In working with clients who are designing their future state organization, it doesn’t take long before they start talking about frustrations with their current state:
…“I don’t get it. As individuals, we are all trying to do the right thing, but as an organization it’s just not working!”
…“I’m always amazed at how everyone individually is working so hard, yet as an organization we are failing.”
…”This will fail if we don’t wear the [Company XYZ] enterprise hat.”
In each case, these statements reflect a misalignment between individual (or team) actions and the good of the company. This matters because these misalignments often lead to sub-optimal outcomes for the organization.
As it turns out, this problem has been studied for decades. It has been coined “the problem of collective action.” Examples abound of this problem in society. For instance, individual fishing companies may “overfish” an area to meet their individual quotas. The result is too few remaining fish to recover the stock for next season, to the detriment of all fishing companies. Another example is traffic congestion. When we are in traffic, we contribute to the traffic. But how many of us would be willing to pull off the road just to help alleviate the traffic for everyone else?
The Problem of Collective Action in Business
The quotes at the top of this blog are a testimony to the existence of the “problem of collective action” in the context of business. This happens in companies big and small, across many different industries.
Let’s take a look at some business-specific examples:
- Senior leadership team members have been given a company-wide spending target, but individual leaders won’t budge on their own budget submissions. The result is a painful, contentious, and generally unpleasant annual company-wide budgeting process.
- Senior leadership project sponsors are unwilling to make “tough choices” to meet company-wide capital expenditure goals – unless it is someone else’s project that gets cut.
Individual departments operate on separate, customized systems and are unwilling to adopt a common technology platform that will save the company millions of dollars – because they like the way their individual system functions for their group.
Designing an Organization to Solve the Problem of Collective Action
While these scenarios seem bleak, there’s some good news in all of this. Companies that engage in purposeful organizational design can often mitigate, or in some cases eliminate, the problem of collective action in their organization.
It’s not easy. It requires a holistic, systemic organizational design approach and methodology that is aligned to deliver against the overall organization’s strategy and goals.
Below are a few elements of a design approach that can address the collective action problem in companies:
- Define the organization’s core motivation. Leaders should ask themselves why the enterprise exists. Why did we form this company-as-a-whole in the first place?
- Define the organization’s core aspiration. Decide what success will look like for the enterprise, and by extension, its stakeholders. An enterprise together can accomplish exponentially more than a bunch of individuals or teams that are not aligned.
- Agree on the tradeoffs that must be made in the organization’s design so the enterprise-as-a-whole can win. In many design workshops, we see leaders asking themselves to “get up on the balcony.” This means they must trade perceived victories for their individual teams for the sake of the company. Furthermore, that must be a go-forward “way-of-working.”
- Measure the actions and behaviors that serve the enterprise-as-a-whole.
- Reward individuals and teams who demonstrate these actions and behaviors
Just as we can point to many examples of the problem of collective action, we at AlignOrg Solutions have found many cases where our clients’ organizational design efforts can shape an organization that is aligned toward its broader goal of winning as a company-as-a-whole.