1. Introduction

1.1 Why a self-managed organization?

1.1.1 Efficiency remains important

Increasing efficiency and productivity has been the big issue in business for over 100 years:

– At the beginning of Taylorism, the aim was to standardize processes, for example through assembly line work. This achieved productivity gains by a factor of 10 – 100.

– In the 1970s and 1980s, automation, IT and later robotization became more important.

– Since the 2010s, the topics have been digitalization and big data.

While productivity increases at the beginning of Taylorism still had to be purchased with a lot of capital, for example to build , the marginal costs digitized processes are approaching zero.

As soon as digitalization takes effect in the company, the respective organizations hardly have to reinvest their profits for production increases, but receive them almost free of charge thanks to negligible marginal costs.

1.1.2 Increased need for adaptability

As it has become much easier to try out new business models, existing market players are challenged and unsettled. As soon as the new business ideas become successful, they often call classic business models or entire industries into question (disruption).

These new business models and strategies are creating greater dynamism and complexity for existing companies, meaning that the companies concerned have to adapt and reinvent themselves.

Our organizations have historically been shaped by Taylorism, trimmed for efficiency and optimized for largely stable framework conditions. The more dynamic and more complex environment is overwhelming many of today’s organizations. If only a few people have to make an increasing number of decisions in an ever shorter period of time, this leads to a bottleneck in the decision-making processes in the respective organization (bottleneck effect). The organization can no longer keep up with the dynamics of the market, becomes sluggish and loses its innovative strength.

The growing dynamics and complexity of the market require organizations to more adaptable to rapidly changing new business conditions, market and competitive situations, technical developments, etc. In order to better meet this increased need for agility, different organizational and management principles are helpful.

For example, external complexity must be countered by a suitable “internal complexity”:

Because it is almost impossible to predict when and where in a complex and dynamic context which cooperation and communication is necessary in an organization, responsibilities, decisions and cooperation relationships must be distributed and shaped dynamically and according to the situation.

However, the focus on adaptability and complexity does not replace companies’ previous need for efficiency and productivity, but merely describes additional necessary skills.

1.1.3 More initiative is needed from employees

There are always surprising situations that cannot be foreseen by the processes of an organization. In these situations, preconceived processes do not help, only courageous and creative decisions by the employees.

If a company does not foresee possible surprises or has too few options for dealing with them, it becomes overloaded and wastes resources. It loses its competitiveness.

Many companies take the wrong turn. Instead of giving their employees the freedom to think for themselves, they add every new exception and variation to their standards.

The body of rules and regulations grows until no one can keep track of it or understand it. The company enters the vicious circle of bureaucracy.

If there are (more) surprises, then “more” rules and process definitions, i.e. “more of the same”, will not help. Then only employees acting on their own initiative and responsibility will help.

The last few decades have been characterized by a steady increase in surprises. Market dynamics have increased dramatically.

1.1.4 We need entrepreneurial employees

In the traditional Taylorist model, employees are either inserted into defined process steps or completely replaced by machines.

In today’s economy, however, with its high proportion of knowledge work, we are increasingly hiring employees so that they can act creatively and independently. They are no longer hired with the intention of fitting them into a system and adapting them, but rather the other way around, so that they can adapt and further develop the processes and the company, i.e. think and act entrepreneurially.

The current mantra is: only those companies that adapt and develop quickly and flexibly will survive. But how can this be achieved?

A change in the mindset of all employees is required.

Employees no longer just work “in” the company, in the inner attitude of followers, but they work “on” the company, with the mindset of entrepreneurs.

This is a completely different way of thinking. All colleagues need certain basic skills for self-managed leadership.

1.2 What is needed in detail?

1.2.1 Agile "ad hoc" working relationships

The world is becoming increasingly complex. We and our organizations are not good at dealing with it. Complexity arises from great variety, i.e. diversity, and a high degree of unpredictability. Why is complexity such a big problem?

Complexity cannot simply be controlled or reduced because we can never be sure what effect our behavior will have on a complex system.

We know from the cyberneticist Ross Ashby: The more “inner complexity” a system can utilize, the better it can deal with a complex and dynamic environment. And inner complexity arises from a diverse social network, i.e. from the practical communication options available. The aim is to increase social density.

That also makes sense: If the right people in the company are allowed to come together and act directly and without detours to solve surprises and problems, this is faster than any route via a hierarchy, committees, special decision-makers, etc.

A hierarchical pyramid-shaped line organization cannot achieve this. In a complex environment, companies with rigid communication channels in which employees adhere to the reporting channels along the hierarchy are inferior to organizations in which network-like communication structures exist and everyone communicates, decides and acts with everyone as required.

Higher-level managers tend to be too far removed from the action. It is usually much more efficient and effective to leave these decisions at the grassroots level before the people involved go to the effort of passing on their experience to higher-level managers.

We pursue two basic goals:

– Increase reaction speed when dealing with unexpected operational situations.
– Improve the speed of adaptation of organizational structures, processes and mental models.

One level is operational: How do we work?
The other is organizational: How do we change the way we work together?

The example in the adjacent figure begins with an event for which no routine is provided in a hierarchical line organization (1).

The employee with whom the problem arises passes it on hierarchically until someone is found who takes responsibility for organizing the solution (2).

Furthermore, we assume that various employees from different areas are required to find an operational solution. Accordingly, the managers of these areas coordinate the establishment of a temporary problem-solving team (3), assign the development of a solution to it (4, 5) and finally decide on its solution (6) before the customer receives it (7).

This approach is obviously very time-consuming and involves a large number of people who do not make any technical contribution, but merely have coordinating tasks. The transaction costs and response time are very high.

Fig. 1-1 Dealing with surprises in the line organization Q1-S34]

In the self-managed group organization (see illustration), the path outlined is much more efficient.

Here, the problem owner can act on his own responsibility (2) if he can find, approach and involve the additional colleagues he considers necessary from a technical point of view, develop a solution with them (4), decide on it and deliver it to the customer (5).

Fig. 1-2 Dealing with surprises in the self-managed district organization Q1-S35]

This does not work in a comparable way in a line organization. The organizational architecture is optimized to reproduce what is known, but not to handle surprises.

Introducing agility into a line organization is like trying to retrofit an elevator into a half-timbered house.

The result is usually a stairlift.

That’s why it’s better to move to a new building at some point.

The complexity of an organization increases with the number of communication options available between its players, i.e. with the degree of networking.

It is not a question of connecting as many employees as possible with as many others as possible in advance and providing for corresponding working relationships. If everyone talked to everyone else, the company would only be concerned with itself.

The number of communications must be as low as possible and as high as necessary.

Instead, the organization must allow the corresponding working relationships to arise ad hoc when needed. It is therefore a matter of maximizing the potentially permitted working and communication relationships, i.e. creating opportunities. The actual active relationships should be limited to what is necessary. This is why a self-managed organization needs a certain degree of transparency about who does what in the company. It is necessary that each colleague independently ensures the necessary cooperation with suitable colleagues, because otherwise no one else will do it.

1.2.2 Principles of action depending on complexity

We not only need models that enable us to deal confidently with complexity and dynamics, but also models that can vary the focus of the organization depending on the complexity.

In our organizations, everything exists side by side, except that different focuses are more relevant in different areas and at different times.

Wherever the framework conditions of the organization are stable, we are required to make use of these conditions through efficient standardized processes.

Depending on the degree of complexity of a problem situation, very different principles of action are appropriate.

In an area of low diversity and high predictability, knowledge of and the application of causal cause-and-effect relationships is helpful (see 1, figure below). Rules and processes simplify problem solving: “If this happens, do this. First one thing, then the other.” All other principles of action would be inefficient here. These simple problem situations could also be handled in other ways, but that would be far too time-consuming and expensive. We would no longer be competitive. Therefore, wherever a problem can be solved causally, this should be the first choice.

Fig. 1-3 Complexity-specific principles of action Q1 S38]

Trial and error (2) – If there are not many possible actions and outcomes, but it is difficult or impossible to predict what will happen next as a result of an action or inaction (2), then the strategy of trial and error helps.

So just try something out and see what happens. Long-term plans are pointless here; a step-by-step approach is more promising. When choosing what to try out, we can be guided by our feelings because it is simply there and doesn’t take any time.

Perhaps we take into account knowledge about the affordable losses and costs of our experiments, we then move into the area of mixed forms.

One example is so-called A/B tests for the optimization of websites and online stores, in which different users are shown different versions, the more successful of which is used at the end of the test.

Regulation (3) – In this area there are many possibilities of what can happen, but we can reasonably predict what effect an intervention will have (3).

In this case, control loops, i.e. target/actual deviations, make sense – in the same way that we keep the car on course with many small course corrections and adapt the speed to the possibilities.

Control systems require (experiential) knowledge of interrelationships. It is worth building up this knowledge for recurring problem situations.

Examples include target agreements, budgets and a focus on key figures.

Self-organization (4) – Here we counter the external complexity given by the problem with our own internal complexity of our organization (4). We increase our communicative network density, our own variety of actions and our ability to change patterns.

We are then well prepared, at least at the meta level, and trust that we will find or invent the right concrete action for the problem, that our organization will resonate with the problem and that a suitable innovation will be provoked.

An important principle of self-organization is the iterative approach.

1.3 Classification of the self-managed organization

The application area matrix illustrated describes the application areas of different development models based on the two questions – whether the system to be developed (object, object of development) is more causal or more complex and – whether the context in which the system operates and which sets requirements is more stable or more dynamic.

Fig. 1-4 application area matrix Q2-S16]

1.3.1 Classification according to the dynamics of the environment

The reason why traditional development models are becoming increasingly difficult to apply successfully is generally cited as the increased complexity and dynamism of the environment:

– Since the 1990s, conventional waterfall-oriented process models have increasingly reached their limits in the field of software development. The environment developed faster and more unpredictably than the development projects were able to handle with their process models (‘-Page 204, Development history).

– Since the beginning of the 2000s, the corporate environment itself has also become more complex (keyword VUCA), which in turn makes traditional management and organizational models increasingly difficult to cope with.

For the graph shown here, this means that there has been a shift from bottom to top (vertical axis).

1.3.2 Classification according to the complexity of the system

However, there is another aspect that is represented by the horizontal axis in the graphic. Here, the focus is not on the system’s environment, but on the system to be developed itself:

– Is it a technical system that behaves causally and reproducibly, as is usually the case with software and hardware systems?

– Or is it a social and therefore complex system, like teams and entire organizations?

If the processing object of a development method is dynamic but can be reconstructed causally, resettable development methods such as Scrum (technical system) should be used.

The applicability is due to its origin in the field of software development, with a reproducible and resettable system behavior.

However, if the subject matter is complex, such as a social system or an entire organization, we need completely different methods than for a simple or complicated development context.

In the following, we describe the tools, methods and mindset of self-managed organization.

In contrast to the more technical-agile methods (causal), social aspects (complex) are also fundamentally included in the approach here.