Scaling the Network Organization: The Power of Teams

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by Jerry Cahn, Ph.D., J.D.

In Team of Teams: New Rules of Engagement for a Complex World, General Stanley McCrystal advances our understanding of how global companies can apply the newest organizational model – the network model – to increase the effectiveness of their teams. In today’s complex world, organizations with local units working in different geographic regions who rely on people with a variety of skills and expertise to make decisions which respond to changing circumstances, will benefit from his insights.

Background: Traditional management theory focuses on the Functional Model (where skills-expertise is the core organizing principle) and the Small Business Unit (SBU) Model which organizes people by the customer needs met by their products; they may be organized by the products lines (e.g., personal health vs. commercial cleaning products) or the geographic regions that the company is trying to serve (e.g., US, China, Eurozone). In the 1960s, NASA was faced with a new challenge – mobilizing a diverse group of professionals to land a man on the moon within a decade, and developed the Matrix Management system (see Sayles and Chandler’s Managing Large Systems), which combines the two: each person reports to both a functional and SBU leader. This gives the person greater perspective on issues, but adds a layer of complexity (handling two bosses). For NASA, they added a very important extra component (often ignored by instructors): the concept of Temporary Project Teams which are the basic unit reporting to the two leaders. Experts would be moved from one team to another, as leaders’ needs for project members increased or decreased.

Over the past few years, organizations have realized the hierarchical models present real challenges to effective, speedy decision-making and flattened their structures.* Organizations like Al-Queda and ISIS have adopted a new flatter model, called the Network Model. It focuses on networking individuals to work together to perform in a situation where communication flow is severely limited yet decisions need to be made quickly. Key is the recruitment of committed individuals and then training and empowering them to make local decisions without having to report to higher authorities.

Recently, a member of my CEO group, whose company has local people serving clients in the US, Europe and Asia, reported running into an upper limit in the ability to scale the operation even though clients wanted more services. We focused on the positive attributes of the network model, but realized it didn’t address many needs. Seeking to refine it, I discovered Team of Teams and used its insights to give the CEO a new set of tools with which to scale the company.

Faced with a losing war effort in Iraq in 2003, where the enemy’s (Al Queda) network model made members far more agile and resilient, than the US Forces, which relies on a classic command-and-decision structure, General McCrystal was appointed to head a Task Force to turn the situation around. He analyzed the situation and shared his comprehensive, in-depth analysis and resultant solutions which by 2008 allowed the US troops to gain the upper hand in the war on Terrorism in Iraq and Afghanistan.

His insights address two issues: the problems with the structure and culture of the US Forces’ organizational model, and the need to advance the existing network model so it could be adapted by his larger and more complex organization. Here are some of the most important ones:

• Complexity doesn’t mean complicated. Things that are complicated have many parts that are joined one to the next – such as a cog’s tooth turning the tooth of the next cog. Complexity occurs when the number of interactions between components increases dramatically; viruses spread, as do runs on banks; communications in the game of “telephone” morph. Because each element has a vast number of interdependencies that can’t be fully understood can lead to unpredictable results.
• Resilience is key. Taylor’s scientific management principles, which focus on efficiency through the reductionist management approach of limiting access to information on a need-to-know basis (e.g., classic assembly lines) isn’t sufficient in a world of complex decision-making. In a networked world, efficiency needs to give way to effectiveness; redundant sources are needed to refine ambiguous data into actionable information. Waiting for top-down decisions can lead to deadly delays. The only way to combat terrorists (or competitors) who make their decisions is for counter-terror forces (or your company’s members) to be empowered to make adaptive decisions on their own.
• Education is more than training. Education requires a fundamental understanding of a situation so you can grasp it, understand “why” it’s important and most parameters involved, and then respond to whatever arises. Training simply involves singular actions (skills) taught to handle challenges. In the medical arena, it’s the difference between medical school education and first aid training.
• An effective culture requires trust among members to facilitate effective, speedy decision-making. In a spread-out organization, it’s impossible for each individual to know everyone: and that’s the limiting factor for members of a network organization! But if you’re a “team of teams”, each individual can become acquainted with at least one member of each other team. Strong ties with at least one “friendly face” within each team, and a sense of purpose across teams, creates trust among members in other teams, and the development of a shared consciousness. This means that the entire organization consists of “teams of teams”, and not silos of teams! (See diagram).

Ultimately, the interdependencies of this complex world, the speed at which data and communications flow, and the resultant decisions that need to be made, require us to use organizational models that facilitate agile and resilient strategies among members who trust one another in their business, regardless if it’s warfare, wealth management, medical care, technology or supply-chain management. The Scalable Network model may be the right tool for your organization since it:
• Focuses on the “team” as the basic unit with members potentially belong to several teams
• Gives members a full understanding the mission as well as their own responsibilities,
• Empowers members to make decisions where resiliency in the face of complexity is essential
• Creates opportunities for members, regardless of location, to build trust with other team members for more effective decisions.

Can this model help you grow your company successfully to the next level? Share your thoughts and questions!

* The most recent model, holocracy, takes it to the logical extreme, putting everyone at one level. Zappos is currently trying to implement it.