This article is part of a series that discusses the management book Humanocracy. The core of Humanocracy is made up of seven principles that are intended to provide orientation when you have to design organizations or act within them. This article deals with the first principle: the principle of paradox.
Published in the series:
The core idea
The principle of paradox is aimed at dealing wisely with (unavoidable) paradoxes. Hamel & Zamini start from the assumption that organizations are constantly confronted with trade-offs. As only a limited number of goals can be pursued at the same time, it is necessary to choose between equally attractive goals. Examples of such trade-off decision-making situations include trade-offs between the need for control and freedom, between growth and profitability, between long-term and short-term profits, or between creativity and discipline. The case of weighing up exploitation and exploration, which we discussed in connection with the principle of experimentation, is also a prime example of trade-offs.
Such contradictory requirements cannot be resolved per se. According to Hamel & Zanini, humanocracy is primarily about bringing the handling of trade-offs closer to concrete decision-making situations. Instead of giving an organization rules that are intended to define the respective primary orientation (e.g. innovation orientation instead of the execution orientation typical of bureaucracies, risk aversion instead of a basically cautious attitude, etc.), it is important to make decisions that are appropriate for the respective situation without simultaneously committing to a multitude of other decision-making situations. The triad that Hamel & Zanini promote is to recognize trade-offs (i.e. be honest about the existence of dilemmas), localize decisions about trade-offs (i.e. assign them to specific situations and the employees involved), and depolarize trade-offs (i.e. promote both/and thinking).
Our considerations
Dealing with tensions, dilemmas, and conflicting goals is a perennial problem for organizations – and in some ways even a defining characteristic. If there are no tensions or conflicting goals, you are not dealing with an organization. Shifting dilemmas to specific decision-making situations instead of pre-deciding them for an entire organization undoubtedly increases an organization’s situational flexibility. But this also makes very many decision-making situations more complex. One example of this is where Hamel & Zanini propose not using KPIs as performance indicators for organizational units and frontline teams, but assigning P&L responsibility to them. Instead of using KPIs to provide relatively simple proxies to guide their own decisions, the entire complexity and multi-layered nature of the P&L problem is localized, and thus multiplied within the organization. In this case, the potential gains in flexibility would at least have to be offset against the costs of increased complexity. The appeal to depolarize trade-offs then seems almost ignorant, since the authors themselves show that it is precisely a characteristic of trade-offs that they cannot be resolved into a both/and, at least not in a specific decision-making situation.
How it could work
We should carefully differentiate what counts when dealing with trade-offs: Where and on which topics do we need situational flexibility and context sensitivity? Where might it be better in the long term to rely on a more standardized approach to trade-offs? When making decisions, the relevant questions are those that help to work out how much is at stake in the respective decision-making situation, how often these decision-making situations occur, and how much they differ from time to time. Such an approach enables efficiency gains through standardization and, at the same time, avoids overburdening staff with excessive complexity, which would itself be inhumane. Ultimately, however, this repeats the basic problem at a higher level: What specific standards should be used to differentiate between situations in which trade-offs are decided locally or centrally? In other words, which tensions should be structurally decided in advance and which ones should be productively anchored in the organization? Working this out is the task of careful organizational design.
The next article in this series:
