The 21st Century Organization:
What it will look like, and How to make it happen.
Mary Anne Moorman
President, Gamma Vision Inc.
Kevin B Kreitman
President, Institute for Applied Systemics, Inc.
Organism / Organization
Survival and adaptation
Co-Creating the environment
The quality movement has taken business, industry, government and education to new levels of performance and awareness. Once they were accepted as tools that could improve profitability, quality teachings and practices have shown us that believing in separation can be a dangerous thing. Separation from the customer and the awareness of customer needs is disastrous. Believing that the marketing department is separate from new product design and engineering has driven companies out of business. When labor and management see themselves on different sides of the fence with antagonistic interests, both sides inevitably lose. With the quality movement emphasizing cooperation with suppliers, consultation with customers, breaking down barriers between departments, and participative management by employees, it has ushered in a new awareness and a new style which has forever changed the way we know that business must be done.
Quality thinking has paved the way to systems thinking. Concurrent engineering, customer focus groups that included designers before the design have all been major quality contributions. Seeing this kind of interconnectivity and interdependence has turned many business around in the last decade of the 20th century. But for success in the 21st century, for organizations to actually thrive in the new millennium, it will be up to the quality movement to provide leadership once again for making the next crucial steps.
Early on, the quality movement saw the inadequacy of the Weber-Taylor mass manufacturing model and its bureaucratic management style. For years we have been analyzing our Henry Ford structures and found them inadequate in a technically advanced, global world. This old view treated organizations as well-tuned machines. However, like old machines, they were not flexible enough to move with rapidly changing markets and emerging technology. They were rigid, doing just what they had been designed to do and nothing more. As the quality movement has shown us, the structure of the 21st century organization will be much more biological than mechanical and will behave more like an organism in an ecosystem than a punch press in a factory. They must be able to learn, adapt, and adjust rapidly --and time and again, to master new survival skills in a changing environment.
If anything our world will be even more interconnected in the years to come, and continuous change seems to be the inevitable pattern. Let's look at some of the predictions futurists have given us. People will be living well into their 90th years, the global economy will lead to a universal currency, there will be universal health care in the United States. We will be connected even more immediately than we are now by the Information Superhighway, with immediate access to people, information and services across the globe. There are no "best practices" to tell us how we will need to meet these challenges--but if we have learned anything from the quality journey, it is that the ability to learn, relearn and change--continually improve-- is the primary survival skill.
The 21st Century Organization: What it will look like
Leaving the rigid metaphor of the machine behind, what can we learn from this new metaphor from the natural world? Organizations which will survive and thrive in the 21st century will have many of the same characteristics as organisms which survive and thrive. What are these, and what will they look like in organizations?
The organism / organization
First, let us look at the organism itself--and apply the wisdom of the body to the operation of our organizations. The body of a successful organism behaves as a "whole system"--the wise body does not put its parts in opposition or competition with each other. The arms and legs do not demand "more blood" when the stomach is busy digesting food, and needs a temporarily increased blood supply. The cells do not hoard their stored fat when it is needed to supply energy to the muscles when the animal must run from danger, or build a shelter or hunt for food. Nor does it require that every body part meet the same "standards" ("Liver, you had better show as much muscle as the stomach if you want to work around here."). On the contrary, the appropriate specialization of body parts, operating in coordination and cooperation, is how the organism survives.
Quick reflexes help organisms stay alive and healthy. Decisions which must be made quickly do not have to route through the central nervous system and be debated by the conscious mind before action can be taken-- nor do they need to affect the whole body before the conscious mind pays attention. Our reflexes tell us to move a burning finger away from a hot burner even though our body temperature is still 98.6. Good news for the finger--and good for the whole body that we don't have to wait until we catch on fire to move away from the heat. On the other hand, 90% of a mammal's nervous system is inhibitory--it blocks irrelevant and unimportant nerve impulses from being passed along and acted upon.
Organizations must have the same total system responsiveness. We can do this in a number of ways. We must align the policies and practices of our organization so that people and processes operate for the survival and benefit of the whole organization. Viewing departments as "cost centers" or "profit centers" ignores the actual role the department ought to play in the success of the whole organization, just as requiring the liver to have as much muscle as the stomach. Common practices and policies which seem sensible and effective can also backfire. For instance, the practice of rewarding salespeople on a commission basis can lead in many directions. It might cause salespeople to sell customers more expensive equipment than they need--in the short term--and ruin a company's mid-range product development, as it has for at least one prominent computer corporation. On the other hand, at a prominent copier manufacturer, the policy led salespeople to supply equipment which was less than the customer needed, but seemed to meet competitors prices. Either of these situations lead to customer dissatisfaction and net losses for the company.
As Kaoro Ishikawa told us, "measure what should be measured, not just what can be measured"--and we would like to add "or what HAS BEEN measured in the past." Measuring the wrong thing is often worse than no measurement at all. Eli Goldratt has shown us how misleading "productivity" measures can be, especially when workers are building up excess inventory just to keep busy.
Finally we need to develop feedback mechanisms which reflect the important physical and informational occurrences in the organization and use them for the well-being of the organization as a whole, not to manipulate particular processes or departments. This is particularly important in terms of the cost accounting system. Most cost accounting systems were designed for outdated organizational models and for external financial reporting purposes. Even standard activity based costing systems often do not give enough of the right information to decisionmakers to control costs such as waste, or predict benefits of new products or practices. Yet these are used routinely to make critical evaluation about process effectiveness and product cost. And, as the quality movement well knows, establishing short feedback response systems is critical, where skilled and empowered employees can respond to local problems immediately.
Survival and adaptation
A successful organism must not only be well-organized, it must be able to adapt. Organisms which both remember and learn as a creative activity increase their survival odds, especially in rapidly changing environments. In order for an animal or a person to adapt creatively, it must have knowledge or memory, the ability to "think" or coordinate its memories and knowledge, and the ability to try and evaluate the results of a new behavior, and remember it. Finally, it must be able to in some sense understand the rules of its environment.
Organizations must nurture adaptivity not "adaptedness". Past success is a poor predictor of future performance in a changing world. Most Fortune 500 companies are out of business in five to ten years. Using our organism metaphor, we could say that "knowledge and memory" is usually found in the experience of individuals and teams in the organization. "Thinking" corresponds to coordinating memories and experiences among different parts of the organization -- usually known as team problem-solving and simultaneous engineering or concurrent design.
In acting and evaluating its results, the organization should focus on end results, both externally (i.e. "Did it serve the needs of the customer?") and internally ("Did the action itself foster stability and adaptivity within the organization or did it damage it? Did we win the battle but lose the war?"). It is important to recognize that the long-term health of the organization, the people in it, and their ability to work together is of paramount importance to adaptability. Organizations, like organisms, have a limited amount of flexibility. That flexibility which is taken up in adjusting to repeated reorganizations, changing personalities and demands, anxiety and fire-fighting is NOT available to help the organization adjust to a changing environment.
Humans are one of the few types of organisms which seem to be able to achieve creative adaptivity. We have survived in climates and conditions which would have destroyed us had we relied on our physical systems to adapt--extremes of cold and heat, water and wind. A great part of our ability to survive and adapt has depended on understanding the "rules of the environment." One of the great challenges to us as we approach the 21st century is to understand the new rules which are emerging in our ever-more-interconnected world. Some of the new rules are the rules of "Systems." It is critically important to provide a "Learning Organization" foundation to identify and intervene in "systems" problems as well as to be able to respond to strategic and quality improvement needs.
Co-creating the environment
All living systems have two way interactions with their environments. We breathe in oxygen from the atmosphere and breathe out carbon dioxide. Plants breathe in carbon dioxide and give off oxygen. Animals eat vegetation and excrete nitrogen which fertilizes the plants. The survival of each organism depends on the survival of others. In this way, organisms co-create their environment. We have seen how our conscious actions unintentionally destroy important parts of the environment which might threaten our own survival: air and water pollution, dams which result in flooding or drought, holes in the ozone layer from chemical contaminants. We are learning that we must contribute to a sustainable environment for all. In our natural environment, this means living within our limits, recycling, limiting or eliminating pollution, preserving our natural resources, and such.
Just as we see the organism as part of, and largely dependent on, its physical environment, we must begin to see the organization as a part of the social/economic system. If the means for economic participation (through valued work) is not available to people, and wealth is not reasonably distributed, then our entire market economy will suffer and our quality of life will deteriorate. Money in the economy is like blood in the body. It cannot and should not be uniformly distributed--you need more blood some places and times than others. But it is absolutely useless unless it is circulating, and nourishing every cell.
In addition to the recognition of our individual and corporate responsibility for our natural environment, we must see how organizations have a self-interest in maintaining a sustainable economy--one where economic goods and access to adequate jobs and the education to do them effectively is widely available, and the economy is both stable and actively self-nourishing, like a healthy ecosystem. It is this area which is most challenging, most novel, and most in need of good models and strategies. Two of the major areas in need of attention will be developing win-win co-operative strategies for education and employment and, more controversial, developing strategies to share the wealth of organizational and corporate gains with all the people who made them possible, and the variety of communities which are part of its sustenance.
Currently, the most common forms of this sort of activity include profit-sharing, stock options, employee owned corporations, ESOPs, employee benefits packages and voluntary service to local communities. Many areas have cooperative programs with schools and community colleges. We will be called to go much further. The economy is rapidly becoming truly global. The ability to share wealth and improve the standard of living around the world, and benefit as an international community will be a great challenge. Our stability and survival depends on it.
The lesson of the current era is that "Everything is connected to everything else." To survive in this environment with these realizations we need to see HOW things are connected and incorporate the values which support our survival. Success in the 21st Century is truly dependent upon implementation of a very old adage "what goes around, comes around." If we value that understanding, it will change the way we perform in society. So what does this mean for us and our performance in our organizations?
We must improve our organizational "nervous system" so we can perceive and act immediately and effectively. This includes eliminating internal competition, aligning our measurement and reward systems, training and empowering employees to act on the scene and communicate critical problems without delay--and to get rapid organizational response. The quality movement has discovered and shared these lessons from experience. It now needs to be able to articulate why they are so critical and integrally important, not just a few items from a list of good quality practices.
We must continue communicating the importance of our "human capital." The people in the organization are the most important source of intelligence, flexibility and responsiveness, and create organizations which support them in their cooperative endeavors.
Finally, we must see that organizations exist in the socioeconomic environment the way fish exist in the ocean, and the way we exist in the physical environment. And just as our enlightened self-interest leads us to recycle waste and control pollution in the physical environment, we must work to maintain and contribute to a sustainable socioeconomic environment. No organization succeeds if its market base (customers) are starving, or its employment base is uneducated. No economy survives in isolation of that of its neighbors.
Those who have stirred the quality pot must keep stirring. Quality has served as our springboard into the new age but a great deal more thinking and effort will be required for 21st century success. The quality movement is in the position of being able to lead the charge, and is in a unique position of having the experience to perceive the nature of the changes which must happen. We cannot stop at "quality." We must enter the millennium ready for an even more complete transformation. And quality professionals must be ready to lead the way.
1. Goldratt, Eliyahu and Jeff Cox, The Goal: A Process of Ongoing Improvement. Croton-on-Hudson, NY: North River Press, Inc., 2nd revised edition, 1992.
2. Ishikawa, Kaoru, What is Total Quality Control: The Japanese Way. Englewood Cliffs, NJ: Prentice Hall, 1985.
3. Johnson, H. Thomas and Robert Kaplan, Relevance Lost: The Rise and Fall of Management Accounting. Boston: Harvard Business School Press, 1987.
4. Kim, Daniel, ed. Systems Thinking Tools, Cambridge, MA: Pegasus Press, 1994.
5. Kreitman, Kevin B, The ECCO System: Foundations for Total Quality Management. Ann Arbor: UMI, 1992.
6. Kreitman, Kevin B, "The New Rules: Systems Understanding of Organizational Control" 1996. Available from the Institute for Applied Systemics.
7. Senge, Peter M., The Fifth Discipline. New York: Doubleday, 1990.
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