The versatile organisation: Achieving centuries of sustainable growth

~ Pergamon European Management Journal VoI. 15, No. 5, pp. 509-522, 1997

© 1997 Elsevier Science Ltd All rights reserved. Printed in Great Britain

PII: S0263-2 3 73(9 7)00031-5 0263-2373/97 $i7.00 + 0.00

The Versatile Organisation: Achieving Centuries of Sustainable Growth RODNEY TURNER, Erasmus Univerity, Rotterdam

The image of an organisation structure as a pyramid has dominated management thinking for the past century, providing an image of stability in troubled times. The resulting functional, hierarchical, line management structures are used both as the structure for governance of the organisation and as the operational model, although there is no inherent reason why both should be the same. They are also inflexible and unresponsive to change. This paper proposes that this view, rather than being the natural way to design organisations, is a nineteenth- century invention, reinforced during the twentieth century. By analysing four, old organisations, the paper proposes a different view of organisations, as a three-dimensional model of the operational process, which itself is not necessarily aligned with the structure for governance, and with different models for different products and services to different customers. It also proposes that an organisation should be viewed, from a clear philosophical perspective, as a democratic community, composed of a federation of independent units, bound by a common set of values, cooperating because it gives them competitive advantage, but operating the principle of subsidiarity. Finally, by considering the link between organisation and strategy, the paper proposes a model for the versatile organisation to provide competitive advantage. © Elsevier Science Ltd

Introduction

There is an image that has determined management thinking for 150 years: armies of Egyptian slaves building pyramids. I heard someone describe his manager as, 'The greatest slave driver since the Egyptians'. However,

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European Management JournalVo115 No 5 October 1997 509

THE VERSATILE ORGANISATION: ACHIEVING CENTURIES OF SUSTAINABLE GROWTH

the image is a fabrication; there is little archaeological evidence for it, and modem archaeologists have devised new explanations for how the pyramids were built. The image says more about Victorian attitudes to management than about the Egyptians. In spite of this, the image has had an enduring influence on our thinking. It leads to bureaucratic, functional, hierarchical, line- management organisation structures, to the ideas of Taylor and work study, and ultimately to totalitarian government.

We cannot blame the Victorians. Theirs was the age immediately after the industrial revolution. Steam driven trains and ships were extending the scope of businesses to the whole country and the whole world, literally. WH Smith, the owner of Greenlands where Henley Management College is now based, by winning the franchise to sell newspapers on railway stations, won a distribution mechanism and outlet in one step. The only way the Victorians could perhaps cope with organisations operating over such vast distances was by making them rigidly structured. They were also developing great machines to harness the forces of nature:

ol ° steam engines to harness steam; o~o dams to harness water; o~° and organisations to harness people.

If engineers could build machines to convert nature's energy into useful work, then managers could build machines, called organisation structures, to convert the energy of people into useful work. That then became the only paradigm for management right up to the 1960s or 1970s. George Orwell's book, 1984, is sometimes thought to be about totalitarian government, but in reality it is about working life in Britain in 1948 (Orwell, 1949).

It is 27 years since a paper in the Harvard Business Review suggested the adoption of Management by Projects,

(Colvin, 1996). This idea has been developed by many authors, (Gareis, 1990; Turner, 1993). Turner and Peymai (1996) suggested the adoption of versatile organisations composed of process or project teams delivering routine or non-routine products to customers (see Figure 1). Peters (1994) and Hastings (1993) have also championed the network organisation. However, the functional organisation structure continues to endure.

There has instead been widespread adoption of outsourcing, with mixed results, (Smith, 1996). The difference between outsourcing and the versatile, network organisation is that in the former the parent organisation remains a functional organisation structure, but identifies elements of its operation that can be more effectively contracted out, sometimes to such an extent that you wonder what the original organisation is still doing. Figure 2 shows the value chain for a major oil company. In the extreme, the company is a bank providing finance for the construction of oil extraction plant and refineries, a marketing company developing and selling products, and a management company managing the value chain. In the versatile organisation, the process and project units all remain within the one umbrella organisation. They are autonomous or quasi- autonomous units, linked by informal contracts, working together to a common purpose; a team of teams. Figure 3 shows the value chain for a famous clothing company, in which the units are much more closely identified with the parent organisation, and retain some of its values. Manufacturing is done by a federation of cottage industries, and sales by franchisees.

Although the adoption of management by projects has been slow, it is historically the way organisations used to work. There are some organisations originating in pre- Victorian times which still operate in this way, very successfully. In this paper, I describe principles derived from observing four such organisations, one 2000 years old, one 800 years old, one 200 years old, (although we think of it as younger), and one 150 years old. By

CUSTOMERS CUSTOMERS

Processes for Routine Work

Projects for Novel Work

Functional j Support

Control C o m m u n i c a t i o n

C o i n m i t t ee fo r

S t r a t e g i c D i r e c t i o n

Figure 1 The Versatile Organisation

5 I0 European ManagementJournalVo115 No 5 October 1997


I / I

V Sell

Petrol

+..~j

,)

Figure 2 Value Chain for a M a j o r 011 Company

adopting the versatile approach to organisation it is truly possible to achieve centuries of sustainable growth.

I start by recapping the traditional concept of 'organisation structure', and then introduce the four case studies and describe common features. (When I suggested some of these to the people I interviewed they did not always agree with me.) I then consider:

organisation organisation organisation organisation organisation organisation organisation organisation

is three-dimensional; is process; is community; derives from philosophy; and democracy; and strategy; is versatile; is competitive advantage.

I end by summarising common principles derived from these case studies.

Organisation is Structure

The overarching paradigm of management since Victorian times has been of organisation as structure. We talk of organisation structures; we use the words organisation and structure as synonymous. However, there is no reason for this to be so. In a book entitled Church, State, Morality and Law, Harmon (1992) asks whether the Church of Rome is Institution or Communion, and decides the latter saying: 'institutions are subordinate to people, structures are subordinate to life.' Oh were it sot

The main model for organisation structure is of course the pyramid, or some variant of this. This is what business schools teach, the diagrams in Figure 4 being drawn from a course at Henley Management College (Camall et al., 1992). It is all fiat lines and boxes; not even a pyramid, just two dimensional triangles. I want to adopt a different model of structure, a steamship, Figure

--.,+¢- Key: ~ Undertaken by parent organisatio,, r - I Cont;acled out

F i g u r e 8 Value Chain for a Clothing Company

European Management Journal Vo115 No 5 October 1997 5 1 1


Organisational forms

Functional

[ ~ I 5'!a rket

By product I I Market

Related Product

Conglomerate / or pure M-form

International ~ division I

International I Division

Figure 4 Organisational 'Structures' from Managing Strategic Change

Figure 5 An Organisation Structure as a Ship

5 I2 European Management Journal Vol 15 No 5 October 1997


5. A pyramid cannot go anywhere or do anything; its purpose is to store dead bodies, or to stand as a folly on a gigantic scale. A steamship can cross the ocean, and is one of the great machines invented by the Victorians to harness the power of nature. In Figure 5, the plebeians are all down in the hull; in the words of the song:

While the poor were down below in the darkness of the hold, the rich upstairs were playing cards for gold.

Above them are the junior management, and then the middle management and then the senior management. The captain is of course in his or her bridge, with the management team. That may be my father; for two years he commanded HMNZS Royalist, flagship of the Royal New Zealand Navy, (the penultimate commander before it was scrapped for so much rusty iron).

Another feature of organisation structures is 'over-the- wall' working. The plebeians in the hull, and the junior, middle and senior management are all in their compartments, communicating over the walls between them. The organisation is structured so that they do not need to work together, in communion, and sometimes deliberately to stop them doing so, with all interdepartmental communication being required to go via the bridge. The people in the organisation know precisely what they have to do, and only need to pass messages to the next person in the chain to say when it has been done. George Or-well (1949) portrayed it in I984, with papers passed along pneumatic tubes. Now the tubes are just replaced by electronic wires. These two

images also illustrate a view of a colleague of mine, (Whitfield, 1992-1996), that IT has yet to lead to an increase in productivity; it takes me, with my PC, and Winston Smith the same length of time to perform the same tasks.

The problem with organisation structures is they are inflexible. Ships rust, sink, or cannot adapt to the modem world, and so are scrapped. I have derived a rule of thumb that an organisation structure lasts about 75 years before it becomes outmoded, and falls apart. It is the versatile project or process based organisation which can provide sustainable development for centuries.

The Case Studies

So is there an alternative to the pyramidal, organisation structure? I have identified several organisations which take a more federal approach to their organisation, making them more able to respond to changing circumstance. Most pre-date the Victorian era; indeed the oldest is 2000 years old. Table 1 lists the four organisations I have investigated to date, and the people interviewed. Table 2 lists other organisations I intend to investigate as part of a wider survey. The four organisations investigated to date are:-

The Church of Rome: founded 2000 years ago by Christ, with St Peter as its first leader. The main unit is the diocese with a bishop at its head. The central coordinating unit is the Vatican with the Pope as its

Table 1 The Case StudyOrganisat ions

Case Study Organisation Interviewees Position

Church of Rome

Oxford University

Commonwealth of Nations (and British Empire)

Red Cross

Mr C. Wookey Mr P.M. Victory

Mr M.J. Sibley Mr R.G. Smethurst Mr Q. Thompson

Dr S.K. Rao Mr S. Mole

Ms Linda Stoddart Ms Henna Hanson

Assistant for Public Affairs Assistant for Public Affairs

Senior Assistant Registrar Provost, Worcester College Partner, Coopers & Lybrand

Strategic Planning and Evaluation Office of the Secretary General

Head of Information Systems, IFRC&RC IME, Denmark, ex IFRC&RC

:i

Table 2 Other Potential Case Studies

Case Study Organisation Comment

Church of England Cambridge University Holy Roman Empire

Soviet Empire

Governance of Britain Governance of USA Governance of Australia Band Aid Concerts

• To compare to Church of Rome • To compare to Oxford University • To compare to British Empire • lasted 1000 years, but its collapse took75 years • To compare to British Empire • both lasted 75years • To compare to each other

• Very short term objectives

European Management Journal Vo415 No 5 October 1997 ,513


leader. There are also several other types of unit. The dioceses are all independent and sovereign. Each bishop is in communion with the Pope, binding his diocese to the church. The Pope does not govern the church. He gives guidance on morals and faith, through encyclicals. Each bishop and their diocese is free to ignore the encyclical, but the ultimate price is to be excommunicated.

Oxford University: founded about 800 years ago. People have been giving lectures in Oxford for over 1000 years, but the University was not formally founded until the 12th century. It was a private institution until the 1920s when it started receiving government funding. Until the 20th century it was primarily a teaching university for undergraduates. It awarded degrees, which were licenses to teach. A BA signified the holder had the knowledge to teach, having studied for three years and passed exams; an MA signified the holder had the competence to teach, having served a further four year apprenticeship. (This simple concept was lost in England and Wales with the foundation of the red brick universities, which has meant the UK's professional organisations have had to invent other ways of measuring the period of professional apprenticeship and competence. The Scottish and American systems have done more to retain it.) Until the end of the 19th century, the main teaching unit in Oxford was the college. The University was the examining and degree awarding body. The colleges are independent, sovereign organisations, with their own charters, and which abide by the University's rules because it gives them competitive advantage. With the 20th century came the growth of 'big science', postgraduate teaching and research, which has created a much greater role for university faculties, and tensions which the University has not yet resolved. It is about 75 years since the University started to receive government funding, which enabled the creation of 'big science'. The tensions that created may threaten the University's position for decades until they are resolved.

The Commonwealth of Nations: had its genesis immediately after the American War of Independence, when British politicians concerned with imperial policy recognised that there was a need to take account of the desire for self-govemment within the Empire. It was originally founded to create a looser relationship between Britain and Canada, to avoid Canada following the United States into full independence. The modern commonwealth is a loose federation of independent nations, with the aims of promoting democracy and good governance, economic and technical development of the poorer nations, and trade. The Commonwealth Secretariat coordinates its activities.

The Red Cross: founded 150 years ago, has five constituent elements (see Figure 6):

the International Committee of the Red Cross, ICRC, a Swiss organisation coordinating the Geneva conventions and providing relief in war zones;

International Commiltec

of the Red Cross

Nalional Associalion

o f t he Red Cross or Rcd Crcsccnt

Quadrennial Congress

Signator3 Governments

to the Geneva

Convention

Inlemational Fedcration

of thc Rcd Cross and Red Crescent

Figure 6 Organisation of the Red Cress

°I° the signatory governments to the Geneva conventions;

oI, the International Federation of the Red Cross and Red Crescent (IFRC&RC), a UN organisation coordinating the activities of the national associations, and providing relief in areas of natural disaster, but only at the invitation of the national association;

o,*o National Associations of the Red Cross or the Red Crescent;

o~o the quadrennial congress, which coordinates the activities. The congress can be held anywhere, but the most recent was held recently in Geneva. The congress also appoints sub-committees to appoint the Chief Executives of the ICRC and IFRC&RC.

Common Features of the Four Case Studies

The four case studies have several common features, including:

o:o a coordinating conference; o,*o a federal structure; oIo a centre which coordinates rather than governs; oIo a Chief Executive appointed by a democratically

elected committee.

(i) A Coordinating Conference

For the Red Cross the quadrennial congress is viewed as the centre of the organisation. For the Commonwealth, the biennial Commonwealth Heads of Government Meeting (CHoGM) is viewed as the pre-eminent body that sets its goals and future direction. The Commonwealth Secretariat, which acts as the main intergovemmental machinery, is drawn in the organisational model as the other end of a central axis.

5 14 European Management Journal Vol 15 No 5 October 1997


For Oxford University, Congregation, the parliament of all resident MAs, is seen as binding the University together. For the Church of Rome, the Vatican Councils and Catechisms are held less regularly to provide focus and develop strategy.

(ii) A Federal Structure

The four organisations consist of autonomous or quasi- autonomous units, held together by common values, identity and purpose. Handy (1982) describes a team as: 'A group of people with common identity working together with a common purpose', which can be said of these organisations. They maintain a common identity because it gives them competitive advantage and they work together with a common aim. The units do not have to remain part of the larger organisation, but they do because it suits them. In the Church of Rome, not only is each diocese independent, each priest under English law is self employed. In Oxford, the faculties are not independent, because they have developed as part of the University. However, often they behave as if they are independent, and in my view it would relieve some of the current tensions in the University if they were equal in number and size to the Colleges and were given more formal independence like the colleges.

(iii) A Centre Which Coordinates rather than Governs

In all four cases the centre guides and coordinates and definitely does not govern. The centre sets principles, and adherence to those principles is part of the price of entry to the communion or federation. The Pope gives guidance on morals and faith, and anyone not adhering is excommunicated. The Commonwealth Secretariat (1989) is seen 'as being at the service of all Commonwealth governments and a visible symbol of the cooperation which animates the Commonwealth.'

The Harare CHoGM (1991) most recently laid down the principles of cooperation within the Commonwealth. The ICRC owns the Geneva conventions, and thus sets the principles which any govemment must ratify to enter the club. The IFRC&RC sets principles for national associations, and owns the copyright on the symbols of the Red Cross and Red Crescent, and so controls entry to the club. In Oxford, the Colleges must admit only candidates which meet the University's entry requirements, and present candidates for graduation which have met the examination standards of the University. The centre does govern the faculties, which is one thing creating the present tensions.

(iv) A Chief Executive Appointed by a Democratically Elected Committee

The Pope is appointed by the cardinals, who are themselves appointed by a process of consensus. The

Commonwealth Secretary General is appointed by the CHoGM. (There are no votes in the Commonwealth. If there is a need they have failed in their aims.) The heads of government should be democratically elected by their people and this is increasingly seen as a sine qua non of membership. The heads of the ICRC and IFRC&RC are appointed by sub-committees of the congress. The Vice- Chancellor of Oxford University is nominated by a committee appointed by Congregation, and the nomination is then approved by a vote of Congregation - - in principle - - much of the voting never happens or attracts only about 5% of those entitled to vote. The democratic process acts as a check against tyranny. The Chancellor is elected by Convocation, consisting of all the University's MAs.

In three of these cases, democracy operates by the masses electing people to represent them, and those representatives, (through one or more steps), electing delegates to a central conference. Only Oxford adopts referendum democracy, that is the masses making a single vote. By luck of historical need, the United States of America elects its president by representative democracy, although it tends to be treated as a referendum.

Organisation is Three-Dimensional

A pyramid should, by definition, be three dimensional, but most organisation structures are drawn as flat, featureless triangles (see Figure 4). Two of the case studies in particular have multi-dimensional organisations.

(i) Oxfo rd University

Thomas and Matterson (1996), in the conclusion of their recent report about Oxford University, drew a 'structure' for governance which started as a cone, but in their report appeared as a circle. There are three interesting features of this model:

• 5, a cone represents the cornucopia of plenty, a better model than a pyramid;

olo no direction is 'up' or ' d o w n ' - - it represents relationships, not reporting hierarchies;

°,'° the two-dimensional model they drew is the view along the axis, not the side view.

I had tried to draw a model of the University, starting with the cross model of the Red Cross (see Figure 7). This did not work because it was not possible to draw the links between all the customers, undergraduate students, postgraduate students and research sponsors, the main service providers, colleges and faculties, and the two elements of the University, degree awarding body and research institution, in that one plane.

I redrew the organisation in three dimensions, Figure 8, and independently reproduced Thomas and Matterson's

European Management Journal Vol 15 No 5 October 1997 5 15


Colleges

Universily t'lS a

degree a~varding body

Congregation. Committees

and Umversitv

Offices

Unlversilv ,3S a

Research Instilution

Facultics

Figure 7 Two-dimensional Organisational Model for Oxford University

(1996) cone. At one end are the University's six main customer groupings, and the two main service providers, colleges, faculties. (The figure also shows a third service provider, libraries and museums.) Both main service providers serve all six customers, but the colleges mainly serve arts undergraduates, and faculties big science

research (see Table 3). Between the customers and service providers comes Congregation and Convocation. These are meant to represent the customers' interests, but for historical reasons mainly represent undergraduates. Convocation is all MAs and Congregation all MAs in residence. Almost all MAs are former undergraduates and hence these bodies represent undergraduates. Fellows of Colleges who have a higher degree of the University can be made an MA by special resolution, and those who do not are given MA status for the duration of their fellowship. The same does not apply to researchers in faculties, creating an imbalance between the power of faculties and colleges. Supporting the service providers is the university offices, including the degree awarding body. There then come the main organs of governance, the General Board of Faculties, elected by the faculties, Hebdominal Council, elected by Congregation, and various sub-committees of these. The Vice-Chancellor chairs Hebdominal Council, creating an interesting axis in the University between the Chancellor elected by convocation, and hence representing the customers, and the Vice-Chancellor, elected by Congregation, the professional staff effectively, but a distorted set of them. Mr Smethurst said in his interview that people in Oxford prefer to draw the organisation as a sphere, with the Hebdominal Council at the centre and Congregation as the skin holding it together, but also creating the link with the external customers. Perhaps this gives a 'cloistered' view of the organisation.

Elects

A p p ~ r o v e s

Appoints

Representatives

Nominates

University as Degree Awarding

Bodv J

as Research Institution,

Elects

Colleges

Libraries Museums

etc

Faculties

and Convocation

Figure 8 A Three-dimensional Organisational Model for Oxford University

5 16 European Management Journal Vol 15 No 50cto ber 1997


Table 3 How Oxford University's Six Customers are Servi©ed by the Two Service Providers

Customer Servicing by Servicing by Represented by Colleges Faculties Congregation

Undergraduates --Arts High Undergraduates-- Big Science Shared Postgraduates-- Arts High Postgraduates-- Big Science Low Research-- Arts Medium Research-- Big Science Nil

Low Yes Shared Yes Low Weak High Weak Medium No VeryHigh No

(ii) The Church of Rome

The organisation of the Church of Rome is multi- dimensional, but here the dimensions represent different functions of the Church. Dulles, (Hannon, 1992), said the church is:

o:o institution: a society with a constitution, a set of rules, a governing body and members who accept the constitution and rules;

o~o communion: an inner communion of spiritual life, and an external communion of professing the faith;

o~o sacrament: a sign to the world and an instrument of what it preaches;

o~o herald: a preacher of the gospel; o;o servant: ministering to the world in its search for

truth and goodness.

Dulles says the models are complementary ways of looking at the church. The last four can be equally valuable, but one thing is for certain: the model of the Church as institution is the least important. Yet this is the way most organisations look at themselves, as an institution with a constitution, and rules, and people in various roles and positions. The other four models all represent different functions of the church, and they may lead to different views about the relationships of people in the Church. The model of the organisation can be dependent upon the function that we are analysing at the moment. This leads to the conclusion that organisation is process and relationships.

(iii) The Structure is not the only Model

Both these examples show that as soon as we see the organisation as multi-dimensional, the structure of governance is not the only model for an organisation. It is a useful model to represent how the organisation communicates with itself to govern (control) its operations. However, we can adopt different models to represent its operations, and as we saw with both examples it can have more than one such model of operations for different customers and services. These operational models ought to represent the process, not the structure.

Organisation is Process

Organisation structures show people in their positions.

Yet products are produced through processes, information is held in relationships. Mr Sibley of Oxford University said:

When I explain the structure of the University to people, I find it easier to explain what the different elements do. The organisation is a collection of blobs linked by crooked lines. Relationships are important.

When considering the multi-dimensional nature of organisations above, we had a different view of the organisation of the Church depending on the function we were considering, and the relationship between the colleges and the faculties in the University differed depending on which of the six customers were being serviced.

Hampden-Turner (1995) has said that knowledge is held through relationships, not in individuals. Building and developing relationships increases the richness of the organisation. Peymai (1993) describes how he helped a medium-sized construction company obtain accredita- tion under BS5750. They first wrote the company's procedures to describe what the various departments (functions) did. Quality fell. They rewrote the procedures to describe how they processed a contract from receipt of order to delivery to the customer. Not only did that create a customer focus, (which is what quality is meant to be about), it also meant that consecutive departments in the value chain had to work together to ensure the product was properly passed between them. They could not just pass it through a hole in the wall, or pass it down a wire.

The consequence of viewing organisation as process is that we should draw a model of an organisation as a network, with the nodes representing the functional elements, and the links representing their relationships, the passing of knowledge, service or product. This breaks away from the rigid matrix organisation, another 'structure' used as a model for project organisations, to an organisation as a network of relationships. The message from the four case studies is that the network organisation should be based on the principle of subsidiarity and on autonomy for the functional elements. The principle of subsidiarity would suggest the delegation of decision taking, where possible, to the elements. This is matter of faith in the Church, where decisions about the parish are taken at the parish level, about the diocese are taken at that level, and about the

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European Management JournalVo115 No 5 October 1997 .517


Church are taken by consensus and by the Pope. The elements should be given autonomy where possible, with profit and loss responsibility for their function. This o5° also enables versatility, because new cells can be created, and old ones disbanded as customer requirements change. The message from Oxford University and the Church is that the network or model of the organisation will be different depending on the differing product or service of the organisation being analysed. °5.

Because the principle of subsidiarity and autonomy has worked so well for the Colleges in Oxford over 700 years, it should be repeated for the faculties. They should either be made independent institutions, or agencies of the University. To maintain the balance of power in the University, the faculties should be of similar size and number as the colleges.

Organisation is Community

Because subsidiarity and autonomy are matters of faith in the Church, it is a federation of sovereign, independent dioceses. What binds them to the umbrella organisation is the communion. The bishops are in communion with the Pope, with the body of the Church, with the body of Christ. The organisation as community was one of the dimensions proposed by Dulles, (in Hannon, 1992), and pervades all four case studies. Although composed of independent units, the units are bound to the parent body through shared values, identity and purpose. The sense of community is missing from many modem organisations, especially in these times of corporate anorexia, euphemistically called 'downsizing'.

In the Church, the balance between individual and organisation or communion is significant. The individual has to sacrifice some rights to be part of the community. The community has 'rights', some of which are in conflict with individual rights, so out of duty to the organisation individuals sacrifice some rights. The body of the Church represents the body of Christ, and so the individual's relationship with Christ is through the communion. This is very different to Protestant churches which are about an individual relationship with Christ. Symons (I994) traces the changing balance between the individual and the organisation throughout European history:

o,'o In ancient Greece, there was a balance between individual and organisation or society, with the recognition that both have rights, and to achieve the optimum balance it was recognised that individuals had to forego some of their fights.

*,*o In the Dark Ages, the feudal system required total sacrifice to the organisation. There were no individual rights, even for the king, who had strict duties to perform. The king's failure to perform those duties is the basis for many of Shakespeare's tragedies.

°5o In the Renaissance the individual became paramount,

and hence the birth of Protestantism. Life was about individual achievement and ambition. In Victorian times there was a switch back to the prominence of the organisation. Individuals had to sacrifice themselves to the organisation. This is of course the basis of totalitarian government and the pyramidal organisation structure. In corporate anorexia the individual counts for nothing. Now, in society in general we have returned to the primacy of the individual. Personal ambition created the greed of the 1980s. However, perhaps it creates a tension in corporate life; organisations are based on the Victorian idea of primacy of the organisation, whereas the people in the organisation are driven by personal ambition. That may be acceptable for the rich playing cards for gold on the upper decks, but difficult for the poor in the hold.

Within the Church of Rome they are quite clear that the community is based on the ancient Greek ideal of a balance between individual and society. That makes the Church appeal in a wide range of cultures because different cultures can strike a different balance to suit their different histories. However, as we can see, the failure to appreciate this dynamic probably creates tensions for many modem organisations.

Organisation Derives from Philosophy

The organisation of the Church, as we have seen, is overtly based on the ancient Greek philosophy of Socrates, Plato and Aristotle, and in two ways in particular:

• 5 ° the Church is governed by philosophers, steeped in the Platonic tradition;

• 5 ° through the balance of individual and society as discussed above.

Mr Smethurst said Oxford University was probably also governed according to Platonic traditions, but not overtly so. The chief executive, (Vice-Chancellor), is a philosopher-governor, elected by philosophers. The Commonwealth has considered its philosophical basis. The Harare communiqu6 of 199I has most recently dealt with this. The tradition of consensus in the Common- wealth requires a genuine search for an understanding of each others views, and attempts to find what is good for the group as a whole. This prevents the formation of factions. For instance the Commonwealth's Islamic countries did not adopt a partisan approach on the issue of Cyprus, the Western countries did not support white minority rule in South Africa, and African countries have not sided with Nigeria most recently.

Most managers probably do not think about the philosophical basis of their organisations, which will create considerable tension. Soloman and Hanson (I985) say about ethics, in a statement which could also apply to philosophy:

5 I8 European Management Journal Vo115 No 5 October 1997


No competent executive would think of taking the company to the negotiating table without a clear sense of objectives, limits and tactics. And yet some of the same executives lead their companies into the forum of public opinion with nothing more than a grab bag of ethical platitudes.

We saw above the tension between modem individualism and the primacy of the organisation assumed in pyramidal structures. Symons (1994) indicates the need to tailor training according to the philosophical basis of the organisation. He says outdoor management training, which has been very popular for about 15 years, is based on the Platonic tradition, and questions whether it is appropriate to send individualistic, ambitious managers, from Victorian organisations, on a course which preaches a balance between individual and organisation. It only will be if both manager and organisation are willing to change their style. Henley Management College has a similar tension. The courses are based on the Platonic style of learning through case study and exercise. Perhaps we inherited that from our first Principal, a New Zealand Rhodes scholar. The management is more based on central control, the primacy of the organisation, and the classroom teaching of the sophists.

Organisation and Democracy

This leads to the consideration of democracy within organisations. Most organisations are undemocratic; indeed totalitarian. Managers decide, and instruct their staff. Often they do not manage through consensus, just through fear. All four case study organisations are based on democratic principles. It is perhaps stunning that we live in a democratic society, and yet work for undemocratic organisations. Shareholders vote at the AGM, but they do not work for the organisation. Where workers do hold shares, they are so outweighed by the voting power of institutional shareholders they can have no influence. The cellular division, with subsidiarity and autonomy, suggested above, together with empowerment, can enable individuals to have control over their working lives, while still meeting the aims of the overall organisation.

Oxford University: Thomas and Matterson (1996) dealt quite extensively with the issue of democracy. The processes are nominally democratic, but it does not feel like that to people in the University. The Vice- Chancellor is elected by Congregation, and the nominees are proposed by a sub-committee of Congregation. In reality, the sub-committee is appointed by Hebdominal Council, chaired by the incumbent, only one name is put forward for the vote, and the vote is made on the basis of a name and a CV. Only about 5% of people bother to vote. It is felt that the system needs to be streamlined, with several candidates, with clear manifestos. This approach does tend to be adopted for the election of the Chancellor by Convocation, but that has only happened twice in the last forty years.

Commonwealth: As I said previously, all decisions are reached by consensus. If a vote were ever necessary, they would feel they had failed. I am here talking about the Heads of Government reaching decisions at the CHoGM, and in an organisation committed to democracy, the Heads of Government themselves are elected by their citizens.

Church: Like the Commonwealth, the Church also has a layered approach to democracy; the priests represent the laity, the bishops the priests in their diocese, the cardinals the bishops, and the cardinals elect the Pope. This layered approach appears more effective than universal franchise as attempted in Oxford.

A key issue under democracy is the relationship of the centre to the rest of the organisation. The model for most western organisations is the organisation as subservient to the centre. The centre is where the board of directors is, and represents the shareholders, and so instructs the rest of the organisation. The model for some Japanese companies is completely different. As part of the treaty at the end of the Second World War, large Japanese conglomerates were broken up. However, conglomerates regrouped, not as a single organisation, but as a group of cooperating organisations. The centre became a sort of bank or clearing house, a service to the members of the group, not the overlord. This is akin to the Commonwealth Secretariat, which is overtly stated as being a service to all member governments, as mentioned above.

Table 4 shows five possible relationships between the centre and the organisation:

°iv the centre governs the organisation, and is clearly associated with one functional element;

olo the centre governs the organisation, but is separate from all functional elements;

o~" the centre guides the organisation, but is clearly associated with one functional element;

olo the centre guides the organisation, and is separate from all functional elements;

o~" the centre serves the organisation, while the functional elements govern themselves.

The other dimension of Table 4 considers cultural diversity, with three parameters:

°~" the organisation has no cultural diversity; °~° the organisation has homogeneous diversity, that is

it is diverse, but the diversity is not clearly associated with any functional unit;

o~o the organisation has heterogeneous diversity, that is it is diverse, and the diversity is quite clearly associated with one or more functional units.

The four case study organisations are shown in bold in Table 4. Several other organisations are shown, as are several countries. The higher up in the table, the more democracy is inherent in the organisation and the more stable is the organisation; the lower down, the less

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Table 4 Democracy and Diversity

No Diversity Homogeneous Heterogeneous Diversity Diversity

Centre as Service Sumitomo Commonwealth Secretarial IFRC&RC EEC

Contre Guides and Oxford Colleges Independent of Units Church of Rome

CHoGM, ICRC Australia USA ex Hawaii Hawaii, EC

Centre Guides but Oxford Colleges Aligned with one Unit vs Faculties

Canada

Centre Governs but Band Aid Oxford Faculties Independent of Units GEC, ICI

European Union

Centre Governs and Church of England Aligned with one Unit Soviet Union

Yugoslavia, UK

inherent is democracy and the less stable is the organisation. As you move from left to right the organisation also becomes less stable. Notice the UK is right down there bottom right with the Soviet Union and Yugoslavia. The Commonwealth Secretariat is shown top right because it acts as a service, but the CHoGM is shown one level down because it sets policy. The Vatican is also shown in that box, because it sets the rules of belonging to the community. Oxford University is also in that box, although the HEQC would like to push it one or even two levels down. The IFRC&RC is in the top right box: the ICRC is one level down because to belong countries must ratify the Geneva conventions. The message is that where you have diversity, you must have autonomy and subsidiarity, and units must have the right to leave the federation, but it must also be made in their overriding interest not to. If you do not have autonomy and subsidiarity, then the organisation will fall apart. There seems to be a rule of thumb of 75 years. The children and the grandchildren of the first people enslaved will accept the status-quo, but the great-grandchildren will not. (The European Union is drifting down the table, which will lead to its break-up in 35 years' time.)

Organisation and Strategy

So that brings us to the issue of strategy, and to introduce this we will have an odd one out round. Which is the odd one out:

°:" Oxford University; °:" Cambridge University; o:" Imperial College, University College and Kings

College London, and Manchester, Birmingham, Leeds, Sheffield, Nottingham, Newcastle, Bristol, Southampton, Liverpool and Warwick Universities;

o:o all of Britain's other Universities.

The parameter against which we are going to make the judgement is the amount of private money these universities raise for research spending. Oxford and Cambridge between them raise more money than all of Britain's other universities combined, and Oxford raises more than Cambridge. Oxford therefore attracts about 30% of all the money raised, and Cambridge about 20%. I am not sure how much the other 13 universities of the so called premier league raise, but it is probably more than all the remaining universities combined, so let us say the remaining split is 30% to 20% as well. Which is the odd one out?

The answer is Oxford. Oxford University, which attracts about 30% of all the private funding of research in Britain is the only university not to have a central committee setting a strategy for the raising of research funding!!! In fact, Thomas and Matterson (I996) deal quite extensively with the lack of strategy setting within Oxford.

So is strategy necessary? A ship needs a navigator. It takes a long time to turn, and hence the decision to turn must be taken a long time in advance, as must the decision to recentralise the rudder to hold the chosen course. Likewise, a functional, hierarchical, line- management organisation structure takes a long time to change, and needs strategists to plan the changes. If the ship's navigator gets it wrong, then the ship is holed, and the whole ship sinks. In the words of the song:

When the captain heard the news from the sailor up the mast, he said, 'steady boys we better not go too fast,' but the company, in their greed, said, 'we must increase the speed.' It was sad when that great ship went down.

That ship was the Titanic.

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Organisation is Versatile

On the other hand, the versatile, network organisation can quickly grow new functional elements, new nodes on the network, to deal with new opportunities, and if they do not work it can shed them quickly. However, for this to happen and not threaten the whole organisation, subsidiarity and autonomy are important. The new opportunity must be funded by new revenue, or by other nodes on the network. If the centre becomes exposed, then failure of the venture can sink the whole ship.

Oxford University is very good at this, which is perhaps why it raises so much research funding. Each faculty and each college almost has the drawing power of another university. Recently one of the sub-faculties in the medical school, which had become moribund, raised £20 million to fund the construction of a new building, which it did without any commitment from the University. That has revitalised the sub-faculty for perhaps the next 20 years. It is interesting that the new management school, which threatened the centre in quite a trivial way, (the use of common land), was blocked by the centre from doing this.

Throughout its history, the Church has responded to new opportunities and needs. In the dark ages, the Benedictines kept knowledge alive. Then with the shift from rural living to towns, the Blackfriars and Greyfriars arose, to minister to the people moving to towns. With the exploration of the new world in the 16th century, the Jesuits were created to spread the faith to new peoples. In the 19th century, the Church provided social services, like hospitals, social security and education. When the government started to provide these, the Church continued to provide a specialist education, but also ensured it provided spiritual guidance in a secular age, something which the Church of England does not seem to do so well.

I have three analogies for the versatile organisation: one is the amoeba, another a flock of birds, and the third a flotilla of yachts. An amoeba can grow a new arm to capture food, and shrink back from other areas where food has now been consumed. A flock of birds flies with a common purpose, without a strategy. The birds are self-supporting; the bird in the apex supports all the others, and the birds at the edge support the birds in the middle. As one becomes tired, they will switch positions. A predator can kill a bird at the edge of the flock, but not threaten the whole flock. The flotilla of yachts can turn quickly to avoid the iceberg or to respond to new opportunities, and can send out a small unit to explore opportunities on their own. The flotilla is of course less efficient than the ship, which is why we build ships and not flotillas of yachts. However, you have to decide the balance between effectiveness, through flexibility and versatility, and efficiency. Perhaps the ready availability of information and communication is enabling us to make the flotilla almost as efficient as the ship, shifting

the balance in favour of the former with its greater effectiveness and responsiveness.

The versatile, network organisation is much better suited to exploit competitive advantage than the structured, functional hierarchical, line-management organisation. It truly offers the ability to achieve sustainable growth for centuries.

O r g a n i s a t i o n is C o m p e t i t i v e A d v a n t a g e

And so we see that the choice of an appropriate model for organisation can provide competitive advantage. Gareis (1996) has suggested a new management paradigm where the competitive organisation:

• 5 ° rapidly starts up and closes down projects o:" has a lean base with a portfolio of projects • 5 ° is a project-based organisation o~" develops a project-specific culture °~° links functional elements through communication

channels.

He also stresses the following:

• 5 ° empowerment; °~" process orientation; • 5 ° team work; • :° continuous change; o:" customer orientation; • :o networks throughout the supply chain.

Although Gareis presents this as a 'new' management paradigm, the four case studies seem to have been practising this approach for centuries, so perhaps Gareis is suggesting a return to a traditional and historically successful approach.

S u m m a r y

Organisation should be viewed as a model and not as a structure. Any representation of an organisation is a model, and no model is a perfect representation of reality.

Organisations are three dimensional, and different models of the organisations will represent different perspectives of the organisation. One will be the structure of governance. Others will be operational processes, with different processes for different products and services to different customers.

The main model of the organisation should be of the operational processes, not of the people in the organisation. It should represent their working relationships, not their roles, reporting hierarchies and governance. It should be a network of functional elements and their links. Links will be transfer of knowledge, services or products.

"3~;"

N

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Table 6 A l te rnat ive Approaches to Contract ing Out

Contracting out by Nature

Federation • Units share values, identity and purpose of parent

• Community supportive of weaker units

• Units share values, identity and purpose of parent

• Parent tries to weed out weaker units

• Units have their own objectives • Parent tries to weed out weaker units

Franchising

Outsourcing

The centre should guide, not command and control. The functional elements should be empowered and autonomous, within the overall aims of the organisation. The principle of subsidiarity should be applied. This can be achieved through a federation of independent, sovereign units, but which share the values, identity and purpose of the parent body, giving a strong sense of community. A federation can be viewed as an alternative to franchising and outsourcing as an approach to contracting out services (see Table 5).

Managers should be certain of the philosophical basis of their organisations, and determine all the policies accordingly. To use a mixture of approaches will cause tension.

Central planning as a model for government was shown to be a spectacular failure in the Soviet Union. Why do we still practise it as the preferred model of management7 Our parents fought the Second World War and the Cold War to defeat totalitarian government, and people died in both wars. Why do we still accept that as a model for management?

Throughout the last millennium of European history, loose federations of autonomous states, operating the principal of subsidiarity have been stable and long lasting. The Church of Rome and the Holy Roman Empire until the late 18th century are two examples. Superstates that apply central control and central planning break up within about 75 years. The Holy Roman Empire from the late 18th century to the abdication of the last emperor, the Hapsburg empire that replaced it, the Soviet empire and the Yugoslav republics are all examples. The European Union started as a federation, but is now becoming a superstate, and so we can expect, from historical experience, that it will break up in about 35 years time. It is 76 years since the United Kingdom had its last change of constitution. Unless it converts itself to a federation of autonomous nations it too will break up further.

The network organisation, operating the principle of subsidiarity, is flexible and responsive, and able to offer centuries of sustainable growth.

References

Carnall, C., Thurloway, L., and Turner, J.R. (eds) (1992) Managing Strategic Change, 2nd edition, Henley Management College, Henley-on-Thames.

Colvin, G. (1996) Survival of the fastest. In Director, August. Commonwealth Heads of Govemment Meeting (1991) The

Harare Communique, Commonwealth Secretariat, Harare. Commonwealth Secretariat (1989) Agreed Memorandum and

Financial Regulations, Commonwealth Secretariat, London. Gareis, R. (ed) (1990) The Handbook of Management by Projects,

Manz, Vienna. Gareis, R. (1996) Application of the new management paradigm

in the project oriented company. In Proceedings of IPMA '96, the 13th World Congress on Project Management, IPMA/ AFITEP, Paris.

Hampden-Turner, C. (1995) Competition vs Cooperation in an International Context. In Proceedings of Seminar 67, Partnering: Competition vs Cooperation, Major Projects Association, Oxford.

Handy, C.B. (1982) Understanding Organisations, Penguin, London. Harmon, Fr.P. (1992) Church, State, Morality and Law, GiU and

MacMillan, London. Hastings, C. (1993) The New Organisation: Growing the Culture of

Organisational Networking, McGraw-Hill, Maidenhead. Orwell, G. (1949) Nineteen Eighty-four, Secker and Warburg,

London. Peters, T. (1994) The Tom Peters Seminar, Random House, New

York. Peymai, R. (I993) An investigation into the use and application of

process management in the construction industry. MBA Dissertation submitted to Brunel University, Henley Management College, Henley-on-Thames.

Smith, S. (1996) Outsourcing. Special report in Director, August. Soloman, R.C., and Hanson, K. (1985) It Makes Good Business

Sense, Athenum, London. Symons, J.N. (I994) A synthesis of management and leadership in

OMD design. PhD Thesis submitted to Brunel University, Henley Management College, Henley-on-Thames.

Thomas, Q., and Matterson, C. (eds) (1996) Oxford University - - Governance, Coopers & Lybrand, London.

Turner, J.R. (I993) The Handbook of Management by Projects, McGraw-Hill, Maidenhead.

Turner, J.R., and Peymai, R. (1996) Organisin 8 for change: a versatile approach. In The Project Manager as Change AgenL ed Turner, J.R., Grude, K.V., and Thurloway, L. McGraw- Hill, Maidenhead.

Whitfield, M.R. Private Communication, 1992-1996.

RODNEY TURNER, Department of Internal Organisafion, Faculty of Economic Sciences, Erasmus University, Room H15-28. Burgmeister Oudlaan, Rotterdam, The Netherlands.

Rodney Turner is Professor of Project

Management at Erasmus University, Rotterdam, and Visiting Professor at Southampton University and Henley Management College. He has industrial experience with ICI and Coopers and Lybrand. He is Editor of the Intemational Journal of Project Management, and author of several publications on project management, including the best-selling Handbook of Project-based Management.

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The versatile organisation: Achieving centuries of sustainable growth

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