Harnessing Complex Interactions in Organizations
Organizations can gain sustainable competitive advantages by facilitating and supporting their most valuable talent capable of performing highly complex interactions.
- Aug 19, 2019
- 14 min read
The importance of intricate interactions in the business landscape is increasing and its effective capitalization can create sustainable competitive advantages for companies.
Sustainable competitive benefits can make a real difference for companies as they focus on optimizing the efficiency of their generously compensated and talented employees. In the past few decades, organizations have improved their workforce efficiency by restructuring, industrializing or subcontracting production and supportive jobs. However, cost or value gains achieved were short-term in most cases. The simple reason was that their competitors employed parallel techniques and activities and were able to gain the same advantages.
On the contrary, the rewards that organizations can achieve by improving the efficiency of their talented employees are likely to be long-term and difficult for their competitors to replicate. Jobs performed by customer service representatives, sale agents and managers are non-repetitive. These workers interact and associate with other staff members, suppliers and customers. They take complicated decisions everyday influenced by their experience, knowledge, judgment and predisposition.
The extent of such critical decision-making workforce is increasing and so is their significance. The business structure and the operational organization are changing as companies become problem solvers rather than just doers. It also impacts the economics of the workforce – employees with an ability to deal with complex and collaborative roles usually require higher compensation and their activities create an uneven effect on the capability of organizations to attract customers and generate revenue. Hence, it is essential for companies to recognize the achievable potential benefits of improving the efficiency of such workers and supporting their performance to be cost effective.
In order to enhance their performance and productivity, executives must abandon their approach towards restructuring and management of technology and talent to improve efficiency. It is possible to replace a checkout clerk with self-serving machines, but the same can not be said of a marketing manager.
Technology can record deposits and provide cash, but can it select an appropriate market campaign? Process manuals can demonstrate operating protocols for a modern warehouse, but they can not solve unexpected problems. Technology can be an effective tool for managers to take timely decisions, but they can’t be decision makers. The role of technological advancement to assist and support expert decision-makers instead of replacing them justifies a different approach to the organizational framework, one that supports their efforts, range of capabilities required by organizations, hiring and training staff, and value created by skilled workers. The organizational and technological plans and strategies are inseparable from the emerging enhanced performance-oriented environment..
The Elevation of performance standards for professionals is not a simple task. Leading companies are devising innovative approaches to achieve this task, but their effectiveness is yet to be seen. There are definite objectives in sight but the way to achieve them is not so definite. But it is important to realize that this is not necessarily a disadvantage. In fact, it is a potential opportunities for visionaries.
The key benefit to gain here is competitive edge. In the process of determining ways to increase the performance of the talent personnel, companies can develop a unique set of skills and aptitude grounded in the combination of technology and capability. Converting these skills to list of processes and IT systems will be difficult. It will require time for best practices to become routine. The development of sustainable benefits will be both likely and valuable..
Upgrade of Interactions
Valued employees in companies assume business tasks referred by economists as “interactions”. These activities involve the acquisition of resources and information and the sale of goods and services. Recent trends in globalization, specialized practices and technological advancement have made interactions prevalent in developed economies. Specialization requires the segmentation of operations, which in turn justifies further interaction. Likewise, subcontracting practices have also dramatically increased the need for interaction with suppliers and vendors. Communication technologies such as e-mail have made interactions easier, faster and cheaper.
The increase in interaction complexity has led to a significant change in economic dynamics. Few decades back, the majority of business labor (other than in agriculture) was undertaking transformational activities such as operating machinery, mining raw materials, or working on production assembly. The numbers of workers involved in such activities have declined in the recent years. This happened partially due to globalization as numerous transformational jobs moved from developed countries to developing ones. Now, most of business workers undertake activities involving interaction.
There is another trend in action in terms of interaction which greatly impacts the performance of organizations. It has been noted that an increasing number of organizations are employing professionals for more complex interactions. For example, it is a standard job to log shipment containers coming into a warehouse, but management of a supply chain system is complicated.
Complex interaction activities are characterized by ambiguity. Companies don’t have guidelines; they must rely on judgment and instinct. These professionals are required to trust their experience or “tacit knowledge” as economists call it. In order to maintain simplicity, complex interactions can be referred as tacit and standard tasks as transactional.
The majority of job descriptions are a composite of tacit and transactional tasks. When an employee completes an expense report, it’s transactional task while when he/she conducts a training session the direct summarization is tacit task. The central aspects of any role comprise of its principal and compulsory responsibilities, the deciding factor of its worth and remuneration.
In the recent years, jobs with tacit interactions as their key factor have increased at considerably higher rate as oppose to ones with transactional nature and the overall employment. In fact, over two-third jobs created in last two to three decades warrants experience and judgment skills to perform. Overall, more than one third jobs involve interaction activities. And majority of developed countries are exhibiting this tendency.
Complexity has become predominate as organizations are reducing, even eliminating least complex roles through restructuring, sub-contracting and automating standard activities. For example, insurance companies, hedge fund organizations, and security firms reduced the figure of transactional jobs. Similarly, at airports the automated check-in procedure corresponds to less check-in staff. Outsourcing enables organizations to reduce IT help-desk employees. Transactional jobs have been removed from manufacturing as well.
On the other hand, business roles warranting higher complex interactions between talented and knowledgeable employees with decision making component are increasing exponentially. Value associated with these jobs is mirrored in their compensation packages which is considerably higher than transformational and transactional roles.
The requirement for tacit employees differs among industries. Financial firms, health care setups and software companies have higher numbers of tacit jobs while utilities, transportation and retail jobs are more transactional. However, some extent of tacit roles is needed in all industries and demand is increasing. The majority of organizations have a key requirement for knowledgeable managers.
New Approach to Improved Performance
There is a clear mandate for a tacit workforce in today’s organization and there are high costs of hiring such workforce. Therefore, it is recommended that organizations focus efforts on improving their efficiency in the same manner as they improved transactional employees’ productivity. An inefficient tacit workforce can correspond to higher financial disadvantages.
The frequency of tacit interactions is not as critical as the value they generate for the company. The organization perceptions have been shaken by recent inclination towards tacit interactions. Historically, organizations have been structured with few tacit workers – managers, performing at top positions to manage extensive workforce involved in transactional and product roles. Hence, the central working dynamics in many companies is still influenced by hierarchical organizational architecture and inflexible performance metrics.
However, the previous balance between tacit and transactional jobs is changing. There is an increasing demand of tacit employees corresponding to a decreasing requirement of transactional and transformational jobs. Companies aiming to be competitive and successful in the current environment must adopt new and innovative approach to organizational structure so that they can gain maximum advantages from this emerging mix of skills. But there is a challenge associated with the new trend – this has not been done before. Companies don’t have experiences or guidelines to enable them to adapt quickly. The appropriate course of action is to experiment and innovate with ways to improve efficiency of tacit workers and eventually, a new organizational format will emerge.
The productivity improvement of tacit workers warrants two key changes from the executives. Firstly, the guidelines to employ technological tools to enhance tacit performance are dissimilar to their use in standardizing transactional performance. Technological systems can’t understand uncodified data, resolve unique or unexpected issues or react aptly to emotional ques. In short, machines can’t replace tacit employees like they substituted transaction workforce. The role of technology here must be to support the performance of tacit worker by expanding and supplementing their tacit aptitude and tasks.
Secondly, the examination of previous efforts to improve labor efficiency illustrates that total performance of industries rises significantly as organizations working in these sectors adopt successful managerial practices from other sectors, especially technological ones. For example, a retail corporation became a leader in automating few manually done transactional tasks including product tracking and monitoring, exchanging data with suppliers and predicting future demands. Following their example, many companies in retail industry started using these innovative methods, which in turn improved workforce efficiency in the entire sector.
The scenario associated with tacit performance is different. The chances that organizations can easily implement best practices successfully are low. The aptitude of making intelligent decisions regarding allocation of resources cannot be coded in a computer software and distributed to other divisions.
There are three methods available for organizations to employ technology to improve the tacit performance of their workforce. Firstly, technology can be utilized to reduce and even eradicate transactional tasks with low value creation potential so that workers can assumer higher value activities. For instances, many pharmacies fill their prescriptions through robots now so that pharmacists can spend more time with customers, which of course enhance efficiency. Similarly, hardware stores have started installing automated self-checkout stations to reduce transactional tasks. These counters lessen customer wait time spend waiting in line to pay. Additionally, the employees working manual cash registers can now work as sale support, a higher value task.
Secondly, the pace, scale and value of decisions taken by employees can be improved by technology. IT systems can provide direct access to filtered and organized data, which can save time lost in sending and reading massive volumes of e-mails. Databases can provide extensive information regarding all aspects and component of the business, for example list of external suppliers with rating, experience and past performance. Additionally, critical trends and variations can be recognized swiftly and precisely by using technology such as purchasing history of a certain customer group.
For example, a health care facility has devised an integrated digital database with patient records and decision-support tools like software that can monitor the caregivers’ timetable for diabetic and heart patients. It is difficult to identify empirically if such tools help doctors in decision making process but there has been a reduction in mortality rate of heart patients.
Lastly, organizations can utilize innovative technological advancement to expend the range and effects of tacit interactions. Flexible systems can better adapt to dynamic work requirements of tacit workers than hard-coded models. It is a key aspect as tacit interactions happens internally and externally with similar frequencies. Broadband connectivity and new IT programs can support interactions at higher pace and lower cost enabling collaborative efforts to be possible over large distances. Organizations can employ more workers in these tasks, have easy access to rural customers and suppliers, and reach expert professionals globally.
Revival of Competitive Advantage
Technology, for obvious reasons, cannot directly upgrade customer service or health care or be able to make smart strategical decisions. It can enable productive employees to achieve this objective, however innovative organizational models also possess the potential to inspire tacit workers to identify and implement plans. These frameworks depend on culture and conditions that motivate tacit workers to identify ideas, to work in an informal and flexible environment and to organize their activities. Current organizational models, most of them anyways, focus on performance optimization of transformational or transactional labor. But tacit models are a different story.
Subsequently, it would be difficult for organizations to recognize and nurture unique skills and abilities that make the most of tacit interactions – for example, new methods to deliver innovation swiftly, efficient sales channels or excellent customer service. The silver lining is is equal hard for competitors to replicate. It is difficult for other organizations to adopt best practices when they emerge from the capabilities of a talented workforce and are reinforced by innovative organizational and administrative models and braced by new technologies. Performance novelties cannot transpire easily throughout the industries and enable performance improvement for all companies; hence there is a chance for foresighted organizations to stack up and maintain financial benefits and unique capabilities.
It has been a trying task for companies to sustain cost and uniqueness benefits for long. They usually slip away when developed from innovative efforts in dealing with transactional interactions. On the other hand, benefits obtained from tacit interactions might be longer lasting. An organization can strengthen their tacit interactions between marketing and product-design teams, consumers and contractors to understand the needs and demands of their customers and in turn develop corresponding value generating products. As a result, companies can generate substantial competitive edge for themselves that could not be easily imitated by their competitors. It is unlikely that competing companies will be able to devise and employ a similar combination of tacit interactions across the organization and value chain.
There are few aspects to consider as organizations prepare to explore and develop the performance of their talented and value workers. They must identify the type of interactions, both tacit and transactional, which are most essential for their continual success and deploy appropriate capital for their performance improvement. Additionally, some organizations may need to reallocate skilled workers from transactional activities to tacit tasks. While other companies may realize the need to shift their tacit skills to transactional tasks to initiate a different approach to issue resolution of these activities. It is important to note that companies must be vigilant against developing over dependency on selective tacit workers.
Companies will be compelled to develop a deep understanding of their hiring process as well as the training and management of tacit capabilities over transactional skills, which will support their potential to flourish. Some companies must devise plans to cultivate tacit capabilities internally and create appropriate opportunities for workers to gain knowledge and experience. Another factor to be reviewed is the monitoring and compensation procedure for the performance of the tacit workforce, the combined effort to produce results, which will be a complicated task.
Organizations may need to swift their approach to technology investment options. Typical, companies invest in technological tools to improve the productivity of transactional and transformational tasks. Their financial commitment to tacit activities is relatively smaller. Therefore, financial resources must be reallocated to tacit tools along with the improvement of transactional performance by streamlining. The difference in overall performance between companies on either extremes of productivity measurement is small. This difference is more pronounced between transaction-oriented industries, which will make investment more logical to upgrade performance. However, the spread of performance at the organizational level in tacit-oriented industries is much higher. Hence, the potential for improvement in tacit tasks is wide