“Accept the fact that we have to treat almost anybody as a volunteer.” ~ Peter Drucker

 

Course Curator: Dr. G. Danford (London Business School MBA, Helsinki School of Economics PhD)

Eight MBA-level sessions covering: Models of change, structural barriers, cultural challenges, and the implementation of change. Speakers include: business school professors (Harvard, Stanford…), corporations (McKinsey, Bain & Co…) and more.


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BEFORE YOU BEGIN: We recommend that you test your understanding of this sessions content.

WHY? Because the MOST VALID method for measuring learning is to compare results from a pre/post test of content.

 

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Please make a note of your score for comparison purposes at the end of this session.


Time Required: 30 min. 

 

5.0 Informal Structures

  • What is the difference between formal and informal structure?
  • The main features of social network analysis?
  • Relationship between social network analysis and change management?
  • ‘Lean’ Change Management A NEW CHANGE MANAGEMENT TOOL

 

LEARNING MOMENTS from this session

The informal organization is the interlocking social structure that governs how people work together in practice. Managed effectively, the informal organization complements the more explicit structures, plans, and processes of the formal organization: and can accelerate and enhance responses to unanticipated events, foster innovation, enable people to solve problems that require collaboration across boundaries, and create footpaths showing where the formal organization may someday need to pave a way.

  • Social networks are self-organizing, emergent, and complex.
  • Social networks can be considered “the invisible organization”.
  • Social networks complement or compete with formal organizational structures (think “org chart”), work processes (think “job description”), human resource practices, leadership style, and organization culture.
  • The organizational hierarchy needs coordination (analytical, sequential). The network needs enablement (imagineering, experimentation).
  • The Lean Startup is an institution designed to create new products/services under extreme uncertaintyto eliminate waste and increase value-producing practices.
  • Lean Change Management assumes that a rapid cycle of building and learning, is the only process that yields actionable data.

 


 

5.1 Informal Organizations

Formal plans. policies, procedures, and standards cannot solve every problem in a dynamic organization; therefore, informal systems must blend with formal ones to get work done.  Managers are less inclined to check up on workers when they know the informal organization is cooperating with them. This encourages delegation, decentralization, and greater worker support of the manager, which suggests a probable improvement in performance and overall productivity. If a manager is weak in financial planning and analysis, a subordinate may informally assist in preparing reports through either suggestions or direct involvement. The informal organization provides a means for relieving emotional and psychological pressures by allowing a person to discuss them among friends openly and candidly.

Holacracy, is an organizational structure within which authority is distributed not from the leader at the top, but to a group of people.

CASE: ZAPPOS

Holacracy is a comprehensive practice for structuring, governing, and running an organization. It replaces today’s top-down predict-and-control paradigm with a new way of achieving control by distributing power. It is a new “operating system” that instills rapid evolution in the core processes of an organization. When companies get bigger, innovation or productivity per employee generally goes down.

In Holacracy, authority is distributed not from the leader at the top to a group of people, but to an explicit process defined in detail in a written document: the Holacracy constitution. Everyone is bound by those same rules, even the CEO. The transparency of the rules means that you no longer have to depend on office politics to get things done. With the fundamental rules made accessible to everyone, anyone in the organization can quickly figure out who owns what, the decisions he or she can make, and who to hold accountable for which functions. source: holacracy.org

 

Zappos (a Division of Amazon), are trying to figure out how to structure themselves more like a city, and less like a bureaucratic corporation. In a city, people and businesses are self-organizing. ‘Zappo’s are trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do. Holacracy is a new way of running an organization that removes power from a management hierarchy and distributes it across clear roles, which can then be executed autonomously, without a micromanaging boss. ~Tony Hsieh, CEO Zappos

 

How Holacracy Works @Zappos (2:30)

Tony Hsieh (CEO Zappos)
NOTE: this video will start and stop at the pre-assigned times 0:19-2:30


 

5.2 Social Network Theory

The social network is a theoretical construct useful in the social sciences to study relationships between individuals, groups, organizations, or even entire societies (social units, see differentiation). The term is used to describe a social structure determined by such interactions. The ties through which any given social unit connects represent the convergence of the various social contacts of that unit. This theoretical approach is, necessarily, relational. An axiom of the social network approach to understanding social interaction is that social phenomena should be primarily conceived and investigated through the properties of relations between and within units, instead of the properties of these units themselves.

In general, social networks are self-organizing, emergent, and complex, such that a globally coherent pattern appears from the local interaction of the elements that make up the system. These patterns become more apparent as network size increases. There are three general levels into which networks may fall: micro-level, meso-level, and macro-level. source: wikipedia.org

  • Micro-level: Social network research typically begins with an individual, snowballing as social relationships are traced, or may begin with a small group of individuals in a particular social context.
  • Meso-level: Begins with a population size that falls between the micro- and macro-levels. However, meso-level may also refer to analyses that are specifically designed to reveal connections between micro- and macro-levels. Meso-level networks are low density and may exhibit causal processes distinct from interpersonal micro-level networks.
  • Macro-level: Generally trace the outcomes of interactions, such as economic or other resource transfer interactions over a large population.

 

Social Networks (5:00)

NOTE: this video will start and stop at the pre-assigned times 0:19-5:25


 

5.3 Social Network Principles

 

Social networks can be considered “the invisible organization”—they are the pathways through which communication and resources flow and how work actually gets done. An organization chart might communicate who reports to whom, but it is ultimately the internal (within organization) and external (ties between members of the organization and people outside the organization such as suppliers or customers) social networks that really explain productivity (or impediments to productivity).

Social networks often complement or compete with such aspects of organizations as formal organization structure (think “org chart”), work processes (think “job description”), human resource practices, leadership style, and organization culture.

However, there is significant difficulty in getting people with different expertise, backgrounds, and problem-solving styles to integrate their unique perspectives effectively. It is one problem to learn or act on knowledge with others who think like you (such as in a community of practice); however, it is an entirely different problem to do this in diverse social contexts, such as cross-functional teams, where people often do not share a common vision, language, metrics of performance, or even understanding of the problem.

The extent to which a given actor is in the middle of the network is referred to as centrality (i.e., network centrality), though the definition of “middle” can vary from who has the most ties, to who is the unique connection between two other groups. Another basic network indicator is density, which essentially reflects how many people in a network are connected (usually directly) to each other. The tie between actors can be directional or bidirectional (i.e., reciprocal flows between actors); similarly, a network can be described as social, personal, professional, informational, and so on, depending on what is of most interest. Across all social networks performance depends on the degree to which three fundamental principles are accounted for:

  • Principle of reciprocity: the degree to which you trade favors with others.
  • Principle of exchange. “trading favors,” in that there may be greater opportunity for trading favors when the actors are different from one another.
  • Principle of similarity: the extent to which a network is composed of like-minded people.

 

Principles of Social Networks (5:00)

NOTE: this video will start and stop at the pre-assigned times 5:26-10:30


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Take A Pomodoro Break Now (5 min. to relax & reflect)

Learning always benefits from short breaks. 

 


 

5.4 Hierarchy vs. Networks

Can the hierarchical side of large organizations work together with the networked side to nurture and accelerate important changes? According to John Lotter (Harvard), “Virtually all successful organizations… begin with a network-like structure and…evolve through a series of states…into an enterprise that is structured as a hierarchy.” Kotter distinguishes between managing (organizing, coordinating, and telling), and leading (inspiring and enabling co-creation. The hierarchical side of a business (analytical, sequential), needs coordination. The network side of a business (imagineering, and experimentation) needs enablement.

“Management-driven hierarchies run organizations, deliver reliability, efficiency and reduce risk. However, there is no way to achieve revolutionary innovation if everything in the system is focused on risk reduction. However, hierarchies are well managed and display clear job divisions, ‘silos’, which allow them to focus on specific efforts. Innovation emerges when information from multiple locations (which don’t normally collide) collide.” ~John Kotter

Two Structures/One Organization (4:00)

Professor John Kotter (Harvard Business School)

NOTE: this video will start and stop at the pre-assigned times 0:26-4:42


 

5.5 The Three Networks

  • Operational: Focused on getting work done efficiently, and maintaining capacities and functions required of the group.
  • Strategic: Determining future priorities and challenges, along with getting support for those priorities (stakeholders, management etc.).
  • Personal: Enhancing personal and professional development (referrals to useful information, contacts etc.).

 

The Three Forms (5:00)

NOTE: this video will start and stop at the pre-assigned times 10:31-15:27


 

5.6 Lean-Change

One concept which might shed light on alternatives change management practices is the ‘Lean Startup’. The Lean Startup is a management blueprint that influences; ways of managing, measurements, metrics for progress, emphasizes testing & learning, and is actionable. The main conditions of the Lean Startup include:

  • Assumes extreme uncertainty.
  • Assumes users don’t know what they want, and can’t tell you what to make.
  • Assumes that a rapid cycle of building and learning is the only process that yields actionable data.

The primary goal of the Lean Enterprise is to eliminate waste and increase value-producing practices. This approach is derived from lean-manufacturing practices (Toyota, and Steve Blank’s customer development model). There are five lean principles which the Lean Startups adheres to:

  • Entrepreneurship is Management.
  • Validate Learning.
  • The Build-Measure-Learn Process.
  • Innovation Accounting.

There are a number of other practices which further define the Lean Enterprise:

  • MVP: Minimal Viable Product is the version of a new product/service which allows a team to collect the maximum amount of validated learning about customers… with the least amount of effort.
  • Build-Measure-Learn: Is the process of turning ideas into products (MVP) by measuring how customers respond, and learning whether to preserve or pivot.
  • Actionable Metrics vs. Vanity Metrics: During rapidly changing circumstances, high levels of uncertainty make traditional accounting useless, the Lean Startup begins from the MVP (baseline), moves from that baseline towards the ideal, and then makes a critical decision (pivot or preserve). Furthermore, the riskiest assumptions are tested first.
  • Pivot: A strategic hypothesis that is testable. The changes made are designed to test a new fundamental hypothesis about the product, business model, and engine of growth.
  • Other: Continuous deployment (SW) and A/B (split) testing.

 

 

5.7 The Lean Model

SEVEN LEAN PRINCIPLES

  • Executive sponsorship must be established.
  • Change leaders must be identified.
  • The team must define the direction and guiding principles.
  • The team must develop detailed plans to manage and execute change.
  • It is essential to complete the defined tasks (via. central and distributed teams), and to monitor performance.
  • The team must execute the transition from current-to-future state.

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Source: AT Kearney 2010


 

5.8 Conclusion

  • Formal plans. policies, procedures, and standards cannot solve every problem in a dynamic organization.
  • The informal organization provides a means for relieving emotional and psychological pressures by allowing a person to discuss them among friends openly and candidly.
  • Holacracy, is an organizational structure within which authority is distributed not from the leader at the top, but to a group of people.
  • Social networks (complement or compete formal structures), are self-organizing, emergent, and complex, such that a globally coherent pattern appears from the local interaction of the elements that make up the system. 
  • The hierarchical side of a business (analytical, sequential), and the network side (imagineering, experimentation) can co-exist.
  • Lean Change Management (focused on quality) is agile and execution oriented.
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BEFORE PROCEEDING:

COMPLETE the Session 5/8 quiz again, and compare the results.

SHARE your thoughts and ideas in the comment section at bottom of page.


 

Recommended Reading:

Holacracy: How It Works (Holocracy.org)

A Lean Approach to Change Management (ATKearney) PDF File


 

NEXT Session 6/8: POLITICAL PERSPECTIVE

CONTENT: Failure to change at Kodak, Prof. George Yip on ‘winning while changing’, and more (political perspective, 3 R’s of politics in organizations, organizational learning, barriers to change, implementing change, successful change management etc.). Political Perspective 6/8