Networked Organization

Better Management for Networked Organizations

Management of hierarchical enterprises does not apply to networked organizations in the 21st century.

People are in need of different answers. They need answers to questions about how to implement better management with fewer managers. Creative networkers cannot rely on bosses to grow healthy organizations for them. They need to know how to manage things together.

I firmly believe that networked organizations own the future. Cooperatives of small firms, groups of young startups, communities of freelancers, and networks of franchisees will outperform traditional hierarchical enterprises. Their biggest challenge won’t be growth or survival. For networks, that is easy. Instead, their biggest challenge will be managing boundaries and growing in the right direction.

Last week, during my Virtual Coffee with Finland, I learned that Helsinki has a thriving ecosystem of startups, and many young games companies. It’s a fine example of what is happening elsewhere in the world as well.

These are the kind of businesses that require new answers to old questions such as:

  • How do we measure performance of teams?
  • How do we decide on salaries and bonuses?
  • How can we replace performance appraisals?
  • How do we collaborate with remote workers?
  • How can we replace job titles and career ladders?

The traditional methods of hierarchical enterprises don’t apply to networked organizations in the 21st century. People need to learn, from scratch, how to manage a business together and how to grow a company with coworkers.

Join me on my global book tour to find some answers.


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  • Riccardo Bua

    Hi Jurgen, I agree with you that most of those practices are outdated and that smaller organizations might have an edge in some area, what I am a bit challenged though is the claim that there will be a competitive edge because of this, I am still waiting on this big wave of new comers wiping out the consolidated large, solid financial conglomerates, most of the time those nimble alternatives end up being bought and absorbed, including some of their best practices while others get watered down….

  • Vasilij Savin

    Dear Jurgen,

    You are right that sometimes networks of smaller entities is more effective than huge conglomerate. But to claim it is always the case would be overgeneralising the case.

    It all depends on business environment, how volatile and complex it is. In the world of utilities, such as electricity or running water, size matters a great deal and it is a simple world with little change. Would your networked organisation be competitive there? I would not bet my money on it.

    There is always a tug-of-war between performing activities inhouse to outsourcing them. It is essential to find the fine balance between transaction costs dealing with external entities and inhouse inefficiencies. Yours is only one solution.

    For more insight, I highly recommend studying Mintzberg “Designing effective organisations”. http://www.amazon.com/Structure-Fives-Designing-Effective-Organizations/dp/013855479X/

    He has done a great job analysing different business environments and the optimal structures for them.

    • jurgenappelo

      Thanks, great reading suggestion.
      Though I’m sure in the world of utilities they also feel the pressure to change their structures. 🙂

      J

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