Recently the CEO of a well-known company asked me, "What is the meaning of culture in our organization? Is culture what most areas of the company do? Is it what management says? Is it what I tell people to do?" The answer is rather more exciting than this.
We've all experienced times when we wanted to solve a problem in our company and tried to apply the best energy, tactics, strategy, practices, and innovative ideas, only to find out sooner rather than later that they did not work at all. And I'm not talking about something that failed but about something that ultimately brought the opposite effect than what was expected.
Regardless of your position in the organization, there are usually four or five things you can blame when this kind of thing happens: lack of institutional support, the culture of the company, the type of organizational structure, economic incentives for employees, or the current framework.
For example, last year I introduced some pairing techniques throughout the whole organization (including managers, product owners, developers, CEO, and HR). I wanted people to think of two employees as the minimum working unit. The result was that not only did no one want to use that model — even after knowing its advantages — but they decided to take the opposite path, to increase the silos in the company and work more in isolation. I imagine that you can recall dozens of similar stories in which a desirable and consistent change with good intentions and a solid economic model had the opposite effect than expected.
Most books, conferences, and other corporate events treat the organization as a monolithic block, and only in some cases do they mention the relationship between culture and hierarchical structure or a particular framework. As you will see, that simplistic mental model is not enough to explain the different causes that create the opposite effects, the scope of the model, and how to measure success.
The four organizational layers
From my point of view, every organization has four different and clearly defined conceptual layers, each serving a concrete purpose and role. Certain major actions that Agile coaches, consultants, ScrumMasters, managers, or CEOs want to push within the company exert some initial activities in a specific conceptual area, whereby specific rules and particular kinds of causes-effects apply.
Before promoting any change (adding practices, techniques, or change in structure), frame it within one of the four specific contexts so that it can lead to understanding which lever must be pulled and how to measure success.
My organizational models have four layers: Social, Mindset, Formal, Organizational, and Value Creation.
Each contains specific rules. For example, under the Social layer, most sociology concepts can be successfully applied, whereas if you are under the Value Creation layer, things related to a specific framework, practices, and how to transform effort into customer value are key factors.
The idea of the four-layer organizational model is to allow people to identify where the impact is, its "local" rules, planned/desired steps, and how to measure success.
If you look at the picture, you would find that many actions that you previously planned and thought would affect the company as a whole clearly start in a defined area that has certain rules, with specific causes and effects. Let's focus on the central layer first.
The central layer of the organization is where the Social model lives. This model mainly involves the way people communicate and interact within the organization. Here, all the sociological rules apply.
Think of the company as an independent country. Regardless of whether it adjacent to another country, it has its own traditions, cultural factors, and specific forms of communication, which may be totally different from those of its neighbors.
The Social model also involves how people complete the tasks socially, how they make processes visible, and the way they provide transparency. This is where behavior patterns
, such as how the "accepted ways of doing things around here," must be taken into account (for example, which things are accepted when working under pressure), what is considered right or wrong, or which methods of communication are considered effective among people.
In one of the companies I worked for some years ago, it was acceptable and expected to work weekends or call other employees no matter how late in the night. In another company, that expectation was socially banned. Being honest with the CEO about everyday issues or working overtime can be considered either an offensive act or something entirely acceptable. The extensive use of emails instead of face-to-face communication or pushing meetings to others' agendas can also be something expected or considered "normal."
The following factors somewhat affect the Social model:
- How people communicate within the company
- The way the processes or other actions become visible within the organization
- Established cultural patterns (which things are good or bad)
Another set of factors, in turn, directly impact the Social model, such as the accepted ways or techniques of work, number of people, and fluctuation between cost-benefit. For example, it is common for employees to express that communication was better and more transparent when the enterprise was smaller or when it had more resources or money.
The following factors have the most impact on the Social model:
- Cultural beliefs (what is right or wrong)
- Work practices accepted as good
- Number of people/scaling
- Fluctuations in the economic model
For some company mergers, apart from the cultural issues that arise between foreign enterprises, the final act has a massive impact on the Social model (e.g., new ways of communication or new beliefs).
A particular behavior from the Social model stems from the impact that the sense of urgency has and how it magnifies the effect on any changes that need to be made. The sense of urgency
is a deliberate act that is considered vital. It pressures people to perform a task within an expected time frame. It can happen as a result of changes in the market or internally.
How many times have you found that two departments that did not communicate with each other began doing so when they had to complete an urgent task by a fixed date? Another example is when people are informed of some adverse economic situation in the organization and begin to collaborate or provide transparency about the processes to collectively finish certain tasks before the end of the fiscal year.
The sense of urgency is a key factor for pushing changes in the Social model. If the sense of urgency is small and is pushed regularly, the effectiveness and long-term effect of the change is generally amplified.
How do we measure the Social model? You might get some idea by direct observation, but it is more effective to measure it by taking into account the flow of relevant information within the organization, the effectiveness of communications, the degree of visibility and transparency, the way that people collaborate, and blockages in the flow.
The layer surrounding the Social model is called Mindset and represents the foundation for beliefs and abstract ideas that the company has about itself and its reality. For a company that has grown over time, the Mindset can be evolutional
, as in the case of certain learned known mindsets (e.g., Lean, Agile); or inherited
, in cases of mergers.
Even though a company uses Waterfall, or nothing at all, it has its own way of thinking, although it is not explicitly written. For example, when I worked for a consultancy company in the U.K., although the mindset was not written, everybody knew and followed it. Obviously, the introduction of Agile or Lean values particularly affects this layer — but not its practices, as they are found in the Value Creation layer, which we will see shortly.
A company’s mindset can be affected over time by an increasing number of employees, mergers, and business partners within the same organization who have alternative ways of thinking. The way to measure the Mindset is by determining how aligned the thinking is with the desired mindset (i.e., Lean or Agile).
In many Agile companies, for example, they use specific questions and rate the answers between 1 and 5, to determine how close they are to a specific state (e.g., accept late changes, etc.).
Formal Organization layer
The third layer is called Formal Organization. A few years ago, a large number of managers where asked to draw how they imagined the organization to be. They all drew an organizational chart with its different departments and structures. They could not have been closer to the Formal Organization layer structures
that control information to ensure consistency between the company, its structures, and its reality.
An important point to note is that this is where the information that comes from the other layers is organized, by using methodical and control structures. The objective is not to create value for the customers but to protect the structure of the company from changing too quickly and also to operate as efficiently as possible, establish order, and control and measure information.
Any changes in the hierarchical structure or ways to control information directly affect this layer. To effectively measure at this layer, you should generate reports that check the alignment between the desired structure of the organization and its reality and how the information is controlled and organized.
Value Creation layer
Finally, the last layer is where the value for the customers is created and where all the processes that support this action reside. Actions are fully customer oriented
and don’t focus on maintaining the company’s structure. Scrum, Kanban, SAFe, or any other framework or method (including Waterfall) resides here.
It is important to note the dichotomy and tension that naturally occurs between this layer and the previous one, and the differences between them.
The Value Creation layer is mainly impacted by the type of framework used, how queues and batches are organized and their size, how the company defines customer value for itself, the number of people in the company, and scaling processes. Success in this layer is measured by the extent of compliance with the framework and selected practices and the way to increase the customer value. Remember that continuous improvement is different in each layer and is carried out using different approaches.
For any strategy or Agile transformation, it is necessary to know the rules governing the organization so that the four-layer organizational model can be used as an important tool to explain how the company works, through its impact and relationships, and in different contexts.