I am a huge fan of the value and effectiveness of the research and writings of management science pioneer Elliott Jaques.
Jaques conducted organizational research for 50 years, culminating in an management system he called Requisite Organization. One of the most impactful management books in my education and practice is a book written by Jaques and Stephen Clement, Executive Leadership. Following closely behind two other late career books by Jaques, Requisite Organization and Social Power and the CEO.
Requisite Organization (RO) is an evidence-based systematic scientific approach to organization management for effective managerial leadership that is integrated, flexible, fair, and effectively productive. It is built with the underlying values and psychological health of people in mind.
RO is about creating conditions for the full release of creativity, capability and cooperative working together in all roles of the organization – in a sustainable trust-inducing environment geared toward achieving the organization’s mission.
The theory and practical application of RO is extremely powerful because of its explanatory power in identifying organizational design elements and exposing harmful but widely accepted ideas and practices that get in the way of creating productive and psychologically engaging workplaces. The core value of RO is in providing a set of science-based tools and guidance to overcome these dysfunctional elements.
While Jaques recognizes that organizational design and effective managerial practices are critical for organizations to maximize their potential, he doesn’t say too much about formulating strategy itself. Some help in this area is provided by bestselling author, consultant, and adjunct professor, Michael E. Raynor in his book The Strategy Paradox.
The one aspect I want to focus on here are Raynor’s observations regarding the linking of strategy to a set of fundamental insights discovered and promulgated by Jaques. In a pair of important HBR articles (“Taking Time Seriously in Evaluating Jobs” (1979) and “In Praise of Hierarchy” (1990)), Jaques explains the links he discovered in: identifying the complexity of work in a role as measured by time-span; the measure of cognitive capability of individuals to cope with the management of complex information and tasks in their jobs; and optimal and natural structuring of hierarchy in organizations to ensure the best results. These interconnections are sometimes referred to as Stratified Systems Theory (SST), are at the core of much of Jaques’ work, and are explained clearly in all of his books cited above.
Building on Jaques’ insights, Raynor applies much of this core work by Jaques to his research and experience studying corporate strategy and trying to discover why some firms succeed, others fail, and still others who are risk-averse manage to survive and fill important needs in the marketplace.
My intention here is not to discuss Raynor’s work, but simply to capture his major observations regarding business strategy that were triggered by and developed on top of the foundational work of Jaques.
One of Raynor’s key findings is that strategic uncertainty and strategic commitment are best managed at different hierarchical levels within organizations because they entail different time-span requirements and the corresponding need for different levels of cognitive capability and ability to manage higher-levels of information complexity.
Raynor explains in The Strategy Paradox:
[W]ell-functioning hierarchies are defined by a clear separation between levels according to the time it takes for those at each level to know whether or not they have made the right decisions today. … The CEO should be thinking about the long term, while divisional management (typically an operating division) is worried about the medium term, and in-the-trenches functional management has to deliver the goods. (9)
Senior management, because it is responsible for longer time horizons, should therefore focus on managing strategic uncertainty. Those lower down in the hierarchy, because they are responsible for shorter time horizons, should focus on delivering on the commitments already in place. This new organizing principle is called Requisite Uncertainty, because each level of the hierarchy is defined by its relationship to managing strategic uncertainty. (9)
[A]pplying the principles of Requisite Uncertainty implies that CEOs should not see their role in terms of making strategic choices – that is, commitments. Rather, they should focus on building ‘strategic options,’ that is, creating the ability to pursue alternative strategies that could be useful, depending on how key uncertainties are resolved. (9)
Requisite Uncertainty provides the foundation for separating the management of uncertainty from the management of commitment. The connection between hierarchical level, time horizon, and the degree of strategic uncertainty faces is the basis upon which responsibility for managing uncertainty is delegated primarily to the corporate office, while making and delivering on commitments falls mainly to the operating divisions. (15)
In summarizing his thesis at the end of chapter 1, Raynor writes:
The strategy paradox arises from the need to commit in the face of unavoidable uncertainty. The solution to the paradox is to separate the management of commitments from the management of uncertainty. Since uncertainty increases with the time horizon under consideration, the basis for the allocation of decision making is the time horizon for which different levels of the hierarchy are responsible: the corporate office, responsible for the longest time horizon, must focus on delivering on managing uncertainty, while operating managers must focus on delivering commitments. This is the principle of Requisite Uncertainty. A critically important tool in applying Requisite Uncertainty is Strategic Flexibility, a framework for identifying uncertainties and developing the options needed to mitigate risk or exploit opportunity. (16)
The key takeaway from this is to ask whether your organization is structured requisitely based on the principles of time-span, and whether or not the appropriate levels of the organization are working on emerging and future-oriented strategic options versus delivering on existing strategic commitments.
To learn more about Raynor’s thinking on these matters and his solution to the strategy paradox, you’ll have to read his book. But don’t overlook learning more about Requisite Organization.
Barry Linetsky is Partner with The Strategic Planning Group, and author of The Business of Walt Disney and the Nine Principles of His Success (Theme Park Press, 2017). Learn more at www.BarryLinetsky.com, and follow Barry on Twitter @BizPhilosopher and on LinkedIn.
© 2017, Barry L. Linetsky, All Rights Reserved