What does the history of man and the advancements of civilizations have to do with business?
I recently followed a recommendation to read Jared Diamond’s book Guns, Germs, and Steel: The Fates of Human Societies. The book was the winner of the 1998 Pulitzer Prize for general non-fiction and provides theories and supporting arguments for why some civilizations throughout history survived and conquered other civilizations. Diamond supports the idea that societies persist and spread based on geographical and environmental factors rather than racial genetics.
Do business organizations parallel human societies?
On page 457 of the book Diamond explores the questions he received from many business leaders after they read his work. He sets-up the question as:
“What is the best way to organize human groups, organizations, and businesses so as to maximize productivity, creativity, innovation, and wealth? …. Should your collection of people be organized into a single group, or broken down into a small or large number of groups?”
Ah yes, one of the classic modern business dilemmas. Businesses are in a constant see-saw between a centralized and decentralized organization. Centralization is pushed to provide more standardization, economies of scale, and reduction of expenses. Decentralization is pushed to provide more innovation and closer customer relationships.
In his book, Diamond suggests that some level of fragmentation (decentralization) helped European advances in history because it created competition which led to innovation. Contrary to this, the unification of China appears to be a factor why it fell behind Europe in innovation during the colonization period. But India, which had even more fragmentation than Europe, didn’t advance as rapidly as Europe with technological innovations and colonization. That’s a very simplified look at Diamond’s discourse on the subject, but it leads him to suggest that the most optimal organizations have some level of decentralization in them.
The trick is to determine the right level of balance.
I promote a balance in a number of areas in the IT organization that I manage. This includes the number of in-house developers vs contract and “off-shore” developers, centralized software tools vs solution specific tools, and centralized processes vs sub-department processes.
A few things are certain with any approach:
- People will point out the faults of the current organizational design and suggest that a change to another model is needed (based on the other model’s merits and not faults).
- There is usually some level of second guessing by team members as they experience organizational results and look for ways to tweak the team setup to perform better.
- There is a natural pull (almost like gravity!) that says we should organize differently. It’s the “always a better way” and “continuous improvement” approach to organization and processes.
I believe the answer depends on what you need from each sub-group in the organization.
IT, like other business departments, is further divided into group based on the type of service provided to customers. I believe groups like desktop/voice services and networking are best setup with a more central approach. This allows them to set to standards for equipment, general office software, voice equipment, etc. I look for this group to provide a consistent and predictable service to the organization. Less variety in what they support allows them to scale better.
The software development groups are tasked with providing innovation and helping the company be more competitive in the marketplace. As such, I like to have the software develop teams setup in a more decentralized organization. This gives them freedom to innovate and compete.
The project management, business analyst, and quality assurance groups benefit from a centralized approach as it helps them to reduce their toolsets and simplify processes. But they also benefit from a bit of decentralization so they can better match their processes to the software development teams.
The problems of any organizational design are always in the forefront to discuss, break-down, and analyze. I’m OK with that. As I said above, I think that’s a natural activity as we constantly look for ways to perform better. It’s neat to see correlations between Diamond’s study of human organization through history and the modern business world. If you haven’t read Diamond’s book, it’s worth your time at least to skim and take-in some of the main theories.
Onward and upward!