The Adaptive Organization

Two Styles of Leadership

The crisis of control in the early 1900s gave rise to hierarchical organizations. A crisis of complexity today is similarly giving birth to new organizational thinking. It is becoming clear that different leadership styles are needed depending on the nature of change being experienced by an organization.

In a broad sense there are two styles of leadership: operational and adaptive. Operational leadership — the historical command-and-control model — relies on positional authority. Adaptive leadership — the emerging model — mobilizes distributed intelligence within the organization.

In Surfing the Edge of Chaos: The Laws of Nature and the New Laws of Business (2000), Richard T. Pascale, Mark Millemann and Linda Gioja described the difference.

With operational leadership, they said, “A solution is devised from above and rolled out through the ranks. If a company is in crisis; if downsizing, restructuring, or reducing costs is called for; if sharpened execution is the key to success, then operational leadership is the best bet.” Operational leadership is far less effective in unstable and unpredictable environments, and it may ultimately threaten an organization’s survival. Trying to preserve stability, rather than adapting to a new reality can be counterproductive in both natural and human systems. This allows threats to intensify.

Adaptive leadership, they say, is more effective when an organization has to abandon the status quo, innovate and make revolutionary change. “If adaptive intention is required, the social system must be disturbed in a profound and prolonged fashion… Adaptive leaders don’t move on an issue too quickly or reach for a quick fix. Rather (taking actions quite the opposite of social engineering), they emphasize mobilizing followers deep within the ranks to help find the way forward.”

The Failure of Re-Engineering

Operational leadership was already unable to cope with the challenges organizations faced at the end of the twentieth century. Companies were increasingly preoccupied with change, spending more than $50 billion annually for ‘change consulting’ in the year 2000. However, more than 70 percent of these change projects failed.

Richard Pascale, a consultant and associate fellow at Oxford University, attributes these failures to reliance on the old mechanistic organizational model, where intelligence is centralized in the leadership, implementation plans assume predictability and control, and strategic intentions are defined at the top and communicated down to the rank and file.

Facing fierce competition in the 1990s, many companies seized on re-engineering as the answer. Thomas Davenport, in “The Fad That Forgot People,” an article published in Fast Company magazine in November 1995, called this “the last gasp of Industrial Age management.”

The practice didn’t start out as a “code word for mindless bloodshed,” he said. But it quickly became ugly. “So ugly that… to most businesspeople in the United States, reengineering has become a word that stands for restructuring, layoffs, and too-often failed change programs… The rock that reengineering has foundered on is simple: people. Reengineering treated the people inside companies as if they were just so many bits and bytes, interchangable parts to be reengineered.” Reengineering spread fear and anxiety, and the outcomes were dismal.

Davenport used results reported in the 1994 CSC Index State of Reengineering Report to illustrate.

“50% of the companies that participated in the study reported that the most difficult part of reengineering is dealing with fear and anxiety in their organizations; 73% of the companies said that they were using reengineering to eliminate, on average, 21% of the jobs; and, of 99 completed reengineering initiatives, 67% were judged as producing mediocre, marginal, or failed results.”

Self-Organization

Living organisms, insect colonies, ecosystems, social systems, economies, cultures, and political systems are complex adaptive systems. In Complexity: A Guided Tour (2009), Melanie Mitchell describes all of these as systems where “large networks of components with no central control and simple rules of operation give rise to complex collective behavior, sophisticated information processing, and adaptation via learning or evolution.”

Given the prevalence of the industrial model, it feels counter-intuitive that an organization can be coherent in the absence of leadership imposed from above. However, this behavior can be observed everywhere in nature. Order emerges spontaneously from interactions between the participants in a system.

Social insect colonies — including bees, wasps, ants and termites — demonstrate complex behaviors that arise when individuals follow a simple set of rules governing the interactions between them, and with their environment. When an ant discovers a new food source, it lays down a chemical trail of pheromones others can follow. When other ants feed in the same location, they reinforce the trail. As the food supply dwindles, there are fewer visitors and the trail fades. Chemical signals synchronize the activity of the colony as a whole. No single ant is in charge.

This kind of collective behavior is called swarming in insects; schooling in fish; and flocking in birds. Starlings flock in the fall and winter months, performing an aerial ballet called a murmuration. Individual birds adjust their speed and direction based on the movements of their nearest seven neighbors. This simple rule synchronizes the behavior of the flock, as thousands of birds soar, dive and turn in formation. There is no avian leader.

A New Organizational Model

With a growing understanding of the behavior of complex adaptive systems in nature, we now have a much better appreciation of the dynamics of human systems and the opportunity to adopt new ways of working. Surfing the Edge of Chaos reports that a number of companies have already begun to implement these models.

CEMEX, a Mexican cement company, uses self-organization to manage its fleet. Trucks are dispatched every morning with no defined destination. They follow two simple rules as orders come in: deliver as much cement as possible to as many customers as possible and stay as far away as possible from other trucks. The self-organizing model generates hundreds of millions of dollars of new revenue every year.

In 1998, British Telecom implemented a similar system to manage its service fleet, saving £250 million in the first year of operation. The U.S. Army used the ant pheromone model to direct drone activities in Bosnia and Serbia, increasing surveillance coverage and rapidly replacing drones that were damaged in action.

Self-organization makes organizations much more agile and adaptive at the edge of chaos, where the hierarchical, command-and-control model breaks down. Faced with the complexities of contemporary warfare, the U.S. Army has embraced it as an alternative to the legacy model of command-and-control. Quoted in Surfing the Edge of Chaos, General Gordon R. Sullivan described the new reality.

“The paradox of war in the Information Age is one of managing massive amounts of information and resisting the temptation to over-control it. The competitive advantage is nullified when you try to run decisions up and down the chain of command… Once the commander’s intent is understood, decisions must be devolved to the lowest possible level to allow those frontline soldiers to exploit the opportunities that develop.”

Self-organization allows organizations to respond dynamically to challenges in a chaotic environment. Attempting to impose countervailing controls, Mark Michaels says in The Quest for Fitness: A Rational Exploration into the New Science of Organization (2000), isolates organizations from reality, creating a disconnect that “produces periodic catastrophes.” Self-organization is effective only when it is able to function freely, and that requires adaptive leadership.