Building a Decentralized Organization
A Review of General Stanley McChrystal and Chris Fussell’s Management Philosophies
Recently finished reading Leaders: Myth and Reality by General Stanley McChrystal, and it serves as an excellent companion piece to his previous book, Team of Teams: New Rules of Engagement for a Complex World, and also to One Mission: How Leaders Build a Team of Teams, written by Chris Fussell, McChrystal’s Chief of Staff.
Together, these works answer perhaps the most pressing question facing startups today — how do you manage effectively in a complex, unpredictable and rapidly changing world?
The principles presented by McChrystal and Fussell gel with lessons I’ve learned at West Point, as a corporate strategist working with international cultures and as a Silicon Valley COO.
As such, wanted to provide a short summary of the work annotated with some of my personal thoughts and experiences.
When General Stan McChrystal took command of coalition forces in Iraq, he quickly recognized that the orthodox, rigidly hierarchical military structures of the 20th century were incompatible with the realities of modern warfare.
Despite having a huge superiority in numbers, equipment and training, the US forces were unable to keep pace with the enemy, who were leveraging technology to create a decentralized structure that allowed them to rapidly organize, strike and then disband, promptly vanishing back into the local population.
To defeat Al Qaeda, McChrystal needed to abandon conventional wisdom and remake the task force into an entity that could move with comparable speed and efficiency while still maintaining the advantages of scale.
The books Leaders, Team of Teams and One Mission provide a deep dive into the flat, cross-functional structure he created and help answer questions that have plagued business and military strategists since the first digital disruptors emerged, including: 1) Why don’t traditional management techniques work in the information age? 2) How can you design a large organization to run like a small team? and 3) What kind of leadership is necessary in a flat organization?
Problem: Legacy Management Systems Don’t Work in a Digital Age
Most management systems today are legacies of a theory known as Taylorism, a scientific approach designed in the late 1800s as a response to the increasingly complicated systems generated by automation and mass production.
Taylorist systems use standardized processes (e.g. the assembly line) and rigid hierarchies to break down extremely complicated tasks into small pieces that individual employees can easily manage.
While these systems worked exceptionally well for over a century, they began to see their value decline as the complicated (multiple components) systems of the 20th century gave way to the complex (multiple interactions) systems of the digital age.
As General McChrystal realized in Iraq, the benefits of real-time data and instant communication among multiple participants belie a darker reality of a world that is growing increasingly chaotic and unpredictable. In this turbulent landscape, traditional strengths such as scale and efficiency are being replaced by speed, agility and cross-functional collaboration.
Armed with this knowledge, McChrystal faced a series of questions that plague most entities facing a digital transition: How do you create speed and agility while retaining the benefits of scale? How do you ensure effective communications between distributed teams from different departments?
Solution: Create Flat, Cross-Functional Teams
A “Team of Teams” is the name General McChrystal gives to an approach designed to achieve the flat, cross-functional organization necessary to survive in today’s military and business environments.
Unlike the Taylorist architecture, which organizes entities into strict horizontal and vertical hierarchies, this model seeks to break down these barriers — eliminating vertical silos through distributed decision making, removing horizontal obstacles through cross-functional collaboration and aligning the entire organization with a shared sense of trust and purpose.
At its core, The Team of Teams structure is adaptable, modular and it leverages technology to merge the agility and cohesion of a small team with the resources of a giant organization.
Why Cross-Functional Teams Fail:
While it’s clear to most that cross-functional teams are necessary in today’s fast paced environment — military operations must coordinate between air, land and sea forces and startups must coordinate between tech, HR, marketing and finance — designing such an entity is much easier said than done.
Often referred to as “herding cats”, successful managers must harmonize team members with different skills, personalities, strategies and motivations. This exercise becomes even more difficult when dealing with multi-generational and geographically diverse workforces.
In fact, this is such a demanding skill that HBR estimates that 75% of cross-functional teams are dysfunctional. While there are many reasons for this, the most prevalent are:
- Misalignment of goals
- Lack of communication
- Unclear roles, responsibilities and decision-making authority
Fortunately, there are proven processes that one can setup to overcome these challenges and facilitate effective collaboration and execution.
How to Build a Team of Teams
Over the three books, both General McChrystal and Chris Fussell provide a host of tactics that are useful in creating a flat, cross-functional organization, but I have chosen to highlight three processes that I feel are especially powerful:
Process #1: Common Purpose
Like many modern leadership strategists, McChrystal believes that a strong and shared sense of purpose is critical to maintaining well-functioning teams — to paraphrase author Simon Sinek, knowing “why” is more important than knowing “what” or “how”.
Shared intentions not only build passion and motivation, but also serve as a key tool for rapid decision making — team members that understand “why” are better equipped to make well-informed choices in rapidly changing environments.
While few doubt the efficacy of a purpose driven strategy, many struggle with the execution of this idea. After all, how often do all members of a startup truly live by the company’s values and goals? How do you make the mission more than an unread sign hanging in the breakroom?
Although there are dozens of books dedicated to answering these questions, one relatively simple way to foster common purpose is with value or mission-based OKRs (MOKRs).
OKRs have become common practice in most successful startups because they help set clear goals, promote personal accountability, align the organization and enable more effective and informed decisions. The one downside to traditional OKRs is that only answer the questions of “what” and “how”. By adding your company values and / or mission, you also can answer the question of “why”:
Because good OKRs are ubiquitous (e.g. everyone in the company should have an objective) and aligned throughout the organization (e.g. the employees objectives align with the team’s objectives and the team’s objectives align with the company’s goal), this simple addition can be extremely powerful, focusing efforts and serving as a constant reminder of the all-important “why”.
Process #2: Shared Consciousness
Information is king in the “team of teams” model. Departments need to understand the long-term goals of the leadership team, management needs to recognize the real-time challenges facing employees and each vertical needs to have a clear appreciation of how their work relates to both the larger organization and other departments.
Creating such a “shared consciousness” maximizes the efficiency of teams, eliminates excessive bureaucracy, fosters cross-functional collaboration and optimizes decision making at the tactical level.
One process used by General McChrystal with great success was the Operations and Intelligence (“O&I”) forum — a regularly scheduled, digitally enabled means by which the leadership could instantly interact with soldiers throughout the organization, and through which any team could coordinate with any other one in the hierarchy.
A civilian alternative to the O&I forum (and one I’ve used with massive success) is known as the “Weekly Meeting Pulse” from Gino Wickman’s Traction.
This concept calls for a recurring series of 60 to 90-minute meetings that “cascade” throughout the organization, are held on the same day and same time each week and stick to a rigid agenda that ensures the meeting starts and ends on time.
A sample of this agenda, borrowed (and slightly modified) from Wickman’s “Level 10 Meeting Concept” is below:
1) Begin with reporting by all department heads and collecting of key issues (25 minutes)
- Meetings should start with each team member sharing one personal and one professional accomplishment for the week (5 minutes)
- The next item on the agenda is the review of key KPIs by department. This not only provides accountability, but also gives everyone in the organization a much clearer view of the bigger picture. If a KPI is lagging, it should be included in a list of issues to be discussed later in the meeting (5 minutes)
- Once the KPI review is complete, each team leader should discuss the status of his or her OKRs for the quarter. At this point, simply stating whether objectives are “on-track” or “off-track” will suffice. Discussion of “off-track” items is saved for later (5 minutes)
- After reviewing KPIs, department heads will give a short overview of customer / employee headlines, both sharing success stories and uncovering potential issues. Again, discussion is saved for later (5 minutes)
- Finally, team leaders review their to-do list from the previous week’s meeting. Items that have been outstanding for too long can be dropped to the issues list (5 minutes)
2) After the initial reporting phase, a “Level 10” meeting moves on to a more in-depth discussion of key issues (60 minutes)
- During the reporting phase, someone on the team should collect a list of all issues uncovered
- After these concerns are collected, management prioritizes the 3 most important ones (I recommend using something like the Eisenhower Matrix to accomplish this)
- The team then works together to perform root cause analysis to uncover underlying problems
- Once those problems are identified, the group will brainstorm potential solutions
- Finally, issues that can be solved easily are added to the next meeting’s to-do list, while those that require deeper analysis are assigned as action items
3) Once the discussion phase has completed, action items are added to the to-do list for the next weekly meeting. A general rule of thumb to follow here is that every meeting throughout the organization should end with three questions: What do we need to do? Who is going to do it? When will it be done? (5 minutes)
It’s important to note that it’s vital for all team members to attend and participate in these meetings. While there are several excuses for absence that may seem valid at first glance (e.g. looming deadlines, client meetings), it’s important that employees understand that their presence not only helps them grow, but more importantly keeps everyone else on the team informed and operating at their best.
Process #3: Empowered Execution
To survive in rapidly changing environments, leaders must learn to share power and encourage decision making “at the edge”. Decentralized decision- making processes generally offer a host of benefits to the organizations as they:
- Encourage creativity
- Typically lead to better outcomes (employees closest to the problem are often the ones able to make the fastest, most-well informed decisions)
- Create room for “positive deviants”, allowing employees to push the norms and make breakthroughs
- Encourage employees to act prudently as they are now taking “ownership” of their choices
But the process of delegating authority must be handled carefully, as arbitrarily removing all constraints could prove disastrous.
For decentralized decision making to work, teams need to understand the organization’s goals (common purpose), have the information to make the best judgement possible (shared consciousness) and finally, have a clear understanding of what choices they are and are not authorized to make (decision space).
This last point is critical, because without a clearly defined decision space, most people will default to playing it safe, letting anxiety over making mistakes or overstepping their bounds lead to hesitance and unnecessary delay.
In order to distribute authority, I’ve successfully used the following three-step process in the past:
- 1) Conduct a Decision Audit: Identify the key decisions your company needs to make to achieve your goals and categorize them based on impact/risk and complexity/level of familiarity
- 2) Assign Decision Spaces: Based on your decision audit, create a clear set of rules for what choices each team leader is and is not permitted to make without approval from others. The simplest example of this is allowing a product manager full authority over capital decisions within their budget but requiring approval from others to increase the budget
- 3) Formalize a Decision-Making Process: While the authority to make decisions is something you should delegate, a strong decision-making process (e.g. root cause analysis, McKinsey’s issue tree framework) is something that you can template and coach throughout the organization
When implementing decision spaces, it is extremely important for management to resist the urge to second-guess individual choices at the operational level. Not only does this undermine trust and motivation throughout the organization, but also ignores the host of benefits that can arise from real-time decisions by those closest to the problem.
If leaders find themselves struggling with the urge to meddle, they can find comfort in the fact that decision spaces work especially well when paired with OKRs, as they allow teams freedom while still maintaining ultimate accountability (i.e. team members are judged by the collective results of their choices over the long-run).
Thriving in a decentralized, cross-functional organization requires a different set of leadership skills. A successful manager can no longer rely solely on traditional command and control structures and instead must learn to master “soft power” traits such as awareness, openness, empathy and relationship building.
As General McChrystal says, the modern leader is less like the “chessmaster” (moving pieces around a board as part of a grand strategy) and more like the “gardener” (creating an environment in which talent can flourish).
In order to assist with this new style of leadership — which relies heavily on cross-functional coordination, rigorous information sharing, delegated decision-making and alignment of purpose — McChrystal and Fussell recommend the use of liaison officers, who can help synchronize disparate stakeholders.
Chris Fussell, who served as aide-de-camp for McChrystal, goes into more detail on this topic, suggestion that a strong liaison officer can:
- Coordinate short, medium and long-term strategy planning and ensure that the leadership’s strategic vision is effectively communicated throughout the organization
- Help establish MOKRs, ensure the effective management of the organization’s meeting rhythm and advise on decision audits and the delegation of decision-making authority
- Build strong relationships with different leaders throughout the organization, understand their challenges and opportunities and keep their finger on the ‘pulse’ of different departments
As I referenced in my previous review of Blitzscaling, the ability to scale rapidly is becoming increasingly important in the startup world, as industries that are dominated by demand-side network effects generally reward the company that reaches critical mass first.
While books such as Blitzscaling offer a more tactical approach for speed, McChrystal and Fussell’s works approach the problem from a different angle, offering a refreshing perspective on how to build an organization that is primed for rapid growth.