Designing a Disentropic Organization

According to a dictionary, Entropy means the following. 


1.In Physics, "thermodynamic quantity representing the unavailability of a system's thermal energy for conversion into mechanical work, often interpreted as the degree of disorder or randomness in the system".

2. "lack of order; attrition, gradual decline into disorder"  


Disentropic, on the other-hand, means "Quality of the system to continuously renew itself" without suffering from disorder and lack of energy"


Going by the above definitions, many of the large entities - whether they are governmental, business, educational, or church - often appear to be in a constant state of entropy, especially after having grown into bigness. What are the sources of disorder, randomness and chaos? Why do people appear dull, crazy and exhausted in such organizations? Why do people sound cynical and not willing to trust anything that goes on in the name of New CEO, New Technology, Mergers, and Change Management. 


Many of us would be surprised to learn that the very logic of size, power and control which brought success and stability in the past have also been the source of disorder, chaos and attrition of energy and enthusiasm in organizations. In the past, organizations were desired for their size, abundance, financial strength, and managers were celebrated for their political prowess, tactical creativity, predictable and customary style of leadership, and employees believed that people at the top are omnipotent and have all the wisdom to secure everybody's interest.  Such factors, no doubt, had played significant role in ensuring profitability, efficiency, and scale-based economic advantages.  


In recent times, however, as organizations are facing accelerated change and insurmountable complexity, managers and employees find themselves helpless; feel that they have no locus of control on their actions, often could not trust their fellow employees and easily get offended by sermons from corporate leaders. And whenever they experience uncertainty and instability due to accelerated change, organizational decisions are deployed with the routine logic and thumb-rule that worked well in the past. Be it change management, leadership selection, corporate strategy, and choice of financial instrument. 


Pursuing a trodden path to think and decide a course of action to resolve modern organizational challenges can be an invitation for disaster. Complexity and pace of change in environments create paradoxical management tensions both from within and without. While organizations have to keep moving to stay current and cope with the dynamic changes in consumer segments, regulations, global trends and technology, they also have to deal the paradoxical tensions with regard to organization design choices, resource allocation, business strategies, stakeholder expectations, time-horizon of investments and returns, choice of technology formats, cooperative vs competitive strategies, or whether to externalize the transactions or internalize them with ownership and bureaucratic controls.  Following are some systemic ways to resolve the emergent complex organizational crisis.  


1) Diversity of Human and Technological Competences               

   To reduce the risk of entropy and sustain dis-entropic conditions, organizations have to carry requisite variety in cognitive, human and technological resources.  Studies report that in turbulent market environments the large-scale organizations are less innovative. Despite the demands of efficiency and specialization, firms need to build diverse competences and cross-functional or cross-industry skills to leverage knowledge across markets and businesses. Diversity in human and technological resources will enhance the organizational learning capacity and will help renew the organization with innovations and new opportunities.


2)  Procedural and Distributive Justice in the Decision Process 

   Resource allocation decision is a perennial challenge for any organization. One of the central aspects of deciding resource-allocation in an organization treating it as systemic activity is whether to achieve balance among the sub-units or components within the larger entity or let select-components of the system to benefit asymmetric resource advantage at the cost of rest of the organization. This dichotomy may occur due to various organizational reasons, for example, managerial discretion, strategic choices, political and power coalitions and information or data source biases/errors. Nevertheless, no organization has infinite or unlimited resources to keep all the constituencies within and without fully satisfied. Although organizations most often try to strike a balance among the competing ends, however, decision-makers often compromise to powerful coalition interests and insiders, and arrive at decisions satisfying to the power centers. Ego-driven conflicts and lack of trust - which are further tempered by decision compromises - can be a big impediment for any progress and change. 


Notwithstanding the good-intent or the strategic priority or a trade-off driving the resource-allocation decision, neither the choice nor the end-result may have the optimal or most desired benefits in the absence of systemic criteria to allocation decisions.  A system-driven choice, if properly designed – driven by consent and reciprocal assurances of all competing interests, stakeholders – even if it is lopsided in terms of resource allocation – will deliver the most optimal results. In other words, system-driven choice or resource allocation process will emphasize due diligence and distributive justice to all significant stakeholders in the decision process. Thus, procedural justice, social exchange norms such as reciprocity and distributive justice should underlie the design of the strategy and resource allocation decisions in addition to prioritizing the strategic choice. 


3) Controls and Performance

   From a systems perspective, the notion of performance has to be redefined as ‘excellence’ achieved in harmony with system balancing the interests of all stakeholders, and rather than asymmetric resource accumulation of a few people or units. In recent years, the notion of competitive advantage which has been defined primarily in terms of shareholders wealth maximization is increasingly challenged with a call to replace it with outcome measures that serve the interests of all stakeholders. For example, the inclusion of sustainability measures, balanced score card, and triple bottom-line controls (people, planet & profits) are new trends in building stakeholder-driven and eco-centric enterprises. 


4) Organize into Self-managing Teams

  Often Managers wonder whether they need to rely on a strong leader to design and execute strategies and bring about changes. Especially in the context of building innovation, learning and quality driven organizations, there is misconception that organizations need to bring in exceptional leaders or pour more resources into change management efforts. New Age smart enterprises, however, challenge this premise and rather try self-managing teams. Blue chip corporations such as Google, Apple, Samsung, CISCO, Siemens, ABB and Ericsson are implementing new programs such as Shoaling, Communities of Practice, and kaleidoscopic networking for building knowledge based innovative organizations that rely on self-managing teams rather than corporate stars.


Accompanying this trend is a substantial change in the nature of organizations emphasizing knowledge which foster intellectual capital and dynamic capability to adapt to constant changes. As organizations are increasingly emphasizing innovation and quality, self-managing teams can easily facilitate the transition because innovation and quality thrives in organic structures and flexible work arrangements characterized by autonomy, intense information and knowledge sharing and participative decision-making.  Teams are identified as self-managed when they are able to regulate their behavior on relatively whole tasks for which they have been established, including making decisions about work assignments, work methods, and scheduling activities. Self-managed are also referred to as self-led, self-directed, self-regulating, empowered. The common attribute of all these teams is that they operate with a degree of autonomy, have responsibility for the entire task.


Higher degree of self-leadership also results in increased communication and information exchange. Absence of hierarchical structure causes managers to seek more information from employees rather than rely on management by command. In addition, there is a shift from a limited vertical flow of information to multiple lateral exchanges between equal members of a team. Since self-leadership involves a paradigm shift from "controlling" to "involvement," employees in SMWTs receive power, information, and knowledge. This approach to leadership in work teams results in commitment building. 


Self-managed work team is effective in drawing tacit and experiential knowledge of individuals because it offers the motivational incentives, organizational flexibility, and dynamism required for learning and sharing knowledge. Self-leadership encourages the team members to take cognitive risk in interpreting various cues and information encouraging the employees to transcend physical and cultural barriers. 


5) Transcending Ego and Distrust

   Leaders need to find ways to transcend the barriers of ego and distrust that impede most of the learning and progress in organizations. Well, such an advise is easier to spell than to practice. Fostering a trustworthy climate for dialogue with the intent of exchanging ideas and learning from one another is critical for managing change. Dialogue allows individuals to articulate their subjective knowledge through positive words and stories. Because all stakeholders are considered significant contributors to knowledge necessary for change, it is essential that the organization distribute and receive information synergistically both inside and outside. If firms are standoffish to their employees, customers, suppliers, and other stakeholders, communication channels become blocked and distorted with misinformation. Good working relationships with various stakeholders are vital for the flow of valuable knowledge.  


6) Toward Inclusive Corporate Governance 

   Several research studies point to the necessity of changes to the corporate governance to accommodate the concerns of stakeholders that are global in character. Furthermore, the traditional authoritarian management styles, which are rooted in the approaches of Ford and Taylor, have reached their limit in achieving financial results. The intense global competition and rising economic powers such as Japan, Korea, Brazil, Canada, India and China have exposed the inherent limitations of traditional management theories in achieving greater surplus value.  There is a need more than ever in the past to move toward stakeholder-driven ‘co-management’ and consensus-oriented corporate governance. This will not only help in bridging the gap between ‘shareholders’ and ‘employees’ but can also enable trouble-free reorganization and restructuring processes. To bring about a real change and paradigm shift in the organization, often firms need to go beyond the initiatives that just focus on the employee behaviors and should attempt to change the very notion of the firm itself which includes the “rules and the very nature of the power and control that traditions perpetuate in our organizations”. 



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