While in London doing some consulting for a high-tech company, I was thinking about what an organization would look like that did not buy into the myth of leadership. I sketched out a model for putting the peer-based organization together ”what I now call the Strategy Diamond. The model is built around customer needs, not a company's functional specialization. I was also convinced that I had to find a way to introduce the peer-based organization into a rank-based company that was not too disruptive.
The Strategy Diamond, as shown in figure 1, provides a visual picture that can help separate an organization's structure from the decision-making responsibilities. The decision making should be based on mission, customer needs, and satisfying those needs, rather than on functions or divisions. In essence, this means that organizations should be designed around customers and company competencies rather than static functions and hierarchical rank. As will be shown, the Strategy Diamond gives us a method to introduce peer councils and task forces in a way that does not immediately eliminate the traditional hierarchy; thus it provides a less threatening entry into peer-based management. Being less disruptive, it will not generate the resistance and hostility that would doom the effort to transition to peer-based thinking before it even began .
The Strategy Diamond has nine facets:
Individual values. All human beings share the same basic values, including the need for self-worth, connection, and contribution. Ultimately organizations exist to enable individuals to realize these values. The enduring organizations are those that accomplish this over the long term .
Basic desires. Across cultural and national boundaries, we also share the same basic desires, including the desire for freedom and security (more specifically , economic security). Enduring organizations are those that fulfill these basic desires, not so much for their customers as for their own employees .
Governing values. These include an organization's vision, mission, and core practices. A company must be clear on its sense of passionate purpose and its core practices for accomplishing that purpose.
Strategic capabilities. As perhaps the least understood of the organization's competencies, strategic capabilities can be determined by answering the question, "What is your competitive advantage in markets that gives you a sustainable edge over rivals?" or, "What do you do better than any rival that is hard to imitate and that adds value for your customers?"
Customer needs and wants. Following that analysis, a business must explore its customers' needs and wants, as well as those of noncustomers, and how they align with the company's own sense of purpose and its strategic capabilities.
Portfolio of products and services. When specific customer desires are matched up against the company's strategic capabilities, the company must decide strategically on what portfolio of products and services it needs to deliver.
Beginning-to-end delivery systems. Following that decision comes the full creation of each product and service, including research and development, product design, product manufacturing, assembly, processing, branding, marketing, selling, physical distribution, delivery to customers, and after-sales service.
Crucial tasks and projects. Within each delivery system are specific projects, tasks, and assignments required for successful functioning of the delivery system.
Individual skill sets. The final facet of the Strategy Diamond features the competencies, skills, and abilities of each employee needed for achieving results.
The Strategy Diamond enables us to envision peer-based organizations. Using this model we can create a full peer-based model like the one shown in figure 2. On the left side of the Strategy Diamond, we can now visualize organizational design and the managing of work through traditional management positions . On the right side, we visualize organizational governance through the peer-based leadership councils. (Specific types of peer councils are discussed in chapter 7.)
A rank-based organization tends to create a management structure and reporting lines wherein the senior executives place rank-based leaders such as EVPs over corporate divisions, VPs and directors over departments, managers over product lines, and team leaders over teams . Power and authority run in only one direction ”from the top down ”and reporting and accountability run from the bottom up. While this model can create a stable organization, it does not create a very innovative one. It possesses all the problems and negative characteristics of a rank-based organization that we have already discussed.
The Strategy Diamond, on the other hand, gives us a way to first visualize preserving the stability of the hierarchy while beginning to capture the creativity of the peer-based organization via the leadership councils. As mentioned earlier, a key condition of creating a peer-based organization is that no radical changes should be made to the structure of the company. Instead, the executives and managers should begin creating networks of peer councils that they advise , consult , and train to become the key decision-making bodies.
An organization should feel free to experiment with the organizational design on the left side of the model; for instance, in deciding whether to structure the work of the company around geographical areas, customers, or products. In fact, by trying out different arrangements and occasionally restructuring, the organization creates deeper internal networks among the employees that serve to improve communication and flexibility.
Chartering peer-based leadership councils with appropriate training and coaching while keeping the traditional management structure in place reduces the amount of resistance and confusion. Within a short time, the organization will open up and begin to take on the characteristics of a peer-based organization. As peer-based thinking becomes common in the culture of the organization, the need for the conventional management positions on the left side of the diamond will disappear. Any major reengineering projects, however, even those that would eliminate any "management position", should be introduced and led by the employees through the peer councils. Where before the rank-based leaders made all the important decisions and then had them carried out, now the peer-based leadership councils make the key decisions with counsel from the senior executives.