Digital organizations for a liquide society (1)

The Guardian has published an interesting investigation into Google in which it states how the company has deliberately delayed complying with pay equity regulations.

The issue of pay equity, which is often associated with platforms and tech companies given their global nature and the traditional hype surrounding them, is a symptom of a more general problem that both traditional companies, and new digital ecosystems, have yet to successfully address: Simply put, organizations are slower than society, and a digital society requires “digital” organizations.

Let’s begin to better understand why by making three considerations that broaden the focus from what the Guardian reports:

1)The first point is about the causes and mechanisms that fuel unequal treatment by organizations. My hypothesis is that companies, as organizational systems, structurally, and in some cases deliberately, allocate resources to the advantage of those who govern them. In this way they harm their shareholders, a particular category of workers and the labor market as a whole.

Why does this happen? It’s a complex issue, but certainly a number of factors are intertwined, including moral hazard, cognitive and organizational barriers, and finally legal incentives and international labor law. In essence, to oversimplify the issue, companies in a digital society should ideally be constantly reorganizing themselves to match skills, motivations and resources to internal and external needs in order to improve problem-solving capabilities and free up space for further growth. However, they face a number of barriers to this continuous reorganization.

These barriers stem from self-interest (my interest is not fully aligned with that of the firm), cognitive limitations (I don’t know that there is a better way of doing what I’m doing), organizational limitations (I don’t want change to make what I’ve learned to do so far unstable and tiring) and legislative limitations (I can’t reorganize because it would violate contracts or laws). The result of these barriers is a damage for who finances the company, for the customer that buys the products, for the society in general and for all the workers that could participate to new configurations of the organization that instead do not happen.

2) Remuneration is not the only element that contributes to workers’ conditions and opportunities. Others are training, freedom to choose work hours and space, access to data, quality of relationships, benefits, experience, etc. In essence, the disadvantage of workers on the periphery of the organization is probably even broader than just the difference in pay but includes a number of factors that essentially lead these people to a kind of entrapment in a caste of the disadvantaged.

3) This organizational dysfunction or institutional imperative (2) not only harms some workers but profoundly deforms the very ability of organizations to effectively carry out their mission. In essence, part of the organization’s functioning is devoted to its own preservation and inequitable distribution of membership benefits, not to playing a positive role with its stakeholders and society at large.

This resistance also manifests itself with respect to proposals for innovation and occasionally results in lobbying activities aimed at securing a position of power. The importance of this phenomenon can also be very high, reaching extremes in which the organization’s net contribution to society becomes negative (3).

The issue, therefore, does not only concern worker discrimination, which is only one of the aspects that result in the sub-optimal functioning of organizations.

So what can be done to limit or solve this problem in a structural way? Let’s start with some notes:

1)The same organizations, even extraordinary ones like Google, have difficulty in remedying this because the system is based on position rents and consequently intervening means in some way damaging the interests of those who participate in the hierarchical chain.

2) Secondly, many executives, institutions and public opinion are not fully aware of the problem or consider it unimportant, overestimating the ethical problems in the behavior of managers, politicians, companies and entrepreneurs.

3) With the evolution of work (digital, immaterial, transnational) and of society, the problem does not seem to be able to be solved by itself, but rather the gap between the increasing complexity of reality (international dimension of organizations, greater weight of states as employers, new demands of those who work, slowdown in labor productivity) and the rigidity of traditional organizations increases.

4) For every formal organizational rigidity, as many informal flexibilities are created, from which digital marketplaces are born. Infact the request for change required by the context must somehow find an answer.

5) The technology we now possess and the new demands of workers for the first time offer us the possibility of solving this problem in a structural way, reconciling business continuity with innovation and inclusion.

The point then is to make organizations work well in this new context by fostering freedom and dynamism while taking the good of digital ecosystems (inclusion, flexibility, productivity) and traditional organizations (stability, protections).

The solution to such a complex issue cannot be indicated in a few lines, but we can indicate some useful points to change organizations:

• make evident some bias in recruitment (I hire not the best but the closest to a role)
• Simplify non-traditional paths (from employee to entrepreneur, from mono to multi-client, from entrepreneur to consultant, from startupper to employee)
• to eliminate negative incentives (es. equal cost in order to contract workers in various countries)
• to favor the contendibility of the roles (i.e. project based activities)
• to distribute delegations, services and qualified information from the center to the periphery of the organizations (training, permissions to look for external collaborators, tools of analysis of the data)
• to revise the regulation of the job in way to concur the continuous reorganization without to remove safeguards and rights to who works
• analyze the nature of work in light of technological change to define what creates value and how.

Technology today imposes a greater speed of change, but at the same time offers us the possibility of an extraordinary evolution in the way we work, better aligning the needs of organizations, individuals and society as a whole (4).

The task of organizations is therefore to move as fast as the society around them. If they know how to do this, they will be able to provide security to all (in addition to securing themselves); if they don’t, society as a whole will suffer from a lack of dynamism, a lack of innovation and a scarcity of protection.

A change in perspective is increasingly necessary so that work is an ally and not a brake on progress.

Nicolò Boggian

1 See Baumann’s definition

2 See Warren Buffett’s letter to BH’s investors in 1989

3 See Acemoglu on estractive organizations/institutions

4 See also Humanocracy — Hamel/Zanini