Concepts COO HR

Organizational Design 2.0: Charisma and Character matters

Inspired by David Korens – A revelation of Spaces

After transitioning from a corporate process-driven culture at an insurance asset manager to a high execution Banking/PE culture and then again to a modern, flat, millenional-enabled inspirational and leadership culture with little structure and basically no authority, I have seen some good extremes and more important, I started to ask myself what model is right for which purpose? What can I learn about organizational design. And I think it helped me look at entrepreneurship in a new way.

Scalable Creative vs Hierarical High Drive vs cost-reduction driven process cultures

The obivous things first. Let’s look at 3 common models of management.

Yes, process cultures rely for one reason only. To make the individual completely replacable via process. In this type of culture, humans are part of the process because they can carry liability, there is a minimum layer of uncertainty and flexibility that goes beyond the process capability, and the cost of automation after risk-adjustments is considered higher than finding the lowest-paid alternative human being doing the job. It is a classic corporate administrative job. It attracts low qualified, low-ambitious people and uses punishment and fear to enforce adherence to process. It tries to eradicate political behaviour to make the experience smooth for everyone. The higher up you get, the more attractive the pay for workload. As workload is going down higher up, and prices grow in experience and seniority. It is a good model for many people.

Then we have the high bonus/High commission structures where political behaviour and competition is wanted and helping. It is all about optimizing the KPIs of the unit or organizations. It is the world of sales and transaction/investment business. You come in fast, you earn a lot fast, you are out fast if you do not perform. It is autrocratic and hierarchical as the income again increases exponential as you rise the ladder, with responsibility rising equally, but of course output relying more and more on the fat tail below you. Having distance and authority is the only thing that keeps the top ones from being eaten alive from the foot soldiers they drive on. And it gets typically more and more aggressive the further up you go. Everything is about high drive and high aggression and high success. No work life balance. No friendships. No stress-reduction. Run as fast and hard as you can, untill you can’t no more.

And then you have the scalable creative model of the flat culture. There is no hierarchy. There is no authority. There is just influence. And rules of influence. Politics not allowed. Only charme, leadership, etc. Information is typically still underserved. In this model, people with high drive and high care for their peers rise and syndicate to move a shared agenda ahead. Ideally, this agenda is in line with the company direction. To influence this direction without authority and without direct interference is the deep art of management here. But in essence, the highest in influence and best in building coherent and cohesive teams will create a layer of control. Then replicating that below themselves to create more structure. That is why it is called scalable. As it forces everyone to learn how to influence and that is only possible by learning the tricks and trades of managing and leadership. In a very strict model without coaching, this leads to highly scalable organizations, but the speed of scaling may be limited. If adding a coaching culture that is based on respect and/or authority, you can get decent speed of scale. The only problem with coaching being that if it is not based on influence, but on authority, that it breaks the paradigm. Ideally everyone is so driven to learn for himself as to be the coachin his domain and uses this to drive the speed of creating maturity that it just works. So this works for fast growing companies up to the level where it breaks down and the process model might take over.

Looking at these models, they all serve to functions. Getting process and efficiency of activity to a level that something such as execution can take place, and giving room for growth, self-fullfillment and a place of vision and utopia. In process cultures, growth and fullfillment is low with high process stability. Processes are also already accepted as sufffiently well adjusted to the environment. SO no need to learn process.

High execution and high competition environments are great to identify repeatable processes fast. But they create cultures that are reducing the level of harmony, fullfillment and growth beyond the core area of growth. They create monolith and silo cultures around a key objectives and everything else becomes a less relevant, admin function that by this dichotomy attracts people of the kind that fit the process model. It kind of crowds out the model for creative leadership.

The creative model again is less focused on process identification, it is slower in execution, but shows higher flexibility to react sensitively to the environment. The high drive cultures find a viable local optimum for  the company to function fast and run on it. The creative team is long-term more resiliant to changing environments and always operates on being decently viable for several optimization problems.

Charisma and Character – A new look

Let’s start looking at the new model via the three pillars that define it.

  1. A world of process and businss architecture. The organs and organizational aspect of the entity. The “body” part that is needed for execution against plans and objectives in a competitive environment.
  2. A place of management, fullfillment, growth and harmony. A place of vision and utopian idas. The intellect and mind of the entity. That defines the charisma of the organization that attracts a certain type of people.
  3. A place of beauty, staged experience and emotions. A landscape that transports us into something beyond space. Into a time and continuum of being. The heart of the entity. Or the thing driving the energy and vitality of the organization. Or the character of the organization.

When you look at modern organizations that compete in the war on top talent, they strive to get success running to afford salaries and compensation. They attract by offering growth and harmony in non-autocratic, participatory work environments where influence trumps authority and sharing and caring is a thing for everyone. And they offer beautifully landscaped office and work environments with entertainment and dietary benefits to support the character of the organization.

But then again, those things fall short. Lots of companies believe painting the wall green is all they need to do to make the place “flamboyant” and give it character. Some think they abandon authority and make the world flat and they attract the high performers. And then they just need some basic processes to be successful in the market to arrive at a high execution, charismatic and character-full organizations.

I think it takes way more than that to understand the paradigm. We are looking at a new understanding of work. Where display induces a state of consciousness. A way that uses the concept of hiding, boundaries and habitual experience to induce a collective trance state that is emotionally richer than the outside world – this is where the character and environment design come in. To be authentic, this cannot be disturbed by power structures that are too vivid and visible. Hence the influence paradigm and the focus on collaboration, joint existence and harmony that has to be established. Growth and fullfillment being the narrative that directs the work ethics and culture under businss objectives. And finally the orchestration of meaning by having functions, objectives, roles – which are all irrelevant in a flat culture – to give guidance to a crowd that otherwise is lost in self-regulating social dynamics.

In other words, companies create bubbles that are adopted to intellectual and emotional desires of their inhabitants. And while this sounds like I am on drugs or losing it to some form of hardcore esoteric self-enlightenment, I think this is what the patterns actually show on a very rational level. Maybe it is caused by people becoming workaholics and loosing their community connections to the trival, shamanic and magic. So they are looking for this in their work life. Given that the information and entertainment overload is doing the rest to their social lives where now banal things as cooking – the chopping and heating up of things – are becoming part of social ritual of self-fullfilling things. Or maybe it is a rebellion against the shocking realization that it has become almost impossible to compete with peers  and that one is stuck in the mediocre existence of a lower middle-class tech worker in a world dominated by peers becoming billionaires over night. Certainly a new nuissance compared to having a joint enemy before. It now is the neighbor that completely destroys ones capability of keeping up with the Joneses. One is falling behind unless one takes a lot of risk. And taking a lot of risk, still many loss it all. It is as brutal as leaving the house every morning to go to a workplace where you are beaten with sticks and stones everyday. Maybe this is where the desire for the magical, imaginary and friendly world comes from.

To win the war on talent, we have to think in all three categories

We have to think nowadays about (a) process, (b) fullfillment, and (c) emotion. Effieciency, charisma, character.

All those three areas have to be taken serious. They can not be staged half-heartedly. They must be real. On top, they must be congruent and reflect the identity of the organization and its founders. This also should not be forgotten. The founders must reflect and live the vision, character, emotion of their organization. They are the central lightbulb that gives the light to the scenery.

And then again, one may not forget the competitivness of our time. It is not enough to merely be a visionary and great person and create an organization around that. No, the central character and organization created around it must be driven by demands of the market. One has to stay on top of trends and the changes to attract talent.

And lastly, context started to matter very strongly again. Especially in our modern world of identity politics where density of identity creates context.

The death of geo-independence

Whatever you create, it has to be created in the right place. The illusion of the IT company being able to operate from everywhere around the world has completely evaporized. The speed of growth, continuous adoption to market, the defense against disruption, etc. All that requires speed and activity and growth now. Something that only becomes viable and possible when having sufficient supply of human capital.

To obtain a good supply of highest calibre human capital, it is best to satisfy two criteria. Already employ highest calibre human capital. And be where people want to be. It has become a common knowledge element today that every new hire you are making as a young company that is not consider A material, is increasing the probability that you will attract a higher share of sub-A talent along the road.  As larger teams of sub-A individuals have higher conflict potential and provide lower growth for A individuals, this problem increasingly prohibits A players to enter a sub-A company. And this spreads.

This sounds extremely cruel to all sub-A players. But when it comes to survival of companis in their growth and scale up phases, the starting distribution of talent is highly crticial. A team of top 1% individuals in let’s say a 21 – 25 year old bracket will very likely collapse under the pressure of deliverying results in the face of growing to 1000 people. Having to keep up with domain knowledge in breadth and depth, in managing and motivating people and conflicts, while aligning with increasing forces of push and pull that are introducing the risk of a company “blowing apart” as it grows, the risk of having a million headless chicken who all run into different directions that all have a 0 net contribution to the company, is becoming high. The risk becomes lower with top 1% individuals in the 25-30 bracket. But even worse when moving to the top-5% of the bracket.

The problem being also that adding better people later on blows the velocity and direction of the earlier employees who now have to be replaced and put on the bench – which will create turmoil – or will lead to the new employees being slowed down and focusing on building influence around them and increase the velocity of everyone around them (something that requires a high sense of purpose and high level of humbleness).

And combining above aspects, we are not only talking about coping with work and responsibility – which again is the process / execution part. But we talk about losing the culture and charisma of the organization. When the growth and harmony aspects is torn down. And we have a risk from the character side where the staged experience or as Baudrillard would call it, the simulacrum, is suddenly falling apart and the facade of bricks and stones and a cold, grey, dystopic scenery shows up.

But then again, even if having many top candidates on payroll. Where do you get 1000 people from if they are not in your area and what is the ratio of qualified and willing potential hires to placements in both cases where they are in the same city and where they have to relocate around the world. The admin costs, the risks, etc. are exploding. With a high risk you will not even get to the right number of decent placement candidates no matter how much money you butter into the recruiting process.

So location matters. The right location to get the right first people. The vision and culture in that location being close enough to the vision and culture and charisma of the organization.

And what about the businèss schools

I think most people still struggle with the process aspect of the business. And not everyon starts a businss to become a 10.000 individuals high calibre talent unicorn. So maybe that is why it is not taught in business school. At least not to my knowledge.

But my take away here is that everytime you consider taking away the importance of one of the three pillars, you are coming out with a less attractive, less engaging, and less rewarding employment experience. Which you may be able to reward with compensation benefits. Or which you have to pay for with less loyal or less qualified talent.

So focus on charisma and character. Culture and environment design. And don’t buy it from cheapscates and mistake it as an easy hack. It is as complex and important as the process and organizational side of the business.

 

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