A question of organisation

New organisational models are constantly emerging. This year has given a boost to the hybrid virtual/local organisation. Think global, act local.

Organisations change all the time. Indeed, organisational change is so commonplace that change management has been a standard function of many organisations for decades. But this year may have seen greater and faster organisational change than other years, due to the global crisis that forced it. This change was enabled by technology and driven by circumstances that looked extraordinary at first sight, but quickly turned into the new normal.

Many organisations moved into the virtual space this year – or, at least, tried to. That is, they went online, not only with some kind of vague online presence, but with as many of their operations as possible. Being a virtual organisation quickly emerged as a huge advantage. There is, of course, a physical substrate for everything virtual. But in many cases, the physical infrastructure of our virtual world isn't much affected by the global health crisis.

The multi-step journey to virtual organisation

Becoming virtual is only the first step. In reality, there are many more steps to come. But the key feature of the virtual world is that it allows higher degrees of freedom. A lot of conventional restrictions simply no longer apply. This is, by all means, nothing new. The early prophets of the virtual world already saw this, both as an opportunity and a challenge. If space and time are virtualised, presence gets a new meaning.

Technology has enabled organisational change for centuries. Strict hierarchies as a dominant organisational principle were necessary when communication and travel were limited and time-consuming. With communication and travel evolving and becoming widespread, organisations could grow both in size and in complexity. Think less command and control, more predict and control. Leadership changed from military style to a more decentralised model. (But keep in mind that military organisations also heavily rely on quick decisions by the people on the front lines.)

Virtual globalisation

Today, organisations enjoy a newer known freedom of choice regarding their organisational structure. On the one hand, we find the modern classics, such as functional, divisional, or matrix structures. On the other hand, there are their younger siblings, like team-based, network, or modular structures. Communication technology is no longer a limiting factor when it comes to the choice of structure. But travel may just have seen its peak and could again turn into a permanent restraint for many organisations.

Thus, we may see both globalisation and localisation thrive at the same time:

  • a virtual globalisation, enabled by communication technology, and
  • a physical localisation, induced by travel restrictions and the unwillingness of workers to leave the safety of their home.

Your boss moves into the cloud and turns into a face on a screen, someone you rarely meet. Meanwhile, your local network of people gains in importance. This may lead to further organisational decentralisation and weaker ties between geographically distant units.

Decentralisation can also allow organisations to grow even further, beyond all borders, into truly global entities. They are global by technology and communication, but local by operations. The old phrase “Think global, act local” has its roots in town planning, which highly impacts its environment. Today's organisations resemble cities in many ways. Cities are self-organised and resilient. The pandemic is clearly a challenge, but cities have survived many of them. We shouldn't call time on the megacity.

Optimising the whole system

The agile movement has touted self-organisation for decades. But scaling agile practice has always been an issue. Partly it's because scaling a single team has its limits, and coordinating multiple teams comes with overhead. And partly, it's because big organisations often struggle with self-organisation for reasons of principle. As a rule of thumb, younger organisational structures, like team-based, network and modular, better align with agile principles and self-organisation than their classical counterparts.

But neither organisations nor organisational change are ends in itself, they are means to an end. The rise of purpose in the corporate world just reflects this truism. As Peter Drucker put it, the purpose of business is to create a customer. Neoliberalism defined the purpose of business as making money and creating shareholder value. While all of this is still true, it's no longer enough. Obviously, every business needs customers, profits and thus shareholder value to survive.

Increasingly, businesses won't have customers and profits unless they make the world a better place. To an extent, this again is nothing new. The world is better off with my local pizza shop than without it. But the days of local optimisation to the detriment of the environment – what economists call externalities – are over. My local pizza shop needs to optimise the whole system in which it operates, taking the environment into account. This is a challenge that requires organisational change.

A hybrid virtual/local organisation

Someone has to heat the oven and bake the pizza. That is why my pizza shop cannot turn into a virtual organisation. But if we take a closer look, the increasingly global pizza franchises did just that. They outsourced the physical process of pizza production and distribution to their franchises and specialised themselves in branding, marketing and supply systems. What they now need to do is reduce the environmental footprint of the whole system. Many companies have at least started this process.

This may be easier for global, virtual pizza franchises than single local shops. Global companies can leverage their purchasing power to strike better deals when it comes to energy supply, or ingredients. Let's define better deals as better for the environment and for the pizza customer. Now, we shouldn't overstretch the pizza franchise example here. It just serves as an illustration for a hybrid virtual/local organisational structure.

2020 may pave the way for organisations with both strong digital (virtual, possibly global) presence and physical (local) operations. In theory, this combination can work with traditional as well as more recent organisational structures. But I suspect it will give another boost to self-organisation and agile principles, teams, networks and modular organisations.

There's the old principle of subsidiarity, which means that issues should be solved on the lowest possible level, or on the most appropriate level, which is often lower than many organisations think. But subsidiarity also leaves room for global (digital, virtual) solutions. Some issues need to be solved globally, and that's last but not least a question of organisation.

Photo by Simon Goetz on Unsplash