Hobart’s Blog – Restructuring is Insane! by Marc Townsend #4

Topic: Rules of the Game

Marc: You were talking last time about playing by new rules of the game as if an organization were a sports team.

Hobart: Running an organization is like coaching a sports team. Except, in the case of an organization, the head coaches/senior leaders get to determine which game they want to play.

Marc: So, you’re saying that the coach decides if he wants to play rugby or football, for example?

Hobart: Yes, essentially. The goal, in either case, is to move the ball over the goal line, but how they do that, which game they play or in organizational terms which operating system they use, is up to the coaches.

Marc: How do the coaches get the organization to switch games?

Hobart: By changing the rules of the game. Change the rules from rugby to football and voilà, you’re now playing football instead of rugby.

Marc: Interesting. You know, when you think about it, except for some differences in equipment and certain skills, every game is defined by the rules.

Hobart: Exactly. Can you touch the ball? Hold the ball? Move with the ball? Touch another player? Etc. The rules are defined and published by some sports organization and everyone in the sport knows the rules and follows them or a penalty is evoked. In board games, those rules are written on the back of the cover or on an insert. These are the rules of the game. Let’s take the rules of Monopoly.

Marc: I love that game.

Hobart: The rules are designed to pit each player against the others, with one person coming out as the winner. The rules are designed to make the game competitive. You could change the rules and make the game cooperative.

Marc: How would you do that?

Hobart: How do you think?

Marc: Well, I guess you could allow people to work together in teams.

Hobart: That’s right.

Marc: Why is a cooperative environment needed?

Hobart: There is a lengthy technical answer to that question, which I doubt you want to hear, but the short answer is because you can only optimize an organization if all the units cooperate.

Marc: Maybe a topic for another day.

Hobart: Your call.

Marc: So, getting back to changing the rules.

Hobart: To change the rules, you first have to define what new rules you want to use. Then, you need to realign your management systems so they support those new rules. After that, you need teach the new rules to your players. And then you need to teach them the new skills they’ll need to be successful.

Marc: That makes sense. Is that how senior leaders usually approach the issue?

Hobart: No. They start with training people lower down in the organization in some new skills and then exhort them to play a new game. Or they may swap out the players, or change people’s positions on the team. A defensive linebacker is moved to being a tight end.

Marc: That’s analogous to moving the boxes around on the org chart.

Hobart: Right. They are moving boxes around within the same game. They need to think about playing a new game, which means using a new operating system and playing by a different set of rules, rules that are not based on needing authority to lead.

Marc: So, the game they need to play needs to be cooperative and leaders need to lead without using authority.

Hobart: Yup.

Marc: Can you give me an example of a rule that needs to change relative to restructuring?

Hobart: I can give you three. Rule #1: There can be one and only one person in a single position and each person can only occupy one position.

Marc: So that means one box on the org chart for a person and only one person occupies a single box.

Hobart: That’s right. Rule #2: There can only be a single reporting line between two positions in the hierarchy. In other words, you can only have one boss.

Marc: But aren’t there instances where there are two bosses?

Hobart: That’s an example of a rule that was modified from the traditional vertical game. In the strict vertical game, one boss is the rule. In the dual reporting game, which is a variation on the vertical game, you can have two bosses. That’s something we can talk about next time if you’d like.

Marc: Yes, I would like to discuss that as it seems a lot of organizations have gone that route.

Hobart: Unfortunately for them. Bad idea, very bad idea. Anyway, Rule #3: Group all similar resources together to optimize an area of activity. That means create an accounting function out of all the accounting people, an engineering function of all the engineering people, a sales function, etc.

Marc: That doesn’t seem like a bad idea to me.

Hobart: It’s not. Not all the vertical rules are bad. The value of grouping like resources together is that you can create standard processes and methods that they follow. It’s also a way of managing technology related to a certain area of activity – like choosing the best accounting software or customer management system. The problem with the rule is the word ‘optimize’.

Marc: And to optimize is to make as effective and efficient as possible.

Hobart: That’s right. That’s how vertical management works. How do I have the best sales function? The best manufacturing function? But that’s not what you want to optimize. What you want to optimize is the whole operating process that serves customers. That’s the process that crosses manufacturing and sales, and R&D and distribution and customer service, etc. It’s the horizontal process, not the vertical one.

Marc: Are these rules written down somewhere?

Hobart: No, I don’t think so, except maybe in one of my books. Because the game has been played for so long, people just absorb the rules unconsciously. They get a job and there are certain unspoken rules that they pick up on and then it’s just how it’s done. It’s basically the same game that’s been played for 60 plus years.

Marc: This is starting to make sense to me. So, we’ve always played rugby. We grow up learning how to play by watching our older brother and his friends play and then we start playing and we never question the game.

Hobart: Right, and that would be okay except that rugby isn’t popular, and you can’t make money at it, at least not in the US, and so unless you learn to play football, you’re going the way of the dinosaur. My apologies to rugby fans out there. The analogy isn’t exact.

Marc: So, if you’re a senior leader and you’re moving the boxes around on an org chart to restructure, you’re playing rugby and you’re going to die out eventually.

Hobart: Yup, that’s about right.

Marc: Can we talk about dual reporting next time?

Hobart: You’re calling the shots.