Tuesday, February 16, 2010

"Flat" vs. "Agile"

Can you tell me what the term "flat" or "agile" organization really means?

We are using the general term "flat" in our consulting work to describe new, hybrid models of non-hierarchical organization structures. You know your company is "playing flat" when...

  1. You focus company performance on customer satisfaction
  2. You directly connect work processes to customers
  3. Your employees know the business...think for the whole firm...and act like an owner when they serve a customer.

As the competitive environment changes at exponential rates, business leaders everywhere are recognizing the critical need for greater organizational responsiveness, flexibility and economic efficiency. Businesses today are experiencing a lowering of physical and intellectual boundaries, undertaking reorganizations in response to the global economy and dealing with the impact of rapid advances in technology. It's no wonder that businesses find it difficult to keep up as knowledge is substituted for capital, firms are downsized, "complete competence" is expected of all employees and companies re-evaluate the paradigm that the "competition" is the enemy.

The primary expression of the new organizational response is the "flat" organization. We see the new, elegant-looking molecular chain, pizza pie and clover-leaf organizational reconfigurations representing a shift from competing on what we make to how we make it...and who we make it for.

Customer Focus and Structure

The flat organization is focused on the customer. All employees serve the customer directly or indirectly and are capable of acting like business owners when they serve the customer. In lieu of departments or functional focus, flat organizations are structured around customers, teams, problems, processes and opportunities. Fewer levels and larger spans of control allow flat organizations the flexibility to "play" directly with anyone needed to make customer service work. Employees know the business and have/have access to the knowledge required to keep the customer satisfied.

In flat organizations, jobs are complex and connections are direct. Employees' performance is self-directed and self-governed based on their clear understanding of the organization's vision and processes. Managers serve the flat organization by transmitting messages that create understanding for employees. Employees, in turn, act on these messages and on external business inputs with the desired business response. Simple jobs, indirect connections, specific direction from management on "how" to do the job, and complex lines of command are outmoded concepts.

Old and New Graph

The relationship between the employee and the firm will continue to change. A "new" work contract concept is finding its way into the boardrooms and around the organization. This new work contract establishes relationships between firms and employees similar to relationships with vendors and contractors. The new work contract deals with limited projects and time frames, paying for the performance of specific duties and making both parties responsible for managing the contract.

Employees in flat organizations must understand how the customer uses the organization's products/services to make money. Employees also need to understand the processes and technologies of the organization and how they give added value to the customer. With fewer employees in flat organizations, the concept of "complete competence" is enabled by enterprise information systems. Synchronization between organizational strategy and your IT infrastructure is essential to sustaining enterprise learning environments.

Sharing risks and financial rewards are key elements as many former competitors create strategic alliances. There's even a new euphemism -- coopetition -- to describe the multiple roles organizations play with and among each other. In effect, flat organizations leverage their strengths to play better and more efficiently with the customer. For example, products lines, geographic coverage and customer bases can be expanded by two strong entities working together, as evidenced by the Pepsico/Lipton alliance which successfully introduced of canned iced tea beverages.

Outsourcing utilizes external vendors to provide/manage services traditionally performed in-house, such as facility management, new product development, recruiting, benefits administration and graphics/printing. The flat organization typically focuses on customer service-oriented activities as its core business. Through outsourcing, flat organizations can gain access to improved technology without capital investment, decrease manpower costs, increase quality, enhance contingency planning and improve the firm's financial performance. Disadvantages include loss of control, supply restrictions and lack of long-term flexibility. Still, outsourcing can convert cost centers within a company to profit centers within the vendor's operation -- a win for the flat organization.

The Bottom Line on Flat

The bottom line is that many organizations are changing from vertical, functionally-designed hierarchies to flatter, process-based operations. These flat organizations are organized around processes, teams and opportunities, with every employee playing to the customer and possessing the knowledge needed to act like an owner as they serve the customer. The relationships between employees and firms are focused through new work contracts which call for performing specific tasks during limited engagements (similar to vendor agreements). Flat organizations establish external relationships, such as outsourcing and strategic alliances, to accomplish basic activities and/or undertake expansion initiatives while maximizing strengths and competitive advantages.

Q: How should our company go about deciding the best strategy to take...and then get there?

A company can get a "best" strategy by following a careful and systematic process that answers Key Questions:

  • What do our customers want that they will pay for?
  • How can we "market position" our company with the customer and against the competition to meet customer needs?
  • How can our company's unique strengths and competencies be used to support that position?

A "best" strategy can be implemented by acting on the answers to Key Questions:

  • What markets will we play in...and not play in?
  • What products and services will we field...and not field?
  • What processes will be altered to support the product and market decisions?
  • What technologies will be developed to support products and processes?

A company has its greatest chance of putting a "best" strategy into play with the following two components in place:

  1. Involvement of the people who will execute the strategy in its development, and
  2. Strong leadership who will clearly define the company's direction and insist on the actions necessary for its implementation.


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