Esko Kilpi on the Architecture of Work

It is not the corporation that is in the center, but the intentions and choices of individuals. — Esko Kilpi

I’ve been following Esko Kilpi’s work with great interest for years. It’s suprising that we haven’t done this interview already, really.

About Esko Kilpi

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Esko Kilpi is founder and principal in Esko Kilpi Oy, a leading research and consultancy firm working with the challenges of knowledge work and digital work environments. The organization is based in Helsinki, Finland. In addition to his work as an executive adviser Esko Kilpi takes part in academic research and lectures on the topics of organizational learning, knowledge based view of the firm and interaction technologies in Nordic countries, Europe, Middle-East, Far-East and USA.

He has published various articles on these subjects and is the co-author of a book on teams and process management (1996) and books on management challenges of the information age (2001, 2006, 2006).

The Interview

Stowe Boyd: I was reading your blog recently, and saw a post entitled The Social Graph of Work, in which you wrote about the industrial approach to getting work done:

The industrial era approach to getting something done is to first create an organization. If something new and different needs to be done, a new and different kind of organizational form needs to be put into effect. Changing the lines of accountability and reporting is the epitome of change in firms. […] An organization is metaphorically still a picture of walls defining who is inside and who is outside a particular box. Who is included and who is excluded. Who “we” are and who “they” are.

This way of thinking was acceptable in repetitive work where it was relatively easy to define what needed to be done and by whom as a definition of the quantity of labor and quality of capabilities.

As a result, organizational design created two things: the process chart and reporting lines, the hierarchy.

But, as you suggest later in the post, we have shifted into a new economy where we don’t know at the outset of some new activity who are the best people to get involved, how the project will proceed, or what the risks are. And the industrial era organization is principally a hindrance, not a support. Could you sketch out the alternative?

The factory logic of mass production forced people to come to where the machines were. In knowledge work, the machines are where the people are. — Esko Kilpi

Esko Kilpi: The factory logic of mass production forced people to come to where the machines were. In knowledge work, the machines are where the people are. The Internet is also the first communication environment that decentralizes the financial capital requirements of production. Much of the capital is not only distributed, but owned by the workers, the individuals, who themselves own the smart devices, the new machines of work. The logic of ubiquitous communication makes it possible for the first time to cooperate with willing and able people, no matter where on the globe they may be. Knowledge work is not about jobs, but about tasks and interaction between interdependent people. You don’t need to be present in a factory, or an office, but you need to connect with, and be present for other people.

It is not the corporation that is in the center, but the intentions and choices of individuals. This view of work focuses attention on the way ordinary, everyday work-tasks should enrich life and perpetually create the future we truly want through continuous creative learning. Work and learning are the same thing.

The architecture of work is not the structure of a firm, but the structure of the network. The organization is not a given hierarchy, but an ongoing process of responsive organizing. The main motivation of work may not even be financial self-interest, but people’s different and yet, complementary expectations of the future.

Success is increasingly a result from skillful participation: it is about how we are present and how we communicate. Through new interaction-technologies and ubiquitous connectivity, we have totally new opportunities changing the way we work together.

Our present system of industrial management creates systemic inefficiency in knowledge-based work. The approach that managers do the coordination for the workers is just too slow and too costly in the low transaction cost environments we live in today. The enablers have turned into a constraint. The existence of high transaction costs outside of firms lead to the emergence of the firm as we know it, and management as we know it.

The architecture of work is not the structure of a firm, but the structure of the network. — Esko Kilpi

A large part of corporate economic activity is still designed to accomplish what high market transaction costs prevented earlier. If the (transaction)costs of exchanging value in the society at large go down drastically, as is happening now, the form and logic of economic and organizational entities also change! Accordingly, a very different kind of management is needed.

Today, we stand on the threshold of an economy where the fundamental processes of coordination are being transformed. Familiar economic entities are becoming increasingly irrelevant as the Internet, not the traditional organization, becomes the most efficient means to coordinate effort and exchange value.

The big opportunity is in new relational forms that don’t mimic the governance models of industrial firms.

SB: I have used the expression ‘fast-and-loose’ to characterize the new way of work, where social connection are looser, although there are likely to be more of them for many individuals. And the relaxation of the ties — as people act with greater autonomy — means that work can be faster, because of lessened friction. Do you see that?

EK: Fast-and-loose is a great way to put it. The accumulating failures of attempts at organizational resilience can be traced to the fundamental but mistaken assumption that organizations are vertical and/or horizontal arrangements, that guide and, as a consequence, limit interaction.

The characteristics of work in the network economy are different from what we are used to: the industrial production of physical goods was financial capital-intensive, leading to centralized management and the shareholder capitalism we now experience. In the network economy, individuals, interacting with each other by utilizing free or low cost social platforms and relatively cheap mobile, smart devices, can now create information products.

Rather than thinking of organization as an imposed structure, plan or design, organization arises from the interactions of interdependent individuals who need to come together. This is because any higher-value activity involves complementary and parallel contributions from more than one person, team, function, or a firm.

The focus of industrial management was on division of labor and the design of vertical/horizontal communication channels. The focus should now be on cooperation and emergent interaction based on transparency, interdependence and responsiveness. It really is a fast-and-loose world. — Esko Kilpi

The Internet-based firm sees work and cognitive capability as networked communication. Any node in the network should be able to communicate with any other node on the basis of contextual interdependence and creative participative engagement. Work takes place in a transparent digital environment.

The focus of industrial management was on division of labor and the design of vertical/horizontal communication channels. The focus should now be on cooperation and emergent interaction based on transparency, interdependence and responsiveness. It really is a fast-and-loose world.

SB: What will it take to make organizations more human? And what is the new role of management in such companies?

EK: Traditional management thinking sets employee goals and business goals against each other. The manager is free to choose the goals, but the employee is only free to follow the given goals. We need a new agenda connecting people and businesses! The aim, however, is not to have a single set of common goals, but complementary goals and a co-created narrative for both!

Linking personal lives with corporate issues may seem like a strange and unnecessary connection. But if we continue to deal with each area separately, both individuals and organizations will suffer. The way I see it, the lack of a connecting agenda may be one of the big challenges facing the emerging post-industrial society.

The Internet era has proven that we are capable of creating social communities that some time ago many would have dismissed as impossible dreams. It is about loose couplings and modularity, about interdependent people and interdependent tasks.

Two people or tasks are interdependent if they affect each other mutually and in parallel. Interdependent tasks call for peer-level responsiveness and coordination by mutual adjustments, not coordination by an outside party, such as a manager. Most of the information that is relevant will be discovered and created during the execution of the task, not before. As a result it is not always possible for a manager and a worker to agree on a coherent approach in advance. Nor is it normally possible to follow a predetermined process map. The variables of creative work have increased beyond systemic models of process design.

The variables of creative work have increased beyond systemic models of process design. — Esko Kilpi

The increased number of variables in creative work also changes our approach to leadership. When seen through the logic of social business, leading and following have a new dynamic. Leading in this new business sense is not position-based, but recognition-based. People, the followers, decide who to follow and what topics to follow. You pull information from someone you trust to be at the forefront in an area, which is temporarily meaningful for you.

Another huge difference from traditional thinking is that because of the diversity of contexts people link to, there can never be just one source of information. Thus, an individual always has many topics and people that she follows. You might even claim that from the point of view taken here; it is highly problematic if a person only has one “leader”. It would mean attention blindness as a default state.

As we want to be more creative and human, the focus of management and management theory should shift towards understanding participative, self-organizing responsibility and the equality of peers. Sometimes people stay together for a long time, sometimes for a very, very short time: ten million people working together for ten minutes may be the model in the future! It is a systemic change, much more than just kicking out the bad managers and inviting new, better managers in.

SB: I like the image of people in a business choosing many ‘leaders’ to follow. That is an aspect of what I call leanership: that individuals can step forward to be leaders in some contexts, at some times, and at the same time be willing to step back in other times and contexts to let others lead. Leadership doesn’t have to be a full-time role, and we don’t have to perpetuate the class distinction between management and staff. This seems to line up with your thinking, too.

EK: Yes, absolutely. According to the present approach to management, organizational outcomes are first chosen by a few top executives and then implemented by the rest. Here, planning and enactment of the plans are two separate domains that follow a linear causality from plans to actions. From the perspective of open source development, organizational outcomes emerge in a way that is never just determined by a few people, but arises in the ongoing local interaction of all the people taking part. For example GitHub encourages individuals to fix things and own those fixes just as much as they own the projects they start.

As we want to be more creative and human, the focus of management and management theory should shift towards understanding participative, self-organizing responsibility and the equality of peers. — Esko Kilpi

An enterprise should serve the purposes of all its constituents. It should enable its parts to participate in the selection of both the ends and the means that are relevant to them personally. If the parts of a system are treated as purposeful, they must have the freedom to choose and to act. This means that the defining characteristic of a social business is the increased variety of behaviors that is available. It is not necessarily about common goals or shared purposes any more. Linear/mechanistic and systemic/organic concepts of an enterprise reduced variety. A complex/social business concept increases variety. This leads to greater responsiveness and agility

SB: The premise of this series is that there are a broad range of research findings from the world of science — social science, network analysis, neurolinguistics, behavioral economics, and so on — but these investigations into the degree of human sociality haven’t really had an impact in most businesses. It seems like a long cultural change to steer the business with a new, scientifically-grounded compass. What do you see in your work, in that regard?

EK: Up to now, we have seen the world around us as systems that, we thought, could be described and understood by identifying rational causal links between things: if I choose X, then it will lead to Y. If, on the other hand, I choose A, it will lead to B. We try to model the world as predictable processes based on knowing how things are and how they will be. We want to be certain, and we think we are.

The problem is that this familiar causal foundation cannot explain the reality we face. Almost every day, we experience the inability of leaders to choose what happens to them or to their organizations. Things are inherently unpredictable and uncertain. There is no linearity in the world of human beings. This is why our thinking needs to develop from the sciences of certainty to something more applicable, the sciences of social complexity.

The sciences of social complexity have helped us to understand that organizations are patterns of interaction between human beings. These patterns emerge in the interplay of the intentions, choices and actions of all the parties involved. All human systems are connected and connected systems cannot be understood in terms of independent parts. The study of isolated parts offers little help in understanding how the parts self-organize and what emerges as the result of network connections. The notion of emergence is central. The aim is to discover emergent patterns.

When the image of work was the assembly line, work could be fragmented and individual performance goals could be set for each worker. The world was all about little boxes separated from one another. The demands of work are different now: how efficient an organization is reflects the links people have with one another and the links they have to the contexts of value. How many handshakes separates them from one another and from the things that matter? We are beginning to see the world as relations.

When we talk about relations, we often take false examples from nature: for example murmuration and bird flocks. We are well aware that the V shape of a bird flock does not result from one bird being selected as the leader, and the other birds lining up behind the leader. Instead, each bird’s behaviour is based on its position relative to nearby birds. And yes, the bird flock demonstrates a striking feature of emergent phenomena. But the birds do not need to figure out the rules of flight that guide how they organize themselves. These rules of self-organization are genetically hardwired. Nature provides this for the birds. Birds then are not “free like birds”.

When it comes to people it is a very different story. Mother nature does not provide deterministic rules for cooperation. We are free to choose, or not to choose, our own ways of doing things together. Accordingly we are ourselves responsible for formulating the principles we use to organize our life.

Social systems are thus fundamentally different from natural mechanisms. Sciences of social complexity are not the same as sciences of complexity.

We are free to choose, or not to choose, our own ways of doing things together. Accordingly we are ourselves responsible for formulating the principles we use to organize our life. — Esko Kilpi

The biggest problem is that we still believe that the unit of work is the independent individual. Self-organization is then thought to mean a form of empowerment, or a do-whatever-you-like environment, in which anybody can choose freely what to do. But connected, interdependent people can never simply do what they like. If this happened, they would very soon be excluded. The relational view of social complexity means that all individuals constrain and enable each other all the time. We co-create our reality and the common narrative.

The sciences of social complexity and networks are the scientific foundations of modern, human-centric management. The new social technologies have the potential to change our value-creating activities as much as the sciences of complexity and networks are going to change our thinking.

The task today is to understand what social technologies, social complexity and networks really mean. The next management paradigm is going to be based on these.

SB: Thanks for your time.

EK: Great questions, Stowe.

Originally published at stoweboyd.com on 16 May 2014.

Written by

Founder, Work Futures. Editor, GigaOm. My obsession is the ecology of work, and the anthropology of the future.

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