Six parameters for restructuring a corporation: a case history [Daniel Hershey, ISSS 1998 Paper Session, July 22/98]

These notes are a rough transcription, prepared as each individual presenter and/or commentator spoke at the ISSS 1998 conference. Gaps and errors have likely occurred. For more accurate citations, please consult the original presenters. These notes have been contributed to the ISSS by David Ing, of the IBM Advanced Business Institute (sabi@systemicbusiness.org).

Daniel Hershey, Professor of chemical engineering, at Cincinnati

Organizations as aging, evolving systems.

Deal with aging cells, which led to the variability of life spans.

• Studies the life spans of people.
• Excess entropy reduction.

• Organizations are also born, and may be reorganized.
• First looked at College of Engineering, before corporations.
• Dean was dictator, with all lines of control through him.
• The looked at whole university: a tendency towards gigantism, which generated some inefficiencies.
• Looked at Czechoslovakia (about 5 years ago), under a Fulbright grant to study government for 6 weeks.
• Government didn't know about themselves.
• President Havel, then chairman, ..., all of equal power: the only answer that they would discuss the issue.
• Model of world -- who does a country report to?
• Defining power and relationships.
• U.S. bloc, Soviet bloc, and Japanese bloc.
• In the past 6 months, now studying the universe.

Have written a number of books:

• Diagnosing an organizational bureaucracy
• Must we grow?

1. Overlapping of functions, which establishes major functions for the unit, and the organization.
2. Geometry of the table of organization:
• Verticality versus horizontal: more hierarchy means harder to get information.
3. Interactions which bypass the boss.
• Old organizations have shadow structures which bypass the boss to get things done.
4. Where's the center of gravity for power?
• (Have a definition of power).
• In a dictator, the center of power is high.
5. Symmetry: How is the power distributed?
6. Informational entropy: efficiency of information flow (based on Shannon)

• Interviewed top 11 units: president, 4 directors, 7 managers.
• Asked what do you do, who reports, fraction of budget.
• Did matrix of activities versus units.
• Based on their perception, drew a table of the organization:
• President, four directors, then seven managers.
• Analysis evolved a different picture.
• Lots of overlapping functions.
• Three layers not a reality: two directors were "super-directors" with much more power than the other two.
• Head of human resources have become important: now involved in design of orgs, and function of orgs, was right below two "super-directors" in important, and above two other directors.
• This meant 5 levels, rather than 3 levels.
• President made super-directors into vice-presidents, and other two directors into managers.
• In addition, sold off a business unit.
• Did measures of change, and found little change in the parameters.

Questions

• Tough question: how do you get people to change?
• President came into class; students were angry that he was promoting change without thought.