A few days the CEO of a well-known company asked me… What is the meaning of culture in our organization? Is culture what most areas of the company do? Is what management says? Is what I tell people to do? The answer is rather more exciting than this.
We’ve all gone through times where we want to solve a problem in our company and try to apply the best energy, tactics, strategy, practices and innovative ideas, to find out sooner rather than later that it did not work at all. And I’m not talking about something which failed but about something that ultimately brought the opposite effect than expected.
Regardless of your position in the organization, there are usually 4 or 5 things you can blame when this kind of things happen: the lack of institutional support, the culture of the company, the type of organizational structure, economic incentives for employees or the current framework.
Let me put you an example… last year I proposed to introduce some paring techniques throughout the whole organization (including managers, PO´s, developers, CEO, HR, etc.). I wanted people to think of two employees as the minimum working unit. The result was that not only nobody wanted to put that model in place -even knowing their advantages- but that they decided to take the opposite path to increase silos in the company and work more in isolation.
I imagine you would be able to recall dozens of similar stories where a desirable and consistent change with a good intention and a solid economic model had the opposite effect than expected.
Most books, conferences and other corporate events treat the organization as a monolithic block and, only in some cases, they mention a relationship between culture and hierarchical structure or a particular framework.
As you will see soon, that simplistic mental model is not enough to explain the different causes and effects, its scope and how to measure them.
The 4 organizational layers
From my point of view, every organization has 4 different conceptual and clearly defined layers, where each of them serves a concrete purpose and role. Certain major actions that Agile Coaches, Consultants, Scrum Masters, Managers or CEOs want to push within the company exert some initial activities in a specific conceptual area, where peculiar rules and very particular kinds of cause-effect apply.
Before promoting any change (adding practices, techniques, change in the structure, etc.), it is advisable to frame it within one of the 4 specific contexts so it can help to understand what is the lever that needs to be pulled and how to measure success.
My organizational model has the following 4 layers:
- Social Model
- Formal Organization
- Value creation
Each contains specific rules, for example, under the social model layer most of concepts coming from the sociology can be successfully applied, while if you are under the value creation layer, things related to a specific framework, practices and how to transform effort in customer value are key factors.
UPDATE: Social Models are now called “Social Systems”
The idea of the four-layer organizational model is to allow people to identify where the impact is going to be, its “local” rules, planned/desired steps and how to measure success.
If you look at the picture, you would find that many actions that you previously planned and thought that would be affecting the company as a whole, they clearly start in a defined layer which has certain rules with specific causes and effects. Let’s focus on the central layer first.
The Social Model
The central layer of the organization is where the Social model lives. This involves mainly the way that people communicate and interact within the organization. Here all the sociological rules apply.
Think of the company as an independent country, no matter whether it is next to another, it has its own traditions, cultural factors and other specific forms of communication, which may be totally different from its neighbors.
The social model also involves how people socially do the tasks, processes are made visible and the way they provide transparency. This is where behavior patterns, such as how the “accepted ways of doing things around here” must be taken into account (for example, which things are accepted around here when working under pressure), what is considered right or wrong, which ways of communication are considered effective among people, etc.
In an organization I worked some years ago, it was accepted and positive to work weekends or phone other employees, no matter it was late night. In another company, that was socially unacceptable. Facing the CEO and being honest about the everyday issues or working overtime can be considered an offensive act or something entirely acceptable. The massive use of emails instead of face-to-face communication or pushing meetings in others´ agendas can also be something expected or considered “normal”.
There are 3 things that affect mainly the Social Model:
- How people communicate within the company
- The way the processes or other actions become visible within the organization
- Established cultural patterns (which things are good or bad)
There is in turn a set of factors that directly impact the social model, such as the accepted ways or techniques of work, number of people, fluctuation between cost-benefit, etc.
For example, it is common for employees to express that communication was better and more transparent when the enterprise was smaller or when the company had more resources or money.
These are some of the factors that impact the social model the most:
- Cultural Beliefs (what is right or wrong)
- Forms or work practices accepted as good ones
- Number of people/scaling
- Fluctuations in the economic model
I have observed some company mergers, and apart from cultural issue when it happens between enterprises from different countries, the final act has a massive impact on the social model (new ways of communication, beliefs, etc.).
There is a particular behavior to understand about the social model which lies in the impact that the sense of urgency has and how it magnifies the effect on any change that wanted to be made in here.
The sense of urgency is a deliberate act that is considered vital. It creates pressure on people to perform a task within usually an expected time frame. It can happen as a result of changes in the market or internally in the organization.
How many times you found that two departments which did not communicate with each other began doing so when they had to carry out an urgent task with a fixed date? Another example is when people is informed of some adverse economic situations in the organization and begin to collaborate or provide transparency about the processes in order to collectively finish certain tasks before the end of the fiscal year.
It is then that the sense of urgency is a key factor for pushing changes in social model. In here, if the sense of urgency is small and is pushed every a regular period of time, the effectiveness and long-term effect of the change is generally amplified.
How is it possible to measure the social model? By direct observation you may get some idea, but it is more effective to measure it by taking into account the flow of relevant information within the organization, the effectiveness of communications, visibility and transparency, the way that people collaborate, blockages in the flow, etc.
The Mindset layer
The layer surrounding the social model is called Mindset and represents the foundation for beliefs and abstract ideas that the company has about themselves and its reality. It can be evolutional, for the case of a company that has grown over time, learned, such as the case of some learned known mindsets (Lean, Agile, etc.) or inherited. The latter occurs in cases where mergers had happened.
Take into account that even a company using Waterfall or nothing at all has its own ways of thinking, although might not be documented (implicit or explicit).
For example, when I worked for a consultancy company in the UK, although the mindset was something not written, everybody knew and followed it.
Obviously, trying to introduce Agile or Lean values particularly affect this layer, but not their practices as they are located in the Value creation layer, which we will see shortly.A company’s mindset can be affected over time by increasing the number of employees, mergers, have business partners within the same organization with other ways of thinking, etc.
The way to measure it is by comparing how aligned the way of thinking is to the desired mindset (i.e. Lean, Agile, etc).
In many Agile companies, for example, they use certain specific questions to rate the answer between 1 and 5 to know how close they are to a specific state (accept late changes, how many times the customer was first, etc.).
The Formal Organization Layer
The third layer is what is called the formal organization. A few years ago, a large number of managers were asked to draw how they imagined the organization; all of them drew an organizational chart with its different departments and structures.
They could not be more close to what the formal organization layer represents (even it is just one part of it). Herein lies the hierarchical constructions and structures which control information to ensure consistency between the company, its structures and its reality.
An important point to note is that here is where the information coming from the other layers is organized using generally control structures. The objective is not to create value for the customers but to protect the structure of the company to change too quickly and operate as efficiently as possible, give order to the “chaos” as also as control and measure information.
Any changes in the hierarchical structure or ways of control directly affect this layer. To effectively measure here, you should use reports that check the alignment between the desired structure of the organization and its reality and how the information is controlled and organized.
The value creation layer
Finally, the last layer contains where the value for the customers is created and where all the processes that support this action reside. They are fully customer oriented and don’t focus on maintaining the company’s structure. Scrum. Kanban, SAFe or any other framework or methodology (including Waterfall) resides in here.
It is important to note the dichotomy and tension that naturally occurs between this layer and the previous one, and the differences between them.
The value creation layer is mainly impacted by the type of framework used, how queues and batches are organized and their size, how the company define customer value for themselves and the number of people in the company or scaling processes.Success in here is measured by compliance with the framework and selected practices and the way to increase/measure customer value.Have in mind that continuous improvement is different in each layer and has to be targeted in each of them using different approaches.
It is then that for any strategy or Agile transformation is necessary to know the rules governing the organization, so that, the 4-layer organizational model is an important tool to explain how the company works, impact, relationship and different contexts.
Thanks for listening,