why and look for better ways for organizations to operate.
Why Do Organizations Exist and What Is the Purpose of This Paper?
Simply put, organizations exist to do things that individuals cannot accomplish by operating alone-i.e., the obvious answer! BUT, the real question goes to the underlying rationale: Why do you want to do something, what is the PURPOSE?
The fundamental question proposed by this paper is just how should people organize for achieving common purposes in a very complex and constantly changing world, and additionally, what would that process look like?
The question arises because our old answers are no longer working. The old model of organizations is predicated on classic economic theory and operationalized using centuries-old, command- and-control concepts based on Newtonian mechanistic theory. This model has died-it just has not been given a proper burial yet!
What are we talking about? Basically, a revolution in the mental model that people use in business and government to create, interpret, and deal with their worlds. "Until recently, business people saw their worlds through the Industrial Age metaphor of the machine and built their organizations accordingly" (Petzinger, 1999, B1). We have evolved from the Agrarian/Craft Age through the Industrial Age to the Information Age in our technology and capabilities to interact with the environment, but we do not seem to have evolved comparably in our sociological capabilities for maintaining community well-being.
The Industrial Age was a linear step up from the Agrarian/Craft Age when humans began amplifying manpower with machines. Everything we know about organizations is extrapolated from the notion that the universe is a giant clockwork type mechanism. From the late 1600s onward we have been using equations-the laws of nature-to predict the tides, orbits, the movement of anything that could be seen or felt. This approach has resulted in organizations that are designed like clockwork mechanisms with levers that if pulled in one place should produce results in another-increase the advertising budget by "X" million dollars for a projected "X" percent increase in sales; pay a sweat-shop foreign female an extra peso and we can expect her to produce five more units per hour-and we have continued on with that model, glibly ignoring the facts that rarely did pulling levers or pushing buttons produce the precise results expected, and callously ignoring that such mentality reduced people to the status of mindless gears in a machine.
Nevertheless, this has become the inherent mode of all industrialized economies' operations. "Traditionally conservative economists, most notably Nobel laureate Milton Friedman at the University of Chicago, have long argued that the sole mission of a corporation is to maximize profits for the benefit of shareholders" (Daviss, 1999, p. 30). Economics departments and MBA programs universally teach quantitative methods that continue to treat the workplace and world as clockwork mechanisms too for the purpose of converting resources into shareholder value. By the end of the 1980s, businesses essentially existed for no other purpose other than to compulsively fulfill this sacred obligation (Petzinger, 1999). Ask any business school student what is the purpose of a business, and he or she will emphatically state, "TO MAKE MONEY."
Sadly, there has been, and continues to be, a tremendous resistance to change in this Friedman-driven philosophy and the organizational practices it drives. We continue to perpetuate the mechanistic command-andcontrol model because, as Dan Sweeney, a vice president at IBM's retail consulting practice puts it-we have learned to equate "professional management" with the inherent belief (assumption) that purpose is profits and that stability means a continuous stream of shortterm profits (an assumption) and that our lives (and in particular, our business lives) should be stable and predictable (Harari, 1999). This string of assumptions is acceptable to people who have been told by respected professors and Nobel prize winners that the future can be predicted by linear projections of the past. HOWEVER, THIS IS PROVING TO BE PATENTLY UNTRUE!
And to what places has doggedly sticking to this invalid model brought us?
Money has become the "purpose" of everything; all things have become monetized in order to fit them into our clockwork computations, yet.... One sixth of the world is on the edge of starvation. Eight-five percent of the world's people are living on 15% of the resources. Two-thirds of our arable land is gone. Fifty percent of fresh water is contaminated. Four thousand acres of rain forest disappear each hour. (Hock, 1998)
Is there a problem? Duh!
In the world today, we have:
* Economic turbulence spreading from Asia, Eastern Europe, Latin America\, and the USA
* A disappearing middle-class of consumers everywhere
* Schools that cannot teach
* Welfare systems in which few fare well
* Police that cannot enforce laws
* Judicial systems without justice
* Families that are far from familial
* Communities that cannot communicate
* Governments that cannot govern
* Individuals everywhere that are alienated from the institutions of which they are constituents
* Growing worldwide poverty-1.3 billion people earning less that $1 per day in 1993, which is an increase of 100 million from 1978
* Workers in the U.S. without high school degrees, who have lost 25% of their purchasing power since 1973; those with degrees-15%
* The earnings gap between men with college degrees versus without growing from 42% to 89% over the past 20 years
* The incentive for males to leave their families reaching a 73% increase in personal standard of living while that of the abandoned family decreasing 42% (and, in the process of abandonment, the transmission of family values being relegated to TV and music media which are a celebration of sex, violence, and instant gratification) (Hock, 1999; Piturro, 1999; Zuckerman, 1998)
It is not working for people, for society. The rise of a two- tiered society is reflected in the emergence of the "knowledge" industries whose workers prosper while those employees without a college education or technical skills fall by the wayside. And it is a problem that is growing: Consider that out of 7.5 million available high school graduates that should go on to higher education, only 2 million can meet the qualifications (Hock, 1999). Where do they go, what do they do? Can they raise families on "would you like fries with that" salaries? In 1970,2.8 million auto and steel industry workers enjoyed middle-class incomes and generous benefits; today fewer than one million do so. Median wages of average workers today, adjusted for inflation, are below the $8 per hour of the late 1980s and even $1 lower than the 1973 rate (Zuckerman, 1998).
Clearly it is not working for the general citizenry. Is it working for business? Not like it used to. Of Fortune 500 companies in 1955, 70% are out of business! ("Factoids," Training & Development, 1998) A 1983 study by Shell oil concluded that corporations live only half as long as human beings (Wah, 1998). It makes one wonder what is really happening? If looking out for the shareholder is the prime directive, what happened to looking out for the future shareholders of these companies? What is the legacy of our clockwork organizations using command-and-control tactics to focus on shortterm strategies to maximize shareholder value? As Lester Thurow of MIT put it: "How far can inequality widen and real wages fall before something snaps in a democracy?" (Thurow, 1996, p. 261) Thurow is concerned in the greater sense of an international slide into a new Dark Ages as a result of the dominant "winner- takeall" logic that dominates market dynamics. Sadly, opposition to such thinking runs deep as evidenced by Thurow's fellow economist at MIT Paul Krugman who brushes aside the concerns for society as "essentially literary sensibility" rather than a scientific- mathematical outlook (Krugman, 1996). Apparently non-monetarist moral principles are difficult to factor into regression equations and therefore must be discarded as not relevant. Hence, we understand the tongue-in-cheek definition of an economist as one who can tell you tomorrow why what he predicted yesterday did not happen today.
How can we avoid such a slide into a new Dark Ages? Ironically, "business is the best hope of the poor because companies that invest in emerging nations will grow profits and abundance for their new global partners..."; and because the alternative is no alternative at all, i.e., "a world in which one billion people trapped in a vicious circle of poverty and the population explosion foment political unrest and increased anti-Westernism as an antidote to their misery" (Piturro, 1999, p. 17), a scenario that seems to be well into its initial stages of playing out.
The 82-year-old Chairman and CEO of the billion-dollar American Income Life Insurance Company understands the problem and what is needed. He alludes to his childhood when his father was appalled when he discovered that the flat tire on his Model T Ford had so many patches on it that it could no longer be fixed and buying a new tire was the only option. "I suspect that's the state of the world today. We've run out of patch room. For many of the problems we face in this world, it's time to buy new tires." (Harari, 1999, p. 35)
Figure 1. Natural Change Organization Concept
Organizations' inability to evolve, to experience ongoing metamorphosis, in a rapidly changing and continuously evolving environment, is resulting in the physical and social destruction of the societies and economies of which they are a part. The same rationale for the way organizations continue to operate would forecast that there is no future for the human race. Surely this cannot be right, or allowed. We must wake up and recognize a major root problem: Current organizational designs are unable to cope with the real world in manners effective for long-term survival.
The future has traditionally been thought of as an extension of the past. If you know the starting point, one can predict the future by following a projected line influenced by known past factors. BUT, the discovery of nonlinear, dynamic systems by Edward Lorenz of MIT in the mid-1960s changed all of that in fundamental ways. Enter Chaos Theory-the concept that chance, changing conditions and creativity enter complex systems at any point and alter the course.
Indeed, in spite of all of the fancy economic analysis models, over the long run the stock market has been described as a random walk, and that is largely due to unpredictable changing events over time-a sort of Chaos Theory in slow motion. However, the speed of change in the environment has continued to pick up pace and that is the one trend that everyone is most confident about; i.e., that, oxymoronically, the only constant we can count on is increasing change. Since we cannot control the environment, and mechanistic organizations cannot adapt quickly enough using top-down command- and-control structures, the only alternative is to move to a more natural, organic model, that like its biological counterpart, organisms in nature, responds quickly at the point of contact with the environment to changes it is experiencing. This means localize short-term responses to local conditions and long-term evolution of the whole over time.
Such organizations would form around a common Purpose and have as its "DNA" a common set of Principles that govern all internal decision-making and implementation. Such an organization would necessarily have to be responsive to any and all People who could either affect its operations and existence or who are affected by its operations and existence. Purpose, Principles, and People would be the driving forces for determining Managerial Philosophy, Structure and ongoing Operations. All elements of this model would be focused on "Customers" and its success would be measured in terms of constituency satisfaction, and, of course in the case of for- profit businesses, money.
Figure 1 diagrams the genesis or concept for formation of such organizations. It could be used as a generic blueprint for designing such selforganizing, naturally evolving organizations. Such organizations would experience "natural change" because one of their basic purposes (as is the case for all biological organisms) would be continued survival; hence the name Natural Change Model.
Where do the concepts of vision and mission fit into this model? They do not fit in so much as derive from it. The concept of Vision is an articulation of the core organizational purpose, its philosophy, values, and beliefs along with a description of ultimate actualization. "Vision" serves as an anchor for all multiple scenario strategic planning. The concept of mission is an articulation of what (products and/or services) is produced for whom and how, all expressed in terms of the organization's philosophy, values, and beliefs. "Mission" serves as an anchor for all operational decision-making. In general, all of the model elements in the six numbered boxes can be thought of as lenses through which the customers are kept in central focus. Probably the most unique aspect of this model compared to traditional economic theories of organizations is the focus on customer first and foremost as a beneficiary of the organization's purpose and the inclusion of constituencies from the greater environmental community in which the organization exists (i.e., affirmative social responsibility as a core value).
Simply put, the elements of this model are:
* Purpose: a clear, socially responsible reason for existing
* Principles: the values and ethics-based rules and guidelines by which the organization will operate
* People: staffing by those whose values and beliefs are congruent with the purpose and principles and who will thereby achieve personal satisfaction by helping the organization to be successful.
* Management Philosophy: embracing purpose and principles and allowing people to be empowered to do their best.
The concept portrayed in Figure 1, can be thought of as the development of a single-cell organization, alive and existing for its purpose. To the extent that other people subscribe to the same purpose and basic set of principles they could form their own "cell" or organization and link with the original "cell" to form a more complex organization. Such a linkage would imply the creation of yet another type of process element in the more complex organization-an element for the purpose of Information Sharing and Coordination (IS/ C). This is a far different function than the traditional hierarchical command-and\-control function as it is driven by common subordination to Purpose and Principles rather than the power and intentions of a dominant coalition of senior managers.
To the extent that anyone or group wants or needs to join the organization, they may do so by subscribing to the common Purpose and Principles and self-organizing in harmony with them. Each new "cell" added to the growing organization is empowered to have voice in the overall organization by inclusion at the next higher IS/C element. This would be analogous to increasingly more complex living, biological organisms that have evolved.
What does such a business organization look like in real terms? Two are familiar to everyone: the Internet and Visa. Both are very real organizations and yet they are almost invisible. Where are their physical "Headquarters"? They haven't any! Who is "in charge" over either of them? No one person or group. They are self- organizing organizations in which multitudinous subordinate organizational elements simultaneously compete with each other for market shares and niches and at the same time cooperate with each other through common subscription to Purpose and Principles, using collaboratively shared resources. Do they work? Visa processes more financial transactions worldwide in a week than the entire U.S. Federal Reserve System does in a year (Hock, 1999). Anyone can join up and create their own Visa card organization as evidenced by the multitude of new card offers in the mail from every sort of organization, from banks to alumni associations to religious groups.
Viewed up close, the individual elements of the overall Natural Change Organization Model might seem to be independent or not even visible at all, lending an appearance of chaos to the environment at any one place at any particular point in time. However, as with the weather, we are coming to learn that there is an interconnectivity to all elements and it is their combined, cumulative effect that gives evidence to order and patterns that can be made sense of. It is the manner in which the flapping of a butterfly's wings in the Amazon valley does have an effect on the weather in Europe, and it is the underlying principle for the power and importance of individuals and groups of people at the most local of levels (Lorenz, 1994; Wheatley, 1994). And it is the interconnectivity of such people in pursuit of common Purposes that transcends political borders and enables such huge organizations to function effectively and independently of governments. As Dee Hock puts it, if you organize in this manner, so long as you do not break laws, who could stop you? No one! And, it is why the solution to the world's problems does not lie with government nor with the old command-and- control mechanistic organizations that have largely created most of the problems, albeit unintentionally.
Hock, "one of the most original thinkers on the subject of organization" according to Peter Senge, formed the Chaordic Alliance in California for the Purpose of helping to create new organizations and transform organizations to demonstrate the viability and vitality of this organizational concept (www.chaordic.org). Dee calls such organization "Chaordic" based on continuously existing on the line where chaos and order intersect. "The Chaordic Alliance is committed to creating the conditions for the formation of practical, innovative organizations that blend competition and cooperation to address critical societal and environmental issues" (Hock, 1999, p. 324).
What have we learned from Chaos Theory? case studies (Wah, 1998) have shown:
* The main characteristics of natural change, adaptive systems are:
1. Truly flat organizational structure
2. Team-based operations
3. Evidence that team members always tell coworkers important issues in person
* Successful organizational development depends on communication awareness: multi-directional, multi-channel, and continuously asking the question of who else needs to be included.
* An inherent value or belief that needs to be developed is a positive sense of ability to deal with change plus a positive mental image of one's self and the world one is dealing with.
* Becoming a "living system" means breaking down hierarchies into groups of people who can move from one part of the organization to another quickly, which requires cross-training and development of self-directed work teams.
* Organizations can and need to compete while simultaneously collaborating with each other to identify emerging conditions and events that are not linearly predictable, using alliances to capture the "bigger picture" more clearly and interacting more effectively in a turbulent environment.
What are Some Conclusions to be Drawn from the Natural Change Organization Concept?
If organizations are living parts of a larger organization called the environment or Earth, their health and behavior have a direct impact on the health and behavior of the greater organization. An organization can be a functioning contributor to the greater good, or an irritant, or even a cancer.
Organizational "boundaries" are highly flexible and permeable versus mechanistic organizations where "boundary" is a function of the intentions of the top management dominant coalition who necessarily interact with traditional cognitive limitations that lead to short-term focused "bounded rationality" (Engdahl, 1993; Galbraith, 1983; March & Simon, 1958; Simon, 1980).
The observable organization in an increasingly "virtual" world would be the patterns and content of information flow, plus the information retention and maintenance systems (Weick, 1979). Organizational "structure" in the classical sense, would be ever changing as a result of:
1. Continuous response to interpreted information from both the external and internal environments, classically called "strategizing", and
2. Subsequent internal sense-making and marshaling of resources in response to constantly changing strategies, classically called "directing", and
3. Subsequent adaptation in operational implementations, classically called "managing," all done at the lowest possible self- managed team levels within the organization rather than directed by top management.
Also, a major moderating variable is inherent in the NCO. March and Simon (1958) refer to it as "uncertainty absorption," which occurs when information that is transmitted is really interference rather than relevant hard data. O'Reilly (1980) presents a model for information distortion in organizations and suggests that not only could "interference" be measured, but that it should be as obvious that it has effects on the decision-making process (Engdahl, 1993). In other words, information must be regarded as a primary "resource input" for any organization and it is critical to be sure that the organization operates on "real" information, not just raw data or even worse, meaningless noise to which some meaning has been erroneously or egregiously given.
Some Closing Thoughts
From James Higgin's book Strategy: Formulation, Implementation, and Control, (1985, p. 43)
"To manage a business well is to manage its future; and to manage its future is to manage information" quotation from Marion Harper, Jr.
From Lester Thurow:
"If it is to succeed, the corporation of the future will have to shift from a consumption ideology to a builder ideology" (Thurow, 1996, p. 315).
And lest we forget that in the sense of Charles Perrow's (1980) "great chain of being" and his nested box analogy, there are serious implications in our interdependent world for a compatibility and consistency in the nested Purposes, the moral virtues, of organizations:
"I never did, or countenanced, in public life, a single act inconsistent with the strictest good faith; having never believed there was one code of morality for a public, and another for private man" (Thomas Jefferson, 1809).
Intent and purpose can interact in various ways, with various results-Aristotle warned us that the acquisition of empire could undermine the common good of the community (Wolin, 1960).
"Things have gone on for much too long and are much too bad for pessimism; optimism is the only real choice" (Dee Hock, Founder and CEO Emeritus, VISA, 1997).
"To learn is to change. Education is a process that changes the learner . .. Learning involves interaction between the learner and his environment, and its effectiveness relates to the frequency, variety, and intensity of the interaction" (Leonard, 1968, pp. 18- 19). This is true for all things in nature, from sub-atomic particles, to bacteria, to amoebas, to whales, to whale pods, to humans, to organizations, to societies!
NOW WHAT ARE YOU GOING TO DO ABOUT HOW YOU, WE GET THINGS DONE!!!??? "INVENT" ANOTHER GEAR TO TURN, ANOTHER LEVER TO PULL... OR REDESIGN BY BEGINNING WITH AN AFFIRMATION OF "PURPOSE" AND "PRINCIPLES"? Just remember that "he who dies with the most toys...." is still dead regardless of whether it is people, organizations, or whole societies. On the other hand, maybe George Carlin got it right when he quipped:
"There is nothing wrong with the planet. The planet is fine.... Been here 4 billion years. We've been here, what a 100,000 years, maybe 200,000. And we've only been engaged in heavy industry a little over 200 years. 200 years versus 4 billion. And we have the conceit to think that somehow we're a threat? The planet isn't going away, we are."
And beyond the ecological disaster that is imminent, remember that the Natural Change Organization concept can apply to evil as well as good Purposes. The people of spaceship Earth are currently engaged in a global war with terrorism as the opponent. Terrorist supporters understand the Natural Change Model perfectly: They are driven by common Purpose, they subscribe to common Principles, and their People are highly motivated by personal identification with the same. Their Management Philosophy is totally driven by \Purpose and Principles, and they are structurally organized to allow any and all to join and function fully at the lowest self-managed team level to accomplish Purpose. This is the reason that it is so difficult to stop terrorism. Terrorism is almost like a bacteria that has invaded our natural system, and the only way we can eradicate it is to organize in a manner that mobilizes a unified global response at the lowest possible levels (antibiotics work by killing the individual bacteria) The implications of this life-or-death challenge are clear: Some aspects of Purpose and Principles are sacrosanct basics to civility and human existence.
This paper is about a real problem! It is about the inability of organizations today to accomplish their purposes in a manner that secures a healthy future for the human species.
Today, both our physical environment and our social environment are being pushed to the point of failure if current trends continue.
Organizations are both the cause and potential cure for Earth's problems!
We have evolved from the Agrarian/ Craft Age through the Industrial Age to the Information Age in our technology and capabilities to interact with the environment, but we do not seem to have evolved comparably in our sociological capabilities for maintaining community well-being.
Economies departments and MBA programs universally teach quantitative methods that continue to treat the workplace and world as clockwork mechanisms too for the purpose of converting resources into shareholder value.
This string of assumptions is acceptable to people who have been told by respected professors and Nobel prize winners that the future can be predicted by linear projections of the past. HOWEVER, THIS IS PROVING TO BE PATENTLY UNTRUE!
Organizations' inability to evolve, to experience ongoing metamorphosis, in a rapidly changing and continuously evolving environment, is resulting in the physical and social destruction of the societies and economies of which they are a part.
Probably the most unique aspect of this model compared to traditional economic theories of organizations is the focus on customer first and foremost as a beneficiary of the organization's purpose and the inclusion of constituencies from the greater environmental community in which the organization exists (i.e., affirmative social responsibility as a core value).
Just remember that "he who dies with the most toys...." is still dead regardless of whether it is people, organizations, or whole societies.
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Richard A. Engdahl, PhD, RODC
Richard A. Engdahl, PhD, RODC internationally known speaker and Associate Professor of Management, Cameron School of Business Administration, University of North Carolina, Wilmington (UNCW), has a broad range of experience in OD consulting and management development. He has published books on management and papers on OD. He is CEO of Organisational Imagineering International, Ltd., and the principal architect of UNCWs Total Quality University TQ model. He has served the Wilmington community on leadership and quality councils.
Copyright O D Institute Summer 2005