...Ancient Mysteries Solved!
When I was a wee programmer at Apple (87-89) reorgs would be announced with great fanfare. Frequently. “Former head of European university sales now reporting to head of university sales for European blah blah blah…” (Maybe I wouldn’t need reading glasses if I didn’t used to roll my eyes so hard back then.)
With my Geek Incentive glasses on (which are much lighter than my reading glasses), re-orgs make sense. (I love it when a 35-year-old mystery is solved.) Here’s what incentives tell us. (Now, in what follows I’m going to only speak about extrinsic incentives with full knowledge that there’s a lot more going on. Pays to focus sometimes.)
One Manager, One Report
Let’s say I’m an individual contributor. Incentives flow from my manager to me. My accomplishments flow from me to my manager. I have incentives to increase my accomplishments.
1:1 is not a great manager/report ratio (my friend Nimrod Hoofien says the right management fanout is 8 at the first level and then 5 the rest of the way up—more about this later).
Now you report to the same manager. So far, so good. Incentives flow down to both of us (I’m deliberately ignoring timing for the moment—again, more later). Both of our accomplishments flow up.
That’s not the whole picture. Our manager aggregates our accomplishments and also experiences incentives.
Our manager would like to report more accomplishments but there’s nothing directly they can do about that. They have chosen a life of service, not of doing.
If only you and I would collaborate we would get more done and there would be more accomplishments to report. (This argument only works when collaboration creates value that wouldn’t be created without collaboration.) But why would we?
(The story gets simplistic. We may have intrinsic motivations to work together, regardless of corporate incentives. I mean, it’s you and it’s me. Of course we want to work together. But please bear with me.)
Our manager has the incentive to encourage collaboration. They want the picture to look like this:
And there you have it. The person in this picture with clear and direct incentives to create collaboration is the first level manager.
I promised I’d explain the value of re-orgs. We have seen the value created by first-level managers by encouraging collaboration. What happens when someone “joins the team” but they can’t collaborate for some reason (like they are working on something completely different—a strawman but stick with me we’re almost there)?
Rando is a distraction from the value creating work of our manager. They are better off with a more-aligned manager. The manager is better off. The organization is better off. We are better off. The new organization is more valuable than the old.
And it’s all down to the incentives. A million caveats:
People are people not nodes in a graph.
Most incentives are either intrinsic, social, or both.
Incentives flow both ways. All ways, really.
Individual incentives for team accomplishments are a recipe for (I was going to say “disaster” but let’s go with) mis-alignment.
The formal organization structure is only one of many (but it is optimized for delivering certain kinds of incentives).
And on and on. We’ll get to all that. For now I’m happy I can give my eyes a rest.