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Transitioning from hierarchical to a network-based organisational structure: 4 key points for leaders

Networks are powerful systems. While the networked-based structure seems to be the way forward to many teams, leaders need to be aware of issues related to the flow of decision making, talent retention and purpose.

by

 Jun 23, 2021

The covid-19 pandemic and subsequent acceleration of digital transformation have forced organisations to innovate rapidly, change their products and services, and remain flexible to adapt to an ever-changing landscape. These significant changes have prompted a resurgence of the debate about the optimal organisational structure.

Over the past few years, there has been a welcome shift toward client-centricity with organisations adopting more agile structures – centred on products, teams, and projects – and forming both internal and external networks of teams that are generally empowered to communicate, coordinate, and make decisions.

Yet, given the volatility of our times and challenges related to digital communications and employee wellbeing, there are certain limitations to the model. A recent study, for example, found that “network centric organisation does not necessarily lead to higher perceived situation awareness or better understanding of the situation”.

We asked three experts from our global educator network to share their advice on the key points to be aware of when adopting a new organisational structure. Their answers reveal that while the networked-based structure seems to be the way forward to many teams, leaders need to be aware of issues related to the flow of decision making, talent retention and purpose.

1. The rise of ‘extreme teaming’

The move towards network-based structures is a recent evolution, according to author and thought leader Peter Fisk.  “A decade ago, around 80 percent of employees had functional roles, the rest seconded to ad-hoc projects. Today, that ratio is reversed. Few employees now have fixed roles. Formal job titles in outdated organisational charts have given way to a more fluid deployment of talent, by project, to manage constant change”, says Fisk.

In a recent article, Fisk states: “Networks, whether organisational or social, are powerful systems. “Every additional participant creates new connections, capable of driving the exponential growth of today’s network-based start-ups.”

At the heart of these network structures is the concept of “extreme teaming”, Fisk continues. “They assemble the best people for the job, energised by customers not managers, building psychological safety, and a collective commitment to deliver excellent, innovative results.”

In his recent book Next Generation Leadership, business educator and adviser Adam Kingl explores how organisations can enable younger talent to thrive. He sees the shift toward networked structures as a competitive advantage:

“Companies that reimagine how work is organised around projects and freelance experts will be sailing on a rising tide”, said Kingl.  “The volume and strategic importance of projects is growing.  About one-fifth of the world’s economic activity per year – $12 trillion – is now organised around projects.”

Over the next decade, Kingl says, “companies are expected to experience over two-thirds’ increase in project work”.  “As the operating environment becomes more volatile and complex, businesses need a new playbook to seize opportunities faster, an adaptive approach to talent and the skillsets that one might need at any point in time.  Organising company structure around project work may make more sense.”

2. Leaders become decision aggregators

Joe DiVanna is a Cambridge-based management consultant and author. As well as working regularly with Headspring clients on custom programmes, he runs his own innovation think-tank providing research and advisory services to the financial services industry. He says that the transition from a hierarchical to a network-based structure is essentially a change in how decisions are made. More traditional structures were based on the assumption that upper levels had “more collective knowledge and experience than the level beneath it” and therefore decision-making flowed up and down the pyramid. In network-based structures, this changes completely.

“This evolution strives to push decision making close to the action where the decision is needed”, says DiVanna. “As each node on the network becomes more and more empowered the entire role of senior leadership changes from a control point to approve or disapprove issues to a consultative resource to be consumed by the organisation”.

Yet, he argues, this change in organisational structure does not relinquish decision making of the senior leadership to the business unit: “What has changed is the parameters of what decisions can be used to empower people at all levels of the organisation”, he said.

As organisations go through this transition, DiVanna continues, “decision making often becomes fragmented. Not all decisions can be handled by the business unit. As a result, exceptions which need decisions become the underlying challenge (which is also an opportunity) for senior management to act as a decision aggregator.”

3. Mind the generational gap

While the network-based structure can help organisations move faster, Kingl warns that there is a significant generational gap when it comes to the acceptance of change and the adoption of networked structures.

“When I ask audiences to consider a world where companies comprise just a dozen or so executives and hundreds of freelance project directors and contractors under them – the gig economy writ large – Baby Boomers and older Gen Xs in the room appear ashen-faced and horrified, while the Gen Ys beam with optimism”, Kingl said.

In Kingl’s opinion, employers will have three possible responses to the inconstant tides of their younger workforce:

  1. Fight it and do everything in one’s power, spending whatever money is necessary, to keep talent,
  2. Embrace it and create the twenty-first century community of (mostly) freelancers,
  3. Select a hybrid path, distinguishing between talent that the company must keep at all costs and employees who one is prepared to let go, because their knowledge or expertise is replicable, or their functions may be completed more efficiently by contractors or business partners.

4. Your structure defines your culture

“Organisation structures define companies – culturally and innovatively, revealing both opportunities and limitations”, concludes Peter Fisk. “Henry Ford’s hierarchical business model that produced low-cost cars a century ago no longer reflects today’s organisational needs: to be fast and agile, human and technological, collaborative and creative, personal and global.”

According to Kingl, as the operating environment becomes more volatile and complex, “enterprises may choose to organise themselves differently, to be able to deliver more and more complex projects and initiatives in this dynamic operating environment.”

Thiago Kiwi

Head of Marketing & Communications at Headspring

Thiago is an award-winning marketing and communications leader with over 10 years of experience in the global higher and executive education sector. He holds a Bachelors in Communications and a Masters in Political Communications & Marketing from the University of London, as well as multiple executive and leadership development certifications. When he’s not busy studying for a new course, he’s growing vegetables in his allotment or training for his next marathon.
Matthew T Rader Zq4UnZoy5AQ Unsplash

How to Fail Successfully

I think you will agree with me that when we come together in these social constructs called companies we tend not to be as innovative, adaptable or inspirational as any one of the human beings in those organisations.  Why is that?

These companies tend to perpetuate this fear of failure.  As a result, we only innovate around tiny, incremental ideas that we’re almost one hundred percent certain are going to succeed because it’s a reputational hazard if we do otherwise.  As a result, companies usually don’t invest in big, supernova ideas that are going to leapfrog the competition and achieve exponential returns.  It is contingent on the leadership community in organisations to rethink their attitude toward failure and how they communicate failure as a learning opportunity.

Of course you have to control the risk when you are innovating, but you have to consider your innovation pipeline as a portfolio with a collective return rather than as individual opportunities that represent lots of chances for embarrassing failures.  If you have one supernova idea out of a hundred that you try over the course of a year, it doesn’t matter if the other ninety-nine were unsuccessful.  And I’ll go even further!  You never could have had that one supernova idea unless you also tried the hundred ideas.

How many of us in our companies try a hundred new things in a given year?  Very few!  U.S. Poet Laureate Maya Angelou once reflected, ‘People will forget what you said…but people will never forget how you made them feel.’  As leaders, therefore, let’s think about how we make our people feel about failure.  Change that attitude and we may find that our organisations are much more innovative than they ever could have been in the past.

Adam Kingl is the author of Next Generation Leadership (HarperCollins) and is a keynote speaker, educator and adviser.  www.adamkingl.com

      Photo by Matthew T Rader on Unsplash

Changeboard

How our brains hinder creativity

How our brains hinder creativity
Written by
Adam Kingl, author, keynote speaker and advisor

Published
22 Mar 2021

Our brains have learnt to sabotage our creative thinking efforts. Adam Kingl explains why taking the time for creativity can help address this issue.
Too many schools minimise or ignore creativity, too many parents discourage it, and too many companies devalue it. Our firms sometimes abrogate responsibility for innovation to a select fraction of the employee population, often someone with a lofty title like Chief Creative Officer, which of course communicates to the rest of the company that they should ‘leave creativity to the experts’.

If we observe how our leaders spend their time, and by extension how we should spend ours, too many are tacitly telling us that creativity is relegated to possibly a few minutes a week and ideally in one’s free time, not when we’re on the clock. In my advisory work to global corporations, I usually find this last condition, lack of time, to be the most common and pernicious.

Why we should make creative thinking a priority
The problem is that if we budget very little time in our lives to innovating or adapting to try new ideas, we typically incur a double deficit in our creative capacity.

First, we never make the time because creativity is always at the bottom of our priority list. Inevitably, we can never plan on all the firefighting and pop-up meetings that will occur in the week, so our real week is much more full of dealing with the day to day than our diaries suggested on Monday morning.

Allowing time for creativity is the only way to yield results
Second, if we do keep and honour a tiny fraction of our week or month to creative thinking, brainstorming and the like, we find our attention span is constantly distracted. We never seem to produce anything worthwhile as a result, and so we face each new window of opportunity for innovation with an ever growing, soul-sucking impression of dread or, at the least, resignation.

What we’re learning now is that we’re unfortunately training our brains to deliver this depressing result. Recent neuroscientific research has revealed how we repress and invigorate creativity. These hurried, captured moments of precious time for innovation yield paltry results. Our brains can’t turn on the magic for such short, unsustainable periods of time.

The five brain states explained
There are several brain states from deep sleep to deep focus and peak performance. The higher the performing brain, the greater the frequency of brain waves, hence Hertz is the degree of measurement:

Delta – deep sleep: 1-3 Hz
Theta – deep meditation, light sleep: 4-8 Hz
Alpha – relaxed, calm consciousness: 9-12 Hz
Beta – normal, alert consciousness: 13-30 Hz
Gamma – super-focused mind, increased brain power, peak state of consciousness and performance: 31-70 Hz.
Which of these do you think is our typical brain state during a normal work day?

I imagine many of you are thinking Theta! Sad but true – light sleep can be our normal work state. That’s rather depressing if that’s your normal. But Beta is probably our usual state, right? This is what we require of our brains to accomplish our normal tasks of answering emails, solving our workaday problems…and possibly Theta state when we’re in committee meetings.

Typical business routines encourage us to work in a state where the Beta waves (business as usual) in our brains are dominant, though we now know that maximum innovation and insight occurs when we are in Gamma state.

How to remain in Gamma state for longer
Neuroscientific research has also revealed that our brains can stay in Beta for a long time, and in fact are conditioned to stay there. As a result, if we crank the mental engine to get up to Gamma, the brain through habit easily and proactively often drags us back to Beta.

Therefore, if we need our brains to be in Gamma in order to be truly creative, genuinely adding previously unheard-of insight and exponentially big ideas, our brains would struggle to do that in, say, a one-hour meeting once a week. Beta state is like a constant and familiar noise, the ever-present static of our work lives that can block Gamma state. I liken this to how I find it hard to think when I’m eating an apple because I have this magnified, crunching noise in the echo chamber of my skull.

Mundane and creative – why getting the balance right is important
We can’t easily shut off this Beta activity, the laundry list of actions and decisions we have to make, even if we’re completely confident in our ability to make them. Beta is our habit, our rhythm, our tyranny.

Because we don’t have balance between the mundane and the creative, we can’t achieve creativity even if we give ourselves those fleeting thirty minutes a week to do so. We must change our routines so that we give our brains more time to marinate in Gamma and increase the frequency of those marinades. Like any muscle, the creative function in our brains requires exercise in order to improve, but as importantly, to be receptive to create in the first place.

The point is not that we denude all traditional routine from our organisations. We need some of that. But most of companies that I’ve experienced usually operate at a ratio of about 99% business as usual to 1% creative time…on a good week! So if you’re feeling uncomfortable that I’m suggesting something like a fifty-fifty balance, I’m not saying that. But the better ratio surely has to be closer to eighty-twenty at least? I’m merely entreating us to ask ourselves honestly, ‘Is the balance right?’

Adam Kingl is the author of Next Generation Leadership (HarperCollins) and is a keynote speaker, educator and advisor. www.adamkingl.com