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Leadership & Business Wisdom

The right organization

The only things that evolve by themselves in an organization are disorder, friction, mal performance.

The pioneers of management a century ago were right: organizational structure is needed. The modern enterprise needs organization. But the pioneers were wrong in their assumption that there is – or should be – one right organization. Instead of searching for the right organization, management needs to learn to look for, to develop, to test, the organization that fits the task.

There are some “principles” of organization. One is that organization has to be transparent. People have to know and have to understand the organization structure they are supposed to work in. Someone in the organization must have the authority to make the final decision in a given area. It also is a sound principle that authority be commensurate with responsibility. It is a sound principal that any one person in an organization should have only one “master.” These principles are not too different from the ones that inform an architect’s work. They do not tell him what kind of building to build. They tell him what the restraints are. And this is pretty much what the various principles of organization structure do.

Limits of quantification

Quantification for most of the phenomena in a social ecology is misleading or at best useless.

The most important reason why I am not a quantifier is that in social affairs, events that matter cannot be quantified. For example, Henry Ford’s ignorance in 1900 or 1903 of the prevailing economic wisdom that the way to maximize profit was to be a monopolist – that is, to keep production low and prices high – led him to assume that the way to make money was to keep prices low and production high. This, the invention of “mass production,” totally changed industrial economics. It would have been impossible; however, to quantify the impact even as late as 1918 or 1920, years after Ford’s success had made him the richest industrialist in the Unites States, and probably in the world. He had revolutionized industrial production, the automobile industry, and the economy in general, and had, above all, completely changed our perception of industry.

The unique event that changes the universe is an event “at the margin.” By the time it becomes statistically significant, it is no longer “further”; it is , indeed, no longer even ” present.” It is already “past.”

How to use objectives

Objectives are not fate; they are not direction.

If objective are only good intentions, they are worthless. They must degenerate into work. And work is always specific, always has – or should have – clear, unambiguous, measurable results, a deadline, and a specific assignment of accountability. But objectives that become a straitjacket do harm. Objectives are always based on expectations. And expectations are, at best, informed guesses. The world does not stand still.

The proper way to use objectives is the way an airline uses schedules and flight plans. The schedule provides for the 9AM flight from Los Angeles to get to Boston by 5PM. But if there is a blizzard in Boston that day, the plane will land in Pittsburgh instead and wait out the storm. The flight plan provides for flying at thirty thousand feet and for flying over Denver and Chicago. But if the pilot encounters turbulence or strong headwinds, he will ask flight control for permission to go up another five thousand feet and to take the Minneapolis-Montreal route. Yet no flight is ever operated without a schedule and flight plan. Objectives are not fate; they are direction. They are not commands; they are commitments. They do not determine the future; they are a means to mobilize the resources and energies of the business for the making of the future.

The management letter

Managing managers requires special efforts not only to establish common direction, but to eliminate misdirection.

Setting objectives is so important that some of the most effective managers I know have each of their subordinates write a “manager’s letter” twice a year. In this letter to his superior, each manager first defines the objectives of his superior’s job and of his own job as he sees them. He then sets down the performance standards that he believes are being applied to him. Next, he lists the things he must do to attain these goals – and the things within his own unit he considers the major obstacles. He lists the things his superior and the company do that help him and things that hamper him. Finally, he outlines what he proposes to do during the next year to reach his goals. If his superior accepts this statement, the “manager’s letter” becomes the charter under which the manager operates.

Mutual understanding can never be attained by “communications down,” can never be created by talking. It can result only from “communications up.’ It requires both the superior’s willingness to listen and a tool especially designed to make lower managers heard.

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