From Hierarchical Structure to Relational Networks

From Hierarchical Structure to Relational Networks

DOI: 10.4018/978-1-4666-7369-4.ch002
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Abstract

In this chapter, the authors show how functional organizations, derived and perpetuated by the Romans, the Church, and the army of Frederick the Great, were ready-at-hand with the emergence of the industrial era and associated with the creation of wealth through a series of subsequent and specialized value-adding steps. This is a typical command and control model. The chapter shows that this is not the only model for wealth creation over the centuries, even though it continues to predominate in contemporary organizations. Relational networks existed throughout the same historical span of time and are undoubtedly responsible for the greatest accumulation of wealth. They often accumulated such a significant amount of wealth that they threatened the legacy models of church and state. Legacy thinking, directly and indirectly, continues to perpetuate questionable assumptions and cognitive blindness about how work really gets done and how wealth is really created.
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Introduction

The Evolution of Organization

Traditionally, it is our custom to view companies as though they were a hierarchical organization chart. We reproduce this structure in management committees and agree upon actions then replicated down the hierarchy following the same logic. This simplicity, however, inherited from the dawn of the industrial revolution and military and ecclesiastical institutions, has little to do with the real complexity exhibited today by 21st century institutions.

Today’s world is one in which intangibles, specifically knowledge, have caught the attention of businesses and governments as well. Knowledge goes into production, governing practices, processes and resources. In the process, organizations have been forced to introduce new concepts regarding how to define organizational dynamics, in order to be able to diffuse value, taking into account the complexity and agility being faced under current scientific and technical conditions.

Following this premise, the possibilities of value diffusion are directly related to the organizational culture that builds the pathways of diffusion, based on relationships and processes. By the same token, if current conditions imply complexity, speed, and consistency, management models resting on such rigid structures as hierarchies will constrain value diffusion and create a series of wastes throughout the organization. These wastes show up in any number of ways: lack of coordination among areas, both intra and inter-functional, rework, commitment failures, breakdowns in programming, the favoring of functional targets, and other “invisible” failures.

As seen above, the organization in its evolutionary process must evolve to flexible plastic forms in order to sustain the qualities of value diffusion based on current scientific and technical conditions. Understanding the organization of the 21st century in this way is to visualize configurations of networks of relationships that stand as support to carry out the strategy of value creation and diffusion.

The need to change our way of thinking obliges us to look at the company as a network of relationships organized around the production of value model. This network of relationships is configured in a world of facticity. It constitutes the real business model, not the one declared by the company, calling forth those business processes responsible for the success or failure of the organization. Until now there were no tools capable of diagnosing the real network and exhibit its configuration, present state and capacity to ensure the strategic viability of the company.

This chapter invites us to view new ways of organizing, motivating us to deconstruct hierarchy and focus on the white spaces in the organization chart, thus making explicit the relational shapes of relational networks or RENS.

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