Creating a peer-based organization does not mean you do away with management positions or management structure, work still needs to be managed. However, the governing, leadership choices in the four key decision-making areas of strategy, tactics, operations, and functional departments will be made, not by the self-similar elites, but by councils of peers drawn from every level and function. Indeed, today a higher consciousness is emerging in organizational thought that rejects rank as the chief way of organizing relationships. It is arising on the periphery, which has been the pattern for all evolutionary progress. Peer-based organizations will be successful and out compete traditional rank-based, hierarchic companies because individuals behave more responsibly, more intelligently, more strategically, and more cooperatively, than the same individuals would in traditional rank-based organizations.
MANAGEMENT OF WORK & ORGANIZATIONAL GOVERNANCE
I do not suggest making major, catastrophic, top-down changes to management structure in order to create a peer-based organization. It will be important in the beginning clearly to separate the management of work by the traditional hierarchy – if that is the design – from the critical leadership decisions that need to be made affecting strategy, tactics, operations, and people. These leadership decisions will be made through councils of peers.
It is a simple and powerful idea. Corporate governance needs to be reformed so that it does not rest upon the same old aristocratic class, whether corporate boards or the executive team, but with the employees of the company. I believe that if corporate governance rests with the employees of an organization in the context of peer-based leadership councils, then that company will not only be more prosperous because more creative, more flexible, and more dynamic, but it will also be more internally and externally equitable and hence more socially responsible.
In my consulting practice helping develop peer-based leadership councils, I realized that issues of organizational governance cannot be separated from a model of organizational strategy and design. I identify the three key areas of corporate strategy and decision-making as the business horizon, or strategic direction, business focus, or tactics, and business performance, or operational effectiveness. When you add people, you get the fourth key area of functional departments.
These four key areas provide a natural opening to envision how to create peer-based organizations through chartering peer-based leadership councils. In order to link organizational governance through peer councils with organizational design and strategy, I developed a model I call, The Strategy Diamond.
BUSINESS STRATEGY – THE STRATEGY DIAMOND
The facets of my strategy diamond are nine in number. Identifying and understanding the nine facets of organizations, allow us to correlate organizational design and strategy with peer-based governance. The first facet is Basic Values. I believe that all human beings share the same basic values. They are the value of self worth, the value of connection, and the value of contribution. Ultimately organizations exist to enable individuals to realize these values. The enduring organizations are those that:
Basic
Values
Basic
Desires
Governing
Values
Strategic
Capabilities
Customer
Needs & Wants
Portfolio of
Products & services
Delivery Systems
Crucial Tasks
Individual
Skill Sets
accomplish this over the long-term. The second facet is Basic Desires. Just as we all share the same basic values, we also have in common across cultural and national boundaries the same basic desires. They are the desire for freedom and the desire for security – more specifically, economic security. Enduring organizations are those who fulfill these basic desires and values, not so much for their customers as for their own employees.
The next facet is an Organization’s Governing Values, which includes its vision, mission, and core practices. A company must be clear on its sense of passionate purpose and the core practices it will allow to accomplish that purpose. The next facet is perhaps the least understood, namely, an organization’s Strategic Capabilities. These are determined by answering the question, “What is your competitive advantage in markets that gives you a sustainable edge over rivals? Or (1) What do you do better than any rival, (2) is hard to imitate, and (3) doing it adds value to customers?”
Following this analysis, a business must explore customer needs and wants, as well as non-customers, and how they line up with its own sense of purpose and strategic capabilities. So we have the next two facets of the strategy diamond, Customer Needs & Wants and the Portfolio of Products & Services. When customer desires are matched up against the company’s strategic capabilities, then the decision of what portfolio of products and services the company should deliver can be made.
Logically following upon this decision comes the creation of Beginning to End Delivery Systems for each product and service, or the next facet. This would include research and development, product design, product manufacturing, assembly, processing, branding, marketing, and selling, physical distribution, delivery to customers, and after sales service. Within each delivery system are key tasks and projects.
This brings us to the next facet of the strategy diamond; namely, the level of Crucial Tasks & Projects within each delivery system. Finally, we come to the final facet of the diamond, the Individual Skill Sets – the competencies needed for achieving results.
The strategy diamond gives us a great way to think about business that clearly allows us to separate organizational structure and work management from governance and decision making authority. With it, we are able to envision peer-based organizations. It also empowers us to organize businesses strategically around customers and company competencies, not around static functions and hierarchical rank making. Putting it all together we can create a peer-based strategy. On the left side of the strategy diamond, we visualize organizational design and the managing of work through traditional management positions. On the right side, we visualize organizational governance through the peer-based leadership councils.
Organization Design/Management Structure Strategy Diamond Organizational Governance/Peer-based Leadership Councils COO
EVP’s
VP’s &Directors
ManagersTeam
LeadersTeam Members Basic
Values
Basic
Desires
Governing
Values
Strategic
Capabilities
Customer
Needs & Wants
Portfolio of
Products & services
Delivery Systems
Crucial Tasks
Strategy CouncilTactical
CouncilOperational
CouncilFunctional Councils
An organization should feel free to experiment with organizational design on the left side of the strategy diamond; for instance, in deciding whether to structure the work of the company around geographical areas, customers, or products. In fact, by trying out different arrangements, and restructuring occasionally, the organization creates deeper internal networks among the employees that serve to improve communication and flexibility. Again, I do not suggest making major, catastrophic changes to management structure in order to create a peer-based organization.
Chartering the four peer-based leadership councils with appropriate training and coaching and allowing the traditional management structure to stay in place, reduces the amount of resistance and confusion. With time, actually rather quickly, the organization will open up and begin to take on the characteristics of a peer-based organization. Any major reengineering projects should be introduced and lead by the employees through the peer councils. The only major management change required is that the CEO choose a competent and committed COO to run the “left-side” work of the business, while the CEO should focus on being the mentor and coach to the peer leadership councils on the “right-side.”
Overseeing these four crucial dimensions of organizational decision-making is the responsibility of the peer-based leadership councils. The strategy council keeps reviewing the organization’s strategic capabilities along with present and future customer needs and wants in order to determine which products and services to offer to which customers. The tactical council keeps reviewing how best to engage both customers and competitors – how best to deliver products and services to customers and execute the business strategy. The operational council keeps reviewing how to do this more profitably. It also stays watchful for high-level dumb, where reality and the opinions of senior management grow apart. The functional councils keep reviewing how best to develop, compensate, and reward the organization’s people.
These peer-based councils bring people from all over the organization together. They get out of their hierarchically imposed roles to meet new people and see things from a different perspective. The councils allow everyone in the organization to contribute to strategic thinking, and so they begin to think and act like “owners.” Over time, these councils will begin to replace traditional leadership and management positions to create true leaderless organizations.
I have been discussing this from a rather abstract level, but what can people at different levels of a company do to turn their organization into more of a peer-based organization? Whatever your level of responsibility, you can view your work from the perspective of the four key areas: strategy, tactics, operations, and people. You can then charter within your own team, department, division, or shop the four councils made up of your direct reports and begin to operate your own area of concern like a peer-based organization in miniature. Each of these peer-based leadership councils will have the responsibility described above, but instead of the entire company being their concern, they will guide the strategy, tactics, operations, and people development of your own small department.
Jeffrey Nielsen is the founder of Intellectual Capital Development. Jeff is passionate about working with organizations to develop robust strategic business models that help them be creative, solve problems, and optimally adapt to their environment to create success. Jeff is a visiting lecturer at Brigham Young University and formerly at Utah Valley State College. He can be reached at (801) 226-9056, or emailed at icdmethod@netscape.net
