How an Adhocracy Stimulates Entrepreneurial Growth

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Organizational design and management practices – that is, who and how you intentionally organize them – arguably have more influence on your business than anything else. It determines virtually all types of interaction, plan, implementation and use of resources. Yet there is often more than one way to skin a cat. In today’s rapidly changing market environment, it is wise to understand how leaders experience and what kinds of results they achieve.

For some companies, an adhocracy can be an approach that offers real benefit.

Preparing the ground for collaborative analysis

How do you solve the conundrum of continuing your business growth trajectory through entrepreneurship and value creation? How do you keep an organization fresh, agile, innovative, and in touch with customer needs as you grow?

Enter into the adhocracy. We got to know the concept, like many others, by reading about it in a book – in this case, Julian Birkinshaw’s. Fast forward. The concept suggests that the model favors action, where meritocracy favors individual knowledge and bureaucracy favors authority. In adhocracy, the organizational structure is transient and based on market opportunities. Strategy is based on experimentation and management is based on decisive action and emotional conviction (a clear counterpoint to a data-driven model). Could this model stimulate entrepreneurship in a company of thousands of people?

Intrigued by these concepts, our team worked hard to loosen our top-down structure. This meant that, rather than being locked into a rigid hierarchy or functional group, we kept everything transient. We have built growth units (business units, with the word growth for emphasis) with an end-to-end structure. Squads of executives led each growth unit, with each executive, regardless of level (SVP, VP, director or manager), being a partner of the growth unit. An entrepreneur who manages his business destiny – that is, owns his income statement, defines his own target customers, moves on to market strategy and value accessory and decides when to pivot. No one admires anyone from above, which brings to mind three other fundamental aspects of adhocracy: speed is essential, management is light, and governance is flexible. We have empowered growth units and individuals to act with autonomy within clear safeguards. What held everyone together was an emotional commitment to the opportunity ahead of each of the growth units. We of course kept the supporting structures, such as HR, Marketing and M&A as horizontal structures that made up what we called the Platform.

Adhocracy reoriented us to help clients accelerate their digital transformation, and we have continued to grow with great success. At the same time, our success caught the attention of Julian Birkinshaw, professor of strategy and entrepreneurship at London Business School and author of Fast forward. Birkinshaw had seen the work of the democracies before, but he had never seen it on the scale we had reached. And like us, he wanted to understand the strengths and weaknesses of what we were doing. So much so that he invited us to participate in a case study.

Related: 5 Tips to Consider When Designing (or Redesigning) Your Organizational Structure

Errors, learning and finally balance

In the case study, Birkingshaw asked a few fair questions: Did we go too far? Was this the right structure to grow quickly, as we wanted? What are the right incentives for taking risks? Are we creating too much complexity? Has the emphasis on market opportunities and customer responsiveness distracted us from a coherent positioning?

At the time of the case study, the transitional aspect of organizational structure – focusing on market opportunities to determine when to create or dismantle growth units or move executives between them – was taken very seriously. We had created a new process called rebalancing to do just that. But the rebalancing happened a bit too often, so much so that some leaders reported that our groups just didn’t have time to connect and create a sense of common purpose. When we looked at some of the key elements of democracy – emotional conviction and cohesion within growth units – we realized that we had pushed the pendulum too far.

It became clear to us that while we wanted to retain the freedom we had given our groups to work without bureaucratic barriers, we needed a longer term vision for the Growth Units. We have slowed down the pace of rebalancing and haven’t jostled things as often. People have had the time to engage and invest emotionally. Our reward was a major leap in their enthusiasm. They clearly understood what our clients were dealing with on a deeper level and were much more engaged in finding solutions.

Seeing this was incredibly motivating. But looking more closely at the behavior and attitude of the Growth Units, we saw that we had pushed the pendulum a little too far, this time in the opposite direction. The Growth Units were so cohesive that it created a silo effect, and we found it difficult to move the cadres between them when the opportunities really demanded.

Seeing these extremes, we set ourselves the goal of achieving harmony. To be successful, we could neither be too emotionally convinced nor too fleeting. The executive partners needed time to validate and evolve their own growth unit business strategy. Through experimentation, with their full dedication, and at the same time being a minimum in phase with what was happening elsewhere. They recognized that we are one organization and that other GUs might need help (for example, because they are growing faster than others).

To achieve this new goal, we first made sure that people understood that we were all on the same team and that we had the same vision. We encouraged them to share information so that everyone could learn faster. Finally, we asked each growth unit to create two powerful stories each year and to rate the other growth units on those stories, based on specific criteria. The idea was to give the growth units a chance to highlight their customer engagement, the issues they encountered and how they tried to resolve those issues. We presented the stories as a way to practice positive empowerment. To learn and gain exposure to ideas, data, techniques, contributions and successes going on across the organization.

Related: Building the Structure for Organizational Growth

When we started, all executives who were not in one of the Platform’s areas (IT, HR, F&A) were assigned to a growth unit, with one exception: our CEO. This is another aspect where we realized we had pushed the pendulum a bit too far: we also needed a few executives who could serve and collaborate between units.

The rebalancing process continues to exist and has improved over time. We started with 12 growth units around the world. Then we dramatically changed the look of some of them, then created new ones, merged some and split others. More recently, we have created the concept of alliances – groups of two or three growth units that share goals and a core of customers that might be too large for a single geographic unit. The smaller growth units seemed to work better for us, which seemed consistent with the concept of Dunbar’s number. So we set a guideline to keep each growth unit at 400 people or less.

Good growth never means you stop learning

How does adhocracy work for us? There is a consensus that this has fostered entrepreneurship, a better sense of belonging in everyone and brought us more agility to identify and respond to market needs. We experienced organic growth of over 40% in 2020 – a result that, of course, cannot be attributed to adhocracy alone. But we were happy with our success and became more confident that we made the right choice for our business. Adhocracy can really make entrepreneurship flourish, even on a large scale – and there are currently over 5,000 of us. We were also careful enough to verify the reality the case study gave us: mistakes are easy to make and it is wise to view your organizational structure as a work in progress.

Of course, the most important thing is to find what works for your business. It may be an adhocracy; maybe not. Whatever your organizational structure, it is important to continually work on refining it. Make it yours, based on your unique business needs. Because when it comes to business and improvement, the journey never ends.

Related: 4 Considerations for Determining the Best Leadership Structure …

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