For a happy organization, ‘coherence’ between structure and objectives matters

One of the differences between a happy and an unhappy organization is how well its structures and processes match its objectives. You can call this ‘coherence’ — a coherent organization is one which is organized and managed in a way that embraces its objectives, rather than just not getting in the way.

If you join a high-pressure mortgage broker or a Caymans-based hedge fund, you’re not necessarily looking for thoughtful management and career development or a well-run organization. You’re looking to make as much money as possible as quickly as possible, and then get out. On the other hand, you can’t run an organization that feeds the homeless, or calculates peoples’ taxes, as though it were a pirate ship.

These are extreme examples, but they illustrate a simple truth that there are basically two types of organizations: those that produce what economists call ‘public goods’, which benefit all of us, and those that don’t. The simple test that differentiates them is this: would anyone mind if they weren’t there? The world can live without gossip magazines, bond dealers and the eighty-third different kind of sugary breakfast cereal. It can’t so easily live without clean drinking water, public transport and an honest system of justice.

Fitting the structure to the organization’s purpose

Most organizations producing public goods were either set up or supported by governments. Sometimes this was because the private sector wasn’t interested; sometimes because the private sector showed it couldn’t provide the level of services and investment required while still making a profit. Transport, utilities, telecommunications, information technology, higher education — all were either organized or financed and overseen by governments.

Organizations that produced public goods, whether in the public or private sector, were typically structured and managed to reflect the objectives of honesty and good service. If you were only interested in making your fortune quickly, you went somewhere else.

The last generation has seen a massive swing towards the idea that organizations of all kinds should not only be in the private sector, but also structured and managed for short-term maximization of profits. Even organizations which could never be privatized are expected to apologize for this by looking and behaving as much like the private sector as possible.

The result is immense stress and unhappiness among their workforces. What has gone wrong with many organizations in recent years is that they are doing essentially the same thing they always did, but now in a completely inappropriate way.

Providing clean drinking water to everybody, even if they can’t pay for it, is an essential part of any public health policy, unless you want people dying of cholera. It’s completely incompatible with short-term profit maximization, and there’s no point in pretending otherwise. Nonetheless, employees, most of whom want to do a decent and conscientious job, find themselves instead servicing an out-of-control machine for endlessly cutting costs and exploiting the very people they are supposed to serve — all in the name of higher quarterly profits.

Whilst the wider economic effects of this misguided change are starting to be understood, there’s much less realization of the toll it has exacted on individuals, and the damage it has caused to organizations themselves.

Signs of hope?

But things are starting to change. There’s obviously an ethical and political limit to how much of an economy can safely be left in unregulated private hands, but there are lots of severely practical economic limitations too.

In the end, most industries that produce public goods can never be run at a profit anyway, unless they are monopolies. Take the airline industry. It was never very profitable, which was why government was so heavily involved in it for so long. Although historically very low oil prices since the 1980s enabled a huge expansion of air travel, analysts tell us that, globally, the industry has never actually made a profit in all that time. With the return to realistic oil prices, airlines are falling from the sky like pigeon droppings, and we may soon look back on he last generation as a curious interlude when people actually thought that airlines could be privately run and could compete to deliver ever-higher short-term profits.

The same is true of telecommunication companies, under siege from all directions, often by alternatives provided free. Already, they are consolidating furiously, and in many countries the choice will soon be between a monopoly supplier and artificial competition subsidized by the taxpayer.

In ten years, large parts of the economy will be back in the public sector or surviving only as regulated private monopolies. The alternative will be extinction, which is fine for gossip magazines but less acceptable for organizations supplying clean drinking water.

By contrast, parts of the private sector — certain kinds of financial services, for example — will have ceased to exist. So it’s actually quite likely that some organizations in a decade or so will be more pleasant places to work than they are now. If they produce public goods, they will be once again managed and structured to better reflect their essentially altruistic role.

How long is it since you read anything that optimistic on a management blog?

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