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Size doesn’t matter

It’s a commonplace that large organizations tend to be stodgy and bureaucratic, and smaller ones tend to be innovative and flexible. When we see a large organization that seems to be innovative and flexible, we are amazed. The press springs into action to report on the existence of this Highly Unusual Thing. It’s an oddity, a curiosity, an anomaly, a freak of nature. The organization is cited as a case study in business books and academic papers. Executives in other companies try to mimic what they think they see the exemplary company doing.

Having participated in various change initiatives in organizations of all sizes (from around 20 people to around 240,000), it strikes me that size alone does not lead to stodginess. I think there’s something more fundamental: Identity. That is, the sense of identity on the part of the individual members of the organization. Do people feel like members of the same organization, all aiming for the same goals, or do they feel like members of a local tribe: Team, work group, department, division, etc.? As an organization grows, what factors might contribute to one sense of identity versus the other?

Organizations usually grow organically, through acquisitions, or a combination. When an organization grows organically, it has a good chance to maintain a cohesive organizational culture in which people feel a common sense of identity and a connection with the organization’s purpose and goals.

It’s possible to take a different course, however. Sometimes, when an organization reaches a certain size, people start to think they need more formal processes, more rules, more standardization. They may start to think that the way to handle operations at larger scale is by creating functional silos. Those silos evolve into fiefdoms where people feel disconnected from the broader organization, and where a localized, tribal identity may take root. Standard procedures and rules accumulate, and eventually it becomes all but impossible for people to carry out the simplest of tasks. The organization loses the characteristics that enabled it to grow in the first place, and stagnates.

When an organization grows through acquisitions, the course of least resistance is for each administrative unit to maintain its previous sense of identity and to continue to do its work in the same way as before. In most cases, individuals who are part of an acquisition continue to sit at the same desk as before, report to the same manager as before, and carry out the same tasks as before. The main difference is that they are now asked to cooperate with other departments or work groups…people who are not part of their own tribe.

When two departments or work groups that used to be parts of different companies must interact in the course of everyday operations in the merged organization, their behavior is identical to that of two hunting parties from different tribes who happen to meet in the forest. They face off and spent a significant amount of time adopting aggressive postures, gesticulating, brandishing their weapons, and making scary faces at each other. The behavior continues until both parties feel assured that everyone knows whose territory is whose.

The acknowledgement of territorial rights is more important in tribal culture than any single hunting expedition. This is why, when we carry out a process analysis in such an organization, it’s typical to find process cycle efficiency on the order of 2%. None of the intertribal posturing adds value from the customers’ perspective. It happens because it is a cultural imperative in an organization that consists of acquired tribes.

The “hunting expedition” on which the two departments are supposed to be collaborating is simply not important to them, especially in view of the fact that their tribal groups were destroyed by the acquisition. Each tribe is all that remains of its original tribal group. Therefore, upholding the identity, dignity, and honor of the tribe is paramount. Members may have many years of their career invested in the tribe, and a large part of their professional identity may be connected with tribal membership. If the tribe is absorbed into the larger organization, it will cease to exist. Its history and traditions will be forgotten.

An organization that is the result of acquisitions has to take special measures to bind the different tribes and encourage a common sense of identity and purpose among its members. Otherwise, the default pattern is that tribal identity trumps common identity, and a high proportion of activity in the organization is in the nature of tribal warfare.

Some managers assume that tribal identity will fade as people leave the company and new employees join. This doesn’t seem to happen. In my view, this is due to a behavior pattern that seems to resemble the outcome of the well-known experiment in which monkeys were trained to avoid bananas, and to attack other monkeys who attempted to obtain bananas. New employees continue the tribal traditions of their work group or department without knowing the history behind it, because that is the way they are socialized into the tribe when they are hired. The pattern of socialization lasts longer than the individual employees.

My experience has been almost entirely in the private sector. I have worked with two US federal government agencies that qualify as “large” organizations, though. Most people in the private sector make certain assumptions about government agencies. Many of these assumptions are unflattering. However, in the two cases I’ve seen, the government agencies were more cohesive than the private corporations. People had a common identity and a common sense of purpose. The government agencies operated at a much higher level of efficiency and effectiveness than private sector companies of comparable size.

I have experience in only two such agencies, while my experience in the private sector is much more extensive, so the comparison is not balanced. For what it’s worth, I’ve experienced and observed far more heavy and clumsy bureaucratic procedures, and a much more entrenched bureaucratic mindset, in several of the private-sector companies I’ve seen than in either of the two government agencies. I think a good deal of it is explained by excessive subdivision of the operation into functional silos and by a tribal mentality that isn’t addressed adequately by senior management.