How an Adhocracy Stimulates Entrepreneurial Growth
Mistakes are easy to make, and it's wise to view your organizational structure as a work in progress.
Organizational design and management practices, i.e., people and how you intentionally organize them, arguably have more influence on your business than anything else. It determines virtually every type of interaction, plan, implementation and use of resources. Yet, there is often more than one way to skin a cat. In today's rapidly shifting market environment, it's wise to understand how leaders are experimenting and what kind of results they're seeing.
For some businesses, an adhocracy can be an approach that provides a real edge.
Setting the stage for a collaborative analysis
How do you solve the conundrum of continuing your company's growth trajectory through entrepreneurship and value generation? How do you keep an organization fresh, agile, innovative and in touch with clients' needs as you grow?
Enter 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 privileges action, where meritocracy privileges individual knowledge and bureaucracy privileges authority. In adhocracy, 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(only)-driven model). Could this model boost entrepreneurship in a company with 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 built Growth Units (business units, with the word growth to emphasize the focus) with an end-to-end structure. Executive squads led each Growth Unit, with every executive, no matter at which level (SVP, VP, Director or Manager), being a partner in the Growth Unit. An entrepreneur who owns their destiny in business — that is, they own their P&L, set their own target clients, go to market strategy and value prop and decide when to pivot. Nobody is looking up to somebody above, which speaks to three other fundamental aspects of adhocracy: speed is of the essence, management is light touch and governance is flexible. We gave both Growth Units and individuals the ability to act with autonomy within clear guardrails. What bound everyone together was an emotional commitment toward the opportunity in front of each of the Growth Units. We kept, of course, supporting structures, such as HR, marketing and F&A as horizontal structures that comprised what we called the Platform.
Adhocracy reoriented us toward helping clients accelerate their digital transformation, and we continued to grow with great success. At the same time, our success caught the eye of Julian Birkinshaw, Professor of Strategy and Entrepreneurship at London Business School and author of Fast/Forward. Birkinshaw had seen adhocracy work before, but he'd never seen it at the scale we had achieved. And like us, he wanted to understand the strengths and weaknesses of what we were doing. So much so that he invited us to be part of a case study.
Mistakes, learning and finally, balance
In the case study, Birkingshaw posed some fair questions: Had we gone too far? Was this the proper structure to grow fast, as we wanted? What are the right incentives to take risks? Were we creating too much complexity? Was the emphasis on market opportunities and client responsiveness distracting us from coherent positioning?
By the time of the case study, the transient aspect of the organizational structure — focusing on market opportunities to determine when to create or decommission Growth Units or moving execs between them, was being taken very seriously. We had created a new process called rebalance to do just that. But rebalancing was happening a bit too often, so much so that some execs brought up the feedback that our groups simply didn't have the time to connect and build a sense of shared purpose. When we looked at some of the key elements of adhocracy — emotional conviction and cohesion within the Growth Units — we realized that we'd swung the pendulum too far.
It became clear to us that, even though we wanted to maintain the freedom we'd given our groups to work without bureaucratic hurdles, we needed a more long-term view for the Growth Units. We slowed the pace of rebalances and didn't shake things up quite so often. People had time to commit and invest themselves emotionally. Our reward was a major jump in their enthusiasm. They clearly understood what our customers were dealing with on a deeper level and were much more engaged in finding solutions.
Seeing this was incredibly motivating. But when we looked at the behavior and attitude of the Growth Units more closely, we saw that we'd swung the pendulum a little too far again, this time in the opposite direction. The Growth Units had so much cohesion that it created a siloed effect, and we had a hard time moving executives between them when opportunities were really asking for it.
Seeing these extremes, we set the goal of achieving harmony. To be successful, we could be neither too emotionally convicted nor too transient. 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 be minimally in tune with what was happening elsewhere. They recognized that we are one whole organization and other GUs might be in need of help (for instance, because they are growing faster than others).
To reach this new goal, we first made sure people understood that we were all on the same team and had the same vision. We encouraged them to share information so everybody could learn more quickly. Lastly, we required each Growth Unit to create two powerful stories each year and to rate other Growth Units on those stories, according to specific criteria. The idea was to give the Growth Units a chance to highlight their customer engagement, the problems they had and how they tried to solve those issues. We showcased the stories as a way to practice positive self-accountability. To learn and get exposed to the ideas, data, techniques, contributions and successes going on across the entire company.
Back when we started, all executives who were not in one of the Platform areas (IT, HR, F&A) were assigned to a Growth Unit, with one single exception: our CEO. That is another aspect in which we realized we had swung the pendulum a bit too far: we also needed a few executives who could serve and collaborate across units.
The rebalancing process continues to exist and has been improved over time. We started off with 12 Growth Units globally. We then changed what some of them looked like quite a bit, then created new ones, merged some and split others. More recently, we created the concept of alliances — groups of two or three Growth Units that share goals and a core set of customers that might be too large for one GU alone. Smaller Growth Units seemed to work better for us, which seemed consistent with the Dunbar number concept. So we set a guideline to keep each Growth Unit at 400 people or less.
Good growth never means you quit learning
How is adhocracy working for us? There's a consensus that it fostered entrepreneurship, a better sense of ownership in everyone and it brought us more agility to identify and serve market needs. We grew more than 40 percent organically in 2020 — a result that, of course, cannot be attributed to adhocracy alone. But we were pleased with our success and grew more certain that we had made the right choice for our company. Adhocracy can truly allow entrepreneurship to flourish, even at a large scale — and we are currently more than 5,000 people. We were also cautious enough to take the reality check the case study had handed us — mistakes are easy to make, and it's 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. Maybe it's an adhocracy; maybe it isn't. Regardless of your organizational structure, it's important to continually work on refining it. Make it your own, based on the unique needs of your company. Because when it comes to business and improving, the journey never stops.
Entrepreneur Leadership Network Contributor