Why Do Organizations Have Problems? Rummler Explains with 6 Fundamental Laws

Rummler’s Fundamental Laws of Organizational Systems

This is an excerpt from Chapter 5: Analyzing Like Detectives in Nine Practices of 21st Century Leadership: A Guide for Inspiring Creativity, Innovation, and Engagement. For this format, some minor editing was necessary.

In Improving Performance, Rummler and Brache describe six fundamental laws of organizational systems. These laws illustrate the need for systemic thinking.

Law 1: Understanding Performance Requires Documenting the Inputs, Processes, Outputs, and Customers That Constitute a Business

When starting a new job, departments might provide organizational charts to explain how the organization is structured and list the names of employees and their roles. What new employees most likely won’t receive are high-level process maps that explain what the organization does and how departments accomplish their work.

Documenting how the business should work and comparing the documentation with the current state is an effective way to find opportunities and problems. This is true especially when paying particular attention to where one group’s output becomes the input of another group. Rummler and Brache note that the greatest opportunity for improving performance happens when examining these handoffs.

Law 2: Organization Systems Adapt or Die

Rummler and Brache state that adaptation isn’t a single event. Rather, adaptation is an ongoing process. Organizations that wait for something to happen and then react, adapt ineffectively. At one organization where I worked, we called this firefighting, which cost the organization about $15 million from the bottom line. Reacting to single events instead of adapting continuously increases operational cost and wastes everyone’s time unnecessarily. If those in charge and leadership practitioners shifted their thinking about adaptation from events to a process and if they used systems thinking to identify changing forces within and outside the organization, they would anticipate and respond to change proactively. This company that did the firefighting did manage to shift from thinking of adaptation as an event to a process, and they did reduce their operational cost by doing so.

Law 3: When One Component of an Organization System Optimizes, the Organization Often Suboptimizes

As Wiseman and McKeown note, department heads often work to optimize their own subsystem without considering the larger system. By doing so, they may unnecessarily limit how their departments integrate with other departments so that the workflow is seamless and unbroken. For example, Rummler and Brache provide an example of a sales department that becomes so efficient at generating sales that the organization cannot produce products in time for new and existing customers. This causes customers to become angry and hurts the organization’s reputation and potential sales.

Organizations consisting of departments that focus only on optimizing their subsystem tend to cause silo thinking—thinking about one’s own department without considering or even caring about the other departments. This type of thinking not only causes unnecessary conflict between departments, but it also prevents departments from working together to resolve interdepartmental issues such as preventing product damages, decreasing defects, and ensuring a consistent and positive customer experience. Silo thinking is the antithesis of systemic thinking.

Law 4: Pulling Any Lever in the System Will Have an Effect on Other Parts of the System

  • Decreasing the thickness of an appliance’s casing saved thousands in raw material cost but generated hundreds of thousands in damages.
  • New safety procedures decreased injuries at a processing facility, but the new procedures slowed production so much that customers didn’t receive their orders on time.
  • Converting in-person sales training to web-based training decreased training delivery costs dramatically, but sales teams couldn’t learn without in-person support.

These examples represent silo thinking, or what I later characterize as single-box solutions, that frequently occur in organizations.

Law 5: An Organization Behaves as a System, Regardless of Whether It Is Being Managed as a System

Organizations that only manage vertically with organizational charts manage the organization inefficiently. To manage as a system, organizations need to manage the vertical organizational charts as well as the horizontal processes.

Law 6: If You Pit a Good Performer against a Bad System, the System Will Win Every Time

Organizations that are bad systems tend to turn good performers into mediocre performers. Reflecting on the previous five fundamental laws, organizations that aren’t managed as systems, in which silo thinking is the norm, tend to restrict positive performance.

Not only do good performers fail to perform because of the system, sometimes those in charge cause the problem. In Multipliers, Wiseman and McKeown provide several examples of how diminishers make extraordinary performance impossible. As a colleague once told me about his dysfunctional department:

“Until I experienced this, I would have never believed that one VP could demoralize a department into producing only mediocre results.”

Conclusion

In organizations that have bad systems, most likely you will find silo thinking along with silo departments. You will also find quick reactions to presenting problems that turn out to be symptoms of a larger problem, and by reacting quickly to solve the problem, the solution causes problems in other departments. To help organizations evolve bad systems into good systems, organizations need people to practice 21st Century Leadership. Thinking systemically in the way detectives analyze crime scenes is a step in the right direction.

References

Rummler, Geary A., and Alan P. Brache. Improving Performance: How to Manage the White Space on the Organization Chart, 2nd edn. San Francisco, CA: Jossey-Bass, 1995.

Wiseman, Liz, and Greg McKeown. Multipliers: How the Best Leaders Make Everyone Smarter. New York: Harper Business, 2010.

About Gary A. DePaul, PhD, CPT

Gary is an authority of how leadership is radically changing in the 21st Century. In his Nine Practices book, Gary summarizes the evolving leadership principles, beliefs, and practices as described by leading authors and experts.

Gary has two forthcoming leadership books:

  1. Crack the Leadership Development Codes: Stories of How Organizations Train Executives and Employees to Lead
  2. Culture Growth: Expand Your Leadership Mindset–Transform Your Culture!

Published by

Gary A. DePaul, PhD, CPT

"I help organizations become more effective at leadership development." Gary A. DePaul is an expert on how leadership is radically changing. He has two decades of experience as a practitioner and scholar of leadership, has worked as a manager in fortune 500 companies, and consults with organizations to improve leadership practices. He completed his Ph.D. and Ed.M. from the University of Illinois at Urbana-Champaign (UIUC) and a bachelor's degree at the University of Alabama at Birmingham (UAB). ISPI has designated him as a Certified Performance Technologist (CPT). https://www.garyadepaul.com https://twitter.com https://www.linkedin.com/in/garydepaul https://www.facebook.com/garyadepaul