(Team Design) Organizational Limit: Size

There’s something about the operational necessity for specialization that seems to limit the effective management of organizations with greater than 150 individuals, and at about $30 million in revenue

Notice that I emphasize the word “effective“

I am well aware that there are a large number of organizations that boast significantly greater numbers of employees, and generate significantly more revenue

However, it’s worth acknowledging that a significant percentage of these organizations are categorized as “zombies,“ which means that they are fiscally insolvent

And therefore: not effective

I’m sure that there are exceptions to the rule, but they are just that: exceptions, and I would be surprised if these organizations weren’t struggling with significant dysfunction

For example, most crime originates from within an organization, because most money, resources, and assets are stolen by “insiders”

Statistically, and year after year, “cyber crime“ is a distant fourth, and even then, a fairly significant number of cyber crime that originates from inside the organization

These sorts of behavioral deviations occur because the organization becomes dysfunctional, and this expression of “death by 100,000 cuts” is a significant reason why our culture, economy, and government are in a lot of trouble

This is why I emphasize the power of hyper-local self-governance, utilizing operational best practices and technology which delivers transparency, accountability, and corporate and operational artifacts that are easy to audit

In practical terms, I’m a fan of creating a network of small, autonomous organizational units that are structured as what we would call “profit centers“

A profit center is distinguished from a “cost center“ in that the resources that the organization either generates or saves is in excess of their operational costs

The benefit of structuring autonomous organizations in this manner is that it’s easier for individual contributors to recognize in how their contributions, large and small, contribute to the bottom line

This lends itself to a spirit of ownership, which encourages a spirit of responsible stewardship, which discourages fraud

With my company I’ve taken this a step further

If you can structure autonomous organizations as profit centers, you are on a path to launching them as fiscally independent and autonomous businesses, so to speak

Let’s imagine that I have a software engineer in team that has been structured as a cost center

Culturally, the members of the cost center have no incentive to generate or save more resources then they cost

In fact, within the perverse economics of cost centers, it’s in the small group’s best interest to position themselves in a manner favorable to other cost centers within the same organization, introducing an unhealthy competition for finite resources, but abstracted from the benefit to the larger, shared organizational goals

You see this kind of thing happened within organizations as they try and navigate the $30-$150 million milestone

Petty internal rivalries for resources erupt into significantly damaging and self-defeating practices that begin to poison the organizations cultural values

Following my example, let’s assume I structure the engineering team to function in a manner that is autonomous, and position them such that they are afforded sufficient transparency, so they can evaluate their decisions from the perspective of a profit center

This changes the dynamic, because now each person is incentivized to demonstrate how they have made or saved the organization at least as much money as they have cost

Additionally, if the organization can be coached in such a way that they can deliver these gains in a deterministic manner, they are now positioned to be launched as an independent, autonomous corporate entity, where employees are suddenly positions to become equity owners in a separate entity

The 214 Alpha platform is designed to support these precise dynamics, but we are not seeking private sector business

It’s our supposition that until the economy becomes sufficiently damaged, and that’s coming, current businesses do not have sufficient incentive to modify business practices that results in so many “zombie corporations“ which ironically boast absurdly optimistic key performance indicators while bleeding money

Whereas organizations that DO have incentive to run efficiently and effectively are those that seek to self govern solutions on behalf of our society’s most vulnerable

Note that this is not currently inclusive to standard governmental entities, which are structured and culturally oriented in such a way that assumes perpetual and ongoing increases in tax revenue

There will be some point in the subjective future where private sector business and formal governmental entities might become interesting to us, but we do not believe they are ready, because most still believe that everything they are doing is working just fine

Of course, that’s not true, but I guess people need to see it when they see it, right?