Sunday, November 23, 2008

19 Ways to Survive the Crisis Without Firing People

The following article is an excerpt from a post i recently made to the cmsig mailing list.

Here is one thing I learned from studying military strategy:

Strategy is a game of interaction and isolation:
  • Strengthen the interactions on your own side, so you can move in a coordinated fashion with a common goal. This enables you to focus power, and to make bundles of rapid, coordinated attacks.
  • *Isolate enemy units from each other, morally, mentally and physically, so that you can pick each unit off easily.
Total strength matters much less than the ability to maneuver and coordinate.

Most business managers have got it back asswards. They isolate units in their own organization in a multitude of inventive ways, then antagonize customers so they present a united front against the company.

For example:
  • Cost Accounting and Functional Organization isolate ones own forces.
  • Management by setting goals force employees to game the system in order to reach goals that are outside the capabilities of the current organization. This creates a divide between managers and employees that can be very difficult to heal.
  • Matrix Management provides employees with multiple, often mutually exclusive, objectives.
  • Most requirement analysis methods make the implicit assumption you do not need insights into psychology, behavioral science, and business strategy to create a great product. That is true sometimes, but most of the time it is not. As a result, customers get to chose which product sucks the least, instead of which is best. (If you do not believe me, I cordially invite you to my home to watch a DVD on my DVD-player, to boil tea water in our kettle, and to use my old Windows PC.)
Oh, and "strengthen the interactions" does not mean "tangle your own value streams so you keep tripping over them". (I sat in a restaurant yesterday, and heard two people discussing how impossible it was to get their project done because meetings got rescheduled all the time. Neither person realized it was a systemic problem. From their point of view, they were working with stupid, unreliable people.)

The reality is, for most companies, a lot can be done to counteract the effects of a crisis. Here is a short list:
  • Stop relying weak systems controls, like setting goals. Evaluate proposed actions against Donella Meadows list of places to intervene in a system. See
  • Scrap the functional organization. Organize around value streams. Use a network model, where each node (or cluster) is in a different market segment. Look to The Virgin Group for an example. Look at how the military in many countries are reorganizing into network organizations. If you look deeply into their reasons for doing it, you will see that the same principles make network organization an excellent model for business organizations.
  • Replace Cost Accounting with something that resembles reality. Throughput Accounting works. Lean Accounting probably works too.
  • Provide IOHAI training for managers, partly to enable the network organization to coordinate despite being a loosely coupled structure, partly to catch business opportunities that you would otherwise miss. (IOHAI = Insight, Orientation, Harmony, Agility, Initiative. See
  • Use TOC and Lean applications to make your processes more efficient.
  • Use kanban, XmR charts (also called process control charts and process behavior charts) and cumulative flow diagrams to show what is going on in your processes. This will improve decision making, but only if you give your managers the appropriate training.
  • Institute a Process Of Ongoing Improvement (POOGI), like the TOC Focusing Steps.
  • Ensure a flow of information from the bottom and up in the organization, for example by having regular Crawford Slip sessions.
  • Make brainstorming part of the way you begin new projects. My preference is for Crawford Slip, but use whatever works in your organization.
  • Make information about effective processes and solutions to effective processes available to everyone in the company. A Wikipedia style database would do a lot.
  • Institute Management by Walking Around. See
  • Use TLTP, System Dynamics, or a combination as decision support for managers. (If it's a major decision, develop a TLTP model and a System Dynamics model independently. See if they match. If they do not, find out why.)
  • Use user interaction design like QFD, GDD or the design method in Crystal Clear to find out what would really delight your customers.
  • Eliminate fear by _rewarding_ failures the organization can learn from.
  • Read at least four management books per year, preferably one per month. Read books that focus on principles. Follow up with books about specific practices. Practice what you learn.
  • Start informal study circles. Hold a meeting each month, or perhaps every other month. At each meeting, any employee that is interested in something even vaguely relating to your business, can hold a talk about it. You'll be amazed how much energy and creativity you can unleash this way. All you need to do is figure out how to turn that energy and creativity into money. (Hint: Crawford Slip can help you there.)
  • If you need to take offensive action, study Boyd, Sun Tzu, and the 36 stratagems for inspiration. (Hint: Read Osinga's book about Boyd and Krippendorff's book about the 36 stratagems.)
  • Fail fast! Many organizations lose money because they keep flogging dead horses long after it is obvious. Fear culture and internal costing are two common culprits. Identify all obstacles to laying dead horses to rest, and get rid of those obstacles. Note that a policy of firing people at the slightest downturn is such an obstacle. If giving electrical shocks to a dead horse can protect people from getting fired, then you will have a lot of artificially induced movement of necrotic tissue in your organization. (Read Deming's Out Of the Crisis for examples.)
  • Keep vital skills within the company. Do not outsource your brains! (Thank you Bill Gates for that insight.) Cost Accounting has a lot to do with choosing the wrong thing to outsource or insource. One more reason to get rid of it. (Look at it from a 36 Stratagems point of view. If you outsource or insource, which stratagems will it leave you open too? You really should know. Goldratt's Late Night Conversations can also provide some insight. )

Not every item of above will be applicable everywhere, but there is something in there that is applicable to almost any company.

Now get off your butt and do it!


Jason Yip said...

Note that Toyota uses matrix management.

The benefit of functional organisation has always been in developing expertise. The value of that shouldn't be underestimated.

I think the issue is less about the type of organisation and more about how we differentiate between responsibility and authority.

Kallokain said...

Absolutely right about functional organization being excellent för education. But:

1. Boydian network organisations do have functional units responsible för education. You get a lot more training and education in that kind of organisation than in a functional organisation.

2. Functional org. aim to keep you busy all the time, so there is very little time for training. Functional org also keep workers separate when working, so there is little opportunity to exchange information while working. For example, the Volvo corporate standard mandates that:
a. Programmers sit at corner desks in square cells, so they all have their backs turned to each other.
b. Desk assignments are fixed. Consequently, programmers in the same project do usually not sit in the same cell.
c. Training has mostly Been replaced by standardising tools and frameworks.

Kallokain said...

>I think the issue is less about the
>type of organisation and more about
>how we differentiate between
>responsibility and authority.

Functional organization is a way of differentiating between responsibility and authority. So is network organization.

Taylor put authority at the top, and accountability at the bottom. It is not what he intended to do, but it is the result of the way he built the organizational structure. (Taylor intended managers to take on much more accountability than they usually do. He failed to introduce systemic affordances ensuring that they did.)

Taylor believed workers are to unintelligent to be educated, hence they must always be monitored closely and told what to do. This became one of the foundations of functional organization.

Boyd, on the other hand, believed in putting authority and authority together. Management defines objectives and strategy. Workers (soldiers, originally) decide how to carry the work out.

Boyd believed people are capable of intelligent decisions, provided they have the right education and the right environment. This is one of the foundations of the Boydian network organization.

Kallokain said...

>Note that Toyota uses matrix >management.

As I understand it, Toyota uses cross-functional management, which is derived from matrix management, but substantially different.

Cross-functional management is a systems approach, a way of making different functional units cooperate better.

Matrix management works at the project level. I have worked in organizations that use matrix organizations, and in organizations that do not. Working without matrix management has been a lot easier than working with it.

DeMarco made a god case against matrix management in Slack.

Kallokain said...

> Boyd, on the other hand, believed
> in putting authority and authority
> together.

Should be:

Boyd, on the other hand, believed in putting authority and responsibility together.

Kallokain said...

BTW, Jeffrey Liker wrote about Toyota's matrix management in The Toyota Way, p. 178-179.

Though he calls it matrix management, the description is of cross-functional management.

The term matrix management gets fuzzy sometimes. Wikipedia defines three different kinds of matrix management.

Panu Kinnari said...

Nice list. Have to look into stuff you mentioned as some of it was new to me. Well, at least the acronyms were :)

Kallokain said...

Please let me know if you get stuck on finding out more. Some of the stuff, like the IOHAI concept, is difficult to find material about. It is possible to find material about the same ideas under different names, or, more frequently, not labeled at all.

I am writing a book about Strategic Navigation, a business strategy method. The first third is devoted to Insight, the first I in IOHAI. It is mainly about different aspects of Systems Thinking.

The best IOHAI figure I've got is this one:

The image is from this article:

The article also has an embedded webcast about the effects of fear in organizations, and what to do about it.