The idea behind having organizational charts came from the military’s organization of man and machines to fight wars. During the industrial era companies followed form in their thinking about organizing man and machines with an emphasis on producing more and more tangible things for consumption.
In the emerging Social Era the markets consumption has shifted from tangible things of value to intangible things that produce more value. The organization and creating of intangible value doesn’t fit with the thinking behind traditional organizational charts.
Organizing and Creating Value
Organizations’ need to learn to shift from organizing power, people and process to the organization of ideas, knowledge and value creation. Value created from human capital (ideas, knowledge and the exchange of information) aligned with strategic capital (purpose, vision and differential) which is leveraged by structural capital (IT, Systems, Processes, networks etc.) and collectively aimed at building relationship capital (customers, suppliers, markets and marketing).
Power has been restructured from traditional hierarchies to social networks inside and outside any type of organization. Power within a social network is within the nodes that transmit ideas, knowledge and information. Power within a social network isn’t about control from what or who you know rather it is about influence from the quality of what you share with the network.
Process definitions have changed from a standard procedure to a fluid adjustment of the way things should work to create the most value for the end-user, internally and externally.
People, internally and externally, are no longer tools of production rather they are co-creators of never-ending value creation. This means that human capital is the foundation of all value creation, tangible and intangible.
Human capital represents all those intangible things that cannot be managed with traditional organization charts rather they are self-managed by the inherent nature and influence of being part of a “social network”. I am not talking about Facebook or LinkedIn but I am talking about the human network that rest within any organization.
Managing intangible capital is different from managing tangible assets. Tangible assets are those things management likes to count or put in a box on an organizational chart. Intangible things aren’t conducive to being counted or boxed in. Intangible capital works best when given the freedom to create value.
Image from Richard Dennison