Have you had all the right elements for your team to perform, but didn’t get the results you wanted? Have you tried changing one thing, only for something else to break? The reason is that your organisation is a system.
In a system, everything is connected to everything else. You can’t change one element without another being affected. And what matters even more than having “the best of everything” is having those elements fit. I’ve rarely had success with changing “only one thing”. If my team is underperforming, it’s never been due to a single process or a lack of skill. Otherwise we would have fixed it already.
It all becomes clear with a shift in perspective. Think of an organisation as a system. It takes input, feeds it through a black box, and produces output to achieve its strategy. As a manager, you can’t control the input and you can’t control the output. Too many managers think they can’t shape that black box, either. You can.
What is a system? What goes into an organisation, and what comes out? And what implications does that have for how you should manage it? Let’s answer those questions.
An introduction to systems
To quote the late systems thinking expert Donella Meadows, a system is “an interconnected set of elements coherently organised in a way that achieves something”. It comprises elements, interconnections between those elements, and a purpose.
An organisation’s purpose is to achieve its strategy in the short-term, and its mission in the long-term. The reason for Google existing is “to organise the world’s information and make it universally accessible and useful”. The UN’s purpose is “the maintenance of international peace and security”. Everything those organisations do follow from that purpose.
If you draw a box around a system, the elements are everything within those four black lines. We’ve mentioned the input, output, and strategy. We’re left with the black box: everything that happens “within” the organisation. These are the work, the formal organisation, the people, and the informal organisation. We discuss each of those in detail later.
Finally, a system has interconnections between elements. And the interconnections matter. We call this “fit”. This is how the whole becomes greater than the sum of its parts. Have you ever seen talented teams fail to produce results? Or strong cultures but subpar performance? It’s not enough to have the right elements. The elements need to fit together.
The organisation as a system
What makes up your organisation? It takes input, feeds it through a black box, and produces output to achieve its strategy.
Input is what you have to work with: the environment and your resources. The environment is your landscape of competitors, regulations, and all sorts of market forces. It’s also regularly changing. Think about Generative AI and the effects it has had on your organisation and your industry, not to mention the impact of COVID. Resources are everything you have at your disposal. Consider the tangibles like employees and technology, and intangibles like reputation and brand.
The output is organisational performance. Whether that’s products, profits, or social good, or employee growth and community wellbeing depends on your strategy.
Last, you’ve got the black box. Some call it the “transformation process” since it’s how input is transformed to output. It’s everything your organisation does, everyone it hires, and how the pieces all fit together. We’ll explore this black box of the organisational system so you can better manage one.
The elements of the organisation
Think of the black box of an organisation comprising four elements: the work, the formal organisation, the people, and the informal organisation.
The work is the “basic and inherent work to be done”. This is creating products. It is marketing. It is the administration and accounting required to run a business. It’s what you do.
The formal organisation are the structures, the processes, and the systems that exist in service of performing the work. Think reporting lines, performance reviews, planning cadences. It’s what’s written down about how you work.
The people covers the characteristics of the individuals that work in your organisation. It’s what people know and what they can do. It’s what they need, what motivates them, and who they are.
The informal organisation is the culture: the values, beliefs, and norms of the organisation. It’s “the way things are done around here”, the “shadow organisation”, the power structures that aren’t captured on your org chart. The informal organisation can be more powerful than the formal one.
Work and the formal organisation are tangible. They’re what you see and what you can quantify. People and the informal organisation are intangible. You can’t systematise everything about your people. Nor is the informal organisation written for all to see.
What can you do with this information? Plenty.
Consequences
Fit determines organisational performance
Imagine you sit down for a meal of fine dining. You’re presented with the finest sushi, the creamiest carbonara, and the heartiest beef stew. Each dish is individually great. Yet put them together, and what do you get? A mess.
The same is true for your organisation. It’s not the elements themselves but their fit between one another that determines organisational performance. Have you ever seen talented teams fail to produce results? Or strong cultures but subpar performance? It’s not enough to have the right elements. The elements need to fit together.
Not only do the internal elements need to fit each other, they also need to fit the external elements. The work you do must align with your strategy. Your culture must align with the environment.
Managers must constantly adjust elements to maintain fit
Companies are no longer static. Their environment changes regularly, as do resources. As a manager, you need to constantly adjust elements to maintain fit.
When a high performer leaves, the element of “people” changes. How do you adjust for the knowledge and skills you’ve lost? The team structure and reporting lines — the formal organisation — will need to be adjusted to work in this new system. Does the work also need to change?
When the input changes, the black box will no longer be optimised for it. Consider the input of “market needs”. You may have successfully sold widgets to your customers for many years. Then, a change in consumer preference happens, almost overnight. Suddenly the product you create no longer has product-market fit. Your input has changed, so your output needs to change. And so you must adapt the organisational black box to convert this new input into the right output.
Improved performance comes from changing multiple elements, not just one
You can’t change only one element to improve performance.
Is the problem your planning cadence? Shift from quarterly to monthly. But does that solve your skills gap?
Is the problem with one or two individuals? Manage them out of the organisation. But does that solve your culture issue?
The problem is that elements interact. You need to consider how they fit together, and change multiple elements to make them fit.
Let’s imagine you shift from quarterly to monthly planning. You might be trying to solve for a lack of planning accuracy and trust between teams building the product and teams selling it. But will this simple change in process fix the issue? Probably not. You might also need to…
- Teach individuals how to better estimate their work (people)
- Setup cross-team working sessions to improve communication flow (formal organisation)
- Redefine the tasks from functional to cross-functional (work)
- Shift the culture to focus on high-integrity commitments (informal organisation)
Your role as manager is to find the right balance with the elements you have, to pull the right levers at the right time.
Change is necessary, and successful change is hard. Especially so in an organisation where everything affects everything else. But now you know how the parts fit together. With a different way of seeing your organisation, you might be able to make the changes you need.