This is the first in a planned series of posts exploring the logic and inherent order of organizations. Very little of this material has been previously published.
The incomparable Peter Drucker in 1974 wrote: “Our children will have to learn organizations in the same way our fathers had to learn farming.” If anything, he understated the matter; we are still, 40 years later, learning about organizations.
Farming may look like a simple matter: Prepare ground, plant crops, harvest, sell, repeat. But as any real farmer can tell you, if that’s all you know about farming you are guaranteed to fail. Likewise organizations can look to be a simple matter: Create a needed product or service, offer it on the market, sell at a profit, repeat. Some legislators are very fond of this view and suggest it as the model for all organizations. But again, if that simple market-based model is all you know about organizations, you are guaranteed to fail. Organizations come in many different forms, and what works for one form – the market-based for-profit organization, for example – can be devastating for another.
Every organization is a unique and distinctive configuration of people in relation to their world. Depending on the organization’s specific purpose for existence, the value it sets out to create, for whom, by whom, in what working relationships and by which specific means, an inherent order emerges. This inherent order establishes a kind of logic for the organization, defining specific bounds on what actions are appropriate or inappropriate, required or optional, allowed or forbidden, expected or surprising, relevant or irrelevant.
Consider, for example, the “on-behalf-of” organization (a term from my 2003 paper, “Herding Tigers”). Our economy is filled with “on-behalf-of” organizations, and their number is growing. An “on-behalf-of” organization is one which provides services to a group of people who have little say about the nature of the services provided to them (that’s determined by a second group), and who do not directly pay for the services themselves (often payment is made by yet a third group.)
Sound familiar? Education is provided by “on-behalf-of” organizations in the USA, as are all government services and, increasingly, health care. Less obviously, virtually all internal service organizations in large organizations are “on-behalf-of” organizations. For example, testing organizations in the automotive industry perform tests required by parts and systems engineers; they are paid from an overall budget within the product development division; and the standards for the tests they perform are established by, among others, the quality office. And, if you ask them, the leaders of these organizations are very likely to say that their first priority is to “satisfy the customer.”
But who exactly is the customer? Simple market-based organizations have customers to whom they provide goods and services. These same customers make their own decisions about what to purchase, and they themselves pay for what they get. Satisfying the customer of a simple market-based organization is – if not easy – at least conceivable. “On-behalf-of” organizations, on the other hand, don’t have it so easy. Depending on how you look at it, they have multiple customers – or no customers at all.
Example: I once consulted to a school district in which teachers, principals and School Board members were terminally deadlocked over an extremely thorny curriculum issue, with three absolutely incompatible views on what to do. I asked each group: “At bedrock, what do you believe makes your solution the right solution?”
- All three groups replied: “It best serves our customers.”
- All three groups were right.
- All three had different “customers” in mind.
For the teachers, the ultimate customers were the students; the ultimate customer for the principals were the state and district administrators who set policy and guidelines; and the School Board members took as their ultimate customers the parents and other local taxpayers who ultimately paid everyone’s salaries. With such diverse “customers”, it is not surprising that the best curriculum looked very different to the three groups.
This is typical in “on-behalf-of” organizations. The requirements of the different groups who actively participate in the organization almost certainly do not align neatly; indeed, they frequently conflict with each other. “On-behalf-of” organizations present special challenges to those who would lead them (this is discussed in detail in my paper “Leading: Perspectives for Leaders and Leadership Coaches”.)
“On-behalf-of” is just one of a number of distinct organization forms that have emerged in the past century. Each has its own inherent order, its own logic, its own set of structures and practices that enable it to be effective – indeed, its own distinct version of effectiveness. But few of us are fluent in the inherent order of even our own native organization, let alone the many alternatives.
Perhaps it’s time we took Drucker’s advice seriously. We need to learn organizations at least as well as our ancestors learned farming, and for the same reason – our survival individually and as a society depends on it.
Let’s begin with the “on-behalf-of” organization.
Next: Navigating the on-behalf-of organization.