NEW YORK–To make his point that many organizations are lagging internally and at risk as a result, Andrew Dignan showed an audience here a picture of a corporate organizational chart showing multiple levels of management like a stack of interconnected Lego blocks linked by spaghetti-like lines of reporting. Then he asked that audience to guess in which year it was created.
Many in that audience thought it was recent enough to have been completed this year or even “yesterday,” according to one person. And therein lies the biggest challenge for 21st century organizations, according to Dignan: their businesses may have gone digital, but their organizational structures remain stubbornly analog.
Dignan, who is founder of The Ready, a consultancy that specializes in organizational design and transformation, told CO-OP’s THINK 17 Conference here that what credit unions really need to be thinking about is whether they are designed for efficiency or adaptivity.
The org chart, incidentally, that many thought of as contemporary actually dated to the 1920s.
“We started to ask questions about how did we get here. It’s pretty simple: We came from a craft economy, an artisanal economy. That was fine, but not at scale,” he explained. “Enter Frederick Winslow Taylor and Henry Ford, who realized the problem with the system like that is a person gets sick, it’s hard to replace that person. There was no leverage. (Taylor's and Ford's) big innovation was to separate the thinking from the doing. The thinkers were the first management class. The thinkers had to figure out how to get more out of the system, and the way to do that was to measure everything. It created the traditional industrial environment, and it worked really, really, well. But at the same time, it wasn’t so great for the worker. Their day-to-day reality was fairly unpleasant. This was a trade-off we were willing to make for a while.”
Declining Corporate Lifespans
But that "while" is over, according to Dignan, who pointed out that the average lifespan of a company is the S&P continues to shrink as successive waves of globalization and computerization occur. In 1958, the average life of a company on the S&P 500 was 65 years. Today, it’s 15, and that number is inflated by companies such as GE that have been in the S&P 500 for more than 120 years.
“It’s an incredible pressure these companies are feeling to change and evolve the way they work,” he said. “At the same, time, we are equally unhappy at the employee level. You see the engagement level, and most people don’t like work. Fifty one percent of people are disengaged, they are just working for the weekend. About 35% are engaged. And 15% are actively disengaged, which is Gallup code for they are sabotaging the business.”
What everyone needs to realize, according to Dignan, is that the future of jobs and labor are about to change dramatically. Non-routine work, he forecast, whether physical or creative, will grow. Routine work will be replaced by robots and artificial intelligence, he predicted.
“The anatomy of every business on earth is going to be dramatically different in 20 years,” he said.
Trend Drivers
It isn’t the “digital” revolution that is driving the trend, he said. Instead, its other factors, such as better access to just about everything as the markets have become democratized, thanks to the Internet.
“In the digital economy, you make things that can be used by many people, many times at the same time,” Dignan said. “Each company entering the digital economy offering up a piece of value is able to offer it up to others to leverage. And we are all now connected by better networks. Uber, love them or hate them, has created a $50- or $60-billion company, without inventing anything. All they invested was a very thin layer at the top that allowed supply and demand to talk to one another.”
The result has been more competition than ever, said Dignan, who believes financial institutions are among those most at risk of dying by a “thousand cuts.” He said technological breakthroughs such as blockchain and market players such as fintechs have become intermediaries in financial services.
“I see so many ways for them to take a piece of the pie,” he said. “It doesn’t have to be Amazon that wins, it just has to be that it all adds up to an aggregate loss for the legacy (business),” he said.
What is taking place, as well, he said, is that the amount of information available just keeps increasing in velocity while there is also more volatility in markets.
Do or Die
Credit unions face the same change-or-die challenge as every other business, according to Dignan.
“The problem isn’t digital, it’s our operating systems,” said Dignan. “One thing that will set you up for success is that you can get very tactical with a transformation to an agile way of working, and that’s all well and good, but if you don’t understand the underlying system of decision-making and transparency, etc., none of that works. People get frustrated and leave.”
Every organization and credit union, said Dignan, has an “operating system” of decision-making made up of the simple, often unwritten rules on “which everything runs. You have an operating system whether you like it or not. It’s a way of thinking and doing and believing inside your organization; it’s how you make decisions.
“So, in a way, what we really mean by being digital is working in a way that prioritizes speed and learning,” Dignan continued. “And that will automatically take care of digital. It keeps you ahead of the market. If you are organized for learning, as the customer changes their habits, you are there to meet them.”
Illustrating his point, Dignan cited the example of Dick Fosbury, who revolutionized the high jump by going over the cross-bar backward, which was counter to how everyone else high jumped, right up until Fosbury won a gold medal with his disruptive change at the 1968 Olympics.
“People will say, ‘It works for Dick, but it won’t work for us.’ Or ‘It works for Amazon, but it won’t work for us.’ That’s where I find a lot of organizations today,” said Dignan. “In reality, we kind of have to commit. Once you go over backward, you realize it’s a better way.”
Who Will Own the Future?
Credit unions will need to be doing their own Fosbury Flops, according to Dignan.
“The future belongs to those that think and work differently. The rest of us are designing for efficiency” and all of its tenets, he said, including command and control, a hierarchical matrix, centralization, top-down directives, need to know and complication.
“Twenty first century organizations design for adaptivity,” Dignan continued. “They look at distributed authority, dynamic teaming, decentralization, emergent leadership, responsiveness, transparency and simple rules.”
No company, said Dignan, is completely in one camp or the other. “But every company needs to be focused on moving toward the design for adaptivity.”