Localness Senge: Chapter 14 THE FIFTH DISCIPLINE

19 February 2000Prepared by James R. Burns How to achieve control without controlling u LOCALNESS--extending authority and power as far from the top or corporate center as possible u More akin to the word EMPOWERMENT u Learning organizations are ones in which thinking and acting are merged for every participant u Localness is especially needed in times of rapid change

19 February 2000Prepared by James R. Burns Two new challenges emerge u How to get senior managers to give up control to local managers u How to make local control work

19 February 2000Prepared by James R. Burns Giving up control: u Will this make senior managers dispensable? u Senior managers must assume responsibility for continually enhancing the organization’s capacity for learning--THEIR NEW ROLE

19 February 2000Prepared by James R. Burns Other questions about localness: u How can locally controlled organizations achieve coordination?\ u Synergy between business units? u Collaborative efforts toward common corporate-wide objectives? u How can the local organization be something other than just a holding company

19 February 2000Prepared by James R. Burns What experience has shown: u Rigid authoritarian hierarchies thward learning u Hierarchies fail to harness the spirit, enthusiasm, and knowledge of people throughout the orgnization and to be responsibe for shifting business conditions u Failure has sprung up from not being able to relinquish control

19 February 2000Prepared by James R. Burns Learning organizations: u do less controlling of people’s behavior u invest in improving the quality of people’s thinking u invest in improving the capacity for reflextion and learning u develop shared visions u develop shared understandings

19 February 2000Prepared by James R. Burns The illusion of being in control u Most senior managers would rather give up anything than control u Senge illustrates the illusion of control from the top with rollerskates connected by springs u Even though senior managers think they are in control, they are not

19 February 2000Prepared by James R. Burns Vacillation u When business is going well, localness prevails u When business is not going well, control gets returned to central management u Such vacillation is a testament to a deep lack of confidence u Is an example of a “shifting the burden” archetype

19 February 2000Prepared by James R. Burns Beliefs u Unless senior management believes: –that the quality of learning –the ability to adapt –the excitement and enthusiasm –the human growth –ARE WORTH THE RISK, they will never choose to build a locally controlled organization

19 February 2000Prepared by James R. Burns Today: Expediency u Many organizations are cutting management levels u Becoming more locally controlled, to cut costs u But these arrangements do not last a business downturn, usually

19 February 2000Prepared by James R. Burns Control without controlling u Local decision making may not be wise u Local decisions can be myopic, failing to appreciate the impacts of decisions u Just because noone is in control does not mean that there is no control u Central control is too slow and too unaware of what is happening locally

19 February 2000Prepared by James R. Burns The Tragedy of the Commons Archetype u What is right for each part is wrong for the whole u This is also called “suboptimization” in the context of quality management u Each individual focuses only on his own needs, not on the needs of the whole

Tragedy of the Commons Archetype, Continued u Occur frequently in businesses where localness is valued u When several divisions share a common support group Prepared by James R. Burns

19 February 2000Prepared by James R. Burns Corporations’ Depletable Commons u financial capital, productive capital, technology u community reputation, good-will of customers and suppliers, morale of employees u When a company decentralizes, local divisions compete with each other for those limited resources

19 February 2000Prepared by James R. Burns The experience u Breaking business into smaller pieces is supposed to encourage local initiative and risk taking u IN FACT, IT DOES JUST THE OPPOSITE

The experience, Continued u Divisionalization and autonomy has created more short-term oriented managers, managers who are more driven by the botttom line u These aggressive division managers are driven by short-term profits only Prepared by James R. Burns

19 February 2000Prepared by James R. Burns Managing COMMONS structures u Who will manage the commons? u Depletion of the commons will work to everyone’s disadvantage u Establish signals that will alert local actors that a commons is in danger u Do not take “below the waterline risks” as was the case for the Titanic

19 February 2000Prepared by James R. Burns The new role of central management u Identifying and managing the COMMONS u Become a researcher and designer –Test new structures in a simulative environment, and recommend those that succeed u Encourage organizational learning u Encourage risk-taking

19 February 2000Prepared by James R. Burns Forgiveness u Localness must encourage risk taking u To do so is to practice forgiveness u “If you are making mistakes, that means you are making decisions and taking risks-- and we won’t grow unless you take risks u “Making the mistake is punishment enough”

Copyright C 2000 by James R. Burns u All rights reserved world-wide. CLEAR Project Steering Committee members have a right to use these slides in their presentations. However, they do not have the right to remove this copyright or to remove the “prepared by….” footnote that appears at the bottom of each slide. Prepared by James R. Burns