Jul 22, 2008

Careful with that Axe, Eugene!

When times are tough, managers like to take an axe to their organization -- cutting jobs and layers, to sculpt a more efficient structure.  Problem is, they often don't know what they are cutting.

I can't tell you how many times I have seen this situation: company downsizes/rightsizes, becomes more "lean and mean", and then in a few months, management scratches it's collective head when things start to fall apart.

Let's look at a simple example. Here is an organization before downsizing... two people are connected with a green link if they have a reporting relationship.

The emergent work flow is much different than the hierarchy. Here is how the work really gets done... two people are connected with a purple link if they actually work together.

Pruning boxes off the organizational hierarchy is easy when you only look at budget numbers, employment costs, and formal job descriptions. The Downsizing Task Force did not know the internal dynamics [emergent work flows, tacit knowledge exchanges, etc] of Andre's organization. Here is the organization after downsizing...

Fernando and Garth have been let go. "We have eliminated the high cost employees" management proudly proclaims! Maybe so, but they have also eliminated their own year-end bonus.

Here are the established work relationships now...

Of course the Downsizing Task Force is blind to this view of the organization, so they do not see obvious solutions like we do. Without social network analysis they will be scratching their heads for a while... what went wrong? ...what do we do?

Glad they made their RIF numbers!

BTW, "Careful with that Axe, Eugene!" is a fav Pink Floyd tune of mine... enjoy it!


VinodS said...

I stumbled upon your blog through Stan Garfield's awesome SIKM yahoo group, and only realize how small my knowledge in the field really is. But I've been interested in Social Dynamics more when it comes to KM, and realize how little value is placed on it (perhaps my own bad experience).

Does this model also apply to natural attrition with a highly linked department?

Valdis Krebs said...

Yes Vinod, a key retirement or two will also cause a break in the natural info/work/knowledge flow.

See this expert-finder analysis.

John Ettorre said...

Lots of fresh thinking here that peels back the onion, Valdis. But then we've long since come to expect that of you. Sorry it's taken me until today to notice this new venue, but I'll now return regularly.

Kare Anderson said...

Valdis, Those graphs are fascinating for those of us just dipping into your analysis and ideas.

Does this approach mean that you might create alternative scenarios for organizations that are considering downsizing

- showing them the consequences of various options?