Organizational vitality can be used as an interesting metaphor for the iceberg, which is reflected in three specific levels, namely, the surface layer of the iceberg corresponds to the primary vitality, the middle layer of the iceberg corresponds to the intermediate vitality, and the bottom layer of the iceberg corresponds to the advanced vitality.
What is "vitality"? Before answering this question, we can learn from Huawei's supreme program, "Live". This is a simple colloquial expression that is rich in the style of Huawei Renzong, and has the unique meaning of "rough words are not rough". Mr. Ren likes to express a point of view with profound connotations in simple and humorous terms. In fact, the colloquial "stay alive" into written language is "long-term sustained and effective growth".
Many businesses are born out of an entrepreneur's initial bold grasp of market opportunities, on the basis of which a small group of people are gathered to fight for it. But as businesses grow larger and older, they will face one existential crisis after another, and the key ingredient that keeps them through these crises is "the right direction and the dynamic organization."
The so-called "generally correct direction" is about strategic foresight and prediction, and now we focus on the topic of "organizational vitality", including various loss of vitality problems faced by enterprises at different stages, the core of which is that in the process of enterprise development, organizational vitality will inevitably experience three serious declines, and thus trigger three major enterprise survival crises, which just involve three levels of organizational vitality, that is, three levels of organizational vitality correspond to three organizational transformations. It should be pointed out that the development process of enterprises focused on in this article refers to the key development period after the initial stage of entrepreneurship, but before aging, that is, the three golden stages of enterprise development after the "infancy" of the enterprise life cycle and the "juvenile period", "youth" and "middle age" before the "old age".
Three levels of vitality icebergs
Organizational vitality can be used as an interesting metaphor for just the right amount of fun, which is embodied on three levels:
The first layer of organizational vitality is reflected in the surface of the surface of the "vitality iceberg", which everyone can see clearly, and its constituent elements are mechanical formal systems, that is, the various principles, processes, working relationships, etc. clearly stipulated, which can also be called "hard" rules. This is the primary part of organizational vitality, and its core function is organizational execution to fulfill daily work tasks.
The second layer of organizational vitality is reflected in the middle part below the surface of the "vitality iceberg", and the general outline can be vaguely seen, and its constituent elements are the softening of the "hard" rules, that is, the flexibility and formal authorization of the "hard" rules, and the informal "flexible" rules (that is, the various work practices that are not explicitly stipulated). This is the intermediate part of organizational vitality, and its core function is to soften the "hard" rules and make up for the rigidity of the "hard" rules, so as to empower flexible organizational agility and improved innovation.
The third layer is the bottom part below the ice landscape of organizational vitality, which cannot be seen at all, including the deepest part of the corporate culture, that is, values, mission and vision. This is different from the informal "soft" rules of organicity, because this level no longer requires any rules from the top down, whether "hard" or "flexible", but relies on constraint and self-motivation. This is the advanced part of organizational vitality, and its core function is to play the role of organizational cohesion and breakthrough innovation. It should be pointed out that this part of the organizational vitality is closely related to the general direction of enterprise development, and it is also the interface between organizational vitality and strategic direction.
Due to space limitations, our article focuses on organizing the first and second layers of the Vitality Iceberg. In the next article, we continue to explore the third layer of the Vitality Iceberg and the overall linkage between all three layers.
The first existential crisis of the enterprise
Organizational execution is the comprehensive coordination of internal and external resources of the organization under the established strategy and vision, and the effective implementation of the completion of the final organizational goals and the realization of the organizational vision. The English equivalent of "execution" is "capability for execution", and its meaning is mainly twofold. First, the ability to complete tasks strictly according to the plan; second, the ability to complete challenging tasks, especially tasks with higher technical requirements. In other words, execution is reflected in the quality, quantity and speed of accomplishing general tasks, as well as in the effective completion of difficult tasks.
A common phenomenon is that when the company is founded, it is small and full of vitality; everyone knows what they want to do, communication and collaboration are very smooth, the work efficiency is very high, and they can see the overall progress of the work and the results of the completion of the task, and everyone has a sense of accomplishment. However, with the continuation of time and the expansion of the scale of enterprises, the division of labor is becoming more and more detailed, the work that everyone is responsible for is becoming more and more single, it is more and more difficult to understand the overall progress of the work, effective coordination is becoming more and more difficult, and solving problems is becoming slower and slower; everyone feels busier and busier, but the per capita output is declining.
Take China's manufacturing industry as an example. When the general enterprise has developed for more than ten years and the scale of revenue reaches more than three billion, it begins to obviously feel that the efficiency of the enterprise has declined. This is manifested in the slowdown in decision-making speed and execution speed, the increase in interpersonal conflicts, and the intensification of rip-offs; the new employees are becoming more and more unable to find feelings; managers wonder that although the quality of new people is not worse than that of the original employees, the ability to solve problems is declining. At this time, employees generally feel that it is difficult to have opportunities for development and growth in the enterprise, so the turnover rate of excellent employees increases.
This is the most likely problem to occur when an enterprise has just embarked on a scale and has not yet established a sound management system (mainly including organizational structure and work processes). With the increase in the size of the enterprise, the enterprise can no longer rely on "individual heroism", but rely on teamwork; the enterprise must complete the transformation from "scattered soldiers" to "elite soldiers". In short, this is the need for a transition from the former "guerrilla" organization to the future "regular army" organization. This feeling will be particularly obvious when the scale of corporate revenue reaches about 10 billion. This is the first existential crisis that companies face in the process of development (the first sharp decline in organizational vitality). If there is no intervention at this time, the enterprise will face a serious recession and even a great danger of death. In other words, enterprises need to complete the organizational transformation from "rule of man" to "rule of law".
The main role of the management system is to solidify the excellent experience in business practice, especially the most effective working principles and processes, not only so that each individual clearly understands what their rights and responsibilities are, how to effectively complete their own work, but also to provide a common language of team communication and a unified interface for coordination between teams. Therefore, perfect working principles and processes are the most important guarantee for enterprise efficiency and the basis for vitality. The most critical step in this phase is the introduction of best practices from the world's advanced enterprises, including advanced governance models, workflows, organizational structures, and IT technologies that are appropriate for this stage.
This is the primary part of organizational vitality, including mechanical formal rules, that is, the various principles, processes, working relationships, etc. clearly defined, which can also be called "hard" rules, and its core function is to improve the organizational execution of daily work tasks. Although this is only the primary part of organizational vitality, many Chinese companies are not perfect enough at this level, and there is still a lot of room for improvement.
However, success is also Xiao He, and defeat is also Xiao He. The solidification of the "hard" rules of best practice inevitably leads to organizational inertia, bureaucratization, entropy increase, and inner volume. Therefore, enterprises need organizational vitality that is one level deeper than organizational execution.
The second crisis of corporate survival
General enterprises will encounter the problem of rule solidification when they reach a scale of about 30 billion. With the growth of the size of the enterprise and the introduction of a large number of formal rules of mechanical nature (as a scientific management system), the efficiency of the enterprise has been greatly improved, but the by-products that followed - inertia, bureaucracy, entropy increase and inner volume - are also inevitable. For example, in terms of decision-making mechanism, with the expansion of enterprise scale and the increase of business complexity, enterprises are faced with the dilemma of how to deal with flat organizations and bureaucratic organizations, centralized and decentralized. If decision-making power is concentrated at the top, the efficiency of implementation at the middle and grass-roots levels will inevitably decline; more seriously, the motivation and sense of achievement at the middle and grass-roots levels will also be greatly reduced. However, if it is delegated to the middle and grass-roots level, it may also become another type of "scattered soldier" state. This is similar to the vicious circle we know as "once you receive it and die, and once you put it out," you will be chaotic. This has been impossible to resolve in Chinese history. At this stage, enterprises face a new round of sharp decline in organizational vitality, thus triggering a second crisis of enterprise survival.
The Boston Consulting Group's research on business development in different industries shows that although the specific degree of performance varies, the organizational vitality of enterprises in all industries will decline with the growth of size and business life.
图源：BCG Henderson Institute analysis
In order to reverse this downward trend, it is necessary to change the factors affecting the vitality of enterprises, so that enterprises can return to the track of sustained and healthy development and growth. To this end, at this stage, the biggest challenge for the sustainable and effective development of enterprises is how to maintain organizational vitality at a higher level beyond organizational execution while achieving enterprise efficiency.
This major problem has long been seen by the famous management scientist Peter Dulac. He pointed out that for more than a hundred years, the greatest achievement of management practice has been to increase the productivity of manual workers by 50 times. While this cannot be underestimated, the greatest challenge of the 21st century is to increase the productivity of mental workers or knowledge workers. According to Durak's estimates, the productivity of some knowledge workers has not risen but declined in the past 70 years. This is very different from the general perception.
Why is this happening? Let's first talk about the characteristics of traditional management systems. The reason why the traditional management system can "greatly increase the productivity of manual workers" according to Peter Dulac is that manual workers, as well as low-level mental workers, usually engage in relatively simple and repetitive tasks, such as workers on assembly lines, employees in offices that process report statistics or fixed workflows. The common feature of these efforts is that there is a relatively fixed input-output function relationship, and the results can be basically controlled. This type of work generally requires little agility and innovation on the performer, and it is relatively easy to balance efficiency, quality, and risk.
"Workflow is a summary of business best practices" is evident here. Workflows also play a good role in empowering such individual workers. As long as the workflow is followed, the efficiency of individuals and teams will be greatly improved. Because of the best workflow standards, it is easy to design synergies and controls based on them to ensure the highest quality of business and the lowest risk. Once this management system is in place, it requires all employees to strictly follow the work process regulations. In addition, the rationality of this management system is also highly recognized by everyone, as an unquestionable fixed norm and corporate practice, and has become the "gene" of enterprise operation.
However, all the work that senior knowledge workers do, such as sales, R&D innovation, strategic management, etc., that are more artistic (requiring flexibility and continuous innovation), are difficult to orchestrate in advance with a fixed workflow that provides the best customer experience or designs the most innovative products as long as they "follow the gourd". Because the business scenario is always changing, how to do it is the best, what to do is the best, there is no fixed rule, can not be one-size-fits-all, often need to break the convention, another way.
Because there is no common set of "best practice" rules for senior knowledge workers, collaboration and control become extremely difficult. Knowledge-intensive work requires continuous innovation, so it needs to be constantly changed, and the "law" of control must be relatively fixed, which forms a management paradox problem. We cannot ask knowledge workers who need to innovate to adhere to increasingly rigid workflows. In other words, the cured rules do far more harm than good for advanced knowledge workers who need agility and innovation, and thus lead to a loss of organizational vitality.
It is worth noting that people have repeatedly debated whether the work of knowledge workers is art or science. If it's science, or more scientific, we can orchestrate a fixed workflow in advance to control these employees. If it is art, or more artistic, we cannot orchestrate a fixed set of workflows to control in advance; however, we cannot completely let these employees go unchecked, because this goes against the essence of the enterprise as an organization, that is, a group of people with multiple individual goals for a common collective goal, and a division of labor and cooperation under the acceptance of a set of accepted rules. This is actually the core issue that the theory and practice in the field of management always try to solve, that is, division of labor (pluralistic separation) and collaboration (unified integration), as well as the yin and yang paradox of management and authorization, and the paradox is both mutually exclusive and mutually exclusive. This core topic is more important and at the same time more difficult in the management of knowledge workers.
We believe that organizational vitality beyond organizational execution is mainly reflected in two aspects. First, organizations need to eliminate the disease of large enterprises, break the rigid inertia, bureaucracy, entropy increase and internal volume, so they must allow flexibility in work processes to improve organizational agility. Second, in addition to organizational agility, organizations also need the active innovation motivation and ability of employees, especially senior knowledge workers, to enhance organizational innovation, including not only trial and error and innovation in functional areas such as technology research and development, marketing, etc., but also innovation in strategic layout and business models.
Improving organizational agility and improving innovation requires the establishment of "hard" rule softening mechanisms based on mechanical formal rules, as well as organic informal mechanisms (i.e., various work practices that are not explicitly defined). We can refer to both of these as "flexible" rules. Among them, the "hard" rule softening mechanism mainly includes the flexibility of "hard" rules (e.g., flexible budgeting), and the "hard" formal authorization (for example, process authorization, business authorization, financial authorization and personnel authorization).
Take process optimization, for example. Process optimization has changed from the "one business, one process" model to the "one business multiple processes" model. At the overall level of the enterprise, it is necessary to grasp the bottom line and adhere to the basic principles, but the process arrangements for specific action paths are for reference only, and the purpose is to empower the grass-roots units and let them formulate the specific work processes that are most suitable for the units on this basis. In addition, companies can establish reference baselines on business and financial authorization, and flexibly authorize on the basis of baselines.
This is the intermediate part of organizational dynamism whose core function is to suppress and correct corporate inertia, bureaucratization, entropy increase, and internal rolling. The vast majority of Chinese enterprises are very deficient at this level and must make up for the lessons as soon as possible.
However, although organizational agility and improved innovation can effectively resolve the second survival crisis of enterprises, they still have deficiencies, neither can they empower breakthrough innovation, nor can they ensure that organizational agility and innovation are in step with each other, and they work together to strive in a unified direction. To do this, businesses need the deepest levels of organizational dynamism.
The third existential crisis of the enterprise
The third layer is the bottom part below the ice landscape of organizational vitality, which cannot be seen at all, including the deepest part of the corporate culture, that is, values, mission and vision. This is the advanced part of organizational vitality, and its core function is to play the role of organizational cohesion and breakthrough innovation. This part of the organizational vitality is closely related to the general direction of enterprise development, and it is also the interface between organizational vitality and strategic direction. In other words, the third layer is based on shared values, missions and visions, building a high degree of trust in a consistent general direction, coordinating work through self-discipline and self-motivation, and no longer relying on any rules made from top to bottom, whether "hard" or "flexible". Therefore, the third layer is an adaptive, self-optimizing self-management mechanism.
If both the first and second layers are characterized by a top-down mechanism, the third layer is characterized by a bottom-up mechanism. When the three layers of organizational vitality are all in place, the enterprise will be full of vitality and can ensure that the enterprise will always follow the generally correct direction of sustainable development, especially if a large enterprise can face a sudden major crisis and make a timely and effective response, including top-down and bottom-up two paths. For example, Huawei's current severe U.S. sanctions are a great example of how the vibrancy of such organizations plays a unique role.
In short, with the increase in the scale of the enterprise and the age of the enterprise, the enterprise will face three existential crises, corresponding to the three levels of organizational vitality. The first corporate survival crisis roughly corresponded to companies with a scale of about 10 billion. The way to overcome this crisis has mature experience in the industry, that is, to enhance the primary part of organizational vitality, that is, organizational execution, by introducing mature "hard" rules. The second enterprise survival crisis occurred when the scale of the enterprise reached about 30 billion, and its business developed across regions and diversification, and developed in the direction of collectivization. The way to survive this crisis is not yet mature, but it can still be learned from world-class companies, that is, by introducing advanced "flexible" rules, the intermediate part of increasing organizational vitality, that is, organizational agility and improved innovation. The third enterprise survival crisis occurred in very large enterprises (the size of enterprises is about 100 billion). The way to survive this crisis is still being preliminarily explored, and we only understand that it centers on the deepest values of corporate culture and no longer relies on any rules made from the top down. How to survive the third crisis of corporate survival, the next part continues to explore.