Without any doubt, our business environment is getting more and more complex. The traditional management system of the large corporation is finding it difficult to find the right answers in today’s business world. Smaller start-ups are more flexible and rob the profitable businesses formerly owned by large corporations. In many articles, we read that the traditional line organization does not provide the framework requirement for the increasingly complex environment as a result of the globalization. One of the reasons for this is based on the fact that the growing interconnectedness is increasing the dynamics of the markets. These dynamics pose a challenge to today’s organizations which were built primarily in order to ensure stability and increase efficiency.
The organizational theory therefore emphasizes the importance of a highly-connected organization and networking leadership. Organizations must be able to deal with this complexity and their inner organizational structures must be more flexible. They have to adapt their management systems to any possible situation which occurs in their business relationships to other players (customers, suppliers and partners). These days, we hear terms such as “adaptive organization” or we remember the days when we learned about network organizations and are cocksure enough that this still remains an academic discussion.
The term network organization was created in the 80s and 90s. Network organizations can be understood as an intra-organizational structure whereby a group of legally-independent companies or subsidiary business units use various methods of coordinating and controlling their interactions in order to appear to be a larger entity or as an inner-organizational organizational design whereby an organization is seen as a solution-oriented system with high momentum. The internal dynamics are based on informal social networks. The inner-organizational aspect was already addressed by Peter Kotter’s publication “Accelerate” when he spoke about a dual system–a system which combines the line organization as well as a network structure.
However, leadership in network organizations does not mean that we will not have any leaders anymore. Leaders have to arrange the framework of the organizational system. The goal is to stimulate the dynamics in the network and to create the appropriate conditions for a self-organized network of the members within an organization. This is a completely new challenge for leaders. They have to step away from the old traditional powerful functions where they were able to rule the game. They are not the players on the field any longer. The players are the employees and a few of them are the central node in the network with a lot of contacts. If we are not able to change the power architecture of the organization, a network structure can never function. The autonomy of the individuals becomes a key success factor. But we know how difficult it is to provide significant autonomy. Today’s technology gives us opportunities; e.g. self-directed learning portals where employees get to design their own learning curriculums are examples of how to increase individual autonomy.
Networks will also define the term relativeness from a different perspective. Relativeness decides whether a person is “in” or “out” of a social group. The individuals are in a network which is no longer relative to an individual hierarchical structure. They find their relativeness in teams which affirm their right to exist in the business context. On the network team, there is an increase in the interactions driven by the dynamics of the markets. Network structures are adaptive and they will therefore adapt their inner logic to the external demands. Neuroscientist John Cacioppo declares the need for safe human contact as being a primary driver–like the need for food. In the absence of safe social interaction, the body generates a feeling similar to loneliness. This also explains why you possibly feel unsafe when you start at a company, knowing basically nobody and then you start to feel better as you get to know more and more people. We have to create groups where our employees feel comfortable.
As studies show (Pries in 2017), 73% of the leaders in today’s corporations are critical of today’s hierarchical line-oriented structures as they know that they will not be able to influence the need for an adaptive organization. Line-oriented organizations are too authoritarian, too heteronomous and purely profit-driven. We need more people-oriented organizations whereby people gain the autonomy to meet the business demands and feel the social safety so that they see their relativeness on teams even though the organizations are constantly transforming their management systems. If network organizations will ultimately be the answer will depend on the willingness of today’s management to let loose of their current power architecture.
I believe it is an issue which cannot be ignored, but it will be a long process–a transformational process whereby not all of today’s corporations will succeed. Executives would be well-advised to start this transformation earlier rather than later. Those managers who are not willing to embark on this journey will no longer be needed in today’s organizations.