Strategy #9. Loose Hierarchies Characterized by greater delegation –Information flows up...
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Transcript of Strategy #9. Loose Hierarchies Characterized by greater delegation –Information flows up...
Strategy #9
Loose Hierarchies
• Characterized by greater delegation– Information flows up– Executives make decisions that govern
subordinates– If you are in a hierarchical organization,
you implicitly agree to abide by your superiors’ decisions
– Rewards are based on pleasing superiors
Loose Hierarchy Examples
• Linux• Wikipedia• AES Corporation
Loose Hierarchy Lessons
Strengths• Minimal communication for coordinating
large-scale projects• Conflict of interest resolutionWeaknesses• Information overload as you go up• Narrow perspective • Decisions can be vetoed at any level• Lack of autonomy, motivation, and what
goes with them
Democracies
• Networked information sharing• Decisions are made by voting –
simple majority, consensus, other voting regimes
• You must abide by decisions made by the group you belong to
• Vote for you interests or your group’s interests
Democracy Examples
• WL Gore– Corporate Culture
• “Our founder, Bill Gore created a flat lattice organization. There are no chains of command nor pre-determined channels of communication. Instead, we communicate directly with each other and are accountable to fellow members of our multi-disciplined teams.”
– Guiding Principles• Fairness to each other and everyone with whom we come in
contact• Freedom to encourage, help, and allow other associates to
grow in knowledge, skill, and scope of responsibility• The ability to make one's own commitments and keep them• Consultation with other associates before undertaking
actions that could impact the reputation of the company
Democracy Examples
Mondragon Cooperative• "Nothing differentiates people as much as
their respective attitudes to the circumstances in which they live. Those who opt to make history and change the course of events themselves have an advantage over those who decide to wait passively for the results of the change".
• Father Don José María ArizmendiarrietaConceptual Creator of the Mondragon Cooperative System
• http://www.sfworlds.com/linkworld/mondragon.html
Democracy Lessons
Strengths• Individuals are insured participation• Group decisions force people to do
things for overall goodWeaknesses• High communication overhead to
insure knowledgeable decision making• Everyone’s opinions count equally
even when some are more qualified
Markets
• Networked communication• Decisions made via mutual
agreement between parties involved in an environment of competitive alternatives
• Incentives come from profit maximization
Market Examples
• eLancing• Guilds• Quasi Markets for ad hoc projects• Idea futures
Market Lessons
Strengths• Markets are efficient• Markets are flexible• Markets are motivatingWeaknesses• High communication overhead• For some situations, overall good may not
be achieved because agreement is not in a key party’s self interest
Trust
• Willingness to be vulnerable (Dynamic-RT)• Dependability – to have faith or confidence • Static versus dynamic understanding of
trust – a state of trusting in contrast to the process of developing of trust or evolving trust
Trust Model
Ability
Benevolence
Integrity
RTRsTrust
Trust Model
• Three trust components– Ability: a group of skills, competencies, and
characteristics.– Benevolence: the extent to which a trustee is
believed to want to do good to the trustor.– Integrity: the trustor’s perception that the
trustee adheres to a set of principles that the trustor finds acceptable.
• Risk taking dynamic (Risk taking in relationship)
Decision-making Structure Comparison
Decision Making
Structure
Communication Cost
Individualization and Synergy
Potential
Conflict Resolution
Autonomy, Motivation,
and Creativity
Centralized Hierarchy
Low Low High Low
Loose Hierarchy Medium Medium Medium Medium
Democracy High Medium Medium Medium
Market High High Low High
Problem – Efficient Decisions
• Loose Hierarchies – Managers force decisions on occasion
• Democracies – Voting for some decisions, election of managers for others
• Market – People participate only when there is mutual agreement, everyone follows the rules
Problem – Quality and Catastrophic Loss
• Loose Hierarchies – Managers control of people and results (e.g. via standards), but not actions directly
• Democracies – May employ standards, voting, elected managers
• Market – Reputation systems, insurance, performance bonds
Problem – Economies of Scale
• Loose Hierarchies – Managers may force people to take advantage of economies of scale
• Democracies – Voting and managers may force people to take advantage of economies of scale
• Market – Rules encourage buyers and sellers to take advantage of sconomies of scale
Problem – Knowledge Sharing
• Loose Hierarchies – Managers provide channels and incentives
• Democracies – Same as loose hierarchies. Incentives may be set by voting
• Market – Rules provide means for protecting, pricing, and selling knowledge