Structure follows strategy.
So said Harvard Business School’s Alfred Chandler in his 1977 book, The Visible Hand: The Managerial Revolution in American Business. Once a strategy has been decided, the organisational structure should be designed to optimise the way resources are arranged, supported by the policies and systems that specify how the organisation should operate, and managed in line with the strategic intent. In this way, Chandler argues, organisations are well-placed to serve their target market, differentiate their offerings and respond to market forces.
Few organisation are structured other than as a top-down, pyramid-shaped hierarchy with which we are so familiar. This was the organisational design that effectively capitalised on the principles of scientific management which advocated the standardisation of production, mechanising labour through jobs designed to match stages of the production process, and separating ‘thinkers’ from ‘doers’. The economic boom of early 1900s that followed the widespread adoption of this design all but guaranteed that organisations would use this structure regardless of specific strategy as the drive for profit outstripped other considerations
There were several reasons why this organisational structure so successfully achieved unprecedented levels of growth and productivity. Mostly it had to do with mass production and the growing mass market. When profits are driven by supply in volume, the simplest approach is to design an organisation that prioritises standardisation. The de-skilling of the workforce in favour of jobs not only meant the ability to increase output many times over but it also enabled paying as little as possible to the people whose work was defined by tasks rather than ability. The corporation thrived.
This top-down hierarchical structure suits perfectly the corporates that are there to serve their shareholders. Shareholders are willing to handsomely reward a CEO they consider to be well-enough skilled to steadily grow the business and profits, able to fend off any threats to the business, and make hard decisions to protect their investment. The enormous pay and bonus schemes are less about market rates and more about ensuring the CEO is accountable to the shareholders and their demand for returns. With the organisation’s power and control concentrated at the CEO level, the CEO is able and authorised to use any and all justifiable means (unfortunately ‘justifiable’ doesn’t always mean ethical, responsible or in some cases even legal) to meet profit forecasts. Reducing services, off-shore outsourcing, cost-cutting and redundancies are as much the requisite tools of trade for CEOs as spanners and wrenches are for plumbers.
But for organisations like Encompass Community Services, one that serves a purpose before a profit and where returns are not counted in dividends, a top-down hierarchy can be a liability. Of course, if funding compliance was the measure of success, standardised process and bottom-up reporting are ideal – simply replace ‘shareholders’ with ‘funding bodies’ and ‘profits’ with ‘funding’. As the previous post outlined, however, such an approach conflicts with Encompass’ commitment to do more for its clients than counting the hours they dealt these funded programs to those funded clients. In reality, Encompass has been managing dual organisational systems: the formal one that complies with how funding dollars are spent; and the spiritual one that makes decisions based on the organisation’s Vision. The dual structure has not only become too costly, but whenever parallel systems exist, there are always plenty of cracks where things can disappear.
The organisation structure was the topic of a meeting with the Encompass Board in late 2013. Encompass needed to choose which structure it was going to support as it could no longer juggle both. One Board member put it most succinctly, “We cannot afford not to.” A top-down, hierarchical chain-of-command is a basic template for delivering more funding but its design is predicated on clients as a mass market and people as standardised labour. Although many of Encompass’ counterparts – against whom Encompass competes for funding – may well be organised to maximise funding, for Encompass this option was not feasible. Firstly, because it would have to be over CEO Elaine Robb’s dead body and secondly because it simply could not co-exist with Encompass’ Vision and Values without significant fallout in the culture of the organisation and the trust it has built with its clients.
The alternative the Encompass Board wanted has two objectives.
- Build a financially-sound, purpose-driven organisation;
- Place the organisation’s resources at the fingertips of anyone who wants to be an Encompass client or part of the community that supports them.
It would shift the Encompass model from ’employ as few as possible’ used by shareholder-driven organisations, to ’employ as many as we can afford’. The ‘maximum profit’ paradigm would be replaced by one of ‘maximised potential’.
‘Maximised potential’ is an overused term that rarely has any real meaning. The Encompass Board determined that it would back any necessary measure to make ‘maximised potential’ a reality. The #encompassproject which was launched as a result of this meeting is now working to de-standardise jobs so that employees can respond to potential from:
- Their individual and collective abilities, ideas and willingness;
- Working closely with the individual and collaborative abilities, ideas and willingness of clients; and
- That looks for common interests and engages with the local community.
An example of how this might work in practice is a program to teach cooking skills to help clients with disabilities work towards independent living. Typically Encompass would deliver a program to teach cooking designing it against nationally accredited criteria and balancing the contact hours that would be funded against minimum numbers of participants needed to make the program viable. However basic, practical and healthy cooking is not just a skill needed by the disabled. Many young people today grew up with two working parents and unlike previous generations have not learned to cook from their mothers. Divorce rates are forcing newly single people to take on cooking responsibilities previously looked after by their spouse. A spate of redundancies in the manufacturing sector in the local area may change the structure of the family where the previously home-staying spouse may be able to find work leaving the partner no longer employed to now look after domestic duties. This program then could be more than using funding dollars to run a client service; it could maximise potential by tapping into changing social and demographic factors. Perhaps private participants would be willing to pay a small fee for such a course, or a local business may subsidise costs, given the wider target market, by sponsoring the program. The program leader may not come from the Encompass training division at all but – supported by the training team – may be the gardener, cleaner, accountant, that is, someone with the ability, ideas and willingness to contribute to Encompass in ways beyond the job.
Potential can only be realised if it has an outlet. With an outlet, potential has the unique property of being capable of constantly regenerating – that is, of being maximised.
*Author’s note: the views expressed in this blog are those of the author reflecting her opinions and experiences and are not the views of Encompass, its Board, management or employees.