In the last fifty years, the technological leap has had a very important impact on business in general. There are more productive machines with new capabilities. The development of new materials opens new alternatives. The ways to communicate are faster and more complex. There are robots with increasing benefits. Internet, big data, artificial intelligence … are matters in constant development by leading organizations in their sectors developed since 1990. How has each organization’s organizational system evolved in this time?
In the following image, we can see external element of the WITORG Guide ‘A. Organizational Characteristics’. In this element, the main influences on an organizational system of the environment that surrounds an organization will be treated.
Despite the great technological changes, it can be observed how governments’ organizational systems or even of many business organizations have hardly changed, or have done so a little. There are Taylorist systems in many organizations. The governments’ parliaments of the nations continue with forms and customs from many decades ago. People perceive, or begin to perceive, these forms of government and the governments themselves as unprepared to face the current world, while trying to regulate or dominate situations that get out of hand.
It cannot be denied that organizations have improved their organizational systems by applying new technologies, which allow tasks to be carried out more quickly due to the higher processing speed and also because they have created tools capable of performing tasks that were performed manually. Software used in fields such as design, music, entertainment, engineering, medicine, etc. allow to save a lot of time.
However, there are other organizational aspects that have not evolved so much in organizations. Below is a list of aspects not so evolved:
- The governments’ parliaments.
- Departmental hierarchical structures.
- Lack of transparency.
- Departmental optima instead of global optima within organizations.
- Unidirectional communication systems.
- The importance of people’s status within organizations.
- Wars of power within organizations.
- Working for bosses instead of systems (this does not mean that bosses or controls are unnecessary).
- Any other the reader wants to add.
Behind the aforementioned points lies the importance of the individual with respect to the collective. The fact that wealth is concentrated in fewer and fewer hands means that the collective is not being thought about. The human being competes with each other constantly, and that competition has made great advances. It can also be verified that countries that apply communist government systems, limiting to a great extent the individual initiative, have not managed to overcome the welfare of Western countries with more or less liberal forms of government.
With what has been described so far in this chapter, it can be affirmed that organizational systems are, to a certain extent, a pending issue for organizations. A leading organization in a sector could justify its results thanks to good governance. However, leading organizations a decade ago ceased to be so and even disappeared.
In an increasingly complex world, thinking about collective organization and other forms of relationship between people seems to start to make sense. This is intended to improve an organization’s survival capabilities in an environment. Another issue would be to check if the organizations have a real collective maturity to do so.
The people who drive an organization and its organizational system
The origin and the circumstances in which organizations are generated are their own and particular to each of them. Normally an idea, a need, a dream, raised by one or several people will be the origin of a new organization, in many cases without being aware of the organizational needs that this implies and the organizational system that they will need.
An organizational system implemented at an organization’s origin evolves with time and circumstances. Although it will do so more or less quickly, conditioned in part by these circumstances and the environment of its origin. Some organizations will survive over time, others will disappear, either having been conceived with an end date, or not being able to survive despite wanting to.
Possible origins of an organization:
- One or more scientists design a product in order to cover a detected need.
- A person seeks a social status and a way to accumulate wealth.
- A social movement is grouped to face environmental circumstances that are negatively affecting their lives.
- A community of people (region, town, country …) feels threatened by another.
- A person wants to be a reference in some subject.
- A regional government or a country visualizes a project with the objective of creating wealth and well-being.
- An organization already created decides to try to start a new activity in a sector in which it did not participate before.
When observing possible reasons such as the ones mentioned above, the first common point that all organizations have is one or several people with an intention, who launch a new project. This fact can be described in various ways: social Darwinism, competition, illusion, need, business plan, etc. Once the new organization is launched, a more or less formal organizational system will be developed as an organizational need.
You can analyse and reflect on an organizational system already created through internal elements of the WITORG Guide 100, 200, 300, 400, 500 and 600. However, it is necessary to understand the reasons why a design of organizational system was created, so, from that consciousness, understand it and evolve it in case of need.
Influence of the current world on an organizational system
In internal element of the WITORG Guide ‘100. Essence of an Organizational System’, part of the elements that condition an organization are treated, as they are directly linked to it:
- The true vision, mission and values proposed by a CEO and some owners in for-profit organizations.
- The values and the organizational system.
- Foundational bases when it comes to political organizations, NGOs, etc.
- The country, region.
- The sector.
- Levels of training and experience required.
The points mentioned condition an organizational system as they are very specific points. But, in addition to them, there is a higher level of influence, which is what is discussed in this chapter, which explains the organizational characteristics in the following sections.
I. The competition due to trade globalization
For some years now, the products consumed in any region have very different origins. Given the great industrial advance of China in recent times, there was a feeling that China was becoming the world factory, along with other countries called BRICS. However, some companies have begun to repatriate their productions, or part of them, and, in other cases, to manufacture their new releases in the same region of their development.
The influence of economic powers on governments and the creation of regions of free movement of goods formed by several countries, globalization after all, imply a change of environment for most organizations and their organizational system.
This new scenario produces uncertainty and the emergence of new competitors; however, organizations also have a wider field to look for opportunities. The question then is: has each organization’s organizational system evolved to face this new scenario of greater opportunities and more competition?
II. The technological advance
The technological advances made in recent decades have brought the great internet network, where we observe:
- Social networks.
- Advertising and promotion.
- The connection possibilities through the internet or other networks.
- Bilateral communication between manufacturer and final consumer.
- Bilateral communication between politicians and voters/citizens.
- Distribution and promotion in the music and film industry.
- Written media, newspapers, magazines, etc.
- Sale of all types of products through the network.
- The uberization.
- The banking and new actors that appear in it without the need for physical offices, new possible ways for payment in trade…
- Any other the reader wants to add.
In addition to the points mentioned, and sometimes related to them, there are also:
- New Materials.
- Robotics, drones, artificial intelligence, increasingly sophisticated and precise machines.
- Advances in genetics and molecular biology.
All these points present new scenarios where an organizational system plays a fundamental role, first because technology allows it to be more efficient and, second, because to understand and develop in the new technological reality it is necessary to evolve an organizational system with the goal of survival.
III. The economic benefit through speculation
In recent years, there has also been an increasing number of tools for savings, investment or, simply, for speculation and the subsequent economic bubbles. People’s ambition for wealth reaches a point where the benefit is above any ethical consideration and respect for a social welfare order. Speculative movements can have serious consequences for an important part of a society that has not been able to or wanted to do anything to avoid them.
Can an organizational system detect situations where speculation negatively affects part of society? Are organizational systems designed to speculate?
Indeed, it is a complex issue.
IV. The loss of power of regional, national and supranational governments
When observing the governments of the regions, nations, political or economic associations and if we analyse each organizational system, we can cite a series of points common to all:
- Governments have used technologies to facilitate administrative procedures, vote counting, data analysis for various studies, to be more transparent, databases for better management on security issues, collections, etc. They improve processes or subprocesses of administrative management, however, not so much their forms of government.
- Governments, in many cases, continue with the same parliaments, the same form of voting, the same way of acting than thirty or even sixty years ago.
- Citizens choose a political party or political representative with a program composed of proposals/projects, as it has been done in the past.
- Citizens, once elected, rarely (and only in the most advanced countries) are consulted about proposals that were not in the programs or on issues of importance to be implemented.
- The progress of a country is still measured in terms of per capita income, GDP and employment rate.
- In general, the profiles of politicians and their academic training remain the same as they were fifty years ago, seeming to ignore the new, and yet very present in all areas, technological world.
From the previous points, it is observed that, while the way of governing a little country has evolved, the world has experienced an important change in the following aspects:
- Technological evolution.
- Opening of new commercial spaces. Elimination of economic borders.
- Global business.
- Business through the internet.
- New big companies with global technologies and power of influence clearly superior to regional or even national governments.
In conclusion, WITORG exposes the feeling of very little progress in the organizational systems of regional or national governments regarding a new technological world in constant evolution is exposed.
- Did governments have more government capacity fifty years ago than nowadays?
- Have governments lost the ability to redistribute wealth among citizens?
- Does the accumulation or concentration of wealth in a few people allow them to influence the governments of the regions or nations to continue accumulating wealth?
- How do organizational systems influence all this?
V. Instability, or its sensation, globally
At present, there is a sense of lack of visibility of the future and, in turn, stability at global level. The causes are:
- The speed with which news arrives and then the speed with which they disappear. This phenomenon is observed as a continuous fireworks show every day at all hours, with events that explode continuously and disappear in seconds. Internet and social networks, with their capacity for two-way communication, make this possible.
- The constant threat of the relocation of organizations due to globalization.
- Artificial intelligence and robotics.
- The uberization of various sectors.
- Religions lose believers, while there is an evolution in values and references in societies.
- War conflicts with a religious component, although with important economic implications.
- Greater migratory movements of history due to wars in some cases, and flows from rural areas to large cities in others.
- Climate change.
- Economic bubbles and their consequences.
- National governments without apparent capacity to order chaos.
All these combined points produce a sense of insecurity from the short to the long-term.
The traditional model of education: primary education, secondary education, university and post-universality is still present; however, another form of education begins to make sense thanks to technological progress. Today, it is easier to self-educate thanks to all the material, methodologies, services and tools available. In addition, new generations begin to understand education from an interactive point of view, compared to models where the student goes to a classroom, listens to teachers and passes tests or exams, thus achieving the corresponding qualifications.
VII. Cycles and economic frequencies, the world continues to have routines
Despite this feeling of lack of control, new car models are launched every five or eight years, smartphones every year, appliances such as refrigerators or washing machines every six or twelve years, the fashion world continues to have its seasons, in many countries, young people complete their academic courses normally and the countries’ parliaments complete the cycles for which they were elected.
Therefore, although a situation of certain chaos and lack of horizon is perceived, the world continues to evolve within an order, although with a greater degree of uncertainty or a sense of it. The title of this section ‘Influence of the current world on an organizational system’ aims to show how organizational systems are going to evolve, so that organizations can interact and survive in environments with greater uncertainty, with more apparent or real lack of control, and where changes can occur faster than a few decades ago. Not forgetting that changes also require a time, and that knowing how to visualize the environments where the organizations interact can be convenient to introduce them in an organizational system in a progressive and constant way.
The existence of routines at all levels is a reality, although they occur in environments of greater uncertainty. From this affirmation, the question arises: to what extent will routines considered lifelong in fields such as politics, education, fashion and industry be altered in the future?
Organizational systems models versus types of organizations/sectors
In this point, it is tried to show types of existing organizations in the present world. In this way, the reader can think about what organizational characteristics are necessary in each case, and also whether the evolution of more Taylorian worlds to more holacratic worlds is possible for each situation.
To do this, a matrix with two dimensions will be built:
- Dimension-1: Types of organizations according to the classification made by Frederic Laloux in his book Reinventing Organizations, of which a summary is offered in the chapter ‘Organizational systems and their evolution’”.
- Dimension-2: Based on the types of organizations indicated in the book The intelligent investor, by Benjamin Graham, commented and updated by Jason Zweig and with prologue and appendices by Warren Buffett, in this dimension 2, WITORG intends to make a classification of organizations. This classification takes into account mainly the intentions of an organization in terms of its results, especially economic, but also considering the size and some qualitative objectives.
This matrix allows us to imagine what types of organizations (dimension-1) can go in each type of company or organization according to the classification of dimension-2.
Then, we will make a short description about the types shown in each dimension to be able to reflect on each one of them.
X: Dimension-1. Types of organizations according to Frederic Laloux
- X1: RED organizations: mafia, street gangs, tribal militias.
- X2: AMBAR organizations: military organizations, Catholic Church, most systems (ministries, etc.) of government of a country, public school in general.
- X3: ORANGE organizations: multinational companies, charter schools. The objective is to grow and beat the competition, maximizing economic or other results. Innovation is key to maintain leadership. It is managed by objectives and the achievement of them is rewarded. Nowadays, it is the predominant type of organization in the world.
- X4: GREEN organizations: Southwest Airlines or Ben & Jerry’s as current organizations. Maintaining the classic pyramidal structures, they focus on culture and empowerment with the aim of achieving an extraordinary motivation of the people who work in the organization.
- X5: TEAL organizations. Frederic Laloux considers this type of organizational systems as emerging. Through his research, he has located a series of organizations that, without working in contact with each other, share similar philosophies and ways of doing things. In addition, the author understands that the focus of these organizational systems (TEAL) can help solve many of the problems presented by the world today. Therefore, as an organizational system, the author considers this option as the most advanced nowadays. Frederic Laloux describes the passage from GREEN to TEAL as a state of consciousness relating this state to the fifth level of Maslow’s pyramid, self-realization and life sense. He also considers the concept of ‘holacracy’ as belonging to the organizations described as TEAL.
Y: Dimension-2. Types of organizations according to their degree of speculation
WITORG considers it necessary to understand an organization from its intention to survive over time. In the book The Intelligent Investor, an attempt is made to differentiate between INVESTMENT and SPECULATION. The concept investment is applied to big caps organizations that aim to achieve moderate but constant positive results over time and maintain a relatively stable exchange rate level. These types of organizations allow people and other organizations to invest in the long term with a certain guarantee that their savings will not lose purchasing power and a moderate profit is obtained.
In addition, there are other organizations that do not meet the requirements of the previous ones, either because of their size, because of their final intentions, or for other reasons, and because of this there is no clear intention to develop and survive over time. These other organizations will also require organizational systems through which to operate to survive in their environment. And some will achieve it, as well as some of the ones defined under the concept of ‘investment’.
The reason for starting from the concept ‘investment’ of the aforementioned book to generate dimension-2 is due to the fact that these have been the most stable organizations in terms of results during history. Starting from this type, WITORG proposes a classification of types of organizations with the intention of surviving in time:
Y1: Large stable organizations: big caps of concept ‘investment’ from the book The intelligent investor
- They are organizations with a high market capitalization and have achieved moderate and positive results continuously over time.
- They are transnational organizations.
- Their actions mean immediate liquidity.
- The competitive advantages are clear regarding the competition and, in principle, they will continue to maintain them.
- They operate in sectors of great stability such as food or consumption.
- They have their own resources or facilities for financing.
- Their management bodies are professionalized, with proven reputation in the management of the company.
- Some of these companies: Coca-Cola, Walmart, Johnson & Johnson, Nestlé…
Y2: Medium and small stable organizations
- They operate in the same sectors as the previous ones and produce similar goods or services with the same stability in terms of demand.
- Their actions do not mean immediate liquidity.
- The competitive advantages do not have to be that big.
- The availability of resources is more limited than in previous cases.
- They do not need to be transnational companies.
Y3: Large cyclical organizations: big caps
- They are organizations with characteristics like those in point Y1, however the sectors where they operate are different; in them, the economic cycles of expansion or contraction condition performance. In expansive cycles, these organizations can improve their level of profit and their stock market valuation will surely rise.
- Some examples: large automotive companies, oil and gas, aeronautics …
Y4: Medium and small cyclical organizations
- They operate in the same sectors as Y3, however, and in general, they do not have the same strengths as a big cap.
- In economic cycles under contraction, they can have difficulties.
- Their actions do not have to mean immediate liquidity.
- The competitive advantages do not have to be as big as in Y3.
- The availability of resources is more limited with respect to Y3.
- They do not have to be transnational companies.
Y5: Great growth organizations, big caps
- They are big caps with a stock market value that is much higher than their book value. This type of organization expects a large growth in its business to reach, or exceed, its book value, which does not correspond to its current book value and there is an expectation of achieving great future benefits.
- Generally, they have been technological companies or companies whose management processes have been innovative and supported by a highly updated technological base, with apparent sustainable competitive advantages over time.
- They are transnational companies.
- They easily access different forms of financing, despite being heavily indebted.
- Some of them have not met expectations in the past, causing large losses to investors. There were many cases with the so-called dotcom economic bubble.
- Currently, there is the case of TESLA, with a great debate about whether it will meet the expectations created.
- The managers are usually charismatic and prestigious figures, with a great capacity for leadership, which can also involve some controversy.
- Google (Alphabet Inc.), Apple, Facebook, Amazon, etc., are companies that at the time could be high-growth organizations and yet, today, they are big caps that due to their size have surely ceased to be so, beyond their stock valuation. As a conclusion, in the last years dotcom organizations have become mature organizations, with increasing difficulties to increase their turnover and results in a constant way; like any mature organization, they begin to show signs of wear. Although it is clear that at the moment they are organizations with many resources and talent to face their future with guarantees.
Y6: Medium and small growth organizations
- They have the same characteristics at expectations level as the Y5 case, in terms of their technological base and their growth expectations, although of smaller size.
- They may not even be listed on the stock exchange, so their immediate liquidity is lower than the Y5 and they may be in debt or with important financing needs.
Y7: Governments and non-profit organizations:
- Supranational governments.
- National governments.
- Regional governments.
Y9: Banking, insurance…
Y11: Speculative business
Y12: Any other the reader wants to add.
This classification may not contemplate several cases raised by the reader so it can be extended to expand the reflection.
Various questions for thought:
- How do you think each possible combination of X-Y affects the organizational system in an organization?
- Are all combinations X-Y currently possible?
- What kind of organization is the majority among the X-s organizations?
- Which is the combination X-Y where it is easier, in theory, to evolve the organizational system?
- Consider if any Y could involve only one X.
- Consider if any X could only be used in certain Y-s.
- In which combination are you? Would you like to be in another combination X-Y? Do you think that combinations exists?
- To be given by the reader.
Reflections on the XY matrix
WITORG presents some reflections on the matrix. The intention is to invite the reader to look at cases of interest. Some considerations related to the point ‘Influence of the current world on organizational systems’ are added:
- The contrast that exists between public education and new (or evolved) ways of education developed by entities, mostly private, in terms of their organizational systems. There are exceptions to this point, however they are a minority.
- From the previous point, it is concluded that governments Y7, in general, have done little to evolve public education systems, in comparison with some private organizations.
- The two previous points say a lot about how little the Y7 governments have changed in their ways of governing and, therefore, in their organizational systems. Governments use technology to achieve certain operational efficiency in administrative procedures, but not so much in improving their management processes, for example in their parliaments.
- Large corporations Y1, Y3 and, above all, Y5 accumulate resources, talent and relatively solid organizational systems, trying to maintain their competitive advantages intact or even extending them beyond the current technological world. Not being alert can mean missing something important.
- The two previous points show a difference between the organizational systems of large transnational organizations with respect to the immobility of governments, incapable of regulating many aspects in economic and social life.
- Many unipersonal, small and medium organizations are trying to adapt and survive in a world that requires more attention and vigilance to the environment, but which can also bring new opportunities.
Regarding the reflections: WHAT CAN ORGANIZATIONAL SYSTEMS DO?