Dual Organizations: Redarchy and Hierarchy

One of the biggest challenges that organizations face in the face of uncertainty is how to organize themselves to interact with the new reality and stay competitive when change is discontinuous and the future is less and less an extrapolation of the past.

The evidence that our organizations are not prepared for this new context is clearly visible. Everything points to the fact that hierarchical and highly bureaucratized structures are failing in their attempts to adjust to the new reality. We necessarily have to rethink what we want our organizations to look like in the future.

It is becoming increasingly clear that, at least for the next few decades, social media will be the engine of major transformations in our production models. So our organizations have already embarked on a journey of no return, of which we know its starting point, but of which we do not know in detail the point of arrival, yet to be defined. The challenge is to move from today’s closed, process-centric organizations, designed like machines and with their benchmarks in the past, to open, people-centered organizations designed as adaptive systems capable of continuously transforming and reinventing themselves. Innovation, continuous and discontinuous, is necessary today to generate competitive advantage and ensure the long-term survival of the organization.

These are times to question

In conditions of instability, profitability is not a guarantee of permanence. Competitiveness, in a complex, changing and uncertain context such as the current one, comes fundamentally from the ability to interact with the new dynamics imposed by global markets in a hyperconnected society.

How can we stay competitive in the face of instability? How can organizations deal with increasing complexity? How do we become a more human-friendly organization and achieve greater commitment from our employees? How can we connect with collective intelligence in our organizations? How do you find a new balance between organizational needs for efficiency and scalability and people’s needs for purpose and meaning in what they do?

In today’s reflection, we will see that, in order to address these issues, we must create “Dual” organizations, which have the dual capacity to exploit old certainties and explore new realities, which are able to deliver results while interacting with the complexity inherent in a hyperconnected world.

There are three steps that open the way to bimodal organizations. (1) First, we need new mental models to build and lead organizations capable of connecting with the collective intelligence of their people and making leadership and innovation everyone’s job. (2) Second, we need new organizational structures capable of interacting with the new reality. (3) And finally, we need new systemic models for change, a roadmap that allows us to move from today’s hierarchical organizations to new bimodal organizational models capable of learning, adapting, and addressing complexity while maintaining their operational capacity and business outcomes throughout the period of the necessary transformation.

This is the dilemma we face as leaders. How can we dismantle the current hierarchy/bureaucracy and build organizations capable of interacting with a necessarily more unstable, complex, and global environment, while maintaining coordination, control, and results?

The End of Organizations as Machines

The industrial organisational model has been that of “organisation as a machine”, i.e. designed for the transformation of raw materials into goods and services, based on concentration, specialisation and the division of labour. The result is obvious: hierarchical, bureaucratic, inflexible and opaque organizations. So it is not surprising that today, hierarchical organizations based on a chain of command, which have been models of efficiency in recent years in many sectors, today, faced with the reality of a hyperconnected society, are paralyzed by hierarchy, the organizational chart and the division between functions.

The limits of this model and the problems it generates when it comes to addressing the current uncertainty and complexity have been discussed in previous reflections. Two are particularly harmful to people: on the one hand, specialization requires specialists, so people are forced to fragment their knowledge and perform a certain type of job, which, as a specialist, they will occupy, in one job or another, throughout their working lives. This model of organisational structure has very high costs for professionals, as we are seeing in people who lose their jobs in sectors in transformation, such as banking or the media, in terms of future employability, and is unsustainable in a digital and global economy.

But the fact is that the excessive division of labor has also led to considerable limitations in the framework of contribution of individuals, which has led to work being merely instrumental and the contribution of people being limited to the exchange of obedience, diligence and specialized knowledge for a salary. The reality is that in times of uncertainty and complexity, specialization and division of labor do not give us the flexibility to adapt and respond quickly to change, and it comes at a very high cost in terms of disaffection between organizations and their workers. In the new context, organisational adaptability and the ability to deal with unforeseen situations are as key as planning and strategy have been until now.

Diversity and connectivity are key to addressing today’s complex problems, standardization has led us to homogeneous structures made up of people who are too similar, incapable of adapting and learning, as its members bring less and less new knowledge to the organization, and more and more time is spent exploiting old certainties and less time exploring new opportunities.

We already have the tools, the new social technologies, as we have seen in a previous conversation, make it possible to coordinate human effort without sacrificing people’s creativity and initiative. So what we need now is to change our vision; change the way we think, see and understand the world. It won’t be easy. In fact, this is the most difficult challenge, because it is our mindsets that have brought us here. But that’s essentially what the leadership of the future is all about.

New Organizational Structures

The hierarchical organizations we have created in the last century place the emphasis on labor and capital as the basis of value creation processes. And by doing this, not only do they not respond to the current needs of companies – agility, innovation and collective intelligence management – but they have also created a model of employee participation that does not allow them to unleash their creativity. As if that were not enough, this model has generated a level of complexity in organizational structures that makes it practically impossible to respond adequately to the changes of the global and digitized market.

To face the new challenges, organizations must seek a new balance between hierarchy as a guarantor of predictability and control, and netarchy as an engine of innovation and growth. We therefore have to face up to the need for new organisational structures and the fact that the new management imperatives are not achievable only with the hierarchical, highly centralised and bureaucratic structures we have built up so far.

Redarchy makes possible new ways of coordinating our efforts, where people have the possibility to choose their framework of contribution and commit to what they are truly passionate about. It is a two-sided coin, of course, with more freedom to choose and greater commitment to fulfill.

The Need for a New Balance

In other words, we need to find a new balance between hierarchy as a guarantor of predictability and control and redarchy as an engine of purpose, innovation and growth. To do this, we are going to have to give our organizations a new social dimension, seeking the necessary new balance between the needs of shareholders for sustainable results and the needs of people to find meaning and purpose in what they do.

In the Age of Collaboration, an organization can only be truly competitive by connecting with the collective intelligence of all the people who make it up, making the most of the new ways of doing things and the new models of collaboration that the social web offers us. The challenge is that the use of social technologies is only possible within a culture of trust, which is key to generating productive interactions between people and between organizations. If the challenges we face are of such complexity that they exceed the capacity of our leaders, the response must necessarily be collective.

Dual Organizations

Organizational architecture is a means to an end, which is ultimately to be able to interact in the new context to learn, adapt, and stay competitive despite the instability and uncertainty of the environment. Hence, organizations in the future must show a bimodal capacity, integrating two operational levels in their structure, which allow them to combine operational results with greater operational resilience in the face of uncertainty and volatility in digital markets. By definition, the dual enterprise is capable of combining various organizational structures and cultures depending on its objectives:

• Stable structures: to ensure a foundation of sustainability, profitability and predictability of results. This means doing a planned job in a standard way and becoming more efficient every day. This is the part of the organizational structure that allows us to operate from a foundation of stability while maintaining production, growth, quality, profitability, etc.
• Dynamic structures: to explore new realities, generate new perspectives, and address new opportunities. This involves new behaviors, and innovating by doing things differently and exploring new emerging opportunities. This is the most dynamic and flexible part of the structure that allows us to explore new possibilities, innovate, address new markets, create new habits and new ways of doing things.

Organizational duality thus provides a promising new approach to continuous and discontinuous innovation within the same organization, by using hierarchy for the exploitation of existing resources and redarchy for the exploration of new emerging opportunities. Internally, companies need to facilitate small-scale innovation and experimentation in dynamic structures where individuals and small teams enjoy greater autonomy. They also need more stable structures for those functions that have to be centralised transversally and that have to do with scale and experience.

Dual organizations aspire to complement the hierarchical model that reflects the structure of delegation of authority in organizations and preserves responsibility, decision-making capacity and accountability, with the redarkic model necessary to give our organizations a social dimension that makes innovation possible and allows us to connect with collective intelligence.

One Organization, Two Structures

Redarchy meshes with hierarchy as an equal. It’s not a working group that reports to a certain level in the hierarchy. Rather, it is a new framework of contribution that is seamlessly connected and coordinated with the hierarchy in a number of ways, primarily through the people who populate both systems. This complementarity of stability and flexibility provides the organization with a greater ability to interact with a more complex and uncertain context and adapt to the new needs of digital customers. The important thing is that, as adaptive leaders, we are able to manage the duality of both architectures, they are different but complementary worlds:

1. The world of hierarchy is a vertical way of doing things, their way of communicating is cascading and their way of thinking is command-control. The strategy is fixed at the top, the power is distributed downwards. People compete for promotion, compensation correlates with position, tasks are assigned, and bosses monitor activity and evaluate performance. In this way, personal contribution frameworks are associated with specific positions in the organizational chart and with standardized jobs that greatly limit people’s initiative and creativity.

The fundamental objective of this hierarchical operating mode is to ensure operational results, scalability and maximize profits for shareholders, including senior executives. Its values are efficiency, reliability, scalability and predictability. This means that behaviour in this mode of operation is conservative, tends towards risk aversion and conformity with the status quo. It’s natural for people in this context not to feel involved or find purpose in what they do. Their focus is to maintain the daily demands of corporate activity, exploit old certainties and preserve the achievements of the past, so they have difficulty identifying new opportunities well in advance, formulating innovative initiatives with the necessary agility and, above all, putting them into practice with the speed they require.

2. The world of redarchy is a way of doing and communicating in a network, its way of thinking is community-collaboration-trust. In the redarchy, control is not hierarchical, but social. The redarchy thus establishes an alternative order in organizations. An order not necessarily based on the power and authority of the formal hierarchy, but on the relations of participation and flows of activity that naturally arise in collaborative networks. As with the social web, the values of redarchy give our organizations the strategic and operational agility they need to interact with a new reality that is more global and complex than at any previous stage. In this world, behaviors do not cascade from the top down, but throughout the network by the power of imitation and social copying.

Redarchy emerges as the natural structure of new networked organizations, facilitating innovation, and making it possible for creative people to choose those contributions that most motivate them and that best align with their own skills. In the networkarchy, tasks can be chosen and not imposed, and the decision-making capacity of each person is determined by their personal reputation and the added value they bring to the organization.

Just as hierarchy is an imposed order that establishes the relationships of delegation of authority between superiors and subordinates, redarchy is an emergent order that arises as a result of the relationships of participation and flows of activity generated in collaborative environments. Redarchy thus gives our organizations two important new dimensions: a network dimension that has to do with the set of nodes and links that facilitate relationships, and a social dimension, the community, that makes possible the development of a collective identity.

While a typical hierarchy doesn’t tend to change much from year to year, the redarchy is constantly and easily transformed. Because it does not include bureaucratic levels, order-and-control prohibitions, or bureaucratic processes, redarchy encourages individual contribution, creativity, and innovation that a hierarchy can never provide. As a new contribution framework involving a cross-cutting portion of employees from all levels and departments of the organization, the network frees information from silos and hierarchical levels, allowing it to flow much more freely and at greater speed.

It is precisely this participatory and dynamic nature of the networky that gives it its ability to respond to exceptionally complex challenges. The mere fact of collaborating and sharing on an equal footing generates interactions, proposals and innovative solutions, and allows the activity to be transferred, in a natural way, to the nodes where value is really being added to the organization. In other words, solutions do not descend prescriptively from above, cascading, but emerge from below, the result of collaborative relationships.

In dual organizations, the redarchy as a complementary structure to the hierarchy makes possible new frameworks of contribution for people, not necessarily linked to occupying positions of power and authority in the organizational chart, but to the credibility and added value of people. Redarchy, however, and this is very good news, is incompatible with the arbitrary and personalistic use of power, and with the use that many people have made of bureaucracy for their own benefit. These abuses destroy value, create unjust organizations, and demotivate people.

In short, it is a matter of creating a single organization with two complementary structures. The
Redarchy and hierarchy should be inseparable, with a constant flow of information and activity between them, an approach that works naturally as the redarchy dynamizers perform their daily work within the hierarchy. In the Kindle version of Redarchy: Beyond the Hierarchy you can see a particularly flexible transformation framework, laid out in three simple iterative stages that any organization can follow to move forward on the path to the Dual Organization.