A Perfect Mess by Eric Abrahamson & David H. Freedman

Author:Eric Abrahamson & David H. Freedman [ABRAHAMSON, ERIC]
Language: eng
Format: epub
ISBN: 9780759516496
Publisher: Little, Brown and Company
Published: 0101-01-01T00:00:00+00:00

Messy Organizational Structure

Is it a bad idea for companies to grow? That may often be the case in our world of increasingly fast-changing customer interests and demands, asserts Peter Nijkamp, an economics professor at the Free University of Amsterdam who studies the impact of technological change on business. The problem is that company growth typically leads to what Nijkamp calls path dependency—that is, a tendency to become locked into a particular way of doing things. “A dynamic market penalizes companies for path dependency,” he says. “And that makes creating larger organizations risky.”

Though perhaps the problem isn’t growth itself, suggests Nijkamp, but the way companies grow. When they become larger, they tend to gravitate to neater, more formal organizational structures and policies geared to push employees to work in neat, efficient synchrony toward common goals. But these very structures are what provide all the friction when it comes to rapid change. The ever-popular “six sigma” philosophy, for example, under the spell of which companies continuously and formally analyze all their processes with an eye to approaching perfection, is obviously not conducive to quickly throwing together a new business unit to rush out a product for a market that springs up overnight and that may disappear as quickly. Merely deciding to attack a new market can be a torturously prolonged process in larger companies. And sometimes, ironically enough, the fault lies largely with postmodern, network-style organizational schemes that companies have embraced as less-restrictive antidotes to the classic pyramidal hierarchy. In these newer schemes, the lines of reporting can become comically complex, to the point that it becomes unclear if anyone is really in a position to make a decision. IBM, for example, in the 1990s adopted a management structure that took the form of an eight-dimensional matrix, whose working presumably would have been perfectly transparent to anyone conversant in string theory. And companies keep taking on new, ambitious organizational schemes as they grow, partly out of fear of the alternative—that the organization will behave in unpredictable, uneven, uncoordinated, messy ways—and partly because they provide senior management with a sense of real accomplishment. Adding to the drive toward new, more ordered schemes is the observation that corporate performance invariably gets a temporary boost from them, thanks to a sort of organizational placebo effect. It’s an offshoot of the Hawthorne effect, mentioned in chapter 3—the principle that almost any purposeful change in a work environment tends to be temporarily effective. But the fact is, almost any highly ordered organizational scheme is ultimately going to be a poor fit for the dramatic swelling and collapsing that characterizes most markets these days.

In contrast, consider Scientific Generics, located in Waltham, Massachusetts, and Cambridge, England. It’s a three-hundred-employee firm that has no real “main” line of business. The company provides some consulting services, but mostly looks for interesting unserved niches in any market, creates units to develop or acquire technology aimed at those niches, then does whatever seems most profitable with the technology: licenses it, builds a business

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