Simone

Hello everybody, and welcome back to the Boundary Conversations Podcast. On this podcast, we explore the future of business model. Those organizations, markets and society in our rapidly changing world. I’m joined today by my usual co-host, Shruthi Prakash. Hello.

 

Shruthi

Hello everybody.

 

Simone

And today we are super thrilled to have with us Niels Pflaeging an internationally recognised manager of Team Care, author, one of the leading voices for challenging convert conventional, let’s say, organisational design and management practices. He is the founder of the BetaCodex and the partner at Red42 Over the last two decades, you have been widely known for, your work on complexity, decentralized organizations. 

 

And, I would say, generally speaking, the transformation of management, systems beyond, command and control, which I think, so to get to make us passionate, on both sides. You have opened countless organizations around, you know, I think teams that negotiate the coordination in complex environments. You’ve also authored influential books like organize for complexity, the Beta Codex, and other books on set for management thinkers that I worked starting that you’re going to talk to us about in a few minutes.

 

Hello, Niels. It’s great to have you on the podcast.

 

Niels

Thanks to you guys for inviting me. It’s wonderful to be with you.

 

Simone

This season, I had so many people coming to the focus from what I called my, pantheon of, inspirations. Right. Because your work, especially on organizational physics, was really foundational, for me, at least, to how I see organizations and platforms. And I remember mentioning your value creation section, a slide in presentations from maybe 15 years ago or something like that.

 

Niels

It was very new. Yeah.

 

Simone

Yeah, yeah. Exactly, exactly. So, so we had this conversation on LinkedIn a few days ago talking about, these exact, you know, it was a very pioneering work that is still relevant, but people still misunderstand it. So, what was your experience in the last, more than a decade in talking about this, Niels and why people are still do not grasp it entirely.

 

Niels

Yeah. As you mentioned, I’m old, so I’ve been in this business for 20 years, doing consulting and writing and speaking. But I do these three things. So I, I think most people that specialize on one of these things. So the great speakers, public speakers, they only speak and as they never have to do a workshop, a real workshop with clients or they do not do consulting projects, they are never seriously questioned.

 

My work has always been very question. Everybody hated my work when I started doing Beyond Budgeting 20 years ago. Everybody hated it because they said, budgeting cannot be abolished. Everybody needs planning. And, you know, planning is very useful. And so when I when we in 2011 came up with the notion that organizations have three structures, not two, not one, but three, everybody had doubts, you know, not everybody responded as you did, saying, oh, it makes immediate sense.

 

So let’s talk about it and let’s put value creation structure first. Few people had this insight right away. I think still people most people struggled at the time. Not sure if you remember around, 15 years ago, there was a book by John Kotter, one of my heroes, who wrote a book about dual structure. So organizations supposedly have two structures.

 

And I said, this is completely wrong. Sadly, you are a hero, John, but it’s wrong. So he is really a hero. I love his work, but that book don’t read it. Yes, organizations still don’t have two structures. In his book, he basically distinguishes two structures that also appear in the organizational theory physics, which is formal structure and informal structure.

 

I think today everybody understands that there is not just formal structure. There is also informal structure, who we like, who we dislike. Shruthi, you are from which part of India you are from India, supposedly, right?

 

Shruthi

Yeah, from the south of India.

 

Niels

You are from the south of India. So who in India do you dislike most? From which parts of India?

 

Shruthi

Tough to answer.

 

Niels

But let’s imagine that you are from Delhi. So you do not like people who are from.

 

Shruthi

Maybe if I had to pick that maybe Delhi. Yeah, I don’t like yes.

 

Niels

Yes. I recently did a workshop in Austria, and it was in a in a rural region in Austria. And at some point I imitated an accent from Vienna, which is the only Austrian accent that I know a little bit. So I imitated how Viennese people speak. And after the workshop, one of the guys, an older guy, he says, Niels, you shouldn’t imitate Viennese accent, because everybody here hates people from Vienna.

 

And he was an Austrian, of course. Right. And I thought I said like, but does it really matter who you hate? I just want to make fun, you know, make a silly joke. You know, I didn’t mean I love the Viennese. Not that I despise nothing like that. It’s just the only Austrian accent that I imitate. You know, this is the way we are.

 

We, like other people, dislike other people for religions. Some of us are racists, even, you know, which is terrible. But we also, you know, we might like people who went to the same school, the same university, who are in the same cult. I have a son who studies. He’s a physicist. He studied physics, and he kind of looks down on everybody else, on biologists and on me.

 

So we are like that, right? We like and dislike people and sometimes seriously, sometimes. Yeah. Oh, it’s very important. For example, when you work in a company to smoke, if you smoke you meet other smokers and while smoking you talk. That’s why it’s also important to drink coffee with other people, drink tea with other people. It’s always good to drink coffee and tea because you meet different tribes.

 

And from that’s informal structure. It’s very powerful – watercooler. I’m not sure about how it is in Italy. I suppose informal contacts are very important. Right.

 

Simone

Yes, I would say leading countries, but even Middle East, it’s the same.

 

Niels

Exactly. It’s everywhere like that. Right? It’s the most powerful structure. Everybody knows that. But what’s really important is informal structure. It has nothing to do with hierarchical levels. It is defeats hierarchical levels because it’s all about sympathy, antipathy and who we are close to. We who you relate with. And so and it’s the informal game, the social game in organisations, it’s very different from the formal positional game.

 

Right? Hierarchy. That’s what formal structure is. It produces a power of hierarchy while informal structure produces influence. You like me so I can influence you. And we do that all the time. So those are two important structures. 

 

What’s and this is what many people today understand. Mr.. Carter started to understand it 15 years ago or so. The problem with those two structure is that you cannot get work done in either of those structures.

 

That’s not work. They don’t describe how work works because just because I like Shruthi and she likes me or we dislike each other, that doesn’t explain how we work. It makes work harder or more easy, easier. You know, but it doesn’t describe how how work gets done. Formal structure. I might be your guy’s boss, but that doesn’t. It doesn’t explain how to explain either how the work works.

 

So there must be a third structure. And this is why we created org physics. Because we understood Silke Hellman and I, we understood 15 years ago that in order to truly understand how work works, how value creation works, we need to understand another, another structure, the third structure. And that’s least understand what? Why I’m talking to you about the two structures formal structure and informal structures.

 

It’s just to make you aware and everybody aware. They are not as important that we as we think they are very important. They both produce power, but the most important power to get shit done, as the Americans say, is value creation structure, which creates another force, another power called reputation. So in value creation structure there is another world.

 

This is way. This is for example, I respect John Carter because he has a reputation of power over me, because I respect his work. In every company there are people who you turn to them when everything goes downhill, and then you say things like, oh, now we have to talk to Frank. The only person who can save us is Frank.

 

All is a yes. So now we have to turn to that person. People with mastery and they are important players in the third structure – the value creation structure. And to understand value creation structure, there’s a fundamental concept that until today, most people do not understand or do not respect or do not want to understand. It’s the distinction between center and periphery, or bit between periphery and center, because the periphery is more important than the center.

 

So organizations are like peaches. They have a periphery, like the peach meat, the juicy part, and they have the little pit inside. That’s the center. And the center serves the periphery so that the periphery can serve the market. That’s the most important new idea in org physics, is that, value creation structure is the only structure where the actual work can happen.

 

Every organization has a value creation structure and the work. The value creation flows from the center to the periphery to the external market clients. Ultimately, and every organization has this. And when organizations become larger than 20 or 30 people, they differentiate. They start differentiating between center and periphery, and the periphery must be in charge. Decentralisation is paramount. Survival also in the age of AI, which we might discuss because if you do not put place power in the hands of the periphery, then you have to rely on centralized steering against the market forces, and you will fuck up the whole organization, or you will blow up the whole organization.

 

And if you do not want to hurt value creation, you cannot accentuate formal structure, too much form of structure and value creation structure. They have an antagonistic relationship. They are like wolves. So if you steer through a hierarchy and formal structure, you will hurt value creation, which must flow from the inside out. And it cannot stand hierarchical force.

 

So these two structures in today’s organisations are in constant conflict. Large organizations suffer from the conflict between the use of formal structure and the need for value creation. And that’s in 120 minutes that I just needed to explain. This is org physics. Every organisation has three structures. They battle against each other. They must be balanced informal structure are important for that structure has a role to play in compliance.

 

But to organize the work we have to understand value creation structure, which means distinguishing between periphery and center. Was that a good enough explanation? Yeah.

 

Simone

And when do you speak about, these three structures? Right there is, of course, the formal structure that, again, doesn’t get to work and is just about compliance and formal roles and gets in the way most of the time, let’s say. Then there is the the relationships, which of course exist all the time. You know, I have been plenty of, with plenty of customers, which told me to get something done for me – I need to go and speak and ask favours and things like that, which is frustrating sometimes. And then there is the value creation structure. So one thing that I wanted to ask you is this value creation structure that you, speak about. You know, org physics is very much based on reputation in, you know, this guy or this girl, or this woman and knows how to, get this done, or they have a clear reputation, clear capabilities, clear mastery.

 

So it’s some sort of structure that emerges from the daily practice. Right. I’m asking you once again, because in my experience, there is, let’s say, especially when you need to really scale such a system in a larger organization that you need to empower the periphery. You need some sort of, structure to enable it. 

 

And for example, in our case, we always use this idea of micro-enterprises or nodes and contracts and other teams have, for example, team topologies that came up with this idea of team structures, or team archetypes. So how can you help, let’s say the value creation structure emerging an organization by creating this enabling texture for the organization to reorganize around it.

 

Niels

Yes, there is an additional ingredient, a secret sauce as you, as you say, to a value creation structure. And this is the notion of the team. A team is not a group, a group is a group. Might be a team, but not all groups are teams. A team is always small. It cannot be too large.

 

That is one thing you referred to. I think to the hierarchies with the micro enterprises. I think the hierarchy is not very kosher because they say that teams have 25 people, but the 25 people are never a team. It’s one of the things I would like to understand in that they are understanding of organisation. For me, for us in org physics, it’s logical that a team can never be bigger than eight people, nine people.

 

And then it gets very difficult. The one pizza rule, as some Americans call it, right? If, if if a team becomes too big, it ceases to be a team, it becomes a group and it becomes, you know, hierarchical social density evaporates and they become like bad, right? So a team is always small. A team has four people, five people, six people, with seven it gets more difficult with eight, quite difficult with 15 people. Impossible. Right. So the secret sauce to decentralization and to value creation structure is have small teams in the periphery with their own clients or serving clients and have teams in the center that serve the periphery as internal clients. So you have the periphery serving external clients, the center serving internal clients and not the center steering the periphery, but the periphery, steering the center.

 

It’s all quite it’s it’s counterintuitive. That’s why we call it like physics, because it’s it’s real. It’s not I’m not talking about opinions here. Every organization works like that.

 

Simone

Essentially, my question is – if you want to completely was more in the direction of asking you what kind of structures a company can create or enable to make it a value creation structure to emerge more clearly, because otherwise the idea of reputation and mastery may sound a bit, fancy, let’s say. 

 

So I was thinking to something like, micro enterprises or, you know, team structures and things like that.

 

Niels

One of the things that I had to learn, I come from an administration background and and I was a financial controller. So at a certain point, I had to learn a lot about, social psychology and how work really works and organisational development and all this stuff, even psychology, by the way. And, so one of the things I learned is the the smallest unit of value creation is three, two people and thier connection.

 

Yes. It’s a myth that individuals create value of work alone. Nobody works alone. People always work in constellations. And that’s hard for most people. That’s hard to understand, especially in America where people think that only the individual account everything counts in large amounts. So, you know, only the individual is everything, right?

 

If you don’t achieve your loser otherwise in face of what value creation is really about, which is collaborating for each other, with each other, doing things together, you know, so every in every company, you need an accountant or somebody doing accounting. You need somebody approaching clients, you need somebody developing the product and so on. So you need a lot of roles.

 

And it’s never just one person. Even the greatest inventors of all times had somebody, you know, and a lab assistant or their wife’s, the Curies had each other, for example, Marie Curie and her husband, they had each other, you know, so nobody’s alone. You know, we work for each other, with each other, and the value creation, structure, self structure design, as we call it, reflects this so that people work in consultation, these small teams, 4 or 5, six people or so, but never 15, 25.

 

And that’s also something that many organizations I work with, with tech companies, a lot of software firms, and they struggle to understand that. No. If those developers think they are alone or work alone, that’s just a beautiful illusion. They don’t, what you have is just bad processes, bad functioning, bad interactions, bad value creation. Because when people think they are alone and do things mostly by themselves, you just end up throwing stuff over the silo walls.

 

You know, you, you have boundaries. And so, so the idea is not to have silos, not to have command and control functions. Or functional, all the functionally divided organization, but functional integration. And what to think about that. People working with each other for each other, you start thinking about, okay, what’s the level of mastery that people have in their roles?

 

What is their reputation? How good are they really? Are they just beginners? Are they amateurs or are they? Do they have mastery, or are they maybe even virtuosos in what they do? So you call this these ideas sophisticated then? They are very basic. Do are people more capable or less capable in what they do? They still are they still apprentices or are they masters already?

 

You know, are they even masters who can have other people as apprentices? So once you start thinking not in positional power like informal structure, but in roles and masteries, you get closer to thinking about the actual work. And that’s what has been lost in command and control organisations in tailoristic organizations. Most of the time we don’t talk about mastery.

 

We talk about positional power or who hates it, you know, and that’s not work. Even a committee is never about to work. If these are practical examples, and any organization that has a committee doesn’t support value creation structure, it creates it. It reinforces formal structure.

 

Simone

Because my question was more about, of course roles, of course mastery. Of course influence, of course. Reputation. But my question was more like, what kind of structures have you seen, used by organization to organizations to implement these, at scale. So, for example, when you refer to teams and I don’t know if you thought it was you, but the I maybe.

 

Yes. Once, somebody said, you can only measure, performance at the team level. You cannot measure it at the individual level. Right. So the idea for me is, in your experience, what kind of regarding team structures or approaches to specialization, like, for example, in the, Haier model or in our approach, we know that there are, you know, micro-enterprises that are shared services.

 

Team topologies have these idea of platform teams, streamline teams. Is there something that, connects well with the idea of value creation structures? This idea of team specialization.

 

Niels

The what you just used, you said micro enterprises.

 

Simone

And what’s the share of services? For example.

 

Niels

Shared services. Shared services is a work from the realm of command and control of centralized theory. I wouldn’t use it. My clients never use it. We distinguish between periphery cells in the periphery and cells in the center. What Haier calls micro-enterprises ourselves in the periphery that have clients that have an external business that sells stuff to external clients, that may produce services or products or both, and they might know now, using my vocabulary, our vocabulary cells in the periphery cannot do everything by themselves.

 

They need some internal support, maybe for production purposes or accounting, or for example, a general manager or a CEO is usually not part of the periphery because she or he doesn’t do anything that an external customer pays an invoice.

 

Simone

Yeah, yeah, sure, sure. That in I mean, your experience is these, cells that you refer with the teams, right? Are these typically group in second level structures? In an organizational they are very much okay. That’s that was my question.

 

Niels

Or essentially that would be the death of value creation structure. No secondary structure needed. You have the center and the periphery. And the center serves the periphery so that the periphery can serve the external market. There should be nothing else. And all cells in the periphery must have external clients. This is very hard for most people to wrap their head.

 

Okay, all my clients have a pushback moment saying this is impossible. It might work everywhere, but not here, because this cannot be.

 

Simone

When you have processes or production that, you know, necessitates, some kind of more structured work. Imagine, for example, that is something that cannot be achieved by one team, relating to other teams. So maybe that’s not the case. You know, in your experience, is there any situation where, maybe you need some longer structure that need more coordination, like in industry, for example, that are more, you know, demand more planning or things like that?

 

Niels

Okay. The answer is no and maybe a little bit of yes. So here’s the thing. Sometimes you need more people to do certain value creation. So one team of seven cannot do this thing.

 

Simone

Exactly. No. That’s my point.

 

Niels

Could be more people or seven more people. So they can collaborate among themselves. Cells can share the business. They can say, oh, we can have this project or client or service and we do it together. We invoice 50, we share the invoice 50:50, the income 5050 between the cells can do this together. So collaboration in peripheral cells is an option.

 

Also there might be longer value creation chains in a company. But that’s rare in industry. That might happen.

 

Simone

That that’s very resonant with the work we are doing right. And how do you manage the need for infrastructure? Like for example, I guess that many teams can share an infrastructure I’m thinking of, I don’t know, factory floor or I’m thinking of a larger system software system. 

 

How do you manage, these larger investments.

 

Niels

Larger investments, the investment do you mean the investment decision or how do you.

 

Simone

Yeah, yeah. Imagine for example, we we are only in to cell based organizations, many cells at the periphery, cells at the center. Sometimes, I guess, especially when you have complex the value creation processes, you may need an infrastructure used by many of those teams. So how what is your in your experience, the dynamic that you can use in this case.

 

Niels

There’s one solution that we found in by Better feld – Baier group, a company that’s part of by a group famous for their DSO initiative calls. Yes. And by a little bit of it, you can imagine that they, they, they produce stuff like aspirin tablets and other other drugs. They have like 500 people. So one of the questions there was, okay, if they have maybe 70 periphery cells or 60 periphery cells and some of them use the same equipment, how to do that?

 

You know, and one of the solutions that they found was with a little bit of help was that some of the center cells, are equipment owner cells, they own equipment that they rent that time, timeslot wise, they rent it to the periphery cells, and the periphery cells pay for using the equipment. But the equipment is owned and maintained and so on by centre cells.

 

So the periphery cells produce on other cells, central cells, equipment. That was a brilliant idea because, you know, these questions that you Simone that you just articulated, they come up in every organization. Oh, we have, infrastructure. We have said so this is what to do. There’s always a solution. Yeah. What I like to tell my clients is also in every stupid command and control, functionally rided organizations, even the worst bureaucratic company there is secretly, secretly, somewhere hidden. There’s a value creation structure, and teams produce value from center periphery to market. But it’s hidden. You’ll never see it in the org chart, which only depicts formal structure. You do not see it in the processes. The committed should be abolished. You know, all the coordination, the steering, the budgeting should be eliminated and then you should ask yourself, okay, how could we have periphery cells with few people five, six, seven people that can serve their own clients.

 

And then afterwards we think what the center must do.

 

Simone

Yeah, yeah. But I it works in spite of the rest. Let’s say no. And sometimes but yeah, I think these were, these were very important examples to give you know, that it makes it tangible, that it can you can organize for value creation, even if you have a complex or complicated system or organization.

 

Niels

It’s important to distinguish between the theory, the practical theory of org physics, which tells us three structures. And if you do not work value creation structure consciously, then formal structure will work you. And the second is how to make value creation structure better by decentralizing power to the periphery, by having functioning cells in the periphery doing the business, and by having the center serve the periphery.

 

So these are and cell structures and is an open source approach. Everybody can use it. Everybody can commercialise it. Every organization has a secretly has a structure like this, but usually it’s not well understood. Some exceptions exist like Toyota, Handelsbanken, but Haier. Yeah, I’m in doubt. But yes, we might discuss it.

 

Shruthi

I think the word that’s been let’s say said the most is the periphery is word. So I sort of wanted to stem from that as well. Right. So I would like to know how over the last few years, the idea of what organisational, let’s say, physics looks like today have these structures, adapted or changed, or the periphery has been pushed after, you know, how the network of coordination has sort of taken shape over the last few years, maybe with the remote working platform ecosystems, things like that.

 

So, how has that organization physics evolved and has this three phase of an organization, even though fundamentally it has remained the same, but have there been any offshoots that are sort of necessary to look at today? Maybe extended beyond the firm centric, let’s say, approach as well? Maybe, I don’t know, external factors, politics, geography and so on.

 

So how has the physics changed and maybe the peripheries as well being pushed a little bit further?

 

Niels

The question about ask physics, has it changed. Is that what physics haven’t changed, you know, like real physics or physics to not change, but our understanding it changes either the fashions or what we think about our, organization of physics change all the time. One example is, until ten years ago or so, it was fashionable to talk about self-organization and decentralization to date, everybody talks about leaders and leadership, which is very much command and control and, and and managerial and very much hierarchical thinking behind it.

 

Authoritarian. I like to call it you. So that are ways, you know, fashions of how to think about organizations. But the reality still is that value creation can only be, created from center to periphery to market, you know, that will never change. It’s eternal. So, but what I think is not very helpful is that we there have been a lot of fads, in recent years to give you an example of sociocrazy, holacracy, which is nothing else, and Matrix Structures Reloaded, or even the so-called Spotify model that was nothing else.

 

And Matrix Structures terrible concept of, you know, having many layers, many, many pyramids, command and control pyramid stacked on each other. And these fads, I think they stand in the way of advancement. Yeah. So bureaucracy is very strong. There are many ideas that, ultimately hierarchical and authoritarian. So I’m, I’m a little bit worried about the, the, the state of the organizational world today, just like, you know, many countries, authoritarianism ism is on the rise.

 

I see that in organizations, the rise of democratic, decentralized organizing is by no means assured. I’m not sure how you see that Shruthi. But, you know, command and control. It’s not easy to kill, you know, it’s like a dragon with many, many heads.

 

But orc physique demands orc physique demands decentralization. That’s that’s a fact. Because when markets turn complex, you need to decentralize decision making and power to the periphery. There’s no way around that. And too many organizations still ignore that. So that worries me today.

 

Simone

We are also been a big proponents of, decentralization and cell based and, you know, reputation based systems. And sometimes when I, think about some of the models that have emerged that push for decentralization, by the way, they embed this idea of, flow, for example, or this idea of, performance.

 

Right. So one thing that I sometimes miss is the idea of accountability. So how do you decentralize, you know, the the the point that I wanted to make is that how you decentralize organization, you cannot really have the same idea of organization. But decentralized, right? It changes what you do. It changes the dynamic of people choosing what to do because they are not just executing someone else’s plan in a decentralized way that actually building a decentralized organization. So what is your take on accountability? Who takes decisions will be a consequences. How do you manage resources? Like salary and and things like that.

 

Niels

There is a lot of confusion in organizations about what this shift of power to the to what decentralization might entail. And just to remember, in the 1950s and 60s and 70, we talked a lot about delegation, which means bosses give some power to their underlings. But they make them accountable, but not responsible, really. So it’s kind of a fetish thing, a fraudulent thing.

 

And delegation. Polka is still a thing in some organizations, still talk about delegation as if it were a solution, which is is not. Delegation is a lazy way of thinking about bosses being good bosses. You know? But we should have much less bosses and much more responsible teams is exactly what you say. Simple, accountability. We must combine accountability, responsibility and the liberty to decide in periphery cells.

 

That’s the idea of what attire they call macro enterprises, what we call periphery cells or mini enterprises, you know, so decentralization means the periphery cell is the company, one of our clients – They have just eight periphery cells. But every client knows that their periphery cell will solve every problem. There is no way around it that that team, that periphery cell will do the work, you know?

 

So you don’t need bosses, you don’t need functions. That team will do it for them. And every client knows this is my team. This is my periphery. This is for me as a company. This is practical. And this notion that the periphery cells are in charge. That is not very. It hasn’t it hasn’t become popular enough yet. Right?

 

Most organizations still struggle. How should we decentralize? Are people smart enough? Do they have the maturity? All that is bullshit, right? The people today have the mastery and in command control. We just cripple mastery or the development of learning, growth and mastery and so on. And we need to decentralize to create the conditions for people to acquire more mastery, to be more responsible, to be more mature, to act more responsibly.

 

So our structures are the problem, not people. And that’s the most basic insight, the technical aspect talks about 60, 70 years ago.

 

Simone

One of the things that I keep hearing is, again, there’s a shortage of, trust in the people in, in the periphery of the organization, even if, you know, ideally, the leadership of the organization has, accepts the idea that, of course, if people take more responsibility, they have to run their own micro businesses that need to have much more skin in the game, in what they do and so on, they logically understand it today, somehow, wholeheartedly want this to happen.

 

But still many times I see them bouncing back to control because, they don’t trust their people. So the easy answer will be you have to trust your people. But at some point, it’s true that people need skills. They need, support. So how do we actually build, really entrepreneurial teams. What is the kind of emotion that an organisation can? You know, what kind of energy or support can an organization give to the sales, the periphery sales, so that they are really able to do the job of the periphery, which is, again, create value in touch with the customer?

 

Niels

It’s a tough thing that you the question is about tough topic because it’s it’s an exercise in logic that needs to be done in every in all of I’ve been doing this consulting work for 23 years or so, and with every client I had to go through this logical exercise. So if you have 500 people, the question that I asked the CEO or general manager is, do you really think you are doing the whole work here?

 

No, of course not. Right. Other people are doing the work. Okay. Do you think you can steer and control everybody’s work? No, of course I do not do that. Do you live in the illusion that you can still control the work and control everybody’s actions? No, of course not. So. Okay. So why then do you have the whole steering mechanisms like budgeting and fixed targets and bonuses and all the nonsense that the committees.

 

If you do not believe that centralized steering can work or should work, I always tell my clients, look, you have a really terribly performing command control organization because of most organizations are terribly performative. We are fooling ourselves that everything is okay, but most organizations perform very badly because of command and control, the steering and centralization. People are unsatisfied.

 

You know, there are all kinds of bad performance, not just too little profit, but an incapability of recruiting, an incapability of growing the business and incapability of, you know, developing people. So there are lots of things, ways how we stifle performance. Right. So I always ask, do you really believe in those illusions? And my clients always say, by logic, I don’t believe that I can steer the organization and then I ask them, then why do you do it?

 

Why do we not get rid of all that overhead, all those middle management layers, if, well, let people return to value creation, instead of having committees and middle managers, all these meetings, they are shallow exercises in disbelief and mistrust and the lack of confidence in human nature. So even a bonus system with all the incentives and targets and so on, every budget is an expression of distrust and a lack of confidence in our people.

 

And I always tell my clients, look, you have such an ineffective organization, so much command of trolls, so much silos, so much bureaucracy, so many barriers to performance. Still, the company survives and makes some profit. Usually my clients have some profit. Yeah. What’s how. So people are capable enough to make your organization that sucks perform reasonably well. Imagine you could liberate people to take responsibility, to take accept authority and let them do the fucking work.

 

And then and then you could save so much money, you know? So we go through these exercises of reasoning that you just you started doing it, you know, impersonating it in a way. And that’s necessary in every organization to, to get you to wrap your head around. Okay. My people cannot be so dumb. Otherwise the company would already be bankrupt.

 

Yeah. My people cannot be the problem I was. But if our structures are a problem, then I as a CEO or general manager, I am creating the problem. Ultimately. And the best people run away because nobody wants to work in command and control bureaucracy. So everyone your clients as well, I think will have to go through that. To understand decentralization, you must go through the exercise of questioning why is everything so messed up, and what would a better structure do to people?

 

What people? Then maybe shout out, oh my God, I’m underqualified. That’s great. If they do that, that’s great. If you see that some level of qualification you can fire some people, that’s but it’s better to fire some people than to to let the best people run away from the command and control prison. I have learned. But decentralization is not an easy sell.

 

People managers especially, must wrap their heads around it, and it’s not trivial. They have to think it through. Why is it better to decentralize? Why is democracy better than fascism? Or Stalinism or authoritarianism? People need to educate themselves to think it through in our societies as well. Why democracy? Democracy seemed so dark and so bad, right? So efficient.

 

Still, it’s much, much better than the authoritarianism of dictatorship. And this is the reflection of we we need in organizations. True. Do you agree with me? That’s good.

 

Shruthi

Yeah, I do agree with you. I think I was just thinking about first who does this thinking and where does this, let’s say, learning stem from? Why is there a reason, therefore, that we are somewhere still stuck in maybe not traditional models, maybe traditional is not the right word, but maybe systems that don’t encourage, let’s say, societal or social thinking and purely encourage, let’s say, managerial, I guess, structural thinking.

 

So how does that, transition happen, in which case? And also are there, you know, existing popular looks like, let’s say agile Kanban. Scrum, etc.. So they’ve also made leaders think in a certain way, in a certain direction, boxed managerial thinking to a certain way of thinking. And to the people who think that. So how do we, let’s say, democratise thinking a little bit?

 

And are there new frameworks or new aspects and frameworks that we need to introduce that they didn’t make, you know, the structural problem of coordination a lot easier? I know you speak about, for example, time is one of the, let’s say, aspects that was not considered closely enough when Kanban, scrum, etc. were developed. So are there more on that first?

 

And also any other, let’s say, metrics that we should also look into these lines.

 

Niels

Time orientation is highly underestimated, right? Few companies like Toyota have figured it out. We still haven’t spread time, orientation and industry lean is really just, shadow of itself and agile I think because we that is that is my point that I would talk about, a few books about time orientation at the moment. But, the most misunderstand resource in organizations is time.

 

You know, we should make time. The boss, instead of having people bossing around, people. Creating actual flow of value creation is one of the biggest secrets. And, the last year, a colleague of mine, a client of mine, we created a concept called time oriented software development that is much, much more powerful than sprints, having sprints and scrum masters and so on.

 

It’s something that really works, and I invite people to take a look at it. Yeah. So that combined with decentralization, I think is the secret to successful organizing. And Shruthi you ask about structures, that help? Yes. And my answer, if I might answer with a, with the opposed. I think we shouldn’t add structures.

 

I think the time is here to do organizational hygiene, to eliminate things, eliminate committees, eliminate functional silos, eliminate the sales department, and let all cells do sales for themselves. You know, eliminate powerful product managers, eliminate people in the center that have power, and then steal and eliminate bonus systems, fixed targets, budgets as centralized allocations, cost management. There’s a lot of steering, steering, steering.

 

It’s cost a lot of time and adds nothing. It’s called waste free. The answer to your question Shruthi about what structures do we need is much less, you know, we need to eliminate rules, travel policies, etc. are useless rules, bureaucratic processes, centralized steering to, unleash power in the periphery. I think that’s I hope that’s an answer that makes sense.

 

And then time is a big topic. But we might come to it in a moment.

 

Shruthi

Yeah, it really helps. I think, the answer sort of lies in, addressing complex systems with simplicity. I think that’s what I’m going to sort of take it as well. And yeah, I think for our, next session, we definitely have a lot to talk about. I think time oriented software development plus decentralization that in theory, for such a large topic, I think we could, you know, look into it.

 

But yeah, thank you so much, Niels. Firstly, for, this engaging podcast, I think we have a lot to, learn and listen to. But, before that, before we end the podcast, we have a section called as Breadcrumbs where we ask our guests to share some, you know, books or podcasts that they sort of take inspiration from.

 

So anything you would like to share with our listeners.

 

Niels

How many can I can I share? I think I have eight breadcrumbs. Okay, here’s a book I’m reading right now. I read a lot of business books. I have a huge library of business books. This is the one I’m currently reading. This is old 20 year, 20, 30 years old Shigeo Shingo, have you heard of the author Shigeo Shingo no, he’s a Japanese guy passed away in the 1990s, I think, and he’s one of the creators of the Toyota Production System.

 

The book is called Non Stock Production the Shingo System for Continuous Improvement. Shigeo Shingo and he wrote 20 books about lean and and continuous improvement and the Toyota Production System. Amazing author. I think this is super fun. And then about time we need to talk about time. Right? So this is the book that about time that everybody should read.

 

It’s called Ten Thoughts About Time by a physicist from Sweden, Bodil Jnsson Tales About Time. It’s an it’s it’s it’s a book of essays. Beautiful. It’s like lyricism about organizing and time. Everybody should read this book. And then there’s somebody. I did a podcast session with Alan Allen C. Bluedorn wrote this book in 2002 or 2004. I think the human organ, The human Organization of time.

 

It’s one of the best business books I’ve ever read. You know, it’s it’s a really wonderful piece of writing about time and organizing. Then there are some things that I wrote that came up in the conversation sound structure, design. How about this. There are two free download free downloadable white papers. I have the print version CEO Cell structure design patterns first paper and then the second everybody can download.

 

And so if you if you and your listeners, want to learn more about self structure design, those are but this is also for free download slave to the rhythm adopt time oriented work systems. Now this is a paper I wrote last year. The other ones as well. This is a paper I wrote last year to, you know, to help people compare the Toyota production systems with other great time oriented organizing concepts, response, manufacturing.

 

And this is another recommendation I have to make. It’s really 2 to 2. Recommendations. One is what would Ohon-san do? It’s the first book by this guy in English that I edited, and it came out one month ago. What would it, strikes a bomb do? And the maximum is, like, the greatest practitioner philosopher of time orientation in the world, together with Taiichi Ohno, who I also edited the book about.

 

So if you want to learn about time, orientation and flow organizing and decentralization, these authors are a must. Taiji Ono. His quotes are in this book. What would Ohno San and and makes along? Sadly he’s Austrian. He was an Austrian. He passed away a year and a half ago and his book in German was never published in English so far.

 

So this is this is what you can get now. I think this is the most profound, most the wittiest, most fun, most exciting book on organizing that’s available in the marketplace now. So you have to read it now. Instant classic. I highly recommend it. 

 

So that’s it. And if you have time, read my book organize for complexity, which covers the.

 

Simone

Classic.

 

Niels

A classic six edition. Exactly.

 

Simone

It was great to have you on the podcast. Your work has been so influential, so important. Your passion can be felt to the screen, to be honest. And I’m really. We should be really thankful for people like you that dedicate their life to this practice of organizational development and design. With all the passion that you have been putting into this for, for more than almost four decades now.

 

So thank you so much for your work. Thank you for your time today. I hope you also enjoyed some of our questions.

 

Niels

Totally.

 

Simone

Shruthi, thank you so much for your for your time as well, for your questions. I hope you also enjoyed the conversation.

 

Shruthi

Thank you. Thanks, Niels. Thanks for one. I really enjoyed it. Thank you.

 

Simone

And of course, for our listeners, you go to our website boundaryless.com. There’s a podcast. You will find this interview with all the breadcrumbs that Neil’s have shared. And of course, until we speak again, I remember to think Boundaryless.