Organizational Design, Pt. 2: Can Your Organization Handle Change Effectively?

Introduction: Organizational Change & Stability

Organizations throughout their life cycle face change. Change can be due to internal or external factors. Internal include a leader retiring; a sudden decrease in revenue, which may require changes in its work force; or even interdepartmental conflict. External include the entry of a new competitor, collusion between competitors, or new legal regulations. Change questions their existence, since, if they cannot weather it, they will need to shut down. And this brings up the concept of organizational stability.

Organizational stability has many definitions, but for our purposes, we’ll define it as an organization’s ability to maintain a level of performance that prevents it from shutting down. This blog entry will explore the different stages in an organization’s development. In addition, we will identify which factors contribute to an organization’s stability. Finally, it will explore an organization that has not been able to handle change well.

The Stages of an Organization’s Development

According to the Center for Organizational Design, there are three stages of organizational development: chaos, stability, and high performance. The stages represent whether the organization’s design leads to high performance. Each stage is characterized as follows:

Stages of an Organization’s Development

Now, it is obvious that a chaotic organization is less likely to remain stable relative to a stable organization and a stable relative to a high-performance organization. But the factors that affect the organization’s stability are most important.

16464035c92468acc71cca21bc4826cd.jpgWill the rocks fall off?

What Affects an Organization’s Stability?

Unlike the post “Organizational Design, Pt. 1: Steps Toward Defining & Characterizing Yours,” which focused on the human components of an organization, this framework will focus on both the human and economic elements. (Since organizational design is the synthesis of the human-related components to the organization, we weren’t focused on the non-human elements.) Because we want to know if an organization is able to weather organizational change and can be characterized as stable, we are focused on the different factors that affect stability.

This framework will give you an in-depth, comprehensive look at what affects an organization’s stability.

Factors Affecting Stability

A Case Study: When an Organization Shows Indications of Collapse

“We need a ride home. Let’s just Uber it.” Ever heard that? Uber has become so popular that people use it as a verb. But from many industry experts, including Newsweek, it may end up as “Silicon Valley’s Most Spectacular Crash.” That’s quite a forecast. What happened?

Business Insider gives us an in-depth look at Uber’s operations and history. Uber started out in 2010 in San Fransisco. It allowed you to get a taxi by using your smartphone. You request a driver, who, like a taxi, arrives at your location and drives you to wherever you need to go. Drivers have the option of using their own car as long as it qualifies; otherwise, they use a car provided by the company. You have the option of paying either by cash or credit, making the ride even more convenient.

“What’s the best part?” you ask? If you need a ride immediately and there are no Uber drivers driving alone, that isn’t a problem. You can drive with someone else “who is riding a similar route.” You simply split the ride and cost. What a great way to save money and be environmentally sustainable (by decreasing greenhouse gas emissions).

uber-self-driving-car

One of Uber’s cars

It pretty much replaced the need for a taxi, especially given the number of issues you experience with taxis. You need a taxi to be right next to you at an opportune time; you have to hail it down physically, e.g. using your hand or by yelling at it; and the taxi cannot already be driving someone else.

Even though Uber is 1.5 times more expensive than taxis, it’s worth it for many. The fact that it provided “nearly 170,000 trips per day between April 2015 and April 2016” across fifty-eight countries proves that. It’s even reached the international stage. It has done all of this in just six years. Be aware that I haven’t even covered other services like UberCARGO, UberRUSH, UberEATS, Uber X, which provide additional, but just as high quality, services.

But as Uber grew, it still has had its share of problems. In June 2015, “protests erupt[ed] in France as Taxi drivers and their supporters block roads, burn tires, and attack suspected Uber drivers.” Uber “employees”—not contractors—have also filed claims against Uber, which has brought its business model into question. (Because they are employees, they have more rights than a contractor.) And Uber had to settle a class-action suit in February 2016, paying out $28.5 million to 25 million riders.

These incidents are indications of larger underlying issues. Tyler Durden has made clear what those issues are and how they have impacted Uber’s reputation in the past six months. Workplace politics, decreasing employee morale, counterproductive work behavior, issues with compliance—all are underlying issues. Probably the worst, however, is the leadership quality and its organizational culture.

CEO Kalanick was found, on video, “rudely arguing with a long-term driver,” and he openly had to say, “I need leadership help.” But many of the leaders are leaving or have been asked to leave. Amit Singhai, VP of Engineering, was asked to leave shortly after being hired. Ed Baker, VP of Product and Growth, resigned, too. Without strong leaders at a company as large as Uber, all the underlying issues are likely to abound.

But its culture only adds to its leadership troubles. Susan Rigetti, a resigned Uber engineer, has described the culture as tolerating gender discrimination. Even more awkward was that her coworker “sent me a string of messages [regarding his relationship issues] over company chat.” This would cross the line for many employees many companies, but all the more so for the recently trained. When she reported to HR, they told her “that they wouldn’t feel comfortable giving him anything other than a warning and a stern talking-to.” The company’s leaders create a culture in which these things occur.

How can the organization maintain its level of performance—and stability—if it doesn’t have the leadership with the level of quality necessary? And what about the culture? It makes you think that it’s no surprise that Uber is starting to show signs of wear and tear. Are the leaders not serving as good examples for a strong, positive organizational culture? It makes you wonder whether it is no surprise that there were protests in France.

Perhaps it developed too quickly, going from developmental stage of chaos to high performance too quickly. It still had aspects that would place it in the “chaos” stage, such as its leadership quality. Or perhaps its organizational history indicates that it hasn’t been in the industry long often, leaving it ready for signs of tear. Whatever the case, the constant change, starting from just Uber and adding on many additional pieces in the span of five years, has not always been good.

For additional ways of analyzing Uber’s situation, you can consider SWOT analysis, Porter’s five forces analysis, and Ohmae’s 3C’s model (which is now the 5C’s model). These focus more heavily on the business standpoint.

Conclusion: Analyzing Any Organization for Stability

Ensuring your organization’s stability is not an easy task. As your organization changes and undergoes continuous growth, seeing it start to fall apart will make you quite anxious. However, while change is a constant, that does not mean you have to suffer.

Using the framework provided, consider the factors affecting stability as its develops. Think about its design and the economic considerations to ensure that it remains stable and is able to effectively handle change. Because change should lead to success, not setbacks.

A well-known model of business learning is the 70:20:10 model. It states that 70% of learning is from experience, 20% from coaching and mentoring, and 10% from formal studies. When you’re first dealing with change, only 30% of what you’ve learned will help you; you’ll end up learning how to handle it through the remaining 70% you learn. Don’t be unprepared. Use this framework to make learning just a bit easier.

Published: 08/07/17, 13:19

Last Revised: 08/09/17, 17:00

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