Organisations: Some Propositions

1. The most effective examples of each type are those which are most consistent and avoid drift towards the other model.

No organisation is at one extreme end of the spectrum along every one of the dimensions. However, the dimensions are not neutral, but reinforce each other. So the more consistently an organisation’s characteristics are grouped around one end or the other of the spectrum, the more effective it is likely to be.

The most basic choice facing those in charge is what type of organisation is required in order to be fit for purpose. Taking a basic Type A and trying to graft on Type B features will usually result in a mess. It is at the heart of many problems of public sector performance across the world. Demanding that a public sector organisation simultaneously govern citizens and serve customers is demanding that it be Janus-faced, and that is an impossible act to pull off. Governments need to decide what they want and create separate organisations to do each. They need some thoroughgoing Type A’s, like central banks. Central banks need to govern financial institutions, not to serve them.

2. There is a natural drift towards Type A; maintaining Type B characteristics requires the constant expenditure of energy.

Businesses tend to demonstrate Type A characteristics as they lose their sense of purpose and they come to be dominated by structure and processes. It is more common if they become very large, but not all large organisations are Type A (GE is a thoroughgoing Type B). Type B organisations tend to drift naturally towards the state of Type A unless their leadership is energetic in countering this. The opposite of this entropy is crisis. In a crisis, external needs become so pressing that behaviour tends to move towards Type B until the crisis has passed. So it is that sustained success is dangerous for Type B’s and they often need to experience a disaster (e.g. a collapse in share price, a hostile bid, a humiliating battlefield defeat) in order to regenerate. Wise leaders of Type B organisations create internal crises by challenging the organisation before a real crisis hits them.

3. In any organisation, power tends to float upwards and responsibility tends to sink downwards.

This is a corollary of 1. Like oil and water in a bottle, keeping the right mix throughout requires vigorous shaking.

4. The intelligence of an organisation is never equal to the sum of the intelligence of the individuals who work in it:
i.e. I ^org ≠ Σ I ^ind

Organisational intelligence is manifested as an ability to respond to its environment and react to changes in order to fulfil its purpose. This depends on its being able to identify, absorb and process information and act upon it. A measure of intelligence is the speed and accuracy with which it does so.

Organisations always act as multipliers or dividers of the intelligence of the people in them. They are never neutral.

5. An increase in communications capacity will lead to an increase in control unless this is deliberately countered.

The volume of communications will tend to expand to fill capacity. Capacity is defined by how much senior people can transmit rather than how much junior people can absorb. An increase in capacity will therefore tend to centralise control. Expansion towards capacity creates overload and in conditions of overload prioritisation mechanisms break down. The effects of this will be to create confusion, slow down decision-making and create inaction.