Managing clouds and the death of formality in business

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I've been toying around with a new hypothesis. Here it is:

Formality in business is dying.

Now I am not talking about Blue Jeans Friday and Bring Your Pet to Work Day all of the sudden cropping up everywhere. I've seen very formally-run businesses where people showed up in jeans with their dogs or whatever. So much superficial informality.

What I'm talking about is a fundamental shift of business culture and management practices from formal to informal in many innovative companies. What do I mean? Let's take a step back.

Here are two of the ways Merriam-Webster defines the word formal.

- relating to or involving the outward form, structure, relationships, or arrangement of elements rather than content
- having the appearance without the substance 

That first definition of formality stands out for me as a perfect description of almost every formal business practice I have ever encountered. "Relating to or involving the outward form, structure, relationship of arrangement of elements rather than the content" (emphasis mine).

Organizational charts. Job titles. Performance reviews. Operational reviews. Strategic planning projects.

In your experience, do these things usually reflect the man-on-the-street reality of the business? Or are they an attempt to impose structure on things that do their best to defy it?

The irony is that, while most formal business practices are attempts to manage the complexity of business by defining structure, they usually fail miserably to capture the true complexity of business. They focus on the structure rather than the real content—and they usually don't even get that right.

In my experience, most business practices that attempt to formalize structure are about as successful as attempts to construct buildings out of clouds. By the time we finish the plan, everything has already changed beyond recognition.

No wonder in the latest IBM Global CEO Study, the #1 issue on the minds of CEOs is how to manage complexity. Most CEOs don't have the right tools to manage complexity.

More often than not, they are managing clouds.

I believe that managing complexity is something the open source way does very well, for reasons I already outlined here. Companies approaching things the open source way already understand that in order to succeed they must surrender some control to the communities in which they operate. They must allow the clouds to float freely.

So why do we cling to the illusion of control? Why do we waste our time imposing superficial structures, focusing on (to paraphrase the second definition of "formal") the appearance rather than the substance of our businesses?

Doesn't it just give us the illusion that we are more in control than we actually are?

I was listening to Gary Hamel speak on a webcast last week, and he gave some examples of very big, prominent companies that are experimenting with eradicating certain types of formality. Crazy stuff like doing away with job titles, minimizing the role of formal management and moving toward an informal leadership model, empowering ideas to come from anywhere vs. through a formal top-down process.

What if we all started looking closely at our businesses for places where the formality we have imposed has caused us to lose sight of the underlying content? Where our efforts to create structures we can understand have oversimplified things that remain incredibly complex. What if we systematically ripped these things out of our organizations one by one?

Could we manage clouds better with less formality? What might an informal business look like?

I'd love to hear what you think.

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Business
Leadership and management
Cloud
Chris Grams
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Chris Grams is the Head of Marketing at Tidelift and author of The Ad-Free Brand: Secrets to Building Successful Brands in a Digital World. Twitter LinkedIn Email: chris(at)tidelift.com
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2 Comments

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Colby Hoke | August 2, 2010
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That their business is informal. I've heard it a lot. I've heard a lot about less hierarchy in relationships and all that. I don't know that a large business will ever actually be informal. It may seem that way, but there are closed-door meetings that will always suggest otherwise. There's online tools where you see your ranking in the entire company. Or, someone sees it.

It feels flat while you're standing, but try to move a little and you'll notice hills. Big ones.

Control is the name of the game. It's a title. People want titles. It's money. People want money. As long as you're in a world that values these things, you have formalities and control.

So, while the higher-ups want less complexity, all that means is that someone just below them is keeping track of all the little things, doing performance reviews, ranking people on a number scale, planning strategic moves, typing every minute of every day into a spreadsheet, and checking the boxes.

Look at the cloud. People build tools for the one "in control" - the user. These tools make it look simple- less complex. It's not and never will be. There's still tons of work being done. Machines provisioned, quotas set, applications with specific preferences running, fail-safes, migrations, conflicts, clusters, nodes, and kernel panics. It's illusion, but it's what you want and it looks like it's less formal.

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Bill McCabe | August 20, 2010
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I have worked in large and medium sized companies, owned my own small one and have consulted with about 250 small business clients. There was a common element in all of them. Somebody was the boss. That person drove the company forward to meet business goals. In the larger ones the boss had to work through subordinates to make the various parts of the business support the overall goals. They used the ideas, talent and labors of all employees to make things happen. Call that a formal stucture if you like. I think if you examine the so called innovative businesses that appear to have little or no formal structure you will still find a top driver working through others to use the ideas, talents and labors of all employees to meet certain business objectives. They may appear to have little or no structure, but in reality the structure is still there. It is just disguised.

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