Organisational Rigidities

Claudio Feser, an executive at McKinsey consulting, started researching corporate longevity and found that 50% of all publically listed companies die within 10 years; only 15% reach 30 years; and only 5% achieve their 50^th anniversary. Further research focused on this 5% whom he referred to as “serial innovators” – those who were continually able to adapt and change in order to survive. In his book, “Serial Innovators: Firms that Change the World” (John Wiley & Sons, 2011) he identifies organisational rigidities that can lead to the demise of most firms and also details how the “serial innovators” overcome these rigidities in order to change, grow and prosper.

Here’s a summary of organisational rigidities along with further implications (“et alors”):

Organisational Rigidities

As companies age, they develop rigidities which block them from changing and adapting. Managers therefore need to overcome the following five rigidities:

1.       Hierarchical Bureaucracy

Whilst hierarchical organisations can have their merits, ossification can take place when the organisation turns into a bureaucracy. Symptoms may include centralisation of decisions with little delegation of responsibility and “excess layers of management that slow their operations.”

To create an “adaptive organisation” 1/ “positively frame the vision” seeing the future in an optimistic way whilst dealing with the issues of today; and 2/ carve out separate and autonomous units which can become “self-managed performance cells.”

2.       Loss of purpose

When companies become rigidly mired in the past, “paralysed [and] blind to the changes necessary to survive” then a sense of purpose can be lost. Without a sense of purpose, staff lose their sense of belonging along with their drive to achieve.

“Cultivate the desire to make a difference” – fulfil people’s yearning to give to a greater cause and serve all stakeholders as well as the shareholders. Use motivational stories to engage staff and include altruistic objectives in the firm’s mission.

3.       Change-resistant corporate culture

After a certain time it is not just the rules and regulations that define what can and cannot be done but also the corporate culture. Whilst a strong culture can be beneficial if it is strategically aligned and adaptive, it can otherwise cause a change-resistant rigidity.

“Cultivate a culture that fosters execution” – promote values and “norms” that encourage achievement, along with creativity and new ways of thinking. When changes are proposed, instead of asking the question “why?” start asking the question “why not?”

4.       Poor incentives

Purely monetary incentives can act as a rigidity as they tend to neither inspire nor retain staff for the long-term. Monetary rewards can “deter staff from cooperating, undermine ‘moral behaviour’ and even encourage deceit.”

Balance financial and non-financial rewards and invest in staff development. Non-financial rewards need to be managed positively and visibly. Motivation can be increased through social recognition and performance feedback.

5.       Adherence to the status quo

Some firms have “defining capabilities” in operations, abilities or specific assets; however these advantages can become restraints by tying the firm to the past and fossilising a “status quo”. This limits the firm’s ability to react to both opportunities and threats.

Two steps are required to overcome this: 1/ top executives need to have a strong desire to learn and “share diverse philosophical approaches”; and 2/ “invest in capabilities” – adapt readily to the pursuit of opportunities and have strategies in place to add to core competencies.

Et alors

The author appears to presuppose that the readers have the power to make sweeping organisational changes and accordingly, at first glance, some of the advice might appear to be “easier said than done”! So what do you do if, as a middle manager, you find yourself in a rigid organisation? Firstly you can positively frame your own vision for your own followers and you can also protect them from the worst “excesses” of the “hierarchical bureaucracy” by fully empowering them: make them a “self-managed performance cell”! Secondly, with all the other rigidities, adopt the same approach: make a clear distinction between today and tomorrow and focus your followers on the tomorrow you wish to create: communicate a motivating sense of purpose; ask “why not?” rather than “why?”; develop your staff through feedback, coaching and training; never stop learning, promote diversity in all its forms and keep an eye on the opportunities and threats arising outside the organisation. You don’t actually have to be the CEO to do this: you can start today!