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Organizing a complex system

Organizing a complex system
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First Published: Sun, Nov 01 2009. 07 59 PM IST

Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Sun, Nov 01 2009. 07 59 PM IST
What do the Commonwealth Games in Delhi have in common with the Integrated Child Development Scheme (ICDS)? A problem of organization. And a problem of implementation. Preparations for the Games in Delhi have slipped behind schedules. The international Commonwealth Games Organization has proposed to install its own monitor in Delhi to oversee progress. The country has been embarrassed. The ICDS is a long-running scheme in the country, and perhaps the largest programme in the world focused on the care of children. However, results are not proportionate with efforts and expenditures. Malnutrition continues to hover at around 45% of India’s children—one of the highest levels in the world, in spite of the country’s overall economic progress and reduction of poverty levels.
Illustration: Jayachandran / Mint
Problems of organization and implementation extend to other areas, too. The country must progress much faster towards its human development goals. It is not for lack of trying. For every problem there is a scheme, often massively funded: the National Rural Employment Guarantee Scheme, the Jawaharlal Nehru National Urban Renewal Mission, the Rajiv Awas Yojana, etc. Most major schemes to address national problems are “central schemes” so that solutions can be properly managed (and adequately funded) by the Centre rather than leaving them to the states, where, it is feared, they will not be well managed. However, the states have essential roles in the implementation of even “central” schemes, and therefore the Centre’s problem is to get the states to perform.
Problems of coordination and control of large programmes that involve many agencies beset large multinational corporations, too. A survey of 2,000 chief executive officers and executives of multinational corporations around the world revealed that the principal organizational challenge they faced was “coordination”. They wanted less “centralization”, so that appropriate solutions could be found locally. They also wanted less “decentralization”: to avoid duplication of efforts and improve efficiency. “Think local, act global”, or the other way round, “Think global, act local”, were the mantras they were repeating. What they wanted were practical concepts and tools to manage their organizations accordingly.
The country must devolve power to the states and local bodies. And it must ensure implementation of change across the nation in many areas as mentioned before—education, health, water management, local entrepreneurship, urban renewal, etc. With pressure to produce results, schemes multiply and organizations, too. Then a central coordinating agency is appointed, which turns out to be not sufficiently effective. So another monitoring agency is appointed. Soon several such agencies for coordinating and monitoring must be coordinated! Thus money and time is wasted in coordination without much impact on implementation on the ground. Therefore, like business corporations, national programmes require better concepts of organization and tools for effective coordination. Let us examine what these may be.
A new organizational architecture
An analysis of prevalent “theories-in-use” of how to organize a complex system reveals two dominant theories: “hierarchies” and “markets”. In fact, these are the two alternatives described by Oliver Williamson, winner of the Nobel Prize in economics this year. These are also the two alternatives that executives imagine. Hence their dilemma: they want less “centralization”, which requires a hierarchy that they fear could stifle innovation; but they also want less “decentralization”, which would open up an internal market for ideas and resources no doubt, but one they fear they may not be able to control.
However, markets and hierarchies are not the only fundamental forms for organizational architecture. There is a third, which operates in natural systems. Imagine a tropical forest, humming with a variety of life. It is not an unformed chaotic system: It has a rhythm to it. Ask yourself: “Who is in charge of this complex system?” It is not obvious who is, yet it functions very well. A study of the organizational architecture of such “complex, self-adaptive systems” in nature and elsewhere (such as the Internet) reveals the principles for designing organizations that can remain on the creative edge between a stifling hierarchy (and bureaucracy) on one side and unorganized confusion on the other. (Interested readers can find an explanation of these principles in my book: Shaping the Future: Aspirational Leadership in India and Beyond, John Wiley and Sons.)
Lateral linking organizations
An essential feature of such organizations is the strength and quality of the “lateral linking organizations” within them. The traditional organization concentrates most of its energy in specifying its vertical structures—hierarchies, allocations of authority, reports up and instructions down. But lateral links across the organization are not deliberately designed with similar attention. They are left to be shaped by informal market forces and political alignments within the organization. Hence they are often weak or inappropriate. In this vertical view of organization, a need for coordination is met by appointing an authority above those who must be coordinated to whom they must all report. Thus, weaknesses in the lateral structures are addressed with more vertical structures—more authorities, more monitors and more controls, which crowd the space for movement and creativity within the organization.
Lateral linking structures are designed to facilitate and strengthen collaboration among the many agencies who must work together, rather than imposing one more “boss” over them to force them to coordinate. These mutually supportive mechanisms are abundant in natural systems, such as the tropical forest. Such mechanisms operate in large, international consulting companies and in the Tata group, too. International consulting companies have fiercely individualist partners. Each is measured and rewarded for performance so internal competition can be high. However, they are brought together in lateral linking “practices”, in which they share ideas, learn from each other, form teams to pursue new ideas and serve clients.
The Tata group has an unusual structure. It consists of many dozens of independent companies in diverse businesses, with separate shareholders, and their own boards. Yet they cooperate in many matters to their mutual benefit. They learn from each other. They adopt standards they all wish to uphold. They share a culture and values. A lateral mechanism that links them is an evolving business excellence framework in which the companies participate. Through this framework they share experiences and best practices, evaluate each other and distil standards they will adopt. It is a good example of how one coordinated organization can be formed from many independent entities over which the centre exercises limited command-and-control authority.
Business groups, such as the Tatas, and international consulting companies, may share some characteristics with federal countries. However, their scales and complexities are lesser. Therefore, scepticism about the transportability of principles from one to the other is expected. (On the other hand, one could argue that nature, where these principles work, is even more complex.) Fortunately, support for these ideas now comes from other sources, too. Elinor Ostrom, who won the Noble Prize in economics this year with Williamson, has shown that large human communities that do not leave it to the market alone can coordinate their own actions without a hierarchy to govern them, and produce better outcomes for all.
A new model of a leader
An examination of how such organizations work reveals the essential role of leaders within them. What is critical is the type of leaders they have. A widely prevalent model of leadership, reinforced by stories, myths and stereotypes, is that a leader must be tough and strong. In this version, he (the popular image of a leader is generally a man) has authority granted to him over others so that he can lead them, whereas lateral organizations require that leadership is exercised without the leader being designated the “boss”. In such organizations, leadership is earned by the ability to influence others to cooperate. The way women often make family members cooperate could be a more appropriate model. Indeed, one should apply insights into our organizations from the way the feminine force binds and sustains nature.
India is a diverse country, with a federal structure, and an ongoing process of devolution of power away from the Centre. At the same time, it needs much faster implementation of changes across the nation with much better coordination of action. It cannot impose a hierarchy. Nor can it leave it to the market. Therefore India, more than any other country in the world, must systematically master these new theories of organization and leadership.
Arun Maira is a member of the Planning Commission. Comment at theirview@livemint.com
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First Published: Sun, Nov 01 2009. 07 59 PM IST