How will Covid 19 affect the Organizational Revolution?

Recently I published How to survive the Organizational Revolution ( with Martijn Ars and Pieter Koene . In the book we claim that developments in society, and particularly IT, require and enable the rise of new organizational forms like multidimensional organizations, Holacracy, agile, platforms, ecosystems and open source. The main trends in new organizational forms are an increase in self-organization, increased organizing across organizational borders and more flexible and decentral governance mechanisms. Below I gather some thoughts about how the current Covid 19 crisis will affect the development of such new organizational forms. Will it stimulate or hinder?

Will the crisis stimulate new organizational forms?

First, the crisis may affect the implementation of new decision making mechanisms. Many organizations are now simply putting their traditional way of working online. This is not very effective. Much decision-making that was done on the fly by the coffee machine now has to be done in a meeting, leading to long and boring agendas. Therefore I predict an increase in new forms of decision-making. For example consent (a form of decision-making that underpins sociocray/Holacracy) is a much more effective form of decision-making especially in an online environment, than traditional voting or consensus mechanisms. Similarly, organizations may take a cue from the methods implemented by open source organizations. New decision-making mechanisms require companies to adapt responsibilities and mandates, thus affecting the organization form.

Second, the crisis will show which behaviour in business ecosystems is most fruitful. Some companies dump their problems on their business partners, for example by paying the bills much later. Of course if cash flow is a problem, this may seem logical. But in strong ecosystems joint problem solving with the ecosystem partners will be more fruitful than each organization trying to solve problems on their own. This crisis may separate the real ecosystems from the ecosystems-in-name-only: do ecosystem partners share the burden of the crisis smartly in order to survive jointly? Or will they try to save themselves? Many companies will find that a strong relationship with business partners is worth gold in times of crisis.

Third, the crisis will vastly increase the experience people have with online work and new information technology tools. The steep learning curve people are forced to go through increases organizations’ ability to work with new organizational forms. New and better methods for online collaboration emerge and these affect organizational forms. The more tech savvy people are, the better they are able to use IT tools that support new organizational forms. This may among others lead to an increase in the use of distributed teams.

Fourth, platform organizations that are pure online players like Youtube or Netflix seem to be more robust than organizational models that are completely offline. This will lead more organizations to see whether parts of their business can be turned into full online platforms. There are many opportunities out there, for example in business to business services like consulting and accounting. In those sectors the use of platforms may accelerate.

Fifth, in our book we describe several mechanisms to remain in control when it is difficult to plan ahead. The widely used PDCA cycle does not work in unpredictable business environments and it certainly does not work in this crisis. The alternative OODA cycle may be more useful: less planning and more searching and finding out along the way. New organizational forms have taken the lead in developing new ways to plan, control and allocate budgets that fit an unpredictable world and that allows companies to adapt when new information becomes available.

Or will there be backlash?

Some elements of current events may run counter to the rise of new organizational forms. First, the traditional response to crisis situations has been centralization. Especially on a governmental level we currently experience that political leaders are centralizing control. Some companies do the same. Others believe decentralization is a better response, because it decreases reaction times to changes in the business environment and allows for more innovative responses. If the decentralization approach is more effective, this will be a strong case for the effectiveness of new organizational forms even in times of extreme crisis. If not, the opposite is true.

Second, whereas pure online platforms seem less affected by the crisis, platform organizations that still have a link to the physical world show a mixed picture. and Uber face big problems. Online shops and food delivery services are doing very well. Digital transformation does not make companies immune to economic swings. Exaggerated expectations may get a reality check and may lead companies to push back on some of their investments to become full-fledged, digital, agile, platform businesses.

Third and related to the previous point, many platforms depend on new forms of labour relations. The demand for Uber and Lyft dropped steeply, leaving many people without an income. On the other hand, Amazon is looking to hire thousands of people. Most traditional organizations are shedding employees, especially the ones with flexible contracts. How will societies judge the final outcome of flexible labour contracts? And how will this affect the future of organizational forms that depend on them?

Fourth, the increased use of technology may also lead people to question it. Some may be disappointed in online meetings, because they require more energy. Many will miss the richness of face-to-face meetings. Discussions about privacy as recently with Zoom are back on the agenda. The Chinese approach with the Corona app is a nightmare for freedom and privacy. The legitimacy of information technology as a tool to manage organizations has hardly been debated. What about your privacy and freedom at work? Covid 19 may put this issue on the corporate agenda and affect the way companies organize.

How will this balance out?

Of course once things get back to normal some of the lessons of the crisis may be lost and some organizations may go back to their traditional ways. Still, this crisis is an important test for the new ways of organizing that have been developed over the past ten years. When the dust settles, we will find out whether the experience of Covid 19 has permanently infected the organizational landscape or not.