Comparing Functional Organizations with Social Organizations

20130701-204206.jpgIn recent weeks we published a few articles (see here and here) promoting a new metaphor (the HIVE Model) that attempts to provide some clarity and structure to how organizations can arrange the workplace so that business processing leverages the power of communities working in NOW Mode.

The core construct of the HIVE model is the Pod. A Pod encapsulates a Role with competences expressed as Controls, each control containing the means and knowledge to perform certain tasks or processes. An employee of the organization to whom the Role is assigned, is the Pilot of the Pod.

A HIVE Unit is a community of many Pod’s through which business is processed by virtue of conversations amongst the various Pod’s. Interactions amongst Pod’s responding to events constitute action pathways that are spontaneously constructed by the Pilot’s of those Pod’s.

Social organizations that operate at their core in this form, i.e., as Social HIVE’s, are very different from the classical Functional structures that so characterized the business world of the 20th century. But for those who grew up inside those structures, the transition from Functional to Social is a challenge that almost requires a leap of faith. The HIVE model is an attempt to alleviate the unknown in that transition but still leaves many unanswered questions, particularly for those who are accustomed to the Functional paradigm and its many established ‘habits’. These ‘habits’ are considered normal, almost taken for granted and so if they are absent in a social model, the latter generates a great deal of skepticism, if not apprehension.

In this article, we compare the two models in the hope that this comparison clarifies the HIVE model further and alleviate some of the apprehension the model may cause.


Two important characteristics of a Functional organization separate it from the HIVE metaphor and social networking in general:

- Functional departments
– Hierarchy

These two characteristics are also at the root of the many flaws of the Functional structure. Grouping people by skill set is a natural choice for human beings. It is consistent with our tendency to classify everything (animal species, plant species, automobiles, consumer products, etc.). We like to turn a complex set of diverse items into neat groups of similar items.

Functional grouping may seem logical but it causes self-centeredness. People tend to gravitate towards the internal dynamics of their departments where they seek comfort in uniformity and similarity. Unfortunately, for a business, this is dysfunctional behavior because there is nothing that a single, monochrome group can do alone that is significant for the business. Functional departments are headed by Managers or Directors who are focused on the operation of the department, inevitably creating a dangerous distance between what motivates the employees of each Department and the core promise of the Enterprise to the market.

The hierarchy metaphor is the device that human beings invented to keep the enterprise connected. Since each department is an island drifting in its self-centered mind set, departments have to be brought under a higher level of authority, at which level we may find some cohesion with the mission of the enterprise. Unfortunately, when a problem occurs, individual departments can’t resolve them and so decisions that are needed end up being forwarded higher and higher in the structure until someone has enough scope to resolve the issue. Since there are few individuals at the top levels, issues accumulate and take time to get sorted out.

In a HIVE construct, none of these problems are present. A HIVE contains all the skills needed to accomplish a mission because the selection of Pod’s for a HIVE is directly based on the mission of the HIVE, which is expressed in terms of what is meaningful to the end customer of the enterprise. There are no other forms or dimensions of goals and objectives than that crisp and clear mission outline. Thus, if an issue occurs, the required action pathways can be instantiated within the HIVE and decisions are made rapidly by the people who know the problem best – ground troops! It is not difficult to conceive that the brains of 50 or 100 competent adults can, collectively, do a better job than a single individual.

The effectiveness of a HIVE is further extended through natural connections to other HIVE’s. Since the structure is flat and there are no hierarchical protocols and authorities interfering with communication, when one HIVE Unit needs help to solve a complex problem, it can simply collaborate with another HIVE next door.

HIVE’s are also free structures that can form new HIVE’s. When a new type of problem surfaces, individuals can arrange a new HIVE, tailored to the new type of problem. This phenomenon of ‘HIVE Mutation’ is inherent to Spontaneous Association. Just as individuals can create action pathways in a HIVE, they can create new pathways which, when repeated, end up generating a new HIVE. Compare this flexibility with the rigidity of a Functional org structure and all that you have to go through to change the structure. It is no wonder that Functional structures resort to other compensatory strategies, like committees, task forces and councils – none of which are needed in the HIVE model.


Work Environment

Meetings and collaboration

In a Functional structure, individuals find themselves, by design, surrounded by like-professionals -it’s a monochromatic world. Hence, when people need to work across functional disciplines, they meet. Meetings are the other device that human beings invented to compensate for Functional disjointed-ness.

Meetings are extremely poor substitutes for continuous collaboration. For starters, they can only deal with a limited number of issues. And they only last a short amount of time after which everybody returns to their monochromatic departments. Any cohesion created by the multidisciplinary nature of the meeting (if any) disappears after the meeting. It’s like a rainbow of short duration. Meetings are also limited by the physical world – everyone needed at the meeting has to be present at the same time, which then causes difficulty booking the meeting, which is why issues take long to resolve. As time passes, issues accumulate faster than people can call meetings.

In a HIVE, this ‘meeting congregation’ is persistent, i.e., it’s not a ‘hit and run’ event, it’s how people work. They are always in the ‘meeting room’. Moreover, because a HIVE operates in a virtual space, people are available all the time to deal with all issues. In a virtual space, people can multi-task and go from one issue to another at the same time. There are few delays and things get done much faster.

Privacy and Confidentiality

One of the aspects that is characteristic of a Functional culture is extreme privacy and confidentiality. Privacy is actually amplified by the borders around a Functional silo and by the layers between levels of authority. [One day a manager is not privy to certain discussions; the next day he is promoted and suddenly he can hear the conversations behind that closed door... Does that makes sense?...]

In a HIVE culture, privacy is not a big issue (possibly with some exceptions) because it is not imposed by notions of power and territory. People are always involved in getting things done for customers. There is no time to waste with gossip or secrecy (yes, secrets do waste time, don’t they?…), time is focused on a collective mission and people know what they need to know to accomplish their tasks and are not interested in what is irrelevant to those tasks.

Flow of Work – Instance Mode and NOW Mode

The way that work flows in a HIVE versus a Functional structure couldn’t be more different. This is the most fundamental issue at the core of this ‘debate’.

The biggest problem with Functional structures is accumulation. Work moves from one Functional silo to another in piles, i.e., in batches. [Here's a batch of time sheets. Here's a batch of invoices to send to customers]. And as each of these batches enters a new department it slows down! Inevitably. That’s because the person organizing, prioritizing and distributing work in one department is not the same as in the next department. And as the work moves from department to department, the pile increases. Accumulation and the resulting slow down in work flow is the cancer and the rust of Functional structures, the key reason why as Social organizations grow and spread across the Economy, Functional structures have no hope to survive!

HIVE’s don’t work in batch mode, they work in NOW mode because they do things in Instance Mode. Consider an instance to be an occurrence of a business object. E.g., one finished goods sku, one client account, one disbursement, one loan application, one customer order, one batch of a medical product, one shipment, etc. Each one of these is an instance.

Working in instance mode means that if an event affects an instance, you process the entire event against that instance. I.e., you never batch steps of a process. Working in instance mode simplifies everybody’s task particularly because HIVE behavior combines instance-mode with NOW mode. Here’s why:

NOW Mode makes it that you don’t do anything on a periodic drum-beat but rather in real-time, as events happen. Thus, you don’t do some things weekly and other things monthly. In the Functional world there are chronic ‘batching’ habits as a result of which people batch tasks and distribute them into weekly, monthly and quarterly cycles. Inevitably, then, you can’t work in Instance Mode.

Take as an example how KPI’s are published in Supply Chain Management. Suppose that once a month you publish Service Levels – what does that entail? That all the Orders of the month, for all the sku’s that were ordered by customers, are gathered and the whole thing is churned through calculations to end up with one number for everything. Sure, you can slice that data by Product, Customer, whatever but that’s not the point; the point is that you have to take all this data or all these instances and process everything in one shot. See how tough that task is?

The same character of batching periodically is found in supply plans and even production schedules: Supply Plans are the output of either MRP or APS runs that are performed at periodic intervals. If you look at a Supply Chain planner or analyst, you will see him or her process and plan many sku’s and materials if not all sku’s and materials in one shot – once a week or once a month. Same goes fora Finite Planner handling Production Schedules: “we review the schedule once a week for the next 2 weeks”.

Processing data in periodic batches is both burdensome and rigid. Now, compare this with HIVE behavior where things are done in Instance Mode, event by event, in NOW Mode:

- If there is an event or a signal or alert showing an anomaly in market supply (it could even be a customer complaining) you go and look at the Service Level for the affected sku’s for the pertinent period of time. You could measure the Service Level (some call it on time delivery; some line-fill rate) for the past week, the past 6 weeks, the past month, or all of the above – to interpret what the signal is telling you. And you would act on that information right away.

- Events and signals would tell a Supply Chain planner that he/she needs to take a look at supply for a few sku’s; he/she would then process an MRP/APS run for those sku’s after a careful analysis of events and their impact. He/she would change the supply plan for the pertinent materials and immediately forward those changes to the Supply Chain. In NOW Mode there is no better time than the present moment.

This same philosophy of NOW Mode/Instance Mode applies to industrial tasks as much as to planning or administrative tasks – work flows as Lean Thinking teaches us. If you are finishing a batch of tablets of a pharmaceutical product, package it right away, analyze it right away in the Lab and as soon as that is done, have QA review the documentation and release it for sale. Don’t just accumulate batches and batches of tablets; and don’t package them all at the same time. Don’t accumulate samples for analysis at the door of theLab and then schedule them for analysis. And so on…

In instance mode and NOW mode, organizations are never burdened by the weight of large volumes of things to be processed. Work is much lighter and is performed much faster. HIVE’s are soft constructs that invite this kind of behaviour; whereas Functional structures, for all of its attributes as documented above, invite batching and delaying.

Skill Brotherhoods

So, are we proposing that we do away with Functional Structures altogether? Not quite. We are proposing that you consider eliminating the inherent notions of power, hierarchy and command-and-control. However, there is one positive side to monochromatic groups that can’t be underestimated – they foster (or may foster) a professional focus on competency, knowledge and, ultimately, quality. This is very important. Organizations aren’t simply machines of output serving the company’s mission. We are humans and what defines us is the creation of new things through the development and dissemination of knowledge. We can’t just jump in and start piloting Pod’s. First and foremost, we are both receptacles and incubators of knowledge and in that sense, going into an introverted cocoon, as it were, where the particular scope of knowledge that drives each of us is fostered, is not just a good thing, it is essential.

Skill groups should exist, they should be formalized and they should be seen as critical activities within the Enterprise. In that sense, Functional groups should continue to exists but, in this case, as “brotherhoods of knowledge and skill“. Their concern should not be the assignment of work but rather to develop skill, monitor competency levels and insure the good quality of every task performed in the enterprise.

Leadership HIVE’s

Finally, what happens to leadership in a HIVE social model?

In Functional Organizations, leaders sit at the top of a functional pyramid or part of it. Their role is defined by the functional scope underneath them in the structure and they have authority over how things are done and who does them. As suggested previously, these attributes of authority and work assignment are not pertinent in the HIVE social model. So, what do leaders do and how?

In a HIVE Model, Leaders strategize and provide direction. There are no HIVE’s unless there are clear goals and a clear mission defining a HIVE. You don’t assign a mission to a HIVE; you cobble together a HIVE for a mission. These missions must be thought out and articulated – Leaders do that.

Leaders must monitor the performance of the HIVE, not of specific individuals. They must monitor conversation threads of critical issues and if, through their wisdom and knowledge, they see it fit, they intercept a course of action and correct it, through advice and counsel.

There are a few points to consider when looking at Leaders and their role in a social organization:

  • A logical way to position Leaders is to assign one Leader to each HIVE Unit. However, keep in mind that HIVE’s are multi-disciplinary in nature while in classical structures, Leaders tend to be somewhat uni-dimenional. To lead a HIVE, a Leader would have to be mission-focused and mission-capable, not really specialized in one field or discipline.
  • If you transition from a Functional structure to a Social organization, a big problem will be that in Functional structures, people in Power and Authority positions aren’t necessarily good Leaders. Leadership and Power are not synonymous. In a HIVE, Leaders lead through drive, inspiration and sheer talent, not through the authority of their position in a hierarchy.
  • Finally, in a HIVE model, Leaders have to work together which then leads us to propose the notion of a Leadership HIVE (or several).

Leadership HIVE’s are Units where leaders work together in monitoring, orienting and strategizing the HIVE complex. In our view, a Leadership HIVE provides the same strengths of the social model to the Leadership role. In a Leadership HIVE, leaders can be there for a multitude of reasons: they can be thought leaders, experts, business leaders, great strategists, etc. If you think of Leadership in the social enterprise context, you will not associate “Leader” with “Power” and you won’t think of a Leader as an individual but rather as a member of a community. Consider that for a few minutes and you will see the tremendous advantages of this way of thinking. Remember for a moment how difficult it is to get high level executives in a Functional structure to work together as a team and you’ll quickly see what we mean…

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Categories: Business transformation, NOW Mode, Social Enterprise


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