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July 21, 2014

What is this noise about holacracy, cross functional team, doers being thinkers and so on...

Zappos recently announced that its CEO Tony Hsieh decided to relinquish his power, abandon traditional organisational structure and move to holacracy; popularized by Medium (a start up by Evan William, known for Twitter and Blogger). Media especially social media is abuzz with articles and interviews about this newest craze amongst technology firms. For the uninitiated, Holacracy is management by committee with an emphasis on experimentation. The CEO formally relinquishes authority to a constitution and re-organizes everyone into decentralized teams that choose their own roles and goals.

“Using cross-functional teams to break down silos improves the chances of success when building highly complicated systems. Some large-scale application-development projects are particularly challenging because of their complexity and high degree of interdependency among work streams. This category includes development of systems for telecommunications billing, insurance claims, tax payments, and core retail-banking platforms. These projects demand close coordination due to frequent refinements to the original user requirements. Such coordination can only happen by breaking down the traditional silos in application development—an achievement often associated with the agile software development approach. But agile is mainly applicable to smaller projects with minimal up-front definition of user requirements that can be cleanly divided into a number of parallel subprojects.”1

“Large technology-led transformation programs are important for creating business value and building strategic capabilities across industries. With many organizations spending around 50 percent of their IT budget on application development, the ability to execute software programs faster and at lower cost is essential to success for many transformation projects. However, the quality of execution leaves much to be desired. A joint study by McKinsey and Oxford University found that large software projects on average run 66 percent over budget and 33 percent over schedule; as many as 17 percent of projects go so badly that they can threaten the very existence of the company.2

Why and How these changes impact us, make no mistake, winds of change are not limited to Technology (IT) businesses. Like in past, slowly but surely other organisations have to catch up.

Look at these facts to help you understand the context and build some perspective –

a)    Advancements in technology are going to make most of today’s jobs redundant during working life of people entering workforce now onwards. This may sound alarmist but only thing which is changing is pace of change. For those who started their careers in last couple of decades, look back and analyse. We will be surprised to see changes in jobs around us in last decade or so.

b)    With rising life expectancy, lots of current entrants in workforce may actually live to see onset of 22nd Century.

c)    Significant percentage of new born world population from now onwards , even in countries with relatively low Human Development Index and average life expectancy of 68-70 years (e.g. India) will actually end up living in 22nd Century, thanks to phenomenon of Normal Distribution Curve.

To quote from my earlier blog – “Mostly, brilliant people end up rattling the cage, they are opinionated”. Technology firms thrive on innovation. In order to attract and retain the Best, they need to harness their brilliance. Brilliant people not only push the envelope on existing technologies, products and services but are also restless with processes in larger eco system. Smart leaders effectively harness this need and creative energy to improve on management processes and systems. Holacracy, emphasis on cross functional teams with empowerment or even Work Outs (launched @ GE by Jack Welch during his early years as CEO) from old economy are nothing but examples of smart leadership.

What is not changing?

First and foremost, focus on Customer and making money. Despite all the hype, marketing and coining terms like “Employee First”. It has always been and will remain about making customers happy in order to make money.

Organisations are created and exist to execute plans to meet customer needs. All changes in management philosophy are to deliver products, projects and services effectively.

With all its benefits and mass appeal, Leadership isn’t about democracy. So even with flat structures no one is propagating, management by majority vote. Ability to differentiate is a key leadership skill. This skills helps leaders to back and run with ideas not having wider appeal and acceptability. By definition most path breaking ideas are based on radically different thought process.

All this may sound unnerving but only way to success is by embracing the Change. Best way to succeed is – don’t wait for change but anticipate and adapt the Change. 

In our next post we will discuss what can you do and what you need to do to succeed in new world order of management.

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With best regards,
Pankaj

1. Achieving success in large, complex software projects by Sriram C, Sauri G and Sanjay K @ McKinsey & Co;

2.(Michael Bloch, Sven Blumberg, and J├╝rgen Laartz, “Delivering large-scale IT projects on time, on budget, and on value,” McKinsey on Business Technology, October)