Adhocracy: The Management Model Capable of Accelerating Companies

You are going to read about:

• Management models that kill speed and flexibility;
• What is adhocracy and how to implement it;
• How to organize your company to achieve success in the digital environment.

Every time we investigate the causes of slowdowns and the barriers that prevent companies from responding more quickly to market opportunities, we are faced with a scenario: a hierarchical power structure and seated on bureaucratic processes. Distributed in silos, the different areas work in a disconnected way, each one taking care of its objectives and goals, pulverizing the information and curbing the flow of innovation and the consequent creation of value for customers.

This is so strong that we have the impression that if we put together vice presidents of operations, marketing and HR for one of these companies in one room, the feeling would be that they do not work for the same company. Each role aiming in different directions, looking only at the part of the cake that fits and responding exclusively for it, without further involvement or exchange with other pairs. 

And although we have the practice of continually testing new forms of leadership, management, knowledge exchange and new work processes, something about this scenario seemed familiar a few years ago. At that time, while we sought to accelerate our journey of digital transformation, successfully creating our agile squads - autonomous and multifunctional teams, dedicated to value flows with a focus on real consumer pains - leaders were not keeping up with the fast pace of innovation and generation of impact that the teams were able to achieve. 

In the first analysis, we believe that the problem was concentrated in the fact that the leaders who had not yet completely detached themselves from the command and control management model, on which their careers were forged.

As smooth as the control is, it does not combine with multidisciplinary, breaking silos, experimentation and autonomy of Agile. In part, we were right.

Partly because, structurally, we were not prepared to support our management with the new digital mindset that so delighted us in the teams, and whose construction framework was designed in our successful Lean Digital transformation model . There was a need to further favor profound personal changes, the deconstruction and reconstruction of our leaders. And for that, it was necessary to change our operating logic, our organizational system.

With the old organization chart, our top executives spent a lot of time in non-productive administrative activities, such as meetings, phone calls and reports resulting from an overly hierarchical structure, which made them isolate themselves from our customers. Each one had teams of subordinates reporting directly to them and concentrated power and responsibility on many accounts. These activities without added value kept them at the forefront of decisions and caused a feeling of overload. 
In addition, a constant complaint was that they did not have time for personal development or for the creative work that was responsible for winning the executive position, such as predicting and developing new product offerings. This undoubtedly brought us closer to the barriers and sterile bureaucracy of the companies we observed. 

Management models that kill speed and flexibility

The above quote speaks of bureaucracy, which is the cause and consequence of very hierarchical structures, and this is a great villain for us and for all other companies that want to achieve agility and speed of innovation. However, there is another unfavorable management model for the development of these capacities that we also need to look at; it is meritocracy. So, let's take a quick look at these two systems. 
 
Bureaucracy

It is a classic way of operating. Bureaucracy was developed in the industrial era, and it is based on standard rules and procedures, a model of command and control leadership and a strong hierarchy. Here, the decisions belong to the person with the highest position on the organization chart. 
This is the model on which companies naturally organize themselves, and with us, it was no different. CI&T has grown, on average, 30% per year since its foundation. In our first decade, we were constantly creating new guidelines, more complex rules and more robust structures to deal with having more people. 

This rigidity makes this system noticeably slow and discourages people from taking risks, acting quickly and thinking creatively. So, as Julian Birkinshaw and Jonas Ridderstrale put it well, it kills innovation. Undoubtedly, for an environment such as digital, in which operations need to bring quick and surprising responses to consumers, this is not the best way. 

But it is worth noting that the bureaucracy is not entirely bad, even in the current market. It is very useful and necessary in contexts that need control and clear decision paths, such as areas dedicated to risk and the observation of companies' legal issues. 
 
Meritocracy

In the information age, formal bureaucracy gave way to meritocracy, as professionals started to have more access to knowledge and there was greater democratization of the possibility of developing skills and generating more value for companies. Gradually, individual expertise gained prominence, and the best argument came to have more value than a high title. It was the victory of science over the hierarchical position.

In a production area, for example, where development and engineering professionals work in agile teams to create digital experiences, meritocracy works well. In this model, team leaders - who usually receive the title of scrum masters - must seek opinions and contributions from teammates, and the argument that makes the most sense will persist. This is also very suitable for areas that need to be based on reason and detailed analysis. 

The problem is that pure meritocracy is not equipped to deal with the construction of collective intelligence, which is so important for experimentation in search of the fast innovation that digital requires. This is because it privileges the individual skills, and not the group, and ends up stimulating competition and discouraging collaboration. As we say, the most intelligent person in the group is not more intelligent than the whole group.  

In addition, this model does not work for areas that require rapid action and flexibility, resulting from the sum of data and intuition, such as those directly linked to consumers and their more direct demands.    
If bureaucracy and meritocracy do not meet the needs of the new market, how to solve this equation?

Adhocracy, the management model of the digital age

The concept of adhocracy was coined by the American futurologists Alvin Toffler and Heidi Toffler, in 1970; such a concept described the format of team organization that - in the future that has already arrived - would have to face the rapid changes in technologies. 

In a theoretical adhocracy, small groups of people work together in squads to find opportunities. Opportunities can be generated by customer needs or the ability to explore a new market. Squad members can be from the entire organization or from the same area with different senior levels. The most important thing is that they have something to contribute and a real interest, an emotional conviction in the work being done. Although decision making is commonly shared, the squad's highest authority must be the person with the most expertise.

In 2018 we decided to test this management model at CI&T, the entire executive layer at different levels started to integrate and collaborate in squads. Between three and five executives shared the job of meeting customer needs. In addition to enriching the processes with more specialized points of view, we offered each client a larger number of executive profiles that they could count on. Clients benefit from greater expertise, while our executives have gained more freedom to move between different relationships and types of work.

Thus, the leaders had more customers, however, in this model of shared work, they spend much less time reporting to senior positions and explaining what to do to direct employees. 

Our model of adhocracy

For us, adhocracy only made sense if people could follow their passions in choosing their customers, and if emotional conviction was a better guide than a spreadsheet with data. The idea that emotional conviction should be the guide may seem a little scary at first, but it is not about discarding reason. Adhocracy is not anarchy; it only considers intuition as a valid source to support decision making. This means that in times when speed is a great value, we cannot drown in data and information and allow ourselves to be victims of paralysis by super analysis.  

We believe in the potential and intelligence of our people and we trust that giving them the opportunity to choose the challenges with which to connect, or to recruit them according to their interests, talents, desires or beliefs, would bring the best results. We were not mistaken. We realize that people have very positive attitudes when they actively choose to work in a squad. Motivation and energy are notorious.

From time to time, with the entry of new customers and the change of objectives, we carry out a rebalancing, a recalibration of the squads, transferring executives to challenges, to customers and to the teams that make the most sense to them. And, to keep up with the performance of the squad and the executive layer, we have created clear rules and a structure that governs these squads. We carefully analyze the tasks conducted internally and performed by each executive with performance analysis. These rules are described in four pillars that support our model of adhocracy:
 
1. Personal development analysis - Executives can request formal or informal feedback at any time and have constant assistance as they move between different roles and squads. 

 2. Performance analysis - This is a formal performance analysis that takes place at an annual rate.

 3. Guilds - Originating from the Agile methodology, guilds are periodic meetings in which people from different areas and squads, but with common interests, meet to share new learnings, discuss issues in depth and improve knowledge. These meetings are true machines of advanced analysis, capable of generating collective intelligence of high value.  

 4. Opportunity-oriented PDCAs - It is the fundamental project management method (Plan-Do-Check-Act) in the squads. With it, it is possible to maintain continuous process improvement through planning and systematic measurement of results.

However, adhocracy is not the silver bullet that solves the problems of all areas of companies. As stated earlier, each management model is appropriate for a given context. Our goal has never been to create new types of governance-based silos. The ideal is to make a smart mix between the three models mentioned above.

The best management system is a mix of all models

Thus, we structured a work framework in which each model was used where it made the most sense, everyone always coexisting in the most organic way possible. The priority is to maintain good communication and the exchange of knowledge between sections that work in a bureaucracy, such as the compliance area; those with a more meritocratic system, such as development teams; and those that operate by adhocracy, such as teams dedicated to direct relationship with the client.

Today, we continue in our eternal way of learning, always looking for the format of operation that makes the most sense for our company, for the market context and, mainly, for our customers.

The important thing will never be the form, but the result. Probably in a short time, we will be adding another model, more learning to our journey. In times when movement is the rule, delivering the greatest possible value to make a difference in the consumer's life and in society should be the only constant. This is our true north.

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