Master thesis Organizational Design & Development

Radboud Universiteit – Nijmegen

Modern organizational design methods:

Do they really differ?

Student: Supervisor:

Reinmar H. van Goethem dr. Dirk Vriens

Student nr. S1014843

December 1, 2020

I

Abstract

Lean, Agile, and Holacracy are all organizational design theories that are popular and are

implemented in organizations big and small. They are different design theories. But they have

similar basic assumptions. They all try to improve an organization by changing the

organizational structure from a bureaucratic regime to a (hyper-)flexible regime. The goals,

design parameters, and design logic of the design theories are compared based on a framework

that underpins the (hyper-)flexible organizational structure. This reveals several differences.

Holacracy is an incomplete design theory that only focuses on the control structure. It has a

different philosophy based on sensitizing the organization and decentralized decision making.

This makes the Holacracy control structure suited for a hyper-flexible regime. Lean and Agile

are complete design theories. These theories present similar production structures but they also

present differences. Agile does present a control structure that resembles a bureaucratic

organization. Problems of slow and inadequate regulation can be expected with such a structure.

Agile focuses on innovation. This is reflected in the design of independent teams with

operational regulatory potential. Continuous improvement is focused on learning from

experience and gathering expertise. This makes Agile suited for innovative and unpredictable

processes. Lean focuses on efficiency. Teams work more sequentially interdependent.

Continuous improvement is focused on improving the infrastructure of the organization. This

makes Lean suited for predicable processes. Lean does present principles for good working

conditions but compared to Agile and Holacracy extra attention is required to not lose sight of

quality of work principles.

II

Table of Contents

Abstract .................................................................................................................................. I

Illustrations ......................................................................................................................... IV

Figures ............................................................................................................................... IV

Tables ................................................................................................................................. V

1. Introduction ................................................................................................................... 1

1.1 Research objective ........................................................................................................ 3

1.2 Relevance ...................................................................................................................... 4

1.3 Outline of the thesis ...................................................................................................... 4

1.4 Demarcation .................................................................................................................. 5

PART ONE .......................................................................................................... 7

2. Conceptual framework ................................................................................................. 8

2.1 Goals ........................................................................................................................... 10

2.2 Parameters ................................................................................................................... 12

2.3 Causal relationship between goals and design parameters ......................................... 20

2.4 Design logic ................................................................................................................ 23

2.5 The framework ............................................................................................................ 26

2.6 Organization regimes .................................................................................................. 27

PART TWO ....................................................................................................... 30

3. Principles of Lean ........................................................................................................ 31

3.1 Goals ........................................................................................................................... 31

3.2 Design parameters ....................................................................................................... 34

3.3 Design logic ................................................................................................................ 43

3.4 Lean in the framework ................................................................................................ 49

4. Principles of Agile ........................................................................................................ 52

4.1 Goals ........................................................................................................................... 53

4.2 Design parameters ....................................................................................................... 55

4.3 Design logic ................................................................................................................ 66

4.4 Agile in the framework ............................................................................................... 73

5. Principles of Holacracy ............................................................................................... 76

5.1 Goals ........................................................................................................................... 76

5.2 Design parameters ....................................................................................................... 79

5.3 Design logic ................................................................................................................ 92

5.4 Holacracy in the framework ........................................................................................ 96

PART THREE ................................................................................................... 99

III

6. Lean, Agile, and Holacracy compared .................................................................... 100

6.1 Goals ......................................................................................................................... 100

6.2 Design parameters ..................................................................................................... 102

6.3 Design logic .............................................................................................................. 110

7. Discussion and conclusion ........................................................................................ 112

7.1 Goals and parameters ................................................................................................ 112

7.2 Production structure .................................................................................................. 114

7.3 Control structure ....................................................................................................... 117

7.4 Separation and formalization .................................................................................... 118

7.5 implications ............................................................................................................... 119

7.6 limitations ................................................................................................................. 123

Reference ........................................................................................................................... 125

IV

Illustrations

Figures

Figure 1: Functional concentration (Achterbergh & Vriens, 2019, p. 56) ............................... 14

Figure 2: Operational differentiation ........................................................................................ 15

Figure 3: Operational specialization......................................................................................... 16

Figure 4: Regulatory differentiation into aspects ..................................................................... 17

Figure 5: Regulatory differentiation into parts ......................................................................... 17

Figure 6: Regulatory specialization .......................................................................................... 18

Figure 7: Separation between operational and regulatory activities ........................................ 19

Figure 8: Representation micro, meso, and macro level .......................................................... 24

Figure 9: Case CT: initial structure .......................................................................................... 35

Figure 10: Case CT: initial flowchart ....................................................................................... 35

Figure 11: Case CT: Lean value streams ................................................................................. 35

Figure 12: Case CT: Lean cell forming .................................................................................... 36

Figure 13: Prototype Lean Organization (Womack & Jones 2003, p. 257) ............................. 45

Figure 14: Case CT: Lean structure ......................................................................................... 47

Figure 15: Framework summary Lean ..................................................................................... 51

Figure 16: Case CT: Agile teams ............................................................................................. 57

Figure 17: Case CT: Agile macro structure ............................................................................. 58

Figure 18: Agile structure example. Adapted from Cohn (2013 p.328-9) ............................... 59

Figure 19: Module groups (Kuipers et al., 2018 p.286) ........................................................... 59

Figure 20: Case CT: Agile meso structure ............................................................................... 60

Figure 21: Agile regulatory activities ....................................................................................... 64

Figure 22: Agile separation between operational and regulatory activities ............................. 65

Figure 23: Case CT: Agile first project structure ..................................................................... 71

Figure 24: Case CT: Ideal Agile structure ............................................................................... 72

Figure 25: Holacracy role example. Adapted from Robertson (2015) ..................................... 82

Figure 26: Holacracy structure. Adapted from Roberson (2016) ............................................. 83

Figure 27: Holaracy degree of regulatory specialization ......................................................... 90

Figure 28: Case CT: Holacracy governance records ................................................................ 93

Figure 29: Case CT: Holacracy structure ................................................................................. 94

V

Tables

Table 1: Summary goals framework (Achterbergh & Vriens, 2019, p. 64) ............................. 12

Table 2: Framework summary ................................................................................................. 26

Table 3: Framework summary Lean and Agile ........................................................................ 75

Table 4: Framework summary Lean, Agile and Holacracy ..................................................... 98

Table 5: Framework summary Goals ..................................................................................... 101

Table 6: Framework summary expressed parameters ............................................................ 102

Table 7: Framework summary functional concentration ....................................................... 103

Table 8: Framework summary operational differentiation .................................................... 105

Table 9: Framework summary operational specialization ..................................................... 105

Table 10: Framework summary regulatory differentiation into aspects ................................ 107

Table 11: Framework summary regulatory differentiation into parts .................................... 108

Table 12: Framework summary regulatory specialization ..................................................... 108

Table 13: Framework summary separation of operational and regulatory tasks ................... 109

Table 14: Framework summary behavior formalization ........................................................ 110

Table 15: Framework summery design logic ......................................................................... 111

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1. Introduction

To cope with the increasing complexity of doing business (Brozovic, 2016) and gaining the

necessary flexibility (Hernaus, 2011) during the last decade, three design theories seem

particularly fashionable. These are Lean, Agile, and more recent Holacracy. Their trendiness is

evidenced by different factors. For example, by the adoption by prominent and successful

multinationals, and by the abundance of scientific publications and books describing or

prescribing these design theories (e.g. Lean: Womack & Jones, 1996; 2003; Womack, Jones &

Roos, 2007; Rich, 2012; Agile: Cooke, 2016; Rigby, Sutherland & Takeuchi, 2016; Rigby,

Berez & Elk, 2020; Drake, 2020; Holacracy: Roberson, 2009; 2015; 2016; Van De Kamp, 2014:

Satell, 2015; Velinov, Vassilev, & Denisov, 2018). Consulting firms often apply these methods

for organizational change projects and implement them in all different types of organizations.

A well-known example is the House in Order project by Essent, a Dutch energy company

currently owned by RWE. This was a long-term organizational transition that started in 2011.

During this transition, a new way of working was implemented following Lean and Agile

principles according to Essent’s CEO, Patrick Lammers (2018). The House in Order project

was guided by McKinsey. During the project, the Harvard Business School became impressed

and wrote a case study about House in Order (Raman & Corsi, 2016; Lammers, 2018). The

adoption of Agile by Spotify and Amazon (Cohn, 2013) and the adoption of Holacracy by

Zappos are other well-known examples (Gelles, 2015; Berntein, Bunch, Ranner & Lee, 2016)

Lean, Agile, and Holacracy seem to show noticeable similarities (Díaz de Mera et al., 2012).

Examples of similarities that can be found are team development, continuous improvement,

access to information, and the change process (Díaz de Mera et al., 2012). Starting with team

development: Lean encourages teams to go beyond the traditional hierarchy and focus on

creativity and skill (Womack et al., 2007). Lean principles argue that quality improvement,

productivity, and flexibility are obtained by transferring responsibilities and decision making

from managers to the teams themselves (Bowen & Youngdahl, 1998). Teams within Agile are

self-steering. Usually, they build on multidisciplinary members and create creative synergies

(Schwaber, 2004) and have minimal dependencies on the rest of the organization (Srinivasan

& Mukherjee, 2018). Holacracy prescribes a structure in teams called circles (Van De Kamp,

2014). Each circle has a certain scope and has autonomy and authority over their assigned scope

(Robertson, 2009). Also, all design theories focus on continuous improvement. Lean asks its

teams to continuously come up with improvements (Womack et al., 2007). Agile embraced

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continuous improvement cycles to keep up with fast technological changes during long-term

projects (Rigby, 2016). And also within Holacary circles, continuous improvement is

stimulated through special meetings (Bernstein et al., 2016; Velinov et al., 2018). In order to

facilitate teams to improve continuously, all three methods advocate complete knowledge

accessibility throughout the whole organization (Womack et al., 2007; Bernstein et al. 2016;

Rigby, 2016). The last similarity identified by Díaz de Mera et al. (2012) is the vision of the

change process. The process is important but even so, maybe even more important is the ability

to change it. So it seems that the three design theories are quite alike

However, even though these design theories show remarkable resemblance, their origin is in

different industries and they stem from different time periods. The Lean principles were

developed in the sixties and seventies in the Japanese care industry and popularized from the

eighties onward by Taiichi Ohno (1988) and his book the Toyota Production System. Agile

developed much later and in a different industry. The rise of Agile is placed during the late

nineties and early 2000s in the software industry (Srinivasan & Mukherjee, 2018). Holacracy

was also developed by a software company (Van De Kamp, 2014) in the second half of the

2000’s (HolacarcyOne; n.d. b), but only really took off when the online shoe and fashion retailer

Zappos embraced the method (Berntein, et al. 2016; Van De Kamp, 2014).

Besides stemming from these different industries and quite some years apart, these design

theories have been studied mostly as different types of design theories. Some hybrid forms have

been investigated (eg. Coplien & Bjørnvig, 2010; Lu, Olofsson & Stehn, 2011), but most

scientific publications and books focus on just one or the other (e.g. Lean: Womack & Jones,

1996; 2003; Womack, Jones & Roos, 2007; Rich, 2012; Agile: Cooke, 2016; Rigby, Sutherland

& Takeuchi, 2016; Rigby, Berez & Elk, 2020; Drake, 2020; Holacracy: Roberson, 2009; 2015;

2016; Van De Kamp, 2014: Satell, 2015; Velinov, Vassilev, & Denisov, 2018). Also,

consultants and organizations providing management training usually treat them as separate

design theories and offer one or the other.

This seems contradictory. On the one hand, these design theories seem to hold similar principles

(Díaz de Mera et al. 2012). On the other hand, these design theories originate from different

industries and time frames and they continue to be treated as different design theories. In their

article, Díaz de Mera et al. (2012) also state that these design theories are different. But both

Díaz de Mera et al. (2012) and other scholars do not provide a definitive answer to what extend

Lean, Agile and Holacracy differ. This begs the question what are the differences between these

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design theories? Are they that different or are they just old wine in new bottles? Are they just a

new hype to provide consulting firms with some new flashy solution for all your problems and

to give scholars something new to write about?

1.1 Research objective

The objective of this thesis is to compare the design theories Lean, Agile, and Holacracy. These

theories are treated as theories for designing the structure of organizations. In order to be able

to compare the three design theories systematically, a comparison frame is needed. This means

that an overarching theory is required which provides the necessary concepts and tools to

construct a measuring instrument for the comparison. This theory has to provide the theoretical

tools to both make a comparison on the desired or prescribed outcome but also on the way a

design is accomplished. The theory that fits these requirements best will be presented after the

presentation of the research question. After the criteria for comparison have been established,

it is necessary to present what principles are prescribed by the design theories. A good

description of the principles is necessary because it is these principles that are analyzed and

compared according to the criteria of comparison. The comparison will provide insight into

how the design theories differ and in which areas they show resemblance. These differences

and similarities are then used to determine the implications for their usability in practice. To

realize the aforementioned, a research question and three sub-questions have been formulated.

Every sub-question is answered in a dedicated part of this thesis.

In which manner are Lean, Agile, and Holacracy different design theories from an

organizational design perspective, and what do these differences implicate for their suitability

under different circumstances?

- What are the criteria necessary to be able to compare design theories? (Part one)

- What are the design principles of Lean, Agile, and Holacracy and how do these

principles compare according to the criteria of comparison? (Part two)

- How do Lean, Agile, and Holacracy compare to each other and what implications do

the differences have? (Part three)

This study aims to establish a way to make different design perspectives comparable from a

theoretical point of view. For comparison, a framework is constructed that will provide the

criteria for comparison. The framework has to reflect a set of criteria that reflect a

comprehensive design theory and provides the means to compare all aspects of the design

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theories. When a framework for comparison is established, the theories will be analyzed and

compared. For the analysis of the different design perspectives, their theoretically prescribed

ideal type is used. The second sub-question will provide the description of Lean, Agile, and

Holacracy and the analysis based on the framework. The third sub-question will provide a

comparison based on the analysis. The comparison aims to find differences among the design-

perspectives and form a conclusion on the implications of these differences.

1.2 Relevance

Lean, Agile, and Holacracy show similarities, but a comprehensive comparison is not yet

provided. This means that there is a lack of conceptual understanding of these design theories

in relation to each other. It is unclear what the differences and similarities are. Secondly, this

makes it unclear what their particular individual contributions to the field of organizational

design are. The lack of a theoretical understanding translates to questions from practitioners in

the field. In particular what the implications of the different design theories in relation to each

other are. Understanding the relationship between the theories and the implication, helps

practitioners to make decisions on the design and implementation of organizational structures.

This thesis will provide a theoretical understanding of the relationship between these theories

and it provides insights for practitioners. The theoretical contribution is a better conceptual

understanding of Lean, Agile, and Holacracy, and of how they compare and relate to one

another. The common underlying assumption is pointed out and a framework is designed to be

the criteria for comparison with this assumption in mind.

The framework helps to not only show differences and similarities. It helps to understand what

the properties of the different design theories in relation to each other are. The properties are

used to draw conclusions on the use of the theories. This thesis concludes what problems might

be expected and what the reason for these problems are. It also provides a general indication of

which design theory might have preferable conceptual properties for certain situations.

1.3 Outline of the thesis

The thesis has been divided into three parts. The first part presents the theoretical background

and constructs a framework for comparison. Part two will provide the answer to sub-question

two. This part consists of three chapters. One chapter for every design theory (Lean in chapter

3, Agile in chapter 4, and Holacracy in chapter 5). Every chapter is structured in the same way.

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The chapters are divided into four paragraphs. The three building blocks of a comprehensive

design theory presented in chapter 2 and the last paragraph with an overview. The three

paragraphs on the building blocks will first discuss the description of the respective theory

(answering the first part of the sub-question) followed by an analysis of this description with

the framework (answering the second part of the sub-question). Lastly, part three compares the

three individual analyses and draws a conclusion on how much the design theories differ from

each other and what the implications are of the differences that have been found. By doing so,

the third part answers the last sub-question and the main question of the thesis.

1.4 Demarcation

Two major outlines have been chosen which have important implications for this study. The

first is to focus only on the three most popular comprehensive design theories of the last few

decades. The popularity of these design theories is based on the abundance of publications and

their use in organizational change trajectories by internal change managers and consultants.

More theories have been developed and widely implemented over the last few decades. These

will not be taken into account because they lack popularity and/or these methods lack the

comprehensiveness of the selected design theories (Chounltalas & Lagodimos, 2018).

Secondly, this thesis will take a design-perspective. The design-perspective has the following

implications. Methods, such as control mechanisms and change programs that lack prescribing

configurational guidelines fall outside the scope of this study. This means that only Lean, Agile

and Holacracy will be studied. Within these design theories also the design-perspective limits

the scope. Tools that are offered by the different methods, which do not have implications for

the structure of the organization, will not be part of the thesis.

Over the years methods evolve. This has led to some hybrid forms (e.g. George, 2003; Putnik

& Putnik, 2012) and forms specialized for a specific situation (e.g. Ries, 2011) based on the

design theories under study. To keep the thesis clear and remain able to make a comparison,

hybrid forms and specialized forms will not be taken into account.

What will be used are the general prescriptive theories on Lean, Agile, and Holacracy that have

implications for the structure of the organization and are meant to be applicable in most

situations. The framework for comparison will be based on the Modern Dutch Sociotechnical

Approach (also referred to as the Integral Organizational Design Approach). There are a few

different reasons why this theory will be used. First, the Integral Organizational Design

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Approach is, as the name suggests, has an integral perspective. It takes into account the whole

organization. Not just one department or team (Kuipers et al., 2018). Besides covering the

whole organization, design theory is built out of three different components which together

form the framework of design theory. The components are the goals, parameters, and design

logic. That these three components form the framework for design theory does not mean that

all different design theories present all of them. As is shown by the famous Structure in 5’s by

Henry Mintzberg (1980) which only presents parameters and no goal or design logic. The

principle of the three-component framework will be addressed more in-depth in chapter two.

The integral properties of the modern sociotechnical approach allow for a comprehensive

comparison. Secondly, the modern sociotechnical approach also shows resemblance with

principles portrayed by the design theories. This approach advocates that the organization

should be built around the primary process(es) (Kuipers et al., 2018). When an organization is

redesigning according to the principles of the Modern Sociotechnical approach, the structure

will be built around the primary process as much as possible (Acherbergh & Vriens, 2019).

Last, De Sitter proposes seven different parameters. These parameters describe properties that

cohere with the design of the organization and give a clear measure by which the prescribed

designs of Lean, Agile, and Holacracy can be scored and compared. Achterbergh & Vriens

(2019. Figure 3.7, p62) provide an example of this in their book ‘Organizational Development

designing episodic interventions’. The seven parameters by De Sitter are supplemented with an

eight parameter by Mintzberg to create a more complete set of criteria.

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PART ONE

The first part of the thesis is the conceptual framework. A framework will be

constructed over the course of this part that will be the basis for this thesis. The

framework provides a relatively complete set of criteria for the comparison. It

consists of three parts. The goals, parameters, and design logic. In addition, the

causal relationship between the goals and parameters is discussed. These parts will

be the reoccurring elements in part two and three. Why these elements are the

elements of a comprehensive design theory and what the criteria of comparison

for these elements are, is discussed in this chapter. The Dutch Sociotechnical

Approach forms the basis for the construction of the framework and is aided by

theory by Henry Mintzberg. The framework will be the foundation of the

individual analysis of the three design theories in part two and for the comparison

in part three. At the end of the chapter, four organizational regimes are described.

These will reoccur during the rest of this thesis because they provide an

understanding of some underlying assumptions found in the design theories.

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2. Conceptual framework

The main goal of this thesis is to compare three approaches to designing organizations that are

allegedly different. Before diving further into the framework, it is important to define what is

meant by that. The terms ‘organizational design’ and ‘organizational structure’ are used

interchangeably. The structure or design of an organization refers to the way activities are

assigned to tasks and how tasks are related to one another. It also shows how formal interactions

take place in the organization (Achterbergh & Vriens, 2019). A task is a set of activities

assigned to one entity in the organization. The complete job, existing of different activities,

someone performs for the organization is a task.

Different theories on structure building are constructed based on a common framework. This

can be described as the framework for organization design theories. The framework for

organization design theories consists of three parts: the goals, the parameters, and the design

logic. A design theory must consist of these three parts to be a comprehensive theory. If one of

these parts is missing, the theory does not provide a complete foundation for the design of an

organization. This three-part framework is a meta-framework for organizational design theory.

It has been derived from examining different theories focused on structure. Theories by De

Sitter (Achterbergh & Vriens, 2019) and by Thompson (Thompson et al., 2003), but also the

theories under investigation, Lean (Womack & Jones, 2003), Agile (Cohn, 2013), and

Holacracy (Roberson, 2016) show these characteristics. De Sitter describes goals as the

improvement of the quality of the organization and quality of work. He describes seven

parameters and his design logic describes a U shape going from macro level to micro level for

the production structure and from micro to macro level for the control structure (Kuipers et al.

2018). These processes both consecutively follow the same path. Thompson et al. (2003)

describe predictability and adaptability as the essential variables. His parameters focus on what

activities are allocated in the primary process and to what degree tasks with different kinds of

interrelatedness are grouped. His design logic is based on coordination costs. Grouping should

be done according to the cost of coordinating interdependency. Grouping tasks of which their

interdependency leads to the highest coordination costs first. This usually follows a micro to

macro path (Thompson et al., 2003).

The first part is the goals the theory aims to accomplish. This is also sometimes called the

‘essential variables’. The goals of a design theory are a more abstract description of what the

organization should pursue. The principles these goals represent show the assumption of what

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leads to a well-performing organization. Without a goal, a design theory has no direction. It

lacks any guidance on what to accomplish and does not describe what makes an organization

perform well. The second part is the design parameters. They also are sometimes called design

principles. Design parameters represent the characteristics of an organizational structure, in the

form of one-dimensional variables, that can be altered to alter the workings of the organization.

Parameters have the property that from a theoretical perspective the effect of their value on the

organization is known (Achterbergh & Vriens, 2019), so the parameters provide the knobs an

organizational designer can turn to change the organization and accomplish the goals set by the

design. When a design theory does not provide parameters, it lacks the characteristics of an

organization that are needed to accomplish the goals and thus does not provide what a ‘well-

performing’ organization should look like. The last part is the design logic. The design logic

describes the ‘how question’ of the design theory. It describes how a design should be created

and how the organization should be designed in order to change the parameter values to the

desired state. To stick with the button metaphor. It describes how to turn the knobs to reach the

desired result. Without de design logic it is understood where the organization needs to go and

what the organization has to look like to go there, but it lacks any substance on how to get there.

The framework is not complete though. The nature of parameters infers that there must be a

causal relationship between the parameters and goals of a design theory. This causal

relationship describes how the prescribed parameters lead to the achievement of the goals. It is

important to understand the causal relationship between the goals and the parameters because

it shows how the parameters influence the organization, respectively to the goals.

Besides the framework, Kuipers et al. (2018) describe four organization regimes. The

organization regimes provide insight into the underlying assumptions of the three

organizational design perspectives. They describe the pioneers regime, the bureaucratic regime,

the flexible regime, and the hyper-flexible regime (also called network regime). The

bureaucratic, flexible, and hyper-flexible regimes are the most important to understand. The

three design theories assume that the organization is currently structured according to the

bureaucratic regime. A redesign will transform the organization towards the (hyper-)flexible

regime (Womack & Jones, 2003; Cohn, 2013; Roberson, 2015; 2016; Rigby et al., 2020). For

the complete picture, the pioneers will also be discussed shortly.

The rest of the chapter will start with a more elaborate picture of the framework that will be the

base for the rest of the thesis. Paragraph 2.1 describes how goals come into play. Also, a set of

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goals found in theory is provided. Paragraph 2.2 sets out the necessity of parameters and

provides eight parameters that will be used in the comparison later on. Paragraph 2.3 discusses

the relationship between goals and parameters. Paragraph 2.4 describes the design logic.

Paragraph 2.5 is the last paragraph on the framework and provides an overview of the previous

paragraphs. The chapter ends with the four organizational regimes in Paragraph 2.6.

2.1 Goals

A design theory must provide a goal or a small set of goals. The goals provide the purpose and

give focus to the design theory and the (re)design process. But it goes beyond that. (Re)design

efforts are made to make organizations perform well. A good structure is key to a well-

performing organization. The design theory’s goals play an important role in understanding

what a ‘good’ structure constitutes. The goals a design theory provides, describe what an

organization has to pursue to perform well.

The comparison of goals in a quantitative manner does not provide much inside beyond a

number and percentage of overlapping goals. To gain a deeper understanding of the similarities

and differences in the focus of Lean, Agile, and Holacracy a qualitative comparison will be

made. The analysis will be made with a set of reference goals. This reference set has to reflect

the current understanding of what constitutes a ‘good’ or ‘adequate’ organizational structure.

De Sitter provides a relatively complete set of goals in a multilayer fashion (Achterbergh &

Vriens, 2019). The goals provided by the sociotechnical approach show goals that correspond

with different design theories and it provides a set that focuses on different aspects of organizing

like innovativeness, flexibility, order realization, and the human factor of an organization. So

this set is chosen as the set of reference goals. The goals given by Thompson et al. (2003) are

predictability and adaptability of the organization. Predictability (Thompson et al., 2003) finds

its equivalent in control over realization (Achterbergh & Vriens, 2019). Adaptability

(Thompson et al., 2003) can be related to both flexibility and innovation potential (Achterbergh

& Vriens, 2019). The quality of work (Achterbergh & Vriens, 2019) principles coincide with

principles in the realm of Human-Centered Job Design (Lauche, 2015) such as the VERA

Principles by Oesterreich & Volpert (1987) and Action Regulation theory by Hacker (2003).

Comparing the goals Lean, Agile, and Holacracy provide to the reference set, a scope and focus

can be identified. It can also help in the comparison when goals are formulated differently but

try to achieve a similar outcome. In the next section, the goals and sub-goals by De Sitter will

be described. The first and most abstract types of goals are the quality of organization and

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quality of work (Achterbergh & Vriens, 2019). This will also be the two paragraphs describing

the goals presented by the modern sociotechnical approach.

Quality of organization

Quality of organization is concerned with the working of the organization. Two sublevels of

quality of organization goals are distinguished. The first level consists of three goals.

Flexibility, control over order realization, and potential for innovation. De Sitter tries to realize

flexibility with the following sub-goals. Short production cycle times. This helps to react to

changes in demand. Also, sufficient product variations are important to cover differences in

demand. The last sub-goal to realize flexibility is to create a sufficient product mix

(Achterbergh & Vriens, 2019). This helps an organization when one product type becomes less

relevant or has unstable demands. These goals should enable an organization to adapt to

fluctuations (Achterbergh & Vriens, 2019)

The second goal that describes the quality of the organization is the control over order

realization (Achterbergh & Vriens, 2019). Three sub-goals have been described which are the

benchmarks to achieve control over order realization. The first is a reliable production time

(Achterbergh & Vriens, 2019). This helps to deliver predictably. Secondly a reliable production

(Achterbergh & Vriens, 2019). The quality of products should be consistent and defects should

occur as little as possible. And last effective quality control (Achterbergh & Vriens, 2019) to

make sure clients receive no defective product or service and help improve the reliability of the

process. The last goal describing the quality of the organization is the potential for innovation.

This is realized by the sub-goals strategic product development and short innovation time

(Achterbergh & Vriens, 2019).

Quality of work

De Sitter argues that an organization should not only be designed to perform well for its capital

holders but also for its workers. Achterberg & Vriens (2019) argue that an organization exists

to provide a societal contribution. The societal contribution does not only consists of the output

an organization provides but also the impact the organization has on its environment, including

workers. So the quality of work is as much an important goal as the quality of organization.

Quality of work also provides two levels of sub-goals but contrary to the quality of organization

the goals of the second level apply to both goals on the first level. The two goals at the first

level are a low level of personnel turnover and a low level of absenteeism. The three goals to

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realize this are workers feeling involved, workers are able to learn and grow from their job, and

last the creation of controllable stress conditions (Achterbergh & Vriens, 2019). In order to

simplify the analysis process, a table is with the goals is given in appendix 2. This table is given

by Achterbegh & Vriens (2019, p.64) which they adapted from work by De Sitter.

Goals summery

QUALITY OF

ORGANIZATION

Flexibility Short production cycle time

Sufficient product variations

Sufficient product mix

Control over realization Reliable production time

Reliable production

Effective quality control

Potential for innovation Strategic production development

Short innovation time

QUALITY OF

WORK

Low levels of absenteeism

Low levels of personnel turnover

Feeling of being involved

Ability to learn on the job

Controllable stress conditions

Table 1: Summary goals framework (Achterbergh & Vriens, 2019, p. 64)

2.2 Parameters

Parameters are characteristics of an organizational structure. The design of the organizational

structure is used to alter these characteristics. It is possible to use the altering of the parameters

because the effect of value on the organization is known (Achterbergh & Vriens, 2019). This

makes parameters indispensable for a design theory. Parameters are the core characteristics of

an organization. These characteristics have to be changed with the aim of achieving the goals.

Without parameters, the design theory lacks a description of the core characteristics of the

organization. Without the core characteristics, the design theory is incapable of changing the

organization in order to accomplish the goals.

In their 2009 work Achterbergh & Vriens (2009) state that giving ‘exact values’ to parameters

is beyond the capabilities of this measure. The comparison is possible based on a more

qualitative valuation. The extremes of the seven parameters are known. This provides a measure

for the three design theories. Based on their theoretical description and principles, it will be

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determined to what extend the design theories strive for a high or low (increasing or decreasing

the) value on every parameter.

As aforementioned, Lean, Agile, and Holacracy will be compared on the basis of the parameters

provided by the Modern Sociotechnical Approach. De Sitter, who developed this theory,

proposes seven different parameters. This set of parameters has been chosen because it fits the

intended analysis. Because the three design theories show commonalities and this set of

parameters has been developed to help the design of organizations in a similar direction

(Kuipers et al., 2018), it provides a fit with the design theories and is most likely show

differences among the design theories. The set of parameters presented by De Sitter will be

supplemented with one parameter though. This parameter is behavior formalization. This is

such an important parameter that has been published on a lot (Hickson, 1966).

The parameters presented by De Sitter can be divided into three groups based on what in the

organization they try to describe. The first set of parameters describes the production structure.

The production structure is “the grouping and coupling of operational transformations and

their relation to orders” (Achterbergh & Vriens, 2009). The second set of parameters describes

the control structure. The control structure is how regulatory transformation is defined and

grouped into tasks. Third, there is one parameter describing the separation between regulatory

and operational tasks (Achterbergh & Vriens, 2009), and last, the parameter describing behavior

formalization.

The first three parameters concern the production structure. After those have been discussed

shortly they will be followed by the three parameters concerning the control structure and the

one describing the separation between operation and regulation. These parameters will be

introduced shortly followed by their extremes as described by Achterbergh & Vriens (2009).

The last parameter that will be discussed is the behavior formalization parameter.

Parameter 11: Functional concentration

Starting with the first operational parameter. The functional concentration is how the

operational tasks are grouped with respect to orders. This refers to the number of order-types,

the department handles (Achterbergh & Vriens, 2009). An order-type is a subset of all orders

1 Note that the numbering of the parameters does not show any significance. Some authors chose to number

them, some do not and different authors present the parameters in a different order. The numbering is just there

for the purpose of showing the structure of the text.

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requiring the same or very similar handlings (Achterbergh & Vriens 2019). A high functional

concentration usually corresponds to the situation in which the structure is formed based on

different functions. Departments have one task in the transformation process for all different

order types (Kuipers et al., 2018).

The functional concentration is at its maximum if a department handles all different order types.

The functional concentration is at its minimum if every order type is handled by different a

department, (Achterbergh & Vriens, 2009).

Figure 1: Functional concentration (Achterbergh & Vriens, 2019, p. 56)

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Parameter 2: Operational differentiation

De Sitter differentiates organizational processes into three different types. Preparing, making,

and supporting. Making (or producing) is everything that has to do with the actual

transformation and realization of output for an order. Put simpler: producing an order

(Achterbergh & Vriens, 2009; Kuipers et al., 2018). This does not mean that an organization

not producing physical products do not ‘make’. The activities that an organization undertakes

to provide a service are also making activities. For example, a physiotherapist performing

exercises with a patient to help heal an injury is still performing making activities, even though

the patient will not walk out the door with a physical product. Preparing refers to everything

that has to be done in order to make the ‘making’ happen. This is for instance planning, ordering

production materials, and sales. These activities are still tied to orders. Supporting are the

activities which have to happen but are not tied to orders. Examples of supporting activities are

maintenance and human recourses. The level of differentiation describes to which extend

preparing, making, and supporting are separated (Achterbergh & Vriens, 2009; Kuipers et al.,

2018).

The minimal differentiation is reached when a task contains all relevant prepare, make, and

support tasks. On the contrary operational differentiation is at its maximum when these types

of operational activities are completely separated into different tasks (Achterbergh & Vriens,

2009). Preparation

Figure 2: Operational differentiation

Parameter 3: Operational specialization

The last operational parameter is operational specialization. This refers to the scope of a task in

relation to the process. A process is split up into activities. The amount of different activities

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assigned to one task determines the operational specialization. A craftsman usually performs

all the actions necessary to produce a product. This is a situation in which operational

specialization is low. Modern electronics factories show situations where someone performs a

small part of the process repetitively. For example, only glues the glass to the LCD panel of a

phone and pass it on to the next person for the next part to be assembled. This is a high form of

operational specialization (Achterbergh & Vriens, 2019).

The extremes are reached when a task contains all possible sub-tasks, which is minimal

operational specialization. Or when a process is split up into as many activities as possible and

every activity is assigned to a different task, which means the organizational structure shows

maximal operational specialization (Achterbergh & Vriens, 2009).

Figure 3: Operational specialization

Parameter 4: Differentiation of regulatory transformations into aspects

Differentiation of regulatory transformations into aspects is the first parameter concerning the

control structure. In an organization, three aspects of regulation can be differentiated. Strategic

regulation, regulation by design, and operational regulation. Strategic regulation concerns the

setting and resetting of organizational goals. Regulation by design is about designing and

redesigning the organizational infrastructure. Operational regulation is concerned with dealing

with disturbances in the operational process when the infrastructure and goals are given. The

degree of differentiation of regulatory transformations into aspects depends on the extent to

which the different aspects are assigned to one task or separated tasks (Achterbergh & Vriens,

2019).

Minimal regulatory differentiation into aspects is reached when a task contains all three aspects

of regulation. Maximal regulatory differentiation into aspects is reached when strategic

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regulation, regulation by design, and operational regulation are completely separated into

different tasks (Achterbergh & Vriens, 2009).

Figure 4: Regulatory differentiation into aspects

Parameter 5: Differentiation of regulatory transformations into parts

All regulatory transformation can be split into three parts. Monitoring, assessing, and acting.

When monitoring, variables have to be measured. When a variable has been measured, the

outcomes have to be assessed. When the assessment shows that the reality differs from the

norm, possible actions should be formulated and chosen to remedy the discrepancy. The degree

of differentiation of regulatory transformations into parts depends on to what extend the parts

are divided over different tasks (Achterbergh & Vriens, 2009).

Minimal regulatory differentiation into parts is reached when monitoring, assessing, and acting

are all found in regulatory tasks. Maximal regulatory differentiation into aspects is reached

when a task contains only one part of regulation (Achterbergh & Vriens, 2009).

Figure 5: Regulatory differentiation into parts

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Parameter 6: Specialization of regulatory transformations

Regulatory tasks have a scope in the same way operational tasks have. A high regulatory

specialization means that the regulatory task only covers a small part of the process. With

regulatory tasks, the specialization can be also enlarged by narrowing the regulatory task to an

extra regulatory specialty. A specialty can for example be quality control (Achterbergh &

Vriens, 2019). Another example can be found in healthcare practices. In healthcare, it is

common practice to divide regulatory tasks among a manager healthcare and a manager

business. The part of the process and specialty a regulatory task covers together form the degree

of specialization of regulatory transformation.

When regulatory tasks are split into different specializations and cover as little of the

organizational process as possible, the specialization has reached its maximum. Minimal

regulatory specialization occurs when a regulatory task is not split into specializations and

covers the whole organizational process (Achterbergh & Vriens, 2009).

Figure 6: Regulatory specialization

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Parameter 7: Separation between operational activities and regulatory activities

This parameter describes to what extend operational, and regulatory activities are separated.

When separation occurs, operational and regulatory activities are assigned to different tasks in

the organization. This can hold for all different parts, monitoring, assessing, and acting, and all

different aspects of regulation, strategic regulation, regulation by design, and operational

regulation (Achterbergh & Vriens, 2019).

In the situation separation between operational and regulatory activities is as high as possible,

the tasks containing operational (sub-)tasks do not contain any regulatory tasks and vice versa.

The relevant regulatory potential is located far away from the operational activity. On the

contrary situation, a task contains both operational and all regulatory parts and aspects, minimal

separation between operational and regulatory activities is achieved (Achterbergh & Vriens,

2009).

Figure 7: Separation between operational and regulatory activities

Parameter 8: Behavior formalization

Organizations need some form of consistency. This can be achieved by the formalization of

behavior. When an organization formalizes behavior this means the organization standardizes

work processes through rules, procedures, policy manuals, job descriptions, and work

instructions (Mitzberg, 1980). An organization can formalize to different levels. Kuipers et al.

(2018) speak about minimal critical specification. This means an organization limits its

formalization to the minimum level necessary for employees to be able to perform tasks. An

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organization can also highly formalize tasks (Hickson, 1966). This usually happens in large

bureaucratic organizations (Kuipers et al., 2018) with jobs with a low skill requirement

(Hickson, 1966).

A low score on behavior formalization is associated with the design theory training to formalize

according to minimal critical specifications. When the theory prescribes that it should formalize

some parts, beyond what is absolutely necessary, will receive a high score.

2.3 Causal relationship between goals and design parameters

The Goal of a design theory describes what makes an organization perform well. The

parameters provided by the design theory are organizational characteristics a theory aims to

alter to reach its goals. In order to achieve goals by altering the organizational characteristics,

there has to be a causal relationship between the two. If there is no causal relationship between

the two, altering any characteristic will change nothing in the pursuit of the goals. This means

that every design theory that is able to pursue its goals has some causal relationship between

the goals and design parameters.

Because both the parameters and the goals by De Sitter are used as the reference set, it is also

important to understand the causal relationship between these two. Two concepts play a role in

the achievement of the goals by altering the parameter values. Those are the number of

disturbances and regulatory capacity (Achterbergh & Vriens, 2019). Disturbances are all things

that cause the process of order realization not to go as it is supposed to (Achterbergh & Vriens,

2019). This can be losing track of an order, a machine or software failing, not being able to

perform a certain task because the employees with the knowledge or skillsets are not available,

or a million other things. Regulatory capacity is the capacity to handle disturbances and being

able to prevent them from happening again (Achterbergh & Vriens, 2019).

The effect of high parameter values

An organizational structure should not be the cause of disturbances. But since the structure of

an organization is not the only possible source of disturbances, the organization should also be

designed in a way that it can deal with disturbances adequately (Achterbergh & Vriens, 2019).

De Sitter advocates that this is realized when an organization is characterized by low parameter

values. A structure with high operational parameter values is a structure that is the cause of

disturbances. A control structure with high regulatory parameter values is not able to deal with

disturbances adequately (Achterbergh & Vriens, 2019).

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Two structural characteristics lead to a high probability of disturbances. A high number of

relations in the network increases the chance for disturbances because every relation is a chance

for a disturbance (Achterbergh & Vriens, 2019). Variability of these relations, physical or non-

physical, leads to a higher chance of disturbances because every variation is a possibility for

mistakes. Every variation also means more activities that have to be coordinated, which

increases the chance for disturbances (Achterbergh & Vriens, 2019).

Every operational parameter is linked to either the amount of variability or the number of

relations in the network of relations or both (Achterbergh & Vriens, 2019). A high functional

concentration means that tasks handle a large number of order types. That directly leads to high

variability (Achterbergh & Vriens, 2019). The problem may be resolved by complex planning

(which is a preparation activity), but that increases the operational differentiation and so

increases the number of relations. When variability is multifold the need for materials, tools,

data, etc. needs to be aligned. Leading to more complex planning and more chance for

disturbances. So a highly operationally differentiated structure results in more relations

(Achterbergh & Vriens, 2019). This also holds for differentiation among other preparation,

support, and making activities. A high level of operational specialization and also results in a

network of operational tasks with a high amount of relations. High specialization means that

the process is split up into small tasks. Small tasks result in many tasks that have to be related

to complete the process (Achterbergh & Vriens, 2019).

High operational parameter values result in a complex production structure. A complex

production structure is characterized by many interdependent relations with high variability.

This leads to disturbances having a domino effect. One disturbance can lead to disturbances

elsewhere. Especially when tasks handle many different order types (Achterbergh & Vriens,

2019).

To handle disturbances adequately the parameters concerning the control structure should have

low values as well. Increasing the differentiation and specialization of regulatory tasks results

in a hierarchical control structure with many regulatory tasks with a small set of regulatory

activities (Achterbergh & Vriens, 2019). Regulatory differentiation into aspects and parts

increase the number of relations between regulatory tasks. Regulatory specialization provides

small scopes for regulators. The resulting complex network of regulators increases the

probability of disturbances in the regulatory process (Achterbergh & Vriens, 2019). Secondly,

it results in the detachment of regulators from the primary process which leads to delays in

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dealing with disturbances. It also results in a lack of first-hand information and contextual

operational know-how which often leads to irrelevant responses to disturbances (Achterbergh

& Vriens, 2019). Third, regulators lack a grasp of this whole process. This diminishes

regulatory potential because integral improvements are beyond the scope. This also holds for

regulation by design and strategic regulation (Achterbergh & Vriens, 2019).

The effect of low parameter values

When an organization is redesigned in a way that lowers the parameter values, it leads to the

realization of the quality of organization and quality of work goals. Waiting times are reduced

because the structure is becoming less of a source of disturbances and disturbances are handled

faster and more adequately (Achterbergh & Vriens, 2019). Because the scope of tasks is

broadened, more integral solutions to disturbances are produced. This reduces production cycle

times and increases the reliability of the production time (Achterbergh & Vriens, 2019).

Lowering the parameter values also means that it is easier to keep track of orders. Less

complexity makes this easier and reduced waiting times. Product quality is improved because

a bigger contribution to the end product (broader scope) makes it easier to spot possibilities for

quality problems and decentralized regulatory activities help solve quality-related disturbances

more quickly and more adequately (Achterbergh & Vriens, 2019). The last quality of

organization goal is the potential for innovation. This is also improved by the increase in the

scope of tasks. This provides the necessary overview to come up with process innovations that

are not just sub-optimizations (Achterbergh & Vriens, 2019).

Quality of work

Lowering the parameter values of an organizational structure does not only improve the quality

of the organization. It also improves the quality of work. Earlier it was concluded that jobs –

both operational and regulatory – become narrow and short-cycled in high parameter value

structures. Such jobs lack the ability to learn on the job and provide little opportunity to feel

involved. Having a broader scope and more regulatory activities provides more opportunities

to learn on the job and improves the contribution of tasks which in turn increases involvement

(Achterbergh & Vriens, 2019). Having disturbances and especially not being able to deal with

them – so not having the necessary regulatory capacity – has been proven to be a major stress

factor for employees (Lauche, 2015). Providing the necessary regulatory potential makes stress

conditions more controllable. Having a more ‘complete’ job – being able to plan and design

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your own tasks – decreases stress and improves the feeling of being involved (Oesterreich &

Volpert, 1987).

2.4 Design logic

Currently, we have discussed the goals, parameters, and by altering the values of the parameters

goals can be achieved because there is a causal relationship between the two. There is just one

part left to provide a comprehensive design theory. How to alter the parameter values to the

desired state. The design logic describes how the organization should be designed and what the

design should look like when the organization tries to achieve the desired state. Without the

design logic, it is possible to analyze an organization and determine its current state by using

the parameters, but it becomes near impossible to change the organization in the desired

direction.

The design logic is harder to compare in comparison with the goals and parameters. Different

approaches can lead to similar outcomes. Take the earlier made comparison between De Sitter

and Thompson for example. Thompson prescribes a design logic based on a diagnosis of cost

of coordination to group interrelated tasks that lead to the highest cost of coordination first.

Using a bottom-up approach, from micro to macro level (Thompson et al., 2003). De Sitter, on

the other hand, uses different principles. He uses a diagnosis based on disturbances to determine

the importance of the interdependency. Further, a top-down approach, from macro to micro

level, is used in combination with order types and interrelatedness of tasks to build a production

structure. When the control structure is built, he takes a bottom-up approach (Achterbergh &

Vriens, 2019). This leads to the U shape of the design logic by De Sitter.

Cost of coordination and disturbances are related concepts. When disturbances occur the cost

of coordination usually increases. When the interdependency of tasks is more crucial – based

on the three types of interdependency Thompson et al. (2003) describe – the separation of these

tasks will probably lead to more disturbances. So even though De Sitter uses different concepts

and a different logic to design an organizational structure, the chances designs based on both

theories would show similarities is remarkable.

Still, a comparison will yield interesting insights on the focal points of the different design

theories. Knowing how design theories propose an organization should be designed can reveal

some hidden assumptions rooted in the design theory. Designing the production structure first

and the control structure second shows that De Sitter thinks the primary process is most

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important and assumes that a well-designed primary process leads to fewer disturbances and a

well-fitting control structure. Thomson on the other hand focuses on the control structure.

Assuming that knowing which type of control is needed between interrelated tasks reveals how

the primary process should be designed.

Modern sociotechnical design logic follows a path through different levels of the organization.

De Sitter distinguishes three levels. The macro meso and micro level (Achterbegh & Vriens,

2019). The macro level of the organization is the largest subpart of an organization. The rule of

thumb is that the macro level of an organization consists of subparts of up to two hundred

people. The meso level of an organization can differ in size. It is the middle part of an

organization. It are separate departments within an organizational subpart of the macro level.

Micro level is the smallest grouping in an organization, aiming at the team level. At this level,

we see the actual grouping of tasks into teams. Usually at this level groups consist of up to

twenty persons (Kuipers et al., 2018).

As discussed in the introduction of this chapter, the (re)design of an organization follows a U

pattern. Starting with the macro production structure to the meso production structure and micro

production structure. After the production structure has been designed, the control structure will

be designed in opposite direction. From micro to macro level (Kuipers et al., 2018).

Figure 8: Representation micro, meso, and macro level

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Macro production structure

The macro production structure is characterized by a process called parallelization.

Parallelization is the process of identifying flows based on an order characteristic. This process

is called parallelization because it aims to design parallel streams that each handle an order

type. These flows on the macro level cannot share common resources with other flows. The

parallelization of flows can be based on a few different order characteristics. It can be based on

input-, product/service-, demand-, or client characteristics (Achterbergh & Vriens, 2019).

Meso production structure

Here the process is called segmentation. The flow created in the previous step is divided into

segments. These segments should be designed as ‘flow-oriented’ as possible. Meso level

provides a bit more freedom. Some segments can be placed sequentially instead of parallel as

long as one-piece flow is maintained. Segments can also share a common resource. But both

sequential placement of segments and segments sharing resources should still be kept to its

minimum. Since segments should cover as much of a process as possible and have to be

designed to be as independent of other segments as possible (Achterbergh & Vriens, 2019).

Micro production structure

Designing the micro production structure, teams can and should be more related. Still, the

interfaces between teams should be kept at a minimum and it is important that interfaces only

exist at the input or output of a team. Not in the middle of the process a team performs. Teams

should have broad tasks that are allowed to perform production, preparation, and support

activities. Functions should become redundant (Achterbergh & Vriens, 2019).

Micro control structure

The mantra for designing the micro level control structure is simple. “If it can be regulated by

the team, it should be regulated by the team,” (Achterbergh & Vriens, 2019, p198). This holds

for all aspects and all parts of regulatory activities that relate to the realization of its output.

This does not only hold for what happens in the team. The team should also have the regulatory

potential that covers the whole segment (Achterbergh & Vriens, 2019).

Meso control structure

The meso control structure does not focus on the necessary regulation within a segment. That

falls under the micro control structure. The meso control structure is focused on the regulation

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between segments. Issues that affect multiple segments should be regulated in an ‘on-line real-

time’ manner. The regulators should be team representatives and not be independent of any

team (Achterbergh & Vriens, 2019).

Macro control structure

At the macro structure, it becomes impractical to let teams or their representative directly

perform regulatory activities. But teams or their representatives should be involved in all

aspects of the macro level regulatory activities (Achterbergh & Vriens, 2019).

2.5 The framework

After the examination of a design theory, it will be plotted in the table below.

Reference criteria

Goals Quality of organization

Quality of work

Design parameters Functional concentration

Operational differentiation

Operational specialization

Regulatory differentiation in

task

Regulatory differentiation in

aspects

Regulatory specialization

Separation between

Operational and regulatory

tasks

Behavior formalization

Causal relationship between

goals and design parameters

Increase regulatory potential

Decrease disturbances

Design logic Macro to micro level

production structure and micro

to macro level control structure

Table 2: Framework summary

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2.6 Organization regimes

Kuipers et al. (2018) describe four organizational regimes. The pioneers regime, the

bureaucratic regime, the flexible regime, and the hyper-flexible regime. These regimes

represent the common four archetypes of organizational structures. Most organizations have an

organizational structure that is characterized by one of these four archetypes. Having some

understanding of these regimes is very useful for multiple reasons. First, there is a correlation

between the parameters described in paragraph 2.2. Organizations in the bureaucratic regime

will correspond to high parameter value structures and the flexible and hyper-flexible regimes

usually correspond with low parameter value structures (Kuipers et al., 2018). Further, in

literature on Lean, Agile, and Holacracy, there are many references to traditional or bureaucratic

organizations. Different language is used to name such organizations but they all refer to

organizations that are structured according to the bureaucratic regime. All three organizational

design theories assume that an organization is currently structured according to the principles

of the bureaucratic regime and all try to restructure the organizations towards the flexible or

hyper-flexible regime. Having an understanding of these regimes provides some insight into

assumptions and context to what the three organizational design theories try to accomplish and

it provides some extra theory that is useful in the comparison of Lean, Agile, and Holacracy.

The organizational regimes will be discussed starting with the pioneers regime. Followed by

the bureaucratic regime, flexible regime, and hyper-flexible regime. The following elements

will be discussed. The general characteristics of the organization, the environment of the

organization, and structural characteristics.

Pioneers regime

The pioneers regime is mostly found in start-ups and young organizations. These types of

organizations are in most instances driven by an innovative vision and/or a visionary leader

(Kuipers et al., 2018). The environment of such organizations can differ. They can find

themselves in a niche or a relatively new market. Structurally these kinds of organizations are

quite fluid. Characterized by a kind of organic structure or lack of a structure (Kuipers et al.,

2018). When an organization in the pioneers regime matures, the organization will feel the need

for a more formal structure. Such an organization, assuming it is successful and matures, will

usually adopt a structure characterized by one of the following regimes.

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Bureaucratic regime

The bureaucratic regime is maybe the best-known regime in the organizational structures. It is

also the most traditional regime that has ground in the post-industrial revolution production

organizations (Kuipers et al., 2018). A bureaucratic regime is characterized by a large

hierarchical structure and by an extensive division of labor (Kuipers et al., 2018). This means

high formalization and detailed planning based on a predict and control philosophy (Roberston,

2016). Decision making and operations are also formalized based on hierarchy, rules, and

procedures. When problems arise, they are usually dealt with by adding rules and procedures

(Kuipers et al., 2018). These types of organizations are characterized by scoring high on most

or all of the parameters (Kuipers et al., 2018).

Organizations with a structure that falls within the bureaucratic regime are relatively closed off

from the outside world. They can make efficient use of economies of scale. But they are slow

in changing and reacting and these structures lead to narrow and stressful tasks (Kuipers et al.,

2018). This means that such an organization is best suited for a stable environment (Kuipers et

al., 2018) with high entry costs and few substitutes (De Wit, 2017). Since markets are getting

ever more volatile and the need for change increases, the three structure theories all describe

such structures as outdated. They assume that an organizational change process starts with a

bureaucratic regime (Womack & Jones, 2003; Mike Cohn, 2013; Roberson, 2015).

Flexible regime

The flexible regime tries to change some characteristics of the bureaucratic regime in order to

become more flexible. Where a bureaucratic regime is more focused internally and on itself,

the flexible regime increases the focus on the customer and finding the balance between a focus

on the customer and internal processes. Formalization is based on minimal critical

specifications (Kuipers et al., 2018). Organizations with a structure that falls in the flexible

regime have a less extensive hierarchy. Regulatory capacity is decentralized. The way a

structure is designed aims to reduce interdependencies between departments and is based more

on order type, in contrast to the structure based on functions in a bureaucratic regime (Kuipers

et al., 2018). The more flexible character of such an organization means that an organization

that has a structure based on this regime is better at handling outside forces and can change

more quickly. It is able to handle more volatile environments. Organizations supporting the

flexible regime generally show low scores on the parameters (Kuipers et al., 2018).

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Hyper flexible regime

The last regime is the hyper-flexible regime. It is also called the hyper-flexible network regime

or network regime. As the name suggests it is the most flexible of the regimes. Structures are

more based on a network that reassembles itself according to the current needs (Kuipers et al.,

2018). The big advantage of such a structure is that it can handle the most volatile markets. In

such markets, changes are demanded rapidly and products are seldom the same as the previous

one. The focus of such a regime is on the outside world (Kuipers et al., 2018). The customer is

truly king. But such a regime can also feel restless. The constant adaptation of the structure to

the current project can have its burden on the organization. Also, lack of standards and stable

processes can lead to higher costs in the same way a bespoke suit is more expensive than an

off-the-rack one. So such a regime is most suited for unstable environments in which innovation

is more important than costs (Kuipers et al., 2018).

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PART TWO

The second part has two goals. First it aims to synthesize a general understanding of

Lean, Agile, and Holacracy. Secondly, this part plots the three design theories in

perspective to the reference set presented in chapter 2. The syntheses will provide an

overview of the design theories based on the framework for organization design

theories. It will provide the goals, design principles, and design logic associated with

the design theories. Literature is selected based on the contributions to the respective

design theory. Highly cited authors are picked, their work is analyzed and the

principles are presented below.

This part is structured according to the design theory. The first chapter, chapter 3,

describes the Lean principles, chapter 4 describes the Agile principles, and 5 the

Holacracy principles. Every design theory is structured according to the, in chapter 2

introduced design theory framework. Paragraph 1 discusses the goals, paragraph 2

discusses the design parameters, paragraph 3 discusses the design logic and paragraph

4 will provide an overview till thus far. Every paragraph consist of a presentation of

the theory followed by the analysis in which the theory is referenced to the reference

set presented in chapter 2.

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3. Principles of Lean

The principles we nowadays call ‘Lean’ were developed in post-war Japan by Toyota. It has

grown into one of the most well-known organizational design theories (Womack et al., 2007).

The origin of the Lean principle has a very rich backstory and was not just an idea someone

came up with. In the early 20th century Ford made a name with his production line. A major

change in (mass) production (Thuis, 2010). This was a time in which customer demand was not

of the question. When you could produce for an ever-decreasing price with higher quality,

people would buy your product (Womack et al., 2007). In the 1920/30s problems of market-

saturation started to occur in the car market and demand for cheaper and more expensive cars

differentiated. This was the time for Sloan who owned different car manufacturers that became

General Motors (Womack et al., 2007).

During the second world war, the Toyota motor company was restrained from the production

of passenger cars and forced to produce trucks for the military. After losing the second world

war, the state of Japan’s economy was bad. Raw materials were scarce. There was not enough

capital to invest in the latest production technologies. The car market was small and widely

diversified for the time with the demand for luxury cars, large and small trucks, and smaller

city cars. In the ‘outside world’ huge motor-vehicle produces, who had more capital to spend,

had the ambition to establish themselves in Japan. The Japanese workforce became more labor

rights conscious. With the result that pays increased, jobs became more permanent and workers

got more participatory rights (Womack et al., 2007). Having to deal with these problems the

western car companies had not, led step by step to the development of the ‘Toyota Production

System’ (Womack et al., 2007) which principles we also call ‘Lean’.

3.1 Goals

In this paragraph, the goals will be presented followed by an analysis of how lean goals relate

to the framework.

Lean Goals

Lean centers around two main goals. The key goals revolve around the conceptions of ‘waste’

and ‘customer value’. Waste is all the activities executed in an organization that does not

translate to value for the customer (Womack & Jones, 2003). Value is something the customer

wants and satisfies a need (Kothler et al., 2016). Value is sometimes defined as something the

customer is willing to go through inconvenience to get (Kothler et al., 2016). These

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inconveniences can be softened by pampering measures. These measures do not constitute

value. Womack and Jones (2003) illustrate this with an example of the aviation industry. The

value here is being transported from one place to another. But especially in the US, this comes

with multiple forms of inconvenience. For example, the need to be early at an airport to check-

in, go through security and having to transfer. Pampering measures to make these

inconveniences bearable, Like a free meal or onboard entertainment, do not provide the need

the customer has (being transported from one place to another) and thus is still waste. The core

assumption beneath the two goals is that an organization will perform well when it captures

value the customer wants and only execute tasks that directly contribute to the creation of the

value. Thus the two goals of Lean are the reduction of waste and the improvement of value.

Lean goals in the framework

Lean distinguishes two goals, the reduction of waste and the increase of customer value. The

comparison of these two goals is presented below. A first impression of the two different sets

of goals is given. This is followed by comparing each of the two individual Lean goals to the

reference set of goals taken from De sitter.

When the two goals are compared with the goals of the reference goals, the focus of the Lean

principles become clearer. Both provide their advantages and disadvantages. The first and most

obvious difference is that Lean only provides two very distinctive goals where De Sitter

provides a wide set of goals that have to be accomplished. The second difference is the focus

of the goals. Lean focuses on things that inhibit the performance of the organization and what

the outside world wants from the organization. The reference goals also focus on the

performance of the organization but in addition, it provides a goal focused on the human factor

of the organization in the form of quality of work goals. Lean principles provide some guidance

when it comes to the design logic under the verse ‘Lean versus Mean’, but not being mean is

introduced by Womack & Jones (2003) as a condition to the success of the implementation of

Lean principles and not seen as a goal on itself.

The reduction of waste corresponds to the quality of organization goals. Both provide

improvement of the transformation process. The reduction of waste and the goals of flexibility,

control over order realization, and potential for innovation try to accomplish show much

overlap. Only the perspective which is taken is different. Lean takes a more practical approach

by focusing on the root cause of what inhibits the realization of the output. The modern

sociotechnical approach names the goal by its desired outcome.

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Flexibility consists of the three subgoals: Shorten the production cycle times, sufficient product

variation, and sufficient product mix (Achterbergh & Vriens, 2019). Only reducing production

cycle times is tackled by reducing waste in the production structure. This is accomplished by

the reduction of three types of waste. Waiting, transportation, and over-processing.

Control over order realization consists of these three subgoals: Reliable production time,

reliable production, and effective quality control (Achterbergh & Vriens, 2019). The reliability

of the production process and production time are directly related to the ‘doing things not right

the first time’ form of waste. Not doing things right the first time leads to defects and is a form

of disturbance that impacts the the quality of the production and time in which a product is

produced negatively. This is caused by the unpredictable nature of defects and the need for

rework. So reducing things not done right the production and production time become more

reliable. Quality control is not captured in Lean goals. This is because quality control is not

directly related to the concept of waste or customer value. How quality control should be

performed is described in the design logic (Womack & Jones, 2003).

The protentional for innovation with its subgoals strategic product development and shorter

innovation time are both tackled by both Lean goals. This is the first goal by De Sitter that also

connects to the goal of customer value. Strategic product development is improved in

organizations by improvement based on what the customer sees as value (Womack & Jones,

2003). The shortening of innovation time is realized by restructuring and reducing waste in the

innovation process (Womack & Jones, 2003).

It can be argued that the improvement of customer value corresponds with a sufficient product

mix and sufficient product variations. Sufficient product- variations and mix mean the

organization is offering value, otherwise it would not be sufficient. Ideally, it works also the

other way around but providing value does not necessarily provide sufficient product- variations

or mix. Sufficient product variations and a sufficient product mix are ‘sufficient’ when they

enable the organization to react to fluctuations (Achterbergh & Vriens, 2019). An offering

might satisfy a need for the customer (Kothler et al., 2016), but that does not mean that the

organization’s offerings provide sufficient variety to react to fluctuations in demand. Besides,

when Achterbergh & Vriens (2019) speak of a societal contribution they note that a societal

contribution not only relates to a contribution by providing desired offerings. It also refers to

the responsibility of organizations not distorting or harming parts of society. When an

organization is only focusing on what is value in the eyes of the customer, other stakeholders

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might be lost out of sight. This might lead to the destruction of some things that are considered

value by others. There is a correlation between the two concepts, but they are not the same. So

this goal in Lean has common ground with sufficient product variations and sufficient product

mix goals in the reference set.

3.2 Design parameters

In this paragraph, the Lean design parameters will be discussed. After this is discussed it is

important to take a step back and discuss how the design parameters relate to the earlier

discussed goals. Then this paragraph continues with the analysis of the Lean design parameters

compared to the framework.

Case introduction

Design theories are somewhat abstract, with different design principles and different

terminology. This can become confusing for the reader. A case is presented to help clarify the

design principles of the different design theories and paint a picture of what the design

principles would mean for a redesign. The case is marked by a textbox as seen below. The case

is fictitious and simplified compared to a real-world organization but it will help illustrate the

design theories.

The case concerns a business to business laundry company, Clean Textile corp. (CT). This

case will follow the logic of being a bureaucratic organization that needs organizational

change, as is assumed by all design theories. CT is an organization that provides large scale

and specialty laundry services for businesses. They pick up the laundry, clean it, press it,

package it, and deliver it back to the customer. They provide three different services. The first

is normal laundry. This is focused on high volume cheap laundry service. Customers are for

example hotels that want their bedding and towels to be cleaned. Secondly is sensitive wash

for more sensitive textiles and garments. Last they provide sterile washing programs. These

are used by labs and specialized production companies that have processes that are very

sensitive to any form of contamination. Sterile programs demand specialized treatment and

are low volume and expensive.

CT consist of four macro level sub-parts. Accounts (Account manager in this part are

responsible for attracting new clients and maintaining relations with existing ones. They also

receive the orders clients place), planning, cleaning, and logistics. The planning sub-part

housed the logistics planning department (responsible for planning pickup and delivery

planning) and the internal planning department (responsible for the internal planning of

orders). Cleaning houses the sorting, washing, control, and pressing department. Logistics

housed a packaging department and transport department.

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Lean design parameters

Lean theory provides five parameters. The value stream, flow, pull, aim for perfection, and

participatory management. When reading the paragraph about the aim for perfection, it can be

noted that it is not a design parameter, but in the Lean literature it is presented as an important

principle in Lean (Womack & Jones, 2003), so it is discussed shortly.

Value stream

The first principle in Lean is the value stream. The design of an organization should be based

on the value stream instead of functions. Tasks should be grouped based on their product family,

not based on the type of tasks that are performed (Womack & Jones, 2003).

The images below contain the current structure of CT and how orders are processed by the

company combined with who performs what step.

Figure 9: Case CT: initial structure

Figure 10: Case CT: initial flowchart

Structuring according to the value stream means that Clean Textile corp (CT) needs to

change its structure based on what the sub-parts and departments do to product families. CT

offers three types of products. The normal laundry, sensitive laundry, and sterile laundry.

These become the basis for the new departments.

Figure 11: Case CT: Lean value streams

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Flow

When a design is based on the value stream, flow is the second design principle. Flow means

that the essential steps to create the value in a certain value stream are lined up (Womack &

Jones, 2013). This can be interpreted figuratively but also literally. Means of production are

physically lined up based on the steps in the production process. Three principles constitute the

flow. Single-piece flow, production tempo based on takt time, and cellular manufacturing.

Single-piece flow is the opposite of a batch-ad-queue system. A batch is produced in a

department and stored. When the batch quota is reached it will be sent to the next department

who does its part (Womack & Jones, 2003). Usually, a batch represents a product type so when

a batch is finished the production process in the department has to change to the next type of

batch. Single-piece flow views the production process from the perspective of one product. The

product has to flow continues through the process. This means that the product is handled in a

cell and when finished immediately goes to the next cell without stopping, being batched, or

placed in a queue (Womack & Jones, 2003). Because the organization should also be designed

according to the product family, this should always be possible and changeovers are rarely

necessary. Cycle time, the time it takes for a product to be completed will be reduced because

waiting time and transportation are reduced.

The pace at which this has to happen is based on takt time. Takt time is the amount of time you

have to produce a product. It can be calculated by dividing the available work time by customer

Now the departments are based on the products, teams have to be placed into these

departments. Cells have to be made. These cells have to be continuous steps. For the

cleaning process these cells could be sorting, washing, control, pressing, packaging, and

transport cells. But because these teams do not handle only one order type, for CT teams

may handle more of these parts at once. See the example for the sterile laundry department.

Figure 12: Case CT: Lean cell forming

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demand (Womack & Jones, 2003). The number provided means that every x amount of time a

product should be finished.

The design of the production line will be based on cellular manufacturing. This means that the

value stream gets divided into a certain amount of cells. Within a cell, a set of tasks is

performed. When these tasks are finished the product can be sent to the next cell. Every cell is

dedicated to one flow and thus one product family. In the case of the production of physical

product cells that follow each other in the production process, cells should also be placed near

each other to reduce movement. In a cell, multiple tasks can be combined. This leads to broader

jobs for the employees in a cell. In some cases, a task cannot be placed in a cell for every flow.

For example, because it has to share a common resource with other production flows. This is

called a monument. When possible the existence of a monument in the production line should

be avoided but Lean is realistic in recognizing that avoiding monuments is sometimes

impossible (Womack & Jones, 2003).

Pull

When creating pull the concept of JIT (Just In Time) production is central. Just in time

production means that an organization produces what the customer wants when the customer

wants it. To prevent overproduction, the production should be based on the demand ‘pulling’ a

product through the production process (Womack & Jones, 2003). This is instead of push

production. Push production is production based on the planning made by the planning

department based on (unreliable) sales projections, ‘pushing’ the production (Womack & Jones,

2003).

Aim for perfection

The aim for perfection parameter is hardly described as a design parameter. Its principles do

not present direct consequences for the design of the organization. But the theory presents it as

an important principle (Womack & Jones, 2003) so it will be discussed just shortly. Lean

distinguishes two forms of improvement. Kaikaku and kaizen. These two terms are in line with

other change and innovation theories, dividing the change into incremental (or continuous)

The nature of CT is already a bit pull focused because the client has to provide dirty laundry

before CT can process it. CT will focus on providing their service to cutomers JIT. Reducing

the amount of prescheduled orders.

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change and radical change (Norman & Verganti, 2014). Kaikaku refers to large change projects

in Lean with as first step the transformation from a traditional function centered organization

to a Lean organization (Womack & Jones, 2003). This can be compared to radical change.

Kaizen refers to the continuous change process that incrementally aims to reach a state of

perfection. By continuously identifying and eliminating waste an organization tries to

accomplish a status in which there is no waste. Even though by removing waste, new forms

always will be revealed (Womack & Jones, 2003).

Participatory management

By designing an organization according to the above principles leads to an increase in horizontal

communication and decreases vertical communication. Tasks and the responsibility for them

should be transferred to the employees who are adding value to the product. There should be a

system in place that detects defects and traces and acts on problems quickly. This means that

the organization must create a culture of participatory management. Employees must be trained

and allowed to make decisions in problem-solving teams. Besides, employees working on

physical transformation tasks should be trained to perform simple repairs, quality checking,

housekeeping, and material ordering. This Lean principle is in favor of highly trained workers

with more responsibilities (Womack et al., 2007). According to Womack et al. (2007), low-

educated workers with little responsibilities means that an organization has more coordinators

and managers that are responsible for the aforementioned tasks. These managers will have the

main task of ‘fighting fires’ – making on the go problems disappear with quick fixes – instead

of sustainable improvement that makes sure that the problem does not occur a second time

(Womack & Jones, 2003). Does this mean Lean advocates to design an organization with no

managers and no support departments? No, teams still have a team leader (Camuffo & Wilhelm,

2016) and there is still a team that can be called upon for problem-solving (Womack et al.,

2007). But their role is different. Team leaders are usually highly experienced workers who

have much experience in the production process. They help their team when a more complicated

problem occurs that cannot be fixed by the worker himself (Camuffo & Wilhelm, 2016). If the

problem becomes really complex and needs more investigation into the cause to prevent it from

happening again. Only then a team can be called in to help (Womack et al., 2007). Supporting

roles should only be consulted when absolutely necessary.

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Connection between design principles and goals

The goal of Lean is to increase customer value and reduce waste. Waste is divided into two

types of waste. Type one and type two. Type one waste consists of all the activities that do not

create value but are currently necessary for the creation of value. Type two waste are activities

that do not create value and are not necessary for the creation of value (Womack & Jones,

2003). Type two waist is defined by seven types of activities that do not provide value for the

customer. The seven forms of waste are over-production, inventory, motion, waiting,

transportation, over-processing, and not right the first time (scrap, rework, and defects) (Green

et al. 2014). Over-production is all the activities that lead to the creation of a product or service

for which is no demand. Inventory refers to the raw materials and semi-finished products that

an organization has in store to keep the production process going. Motion is the movement of

equipment and personnel. Waiting is the storing of semi-finished products before it can enter

the next phase of production. Transportation is the movement of semi-finished products. Over-

processing is the duplication of work and repeating tasks. And last doing something not right

the first time is some kind of mistake made that leads to the necessity of redoing the task or

correcting (Green et al. 2014). The design principles within Lean are the creation of flow and

pull, the aim for perfection, and participatory management (Womack et al. 1990; Womack and

Jones 2003). These four design principles are in place to eliminate some of the seven types of

waste.

Lean parameters in the framework

The design principles will be compared by relating them to the parameters described in

paragraph 2.2.

For CT this means that every team has a team leader that supports workers with more

complex problems, but employees have the responsibility to detect problems and handle

accordingly. So solving them themselves whenever possible and asking for help when

necessary. It is important that solutions are no quick fixes but that the root cause of the

problem is found and a permanent solution is designed.

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Functional concentration

Remember that the degree of functional concentration refers to the number of order types a

department handles. Lean is centered around channeling the value stream. The design method

prescribes that the organization should be designed according to product family. This means

that a department handles one product family. Orders that do not concern that product family

will be handled by another department dedicated to that specific product family (Womack &

Jones, 2003). This way of distinguishing parts of the organization in the redesign is referred to

as parallelization by De Sitter (Achterbergh & Vriens, 2019). When it comes to physical

transformation tasks Lean discourages the sharing of reassures. This leads to the conclusion

that Lean strives for a low functional concentration. What has to be added though is that Lean

advocates to base the design in any situation on the product family (Womack & Jones, 2003).

De Sitter leaves more freedom when it comes to parallelization. Besides product characteristics,

De Sitter also provides input characteristics, demand characteristics, and client characteristics

as possible characteristics as grounds for the parallelization (Achterbergh & Vriens, 2019).

Differentiation in operational tasks

When the organization follows the Lean principles separation of operational, preparation, and

support tasks will be decreased. Lean tries to lower the operational differentiation but does not

pushes it to its extremes. Staff departments, though rethought, stay in place. Departments such

as engineering and purchasing, which are responsible for preparation activities such as

providing the right production tools and the necessary materials, keep these tasks. On the other

side employees in the operational part of the organization get more freedom to improve and fix

things. This means that when a tool does not suffice, the worker has more freedom to alter it or

create a substitute. Also by the implementation of flow and pull mechanisms planning by the

planning department is highly reduced. Previously planning would have been a detailed and

complex task where every order has to be planned with great precision for all the departments

involved. By introducing flow and pull, the task of the planning department is to make sure

orders are scheduled for the right department and are released to the department in

correspondence with the takt time. The rest of the necessary planning activities can be

performed on the work floor (Womack & Jones, 2007). Because of the lowering of

differentiation of some activities, but not of all to their extremes, Lean reaches a medium degree

of differentiation in operational tasks.

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Degree of specialization of operational tasks

The degree of specialization of operational tasks means that the tasks that constitute jobs cover

a small part of the production process. Lean prescribes to design the organization according to

flows. This translates to a situation in which departments cover the whole production process

or their order type. On the level teams, Lean prescribes production cells. Production cells

contain a set of tasks and employees assigned to a production cell ideally can perform all

activities within the production cell (Womack & Jones, 2003). At the higher level in the

organization, the degree of specialization is completely removed by assigning a whole product

family to a department. At the lower level in the organization, Lean tries to decrease the

specialization. In the production cells, a broader spectrum of activities should be present in

comparison to a functionally structured organization (Womack & Jones, 2003). Lean tries to

decrease the degree of specialization on multiple levels in the organization so it aims to reach a

low degree of operational specialization.

Degree of differentiation of regulatory activities into aspects

Regulatory activities consist of the aspects of strategic regulation, regulation by design, and

operational regulation. At the level of physical transformation (or operational) tasks, regulation

by design and operational regulation are not differentiated. Daily disturbances (or defects in

Lean terminology) should be dealt with by the same people who have to change the

organizational structure. Lean prescribes that teams are responsible for their own improvement

through kaizen and kaikaku practices. Waste has to be eliminated by finding permanent

solutions for defects and by changing the organizational design (Womack & Jones, 2003).

Employees who perform physical transformation tasks don’t get much say in goalsetting.

Production goals are based on orders and corresponding takt time. Womack and Jones (2003)

also prescribe that goals for improvement have to be set. The problem-solving task gets more

regulatory aspects. Lean prescribes to create a Lean innovation process with multidisciplinary

teams instead of an innovation process jumping from a marketing department who defines what

the customer sees as value to other functional departments who make designs, engineer the

product and engineer the production process (Womack & Jones, 2003). Such a multidisciplinary

team can set its own goals and give its own identity to the product (Womack et al., 2007). Lean

strives to decrease the differentiation of regulation into aspects but not to the fullest of

possibilities.

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Degree of differentiation of regulatory activities into parts

Regulatory activities do not only consist of three aspects but also three parts. These parts are

monitoring, assessing, and acting. Lean does not recognize these three different parts of

regulatory tasks. But it prescribes that employees burdened with physical transformation tasks

should also be able to detect defects, trace it to the root cause and fix the problem. There are

teams in place to investigate root causes and come with a solution when a problem becomes too

complex (Womack et al., 2007), which would differentiate monitoring from assessing and

acting. But Lean strives to keep these three parts as much together as possible and so strives for

the lowest degree of regulatory differentiation into parts.

Degree of specialization of regulatory activities

The specialization of regulation is about the scope of regulatory activities. Lean decreases de

specialization and increases the scope of regulatory activities. The scope of the physical

transformation tasks and problem-solving tasks are increased as has been established discussing

the scope of operational tasks. By making those responsible for the regulatory activities also

responsible for the whole scope of regulatory activities considered with the operational tasks,

the scope of regulatory tasks increases accordingly (Womack & Jones, 2003). The team

responsible for solving more complex problems has a scope coherent with the entire flow

(Womack & Jones, 2003). So its regulatory potential has a scope that covers the entire process.

It can be concluded that Lean aims to achieve a low degree of regulatory specialization.

Degree of separation between operational and regulatory activities

This parameter measures to what extend regulatory activities and operational activities are

bundled in the same task. It has already been established that Lean advocated that regulatory

potential should be as much as possible transferred to the employees who directly ad value to

the end product. The employees that ad value, are employees working on physical

transformation tasks. In conclusion, Lean strives for a low degree of separation between

operational and regulatory tasks.

Behavior formalization

Behavior formalization is a reoccurring concept in Lean principles and Lean organizations

(Gupta, Sharma & Sunder, 2016). Behavior formalization is usually referred to as

standardization in Lean related literature. It has already been mentioned that Lean aims to

broaden the scope of tasks and that Lean strives that employees have broad overlapping skillsets

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so multiple employees can perform the same tasks. Coworkers should be able to take over tasks

whenever necessary. For coworkers to take over tasks, tasks have to be standardized (Swank,

2003). Standardization also plays a role in continuous improvement. Something has to be

standardized to change it, optimize it, and decrease the possibility for mistakes (Kim et al.,

2006). In service organizations, it is mostly focused on output standardization. For example,

making sure everybody uses the same filing system and administrative outputs are always

formatted the same (Swank, 2003). In production organizations, the behavior formalization

focuses mostly on process standardization. Standardization is one of the steps in the 5S model.

The 5S model is a five step model for continuous improvement used in many Lean

organizations (Rathilall & Singh, 2018). In many cases, this is coupled with Six Sigma. A form

of matric-based monitoring is used to quantitatively monitor the performance of the

organization and assess the effectiveness of standardized processes and changes made to those

processes (Kim et al., 2006). This thesis will not elaborate more on the Lean Six Sigma

combination but that it is a commonly used coupling, illustrates the importance of the

standardization in Lean. So it can be concluded that behavior formalization is high in Lean.

Remark about the design principles

According to De Sitter disturbances are caused by a high number of relations and variance

(Achterbergh & Vriens, 2019). Lean does reduce the number of relations and variance, but

literature focuses mainly on variance as the root cause of disturbances (Womack & Jones,

2003).

3.3 Design logic

In this paragraph, first, the design logic is discussed. First the design logic presented by Lean

literature. Secondly, the presented design logic is analyzed and plotted against the framework.

Lean design logic

To understand the design logic of Lean first an understanding of the three types of activities

Lean distinguishes is required. The three activities are the physical transformation task, the

information management task, and the problem-solving task. The physical transformation task

consists of all the activities directly related to the production of value. The information

management task consists of the activities related to the administrative part of getting an order

through the system. The problem-solving task consists of the conceptualization, design,

engineering, and launch of a product. When redesigning an organization according to Lean

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principles, you start with the physical transformation task and continue in the order presented

above.

When starting the redesign process, by Womack & Jones (2003) referred to as ‘getting started’,

focusses mainly on enabling the possibility for a successful radical episodic change. After the

‘getting started’ phase the change of the physical transformation task is executed in the ‘creating

an organization to channel your streams’ phase. Followed by installing business systems to

promote Lean thinking. Then the alignment of schemes in your organization to the Lean

structure in the form of compensation, training, and accounting mechanisms is created. The last

phase, ‘completing the transformation’, converts the previous top-down radical change project

into bottom-up incremental change and increases the focus from your own organization to

partners in the value stream (Womack & Jones, 2003).

Getting started

The first part of ‘getting started’ is getting the necessary people into the organization. According

to Womack & Jones (2003), you need two types of people. You need a change agent and a

‘sensei’. The change agent is someone in the organization with the ability, power, and will to

drive the change process. The sensei is the master that knows all about Lean. The sensei will

make sure Lean practices are implemented correctly and people are trained in the way of Lean.

The second part of ‘getting started’ is the gathering of momentum which is needed for the

organization to change. First, some kind of crisis is needed. Changing toward a Lean

organization is possible without a crisis but much harder because the people in the organization

lack a sense of urgency to change (Womack & Jones, 2003). When there is a crisis, it is

important to forget strategic options to deal with a crisis like selling parts of the organization or

changing the business model. First, you have to reduce waste before you seek your solution in

industry-related changes (Womack & Jones, 2003). When you have the necessary leadership,

knowledge, and sense of urgency, it is time to identify and map your current value streams. The

identification of your value streams must be based on product families. Then a step by step

analysis is performed per value stream to map them. Mapping a value stream is the process in

which an organization identifies all the tasks that have to be executed to produce the end

product(family). When the value streams are mapped it is time to create flows (Womack &

Jones, 2003). Womack & Jones (2003) suggest starting with a relatively easy value stream with

high importance to the firm and high visibility throughout the firm. This in combination with

demanding immediate results will set precedent for the entire firm. After flow has been

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established in this one flow for product family x, pull mechanisms have to be implemented, and

waste exposed by the creation of pull has to be eliminated (Womack & Jones, 2003).

Figure 13: Prototype Lean Organization (Womack & Jones 2003, p. 257)

Create a new organization

When momentum has been created, efforts should be increased in the transformation to a Lean

organization. This phase is about creating an organization to channel your streams. The entire

organization will be reorganized. All the physical transformation tasks will be regrouped into

streams based on product family (Womack & Jones, 2003). For every product family flow and

pull are created based on the design principled explained in the previous paragraph. Womack

& Jones (2003) advocate that the organization should also rethink staff functions to align them

with the new structure for physical transformation tasks. But no real redesign logic or principles

are provided. In their figure in which they depict a prototype for a Lean organization (see figure

13) the staff departments, like marketing, finance, engineering, operations, HR, and purchasing,

remain (Womack & Jones, 2003). Besides the existing staff departments, a new Lean promotion

department is added as a staff department. This department is responsible for the mapping of

value streams, Lean education for all employees, and offers support to on the floor improvement

teams (Womack & Jones, 2003). Transforming the organization from a functional structure to

a Lean structure and principles of flow and pull, means the organization can be as productive

with less human effort, freeing up personnel. Here Womack & Jones (2003) highlight the

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possibility of Lean becoming mean. Lean becomes mean when Lean improvements lead to job

cutting. Especially for the long term stability of Lean in the organization, it is important to

prevent becoming mean. When continuous improvements created by Lean methods leads to job

loss, employees will sabotage the Lean organization because they will fear for their own job

and being the cause of job loss for coworkers. Jobs can be saved in a few ways. The two main

ways Womack & Jones (2003) mitigate loss physical transformation tasks is to employ people

in the Lean promotion department and by increasing the effort put into the problem-solving

task. With the former, the organization can use specialized knowledge about certain production

steps in the design of the flows and production cells. The lather will help the organization grow

by introducing new forms of value for their customers. New products and the accompanying

production line will also help create new jobs for more people whose tasks disappear and refill

space freed up space because of Lean improvements. To do this properly it is important to

devise a growth strategy so efforts are focused in a consistent direction. Guaranteeing jobs is

for some people not enough. A small group, in marketing terms the laggards or in terms of

Womack & Jones (2003) the anchor-draggers, will not accept or will not be able to function

properly in the new environment. These anchor-draggers have to be removed. The last part of

this step is to build a culture of improvement. When a part of the organization has been

improved, new improvements must be demanded. The changing of machinery and jobs

becomes a constant.

Design wise for CT this means that first the product families are identified followed by

setting up teams in the form of cells as shown in the previous paragraph. Currently all the

equipment needed for doing laundry is organized in its current departments. As soon the

value stream is mapped and it is clear how the flow and cells should look like, the needed

equipment will be arranged according to these flows. So the equipment for the different

steps for normal laundry is put together in order of the flow. This is also done for sensitive

laundry, and sterile laundry. Than tasks are rethought. Because remember that some

activities earlier separated are now combined within a team.

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Installing business systems

In the next phase, the center of focus is aligning the rest of your business to Lean production.

First schemes fitting the Lean configuration should be implemented. Policies should support

kaizen and kaikaku activities for improvement. Your financial accounting system should be

adapted to the Lean environment. Compensation should consist of a market conform wage for

the qualifications of employees aided by compensation based on the performance of the

organization. Because a Lean organization should be more profitable, even though people earn

market conform wages, the additional performance-based compensation should increase this

substantially and make for well-payed employees (Womack & Jones, 2003).

Further, a Lean organization should be transparent. It should not benchmark itself compared to

other organizations. The Lean organization should benchmark itself to its previous self and

check the rate of improvement (Womack & Jones, 2003). Maintaining a Lean organization is

not easy. Employees have to be well educated. Lean thinking, Lean techniques, and skills have

to be taught to everyone in the organization. Womack & Jones (2003) even advocate examples

of organizations that have set up their own corporate education institutes. The last part of the

When the above principles are compined in a new structure for Clean textile corp. it will

look like this.

Figure 14: Case CT: Lean structure

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organization that has to be aligned in this phase is the tools. This includes physical equipment

but also IT systems, test equipment, and prototyping systems (Womack & Jones, 2003). Most

tools in the organization will be better suited to a functional organizational structure. For

example, complex IT systems are usually built with large functionality designed organizations

in mind. Keeping these kinds of systems in place could very much hinder the implementation

of Lean in your organization. Also along the way existing ‘monuments’ will appear more

flexible or more easily replaced with activities in normal cells.

Completing the transformation

The last phase, completing the transformation, starts to focus on the ‘outside world’. Being

Lean in a value stream that is not Lean, still does not translate to more value for the end

consumer and can lead to remaining waste at the beginning and end of your organization in

order to mitigate other firms not being Lean. This can still lead to loss of value for the end

consumer and the consumer eventually finding other ways to satisfy its needs leading to the

inevitable demise of the entire value stream, including your organization. (Womack & Jones,

2003). Womack & Jones (2003) also provide case material showing a misfit between the Lean

organization and a not so Lean organization down the value stream. Organizations up and

downstream should be convinced to become Lean and to work together with you to improve

the value stream from raw materials through semi-finished products to the end consumer. In

this last phase, your Lean practices should be in order. Now it becomes important that change

is driven from the bottom-up and not from the top-down. Some people in the organization may

struggle with this conversion. For those people, it might be wiser to consult other firms in the

value stream of move on to another organization which is still organized functionally.

Lean design logic in the framework

Two things stand out when the design logic presented by Womack & Jones (2003) is examined.

They cling to a three-stage model which is commonly used in organizational change. And their

strategy seems very close to one of the most famous examples. Lewin’s basic change model.

Consisting of unfreezing, changing, and refreezing the organization (Schein, 1996). First it the

getting started phase. In this phase, the organization is gathering momentum to change

(Womack & Jones, 2003). Unfreezing is the act of preparing the organization for change in a

way it can break through its quasi-stationary equilibrium that under normal circumstances

pushes the organization towards its equilibrium (Schein, 1996). What is interesting though is

that Womack & Jones (2003) describe that the preparation for change is to start the change.

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Part of the unfreezing process is showing as fast as possible that the proposed change works.

When this has been accomplished, the changing and refreezing steps are carried out as described

in the previous section. An observant reader might already have observed that the previous

paragraph consists of four phases, not three as a three-stage model would suggest. A more

unique approach advocated by Lean is to step beyond the boundaries of your organization and

improve the whole value stream to decrease vulnerability and improve value for the end

consumer (Womack & Jones, 2003).

What also stands out in Lean can be maybe me derived when looking at the three-stage focus

of Lean. Lean provides an implementation guideline (Womack & Jones, 2003) and lots of

practical tools to implement to establish an on the floor planning and support Kanban

(incremental) change initiatives (Wood, 2004). Supported with case examples such as Womack

& Jones (2003), Camuffo & Wilhelm (2016), and Raman & Corsi (2016). But what it misses

is clear guidance on how to get there. Most of all it does not clearly describe how to design the

organization. Lean prescribes to design the organization according to product family followed

by the parameters, but the design logic does not guide how to do that. This might be the case

because Womack & Jones (2003) are advocates of a ‘sensei’ an all-knowing Lean consultant

so to say. When this consultant knows Lean like the back of his hand and has experience

implementing it, the organization might not need elaborate theoretical descriptions but is make

the organization dependent on consultants or training provided to a change manager.

3.4 Lean in the framework

Reference set

(sociotechnical approach)

Lean

Goals Increase customer value

Decrease waste

Quality of organization Main focus on decreasing

production time and on the

controllability over order

realization.

Quality of work Some quality of work

aspects can be found within

Lean, but it is very possible

to become ‘mean’ because

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the quality of work is not

anchored in the goals.

Design parameters Flow,

Pull,

Aim for perfection,

Participatory management

Functional concentration Low (by creating flows

based on product family)

Operational differentiation Medium (Giving workers in

the production structure

more preparation and

support tasks but keeping

staff departments for some

tasks)

Operational specialization Low (by increasing task

scope in production cells)

Regulatory differentiation in

aspects

Medium (some aspects are

kept together, for some

dedicated department

remain)

Regulatory differentiation in

parts

Low (Workers who perform

a certain task are also

encouraged to perform all

parts within their abilities)

Regulatory specialization Low (By widening the scope

of operational tasks,

regulatory tasks follow)

Separation of operational

and regulatory tasks

Low (Workers with

operational tasks also get the

corresponding regulatory

tasks)

Behavior formalization High (Standardize both

process and input to increase

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flexibility, reduce mistakes,

and support continuous

improvement.)

Causal relationship between

goals and design parameters

Increase regulatory potential

Decrease disturbances

The seven forms of waste:

Over-production, inventory,

motion, waiting,

transportation, over-

processing, and not right the

first time.

Design logic Macro to micro level

production structure and

micro to macro level control

structure

Getting started

Create a new organization

Installing business systems

Complete the transformation

Figure 15: Framework summary Lean

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4. Principles of Agile

Agile originates in the software industry. It arose around the dot com bubble in the 1990s and

early 2000s. The first Agile methods were developed in a software company. Faced with

impossible demand to replace all its legacy offerings in less than six months, J. Sutherland

began to learn more about maximizing productivity. Combining insights from that time led to

the creation of Agile. One method stood out for Sutherland. This method was based on a rugby-

like back and forward passing of the ball while constantly moving forward. To honor the rugby

analogy of the method leading up to Agile, Sutherland named this new approach ‘Scrum’

(Rigby et al., 2020). Sutherland and his organization were not the only ones looking for new

organizational methods and structures. Especially at that time, during and just after the dot com

bubble. During that time demand for software and volatility in the software market increased

drastically. Leading to situations in which classic manufacturing structures and principles were

not suited for the task at hand. Increasing the demand for new methods of organizing that were

suited for more innovative processes (Rigby et al., 2020). A group of software developers, who

were also busy with improving processes, including Sutherland, met in the early 2000s. There

were also advocates of some different approaches such as Extreme Programming (XP) and

Adaptive Software Development (ASD). This group decided to change its name to Agile (Rigby

et al., 2020). For all these methods the organizational structure is based on Agile teams. How

these teams manage their work can differ. Most teams use scrum, but they could also use

Kanban, XP, or ASD (Rigby et al., 2020). Since this thesis focuses most on the organizational

structure and not on tools to manage tasks, most that will be discussed in this chapter apply to

Agile in general. When theory on Agile in general falls short the thesis will only focus on Agile

based in Scrum because this holds most true to its origin (Rigby et al., 2020) and is the most

used form of Agile (Cohn, 2013)

Agile aims to improve innovativeness. The software heritage is visible in the assumption that a

team always delivers something new (Cohn, 2013; Rigby et al., 2020). Design choices are made

with this assumption in mind. The central part of Agile is the Agile team. These teams are

assumed to work project-based (Cohn, 2013; Rigby et al., 2020). Such a project can be a new

software program (Cohn, 2013), but also an innovation project for a new product or an

organization that delivers tailor services or products (Rigby et al., 2020) (like a consultancy

firm or a yacht builder). In contrast to the other design theories, Agile is not necessarily integral.

Agile teams can exist in a bureaucratic organization. It is possible to implement Agile teams

only where they are wanted, besides bureaucratic parts (Rigby et al., 2020). Rigby et al. (2020)

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go as far as to say that Agile is not in every organization suitable for all activities. For example,

support activities might not benefit from working Agile and instead benefit more from a

bureaucratic structure.

4.1 Goals

Agile provides three goals. Implementing an Agile organizational structure and principles

should lead to improved innovation, better productivity, and improved employee engagement

and job satisfaction (Cohn, 2013). In this paragraph, these three goals will be elaborated.

Agile Goals

Innovation

Agile is developed in environments where innovation is important and products usually are

never the same, requiring innovation for every customer. When software is created, it can be

copied indefinitely so producing software is always producing something that is new and does

not exist jet. Dealing with such demand for innovation is central to Agile (Rigby et al., 2020).

But Agile is not limited to software development. Agile structures have the main goal to build

the organization in such a way that it facilitates innovation. A few things are important when it

comes to improving innovation. First is the ‘to market time’ of an innovation. Working with

Agile should improve the time to market for innovations drastically (Cohn, 2013). Further

innovations should be more successful. Just a small percentage of innovations are successful.

Most innovations fail (Wulfen, 2012). An innovation project in an Agile environment should

drastically increase the percentage of innovations that become successful. Meaning that the

innovation will be implemented and makes it to market (Cohn, 2013). Even though Agile

principles have been developed in environments that demand product innovation, it is suitable

for other types of innovative processes (Rigby et al., 2020).

Productivity

Working in an Agile environment should increase productivity in multiple ways. It should

encourage only doing what the customer wants. It should also lead to an improvement in quality

(Cohn, 2013). And last, it should reduce idle time (Rigby et al., 2020). This goal has some

resemblance to the Lean goals (Womack & Jones, 2003). Improvement in quality means that

with software there are fewer bugs (Cohn, 2013), and in other industries fewer defects so the

organization has to put less energy into repairing these defects ultimately increasing

productivity. And last, processes have to deal with less idle time. The process coming to a halt

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because the continuation of the process depends on something it is waiting for. An Agile

enterprise reduces both waiting times and the amount of waiting steps, leading to more

productivity (Rigby et al., 2020).

Employee engagement and job satisfaction

Agile values job satisfaction among employees. Cohn (2013) points out that employees with

higher job satisfaction also become more productive. Agile structures the organization is such

a way that employees are more engaged in the project their working on and makes tasks more

complete (Cohn, 2013) when looking at the VERA principles of a complete task (Oesterreich

& Volpert, 1987). The involvement of employees by providing more autonomy is central to

Agile (Rigby et al., 2020). The ability to learn on the job and controllable stress conditions are

mentioned less explicitly but are found in the Agile principles (Cohn, 2013). As will be

described in the next paragraph, Agile is very specific in how to design teams. The way Agile

does this results in the ability to learn on the job (Cohn, 2013). Stress reduction is realized by

providing a relatively constant pace of work (Cohn, 2013).

Agile Goals in the framework

The goals provided by Agile coincide with much of the reference set of goals. Both on the

quality of organization and quality of work goals. The first and most obvious is the innovation

goal. It provides a structure for fast innovation processes that should realize a relatively high

percentage of successful innovations in a short amount of time. ‘To market times’ should be

drastically reduced. Agile also advocates finding a balance between strategy-driven innovation

and customer insights so it also covers the strategic innovation part presented by the reference

set of goals. Flexibility is realized by reducing cycle time by changing the process by working

with so-called sprints – which will be elaborated on in the next paragraph on design parameters.

Since innovation is a major part of Agile principles, it hints at the existence of a sufficient

product mix with sufficient product variations, but this is not expressed explicitly and does not

necessarily have to be the case in Agile organizations. In Agile literature, the focus is on

innovativeness. This draws attention away from the control over realization goals. With

productivity improvements, Agile does aim to reduce defects which in turn leads to more

reliable production and production time.

The quality of work goals are expressed most explicit in the Agile principles compared to the

two other design theories and play a role in how Agile advocates to structure teams. The goal

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coincides with the quality of work goals of the reference set. The resemblance between Agile

literature (Cohn, 2013) and the reference set (Achterbergh & Vriens, 2019) on quality of work

is clear.

4.2 Design parameters

Agile design parameters

The assumption behind Agile is that activities are project-based. The way Agile explains how

the organization should be structured has in mind that the process to generate output is based

on projects and it assumes that a project does yield something new or innovative (Rigby et al.,

2020). This means that Agile does not always dictate the structure for the whole organization.

Rigby et al. (2020) describe three levels of Agile: The Agile team, Agile at scale, and the Agile

enterprise. The Agile team is the smallest level in the organization and the smallest form of

Agile. Teams are the core of Agile and will be discussed elaborately in the rest of this paragraph.

Agile at scale means that is applied in the organization at a larger scale than one or a few Agile

teams. Agile is a partial structure in the organization only using Agile teams in the organization

where it is beneficial. For example innovation teams (Rigby et al., 2020). Operational and

support tasks are still performed by parts of the organization that are designed according to the

bureaucratic regime (Kuipers et al., 2018; Rigby et al., 2020). These kinds of situations could

arise in organizations that produce a physical product. Such a production process is according

to Rigby et al. (2020) usually benefits more from a bureaucratic structure. This does not mean

that the Agile teams are far removed from the operational activities. On the contrary.

Operational employees might become part of an Agile team and the teams should be located as

close to the part they are working for (Rigby et al., 2020). If a food company produces nutrient

bars and an Agile team is dedicated to creating a new nutrient bar, it should be located close to

the production line.

The Agile enterprise is an enterprise that is fully structured according to Agile principles. Some

support tasks might still be structured according to bureaucratic principles, but operations run

according to Agile principles (Rigby et al., 2020). This is more applicable for service

organizations and organizations providing tailor-made solutions such as software and

consultancy firms. The rest of this chapter will assume Agile as in an Agile enterprise. This will

provide the best grasp of the Agile principles. It is important to keep in mind that Agile is

centered around project-based and innovative tasks and that it, in contrast to Lean and

Holacracy, is very well possible to implement Agile not in an integral way.

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Team-based

Teams are the core of the Agile structure. Theory provides some strict guidelines for what teams

should look like. The first rule is to provide small teams. As small as possible to handle a project

or a part of the project (Cohn, 2013). Ideally, a team consists of 5 to 9 people. This is based on

the productivity in a team. Smaller teams are too vulnerable and larger teams will reduce

productivity through increasing overhead by increasing necessary communication and reduced

input from added members (Cohn, 2013). Theory on group dynamics proves that in large teams,

the contribution of lower contributors decreases radically while the contribution to the project

of high contributors does not decrease by much (Alblas, 2010). Team commitment is also

important in Agile. Agile prescribes that team members should be fully employed in the teams.

Their full-time commitment is to the team, not the functional department they are part of (Rigby

et al., 2020). Usually, the tasks assigned to a team are complex enough. Having team members

in more teams will make their task overly complex which can lead to stress, uneven workloads,

and less overall productivity (Cohn, 2013). Sometimes team members that do not devote all

their time to the team are allowed or necessary. This can for example be the case with large

projects where teams require a lot of communication. They can share team members to align

their activities. But an employee should never be part of more than two teams at once (Cohn,

2013).

The composition of an Agile team is also guided strictly. How they are composed must comply

with two rules. The first rule is that the team is multi-disciplinary. The team is comprised of

people with all the necessary skills for the project (Rigby et al., 2020). In the example of the

nutrient bar project provided by Rigby et al. (2020), the project team consisted of one of each

form product development, packaging, marketing, sales, customer insights, manufacturing, and

supply chain. All these people bring their functional expertise to the innovation project (Rigby

et al., 2020). Secondly, it is also important to have a multi-skilled team. Combining junior

skilled employees with senior skillsets. This leads to a dynamic in which juniors can perform

tasks that fit their skill set, the opportunity for them to learn from seniors, and seniors not having

to perform below skillset tasks (Cohn, 2013). Besides these two rules for team composition,

two roles are introduced. These are the product owner and the Agile master (Cohn, 2013). The

Agile master is a kind of personal trainer at the gym. It is the process guide for the team. He

can decide what the process will look like and what methods will be used. Like deciding to

choose sprints of two weeks (Cohn, 2013) and using the stage-gate innovation model (Wulfen,

2012; Cohn, 2013). The product owner is in charge of the output. The product owner is

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responsible for goal setting and prioritization (Cohn, 2013). These responsibilities are

elaborated more in the authority paragraph below.

Project-based

The structure of an Agile enterprise is project-based. Agile teams are assigned to a project

(Rigby et al., 2020). In turn, the larger organizational structure of an Agile enterprise is also

based on projects (Cohn, 2013). In other words, the organization should be structured according

to (expected) output. According to Rigby et al. (2020), an organization should get rid of

departmental silos. These would be called functional departments in the bureaucratic regime

(Kuipers et al., 2018). In the Agile enterprise, all these tasks formerly performed in these silos

should be executed within the project (Rigby et al., 2020).

The guideline for the decisions about the structure is the manageability of a project. Agile is

suited for innovative projects partially because it decreases the size of the project. The size of

projects is decreased by dividing the project. By doing so Agile is capable to make ‘monster’

projects graspable. How the organization should be structured when a project is too large for

one team to handle will be illustrated according to an example provided by Cohn (2013). A

software firm has the desire to make an office package consisting of a word processor, a

spreadsheet, and a presentation program. The overall project will form the basis for an

The teams at Clean Textile crop. will become more diverse. Currently every team is

homogenous. Everyone has the same task and skill level is similar. Instead of grouping

teams based on function, the teams will be grouped based on skillset. All the necessary skills

to perform the activities will become part of the team. So a team might consist of members

that have skills in sorting, washing garments corresponding to the needed treatment,

controlling the sterile laundry and packaging according to laundry program.

Figure 16: Case CT: Agile teams

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organizational subpart at the macro level. So this subpart will be the office software package

department. This subpart is overseen by the chief product owner (Cohn, 2013). Also, the

development of one of the three programs is too large to be handled by one team. So there will

be formed three departments based on their output at the meso level. Namely the word

processor, the spreadsheet, and the presentation program. Every department has a product line

owner. This product line owner oversees development within its department and the teams

collectively (Cohn, 2013).

Functionality based

The next level is the level at which teams can handle the task at hand. To divide these tasks

Cohn (2013) advocates that the structure should be based on functionality that can be delivered.

So the structure should still be based on the output. The output per team does not have to be

perfectly equal. A team that meets the requirements presented in the previous paragraph should

be able to handle the task at hand. So one team might only need five employees to deliver the

required output and another needs nine employees to do so (Cohn, 2013). In the example, the

word processor it might be necessary that it can produce tables, use different fonts and styles

Within CT it is hard to design according to project because processes within CT are not

project based. But functional ‘silos’, so the current functional departments will be

dismantled and the new structure will be based on differences in output. Like the redesign

of CT with Lean this the output are the different laundry services offered. If possible, a team

should handle all of the activities for this output (so for one of these different laundry

services). If not so these activities have to be divided.

Figure 17: Case CT: Agile macro structure

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for headings, and has a spell check. For all of these functionalities, an Agile team can be

installed. These teams are responsible for everything that has to do with their functionality

across the different levels of programming. This is including assuring that it integrates into the

overall program. Sometimes integrating (or assembly in production terms) is too complicated.

Then this task can be assigned to a separate team, but preferably not (Cohn, 2013). The figure

below illustrates the Agile structuring presented by Cohn (2013).

Figure 18: Agile structure example. Adapted from Cohn (2013 p.328-9)

What Cohn (2013) describes is described by Kuipers et al. (2018) as module groups. Teams

that can perform tasks parallel and their outputs combine into a product. This way of structuring

might be very useful for organizations that develop software. But this is only one of six different

ways to structure teams at the meso level presented by Kuipers et al. (2018) that might show a

better fit in other environments. As long as it follows the core principle for a meso level

structure in Agile as presented bij Cohn (2013); reduce the interdependencies of teams.

Figure 19: Module groups (Kuipers et al., 2018 p.286)

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Authority

Teams in Agile are in definition autonomous or self-organizing teams (Rigby et al., 2020). This

does not mean they are free to do whatever though. There are different systems in place that

guide teamwork. First authority distribution is discussed. Agile teams come with two new roles

and it provides a different way to govern projects (Cohn, 2013).

Autonomous means that a team has full authority over how it operates. Nobody but the team

itself, mostly in the role of the Agile master, is allowed to make decisions about the process

(Rigy et al., 2020). For example, when the team is tasked with the creation of a new product or

service it can use design thinking methods (Kumar, 2013; Rigby et al., 2020) but the team might

Teams should handle as much of a ‘functionality’ according to Agile. This is called feature

teams. They should deliver a complete feature. This terminology stems from the IT

background of Agile. A feature team in CT would mean that the team performs all steps for

a specified part of the orders. But Agile also recognizes that this is not always possible.

Than the organization should opt for component teams. The principle of component teams

is comparable to the concept of cells in Lean. These teams produce a part of the output with

sequential dependency. Following Agile principles would mean that CT has teams that

handle a part of the orders assigned to their department and perform all activities (sorting,

washing, controlling, pressing, and packaging). But in the case of CT, it is important to keep

in mind that these teams are dependent on machines. Having teams perform all these

activities might mean that they have to share machines with other teams. Than it might be

more pragmatic to make a design with component teams. In that case, the design for the

new CT structure might look like the example presented in the Lean chapter. For now the

assumption is that it is possible for CT to change the structure fully according to the

principle of feature teams. Than it looks like this

Figure 20: Case CT: Agile meso structure

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also opt for lean startup methods (Ries, 2011) or Business model generation tools (Osterwalder

& Pigneur, 2010). A team does not have a say in what it does. Executives or business unit

managers still have the power to give the Agile team an assignment (Rigby et al., 2020). In the

example of the food producer given by Rigby et al. (2020), the Agile team is tasked with the

creation of a new healthier nutrient bar. How the team comes to the product is to the team, but

it is still reporting to the CEO and other executives. Some partial outcomes, like the prototypes,

were shown to the executive board. Important to note is that executives or business unit

managers do not control every decision made. They can demand some output and a timeframe

in which the output is expected. They cannot demand some decisions in this direction or that

direction. That is the authority of the Agile team (Rigby et al., 2020). Customers value is

important in Agile. Regardless of whether the customer is internal or external (Cohn, 2013). So

a lot of decisions are made based on customer feedback (Rigby et al., 2020).

The previous example is a relatively simple innovation project that can be handled by one team.

Earlier an example of a more comprehensive project, an office software package, was given.

To manage such large projects which have lots of teams working on them Agile advocates using

backlogs. A backlog is a system that provides requirements to reach the end goal. It is in place

as a system to handle strategic regulatory activities like alignment and prioritization in projects.

Product owners are responsible for the part of the backlog that concerns their team.

Connection between design parameters and goals

Innovativeness can be best linked to the micro structure of teams and their authority. Innovative

projects are sensitive to restrictions. The success chance can easily be hindered by the lack of

autonomy and by hindrances that slow the process down (Wulfen, 2012). Innovative processes

also require different disciplines. Providing teams the necessary authority to design their own

process and the necessary decision-making rights helps both the speed of the innovation process

and the chance of success. Agile also advocates that teams have to be multidisciplinary and

multi-skilled (Cohn, 2013). This helps the process along by providing the necessary skills and

helps the chance of success by providing different perspectives (Wulfen, 2012). The

functionality based meso level and project-based macro level of the organization can also help

by reducing interdependencies. Especially for large projects. Productivity is improved by the

overall structure of an Agile enterprise. By reducing the interdependencies, teams can be more

productive. Employee engagement is improved by all design principles. By working in a

project-based structure, it provides a clear view of the individual contribution. Multidisciplinary

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teams ensure that teams can perform broader tasks. So employees in these teams can participate

in tasks that are initially not within their specialty.

Agile parameters in the framework

The design principles will be compared by scoring them on the parameters described in

paragraph 2.2. After scoring the above-mentioned design principles, some extra remarks will

be made. Agile can be partially implemented as part of a bureaucratic organization or

completely implemented making the organization an Agile enterprise. (Rigby et al., 2020). To

score the Agile parameters on the reference set of parameters, it is assumed to follow all

principles toward an Agile enterprise. Otherwise, the comparison will be based on a watered-

down version of Agile.

Functional concentration

Agile teams are designed to work on one project. Whether that is an innovation project or a

project that delivers a tailor-made product to a customer. Agile also advocates that team

members work full time on the project (Rigby et al., 2020). At the meso level, the organization

is formed around projects and organizational output (Cohn, 2013). Agile advocates to get rid of

functional silos in which orders transfer from function to function. Teams and departments

should be structured based on output (Cohn, 2013; Rigby et al., 2020). So at the macro, meso,

and micro level, the organizational part handles only one order type, refining the order type at

lower levels. It can be concluded that Agile strives for a low functional concentration.

Differentiation in operational tasks

Agile literature does not differentiate between preparation tasks and support tasks, naming them

both support activities. Rigby et al. (2020) describe that support tasks remain in support

departments. They advocate that for some support tasks, like administrative work, the

bureaucratic organization is the most effective organizational structure. Cohn (2013) does not

provide exhaustive information about preparation and support activities. He does advocate that

teams should contain all the necessary disciplines and skills. He also advocates balancing

domain knowledge in teams so different problems can be handled by the team itself. Based on

this information the conclusion is drawn that multi-disciplinary teams can handle some

preparation and support tasks themselves, but for larger tasks support departments will remain.

This leads to a medium differentiation in operational tasks.

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Degree of specialization of operational tasks

Teams in Agile are multi-disciplined (Rigby et al., 2020) and within the team, all employees

participate in the entire process, so they step out of their functional role and get a broader scope

over their whole project. When projects get larger and teams produce just a part of the project,

their scope gets a bit limited. But Agile does advocate that a team works as a feature team and

not like a component team (Cohn, 2013). This way of working does broaden the scope when

the team works on a larger project. Agile strives for a large scope for both teams and individual

tasks, so it can be concluded that Agile strives for a low operational specialization.

Degree of differentiation of regulatory activities into aspects

Teams have authority over their own process. Teams regularly evaluate how things are going

and what the team can do to improve themselves. They have the authority to handle operational

regulatory aspects (Cohn, 2013). A special role is reserved for the Agile master. The Agile

master is responsible for the operational regulatory process within the team (Cohn, 2013). When

it comes to strategic regulation, it becomes more complicated. The product owner, has the

authority to determine the necessary steps in its process and prioritize activities. The product

owner can be part of the team, but with larger projects, a product owner can be part of two

teams and with increasingly larger projects, a hierarchy of line- and a chief product owner

arises. There also remains a chain of command when it comes to overall goal setting (Cohn,

2013). An executive, business unit manager, or chief product owner has the authority to set

output goals and timeframes in which these outputs have to be delivered (Cohn, 2013).

When it comes to regulation by design it gets completely different. This part follows less out

of a design parameter and more out of the design logic. But it states how regulation by design

is organized in an Agile enterprise. The regulation by design tasks are also executed following

the Agile principles. The project team is called the Enterprise Transition Community (ETC)

(Cohn, 2013). The ETC determines what has to happen in the organization to iterate towards a

more Agile organization. When an improvement point has been identified it is assigned to an

improvement community, a team that executes and works out an improvement (Cohn, 2013).

Becoming an improvement community is voluntary. So when a group of employees finds

improvement points they are passionate about, they will form an improvement community (IC)

and will devote some of their time to realizing these improvements (Cohn, 2013). Since 1)

operational regulation is the domain of a team, 2) strategic regulation can partially be the

domain of a team in the form of the product owner and partially of superiors and 3) the

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regulation by design domain of the ETC and IC, they are separated, and thus Agile advocates a

high differentiation in regulatory aspects.

Degree of differentiation of regulatory activities into parts

All operational regulatory activities are the domain of the team. So they aslo perform all three

parts of monitoring, assessing, and acting (Cohn, 2013). The Agile master is within the team

responsible for monitoring and assessing. Other team members are responsible for acting.

Regulation by design has just been explained. The ETC sets goals for the improvement of the

organization. The IC executes them. The monitoring and assessing parts are separated from the

acting parts (Cohn, 2013). Strategic regulation keeps the parts together. The (chief-/line)product

owner is completely responsible for all the parts (Cohn, 2013). Since regulation by design is

split among the ETC and IC’s and the Agile master has particular responsibility for monitoring

and assessing, Agile scores medium on regulatory differentiation into parts.

Degree of specialization of regulatory activities

The regulatory activities are somewhat specialized in an Agile organization. Regulatory tasks

are divided among an Agile master and a product owner. The product owner is responsible for

the team’s output. The Agile master is responsible for the process (Cohn, 2013). The product

owner is for example responsible for alignment among tasks and the prioritization for a team,

group of teams, or department (Cohn, 2013). The Agile master on the other hand makes process-

related decisions like what tools to use and what intervals to work with (Cohn, 2013). Since

these activities are, always seen as different tasks executed by different people, regulatory

activities are highly specialized.

Figure 21: Agile regulatory activities

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Degree of separation between operational and regulatory tasks

In Agile, operational regulatory tasks are the property of the team that is performing the

operational tasks. For strategic regulation and regulation by design, previous paragraphs set out

how these are differentiated in both aspects and parts. Different parts of the organization

perform these regulatory aspects and parts. Strategic regulatory tasks are usually performed by

management. Regulation by design tasks are differentiated in parts assigned to the ECT and IC

(Cohn, 2013). Employees can join an IC if they feel connected to an objective set by the ECT.

Since there are some possibilities to participate in regulatory tasks when the employee performs

operational tasks, Agile does score medium on the degree of separation between operational

and regulatory tasks.

Figure 22: Agile separation between operational and regulatory activities

Behavior formalization

Behavior formalization within Agile is minimal. There is a lot of room for teams to do things

in their way. There is no behavior formalization when it comes to the process control and just

a little when it comes to output control. Especially because Agile focuses on delivering

something new, unique, or tailor-made. It allows for the use of different methods to streamline

work, like Scrum (Cohn, 2013), XP (Rigby et al., 2020), or the use of one of the multiple

innovation cycles – like design thinking (Rigby et al., 2020) or the stage-gate model (Cohn,

2013). Using one of these methods usually increases behavior formalization but even then,

those are meant to bring about innovation and innovative processes. Such processes do not

thrive in a highly formalized environment (Wulfen, 2013) so even those are not that restrictive.

These methods only provide guidance. So behavior formalization is low.

Remark about the design principles

According to De Sitter disturbances are caused by a high number of relations and variance

(Achterbergh & Vriens, 2019). Agile does reduce the number of relations and variance, but the

focus is on reducing the number of relations.

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4.3 Design logic

Agile design logic

Literature on Agile describes four parts that have to be kept in mind when changing to an Agile

enterprise. These parts are not sequential steps. The first part is the adapting to Agile part. It

explains the change process. Parts two to four highlight the most important choices that have to

be taken in becoming an Agile enterprise and it provides guidelines on what to consider making

the choices. The second part discusses choices on what the implementation will look like. The

third part describes how to iterate toward agility with the use of the enterprise transition

community (ETC). The last part will discuss how to start with the first Agile project.

Adapting to Agile

The adoption of Agile consists of five necessary steps for a successful and lasting transition to

an Agile enterprise (Cohn, 2013). It consists of awareness, desire, ability, promotion, and

transfer. Awareness is about knowing that the current structure of the organization does not

suffice anymore. This is followed by having the desire to adopt Agile to address current

problems. Then Agile has to be promoted throughout the organization and last, the new

structure has to be transferred to the entire organization (Cohn, 2013).

Being aware that the current structure does not suffice anymore is the first step. Especially when

an organization has had some successes it is a hard but important task to make sure that the

organization is snapped out of the successes of the past and starts seeing the problems of today

and tomorrow (Cohn, 2013). An important problem – mainly in bureaucratic organizations – is

the lack of a big picture for the most of the people in the organization. It is also important not

to confuse movement with progress. Reports being written and adding some new protocols does

not necessarily mean that the organization is improving. The organization has to become aware

when it is moving without improving (Cohn, 2013). To create awareness, it is important to

communicate that there is a problem and where that problem is (Cohn, 2013). Tools like metrics

can help create awareness and focus on the most important reasons to change (Cohn, 2013).

To create desire, people in the organization must know that there is a different way. Showing

not only what the problem is, but also that it is solvable. The desire to change is driven by a

vision of how the organization can be (Cohn, 2013). Those who now have the desire also have

to feel that it has to change today. Not in six months. From here build momentum by focusing

on those people who want to help in the effort (Cohn, 2013). To catalyze this process, align

incentives first fitting the desired structure. If incentives do not change on time, employees will

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be incentivized to keep working the old. Then the change initiative is playing tug-of-war with

the institutionalized mechanisms (Cohn, 2013). Helping people is important. Fear should be

addressed and employees should be supported in letting go of the current structure (Cohn,

2013). Lastly, it is important not to discredit the past. Discrediting the past will lead to more

resistance toward the change because people's identity and sense of self-worth are connected to

the legacy of the organization. Successes of the past are still successes, only now it is time for

a new paradigm (Cohn, 2013).

The ability to change is important because people will discover that they are still good at their

jobs but not at working Agile. Old habits have to be unlearned and new habits that fit working

in a team and innovation-based structure. The ability to change to an Agile structure can be

supported by providing coaching and training to employees, making sure that accountabilities

reflect the new structure and individuals are held accountable for them (Cohn, 2013). The

organization is transparent and shares information. Be reasonable in expectations and targets.

Saying that a team is Agile starting now, is not reasonable. Teams will not know where to start

and feel like they just do the same as always but now it is called Agile (Cohn, 2013).

When implementing Agile, the new structure has to be promoted. Three things are important.

Building off success will make the change more easily than only focusing on changing

problems. So the organization should publicize success stories of the new Agile structure

(Cohn, 2013). Other forms of attention are great as well. Shamelessly market Agile in the

organization. Not meaning that the organization should lie about or exaggerate Agile and its

potentials, that is devastating. But make sure employees hear, see, and experience a lot of it

(Cohn, 2013). Last is the Agile safari. An Agile safari gives employees that are interested in

experiencing Agile that chance. They can join a team that already works in the Agile

environment to experience it and learn the Agile ways (Cohn, 2013).

After the first Agile teams are successfully integrated into the organization, it is important to

expand the Agile structure throughout the organization. Special attention is given to parts of the

organization that are less natural environments for an Agile structure. Departments like product

development are natural and fundamental participants in the new Agile structure. Staff

departments usually work with policies that work against the adaption of an Agile structure.

For these organizational parts, a transfer method that resembles the spread of a virus is proposed

by Cohn (2013). Having close contact between Agile teams and these departments. Agile teams

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have to collaborate more with these teams and have to ‘infect’ them by fostering tensions into

change towards an Agile enterprise (Cohn, 2013).

Patterns for adopting Agile

Three pattern choices have to be made when changing to an Agile structure. The size of the

transformation, the explicitness, and the change strategy (Cohn, 2013).

An organization has two choices for the start of the change process. A small start or an all-in

start (Cohn, 2013). Both have their advantages. A small start is a less expensive endeavor.

Success is more likely because the organization can choose the initial project and its members

carefully, assuring that there is a good fit between the new Agile structure, the tasks, and

participants (Cohn, 2013). Also, change processes are quite risky. Starting small minimizes that

risk. Small mistakes can have giant consequences when it affects the whole organization. When

starting small these mistakes stay contained. Large change projects are also more stressful for

the organization and its employees. Starting small reduces this stress (Cohm, 2013). Last,

organizations can implement Agile without reorganization. Large change projects usually mean

a large reorganization. Which has a bad reputation and leads to even more stress (Cohn, 2013).

Going for an all-in start can lead to widespread commitment. A small start can lead to increased

resistance because resisters hope for a pilot that will be abandoned later (Cohn, 2013). Having

Agile teams in a traditional bureaucratic organization leads to tensions between the two

structures (Rigby et al., 2020). Going for an all-in approach reduces these tensions (Cohn,

2013). Last a small start means a slow transition. An all-in approach is over more quickly.

The organization can choose for loud implementation or one that starts unnoticed. Going for

the public display transition helps to keep the change on track (Cohn, 2013). When it is public

it provides a vision for everyone so more people can keep the process on track. Openness shows

organizational commitment and it is easier to solicit outside support (Cohn, 2013). On the other

hand, a stealth implementation can help make the transition before any resistance can be

formed. When no one knows the change is going on, this leaves room to first figure things out

and achieve success before others know. When no one knows, no one can tell you to stop the

change process (Cohn, 2013).

The change strategy is about how to spread Agile throughout the organization. Since Agile is

team-focused the two different strategies are based teams. The first strategy is split and seed,

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the second is grow and split (Cohn, 2013). Assuming there is at least already one Agile team,

the spilled and seed strategy splits the Agile team into small groups of people who have

experience with working in an Agile structure. New Agile teams will be formed. A new Agile

team consists of a few people that have Agile experience and employees who are new to the

Agile structure. The advantage is that this is a more rapid way of spreading Agile and a lot of

teams have at least someone who has experienced the new structure. It also ensures that teams

always have the optimum team size (Cohn, 2013). The grow and split approach uses an Agile

team and ads extra team members. When the team has reached a size that can be split into two

and all the members have experienced Agile, the team will split into two new teams. The

advantage is that community feeling and team spirit are stronger (Cohn, 2013).

Iterating toward Agility

Becoming a well-performing Agile enterprise is not achieved in a change program. The

organization has to learn and make small steps forward. In the previous paragraph, this process

has already been discussed. It uses a team called the Enterprise Transition Community (ETC)

(Cohn, 2013). The ETC has five responsibilities. They need to articulate the context, stimulate

conversation, provide resources, set appropriate aspirations, and engage everyone.

The ETC is responsible for the five steps discussed in the ‘Adapting to Agile’ paragraph (Cohn,

2013). It is important that people talk. Not communicate through text. This leads to better

understanding, better discussions, and will generate more ideas. So the ETC has to stimulate

conversation throughout the whole organization (Cohn, 2013). The transition to an Agile

organization needs resources. The ETC has to provide resources for the projects they have

proposed (Cohn, 2013). Goal setting is an important tool to improve successful efforts in the

change project. But these goals have to be realistic. Not too easy or impossible to achieve and

they have to improve the organization's Agility (Cohn, 2013). And the last responsibility is to

engage everyone. They have to stimulate adoption and have to make sure everyone is involved

in the process (Cohn, 2013). In the previous paragraph, the process prescribed for the ETC and

the creation of IC’s has already been explained so that will not be repeated here.

First Agile project

When the necessary choices for the Agile adoption patterns have been made and an ETC is in

place, it is time to start the first Agile project. First, it is important to select the right project

(Cohn, 2013). Four elements come into play when choosing the right project. The duration,

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size, importance, and business sponsor engagement. For the duration, it is important to choose

a project with an average duration. When a project is too small skeptics have more leeway for

extra skepticism. When a project becomes too long, showing results takes longer, and chances

for mistakes increase (Cohn, 2013). The size of the project should be one that can be handled

by one team. If that is not possible, pick one that can be handled by as few teams as possible.

When a project involves more teams, it becomes more complex and so does the initial learning

process, increasing the chance for mistakes (Cohn, 2013). The project chosen has to be one that

is of high importance. A high importance project generates the necessary attention and it will

increase commitment from the employees involved (Cohn, 2013). Provide business sponsorship

for the project. When the first Agile project enjoys sponsorship from the business side, this can

help with cutting some necessary red tape and pushing against entrenched business processes,

departments, or individuals (Cohn, 2013).

When the project is chosen, what is left is to determine when to start, and who will be on the

first Agile team. The right timing can be different for every organization. One thing to keep in

mind is that people cling to symbolism. So a symbolic moment can increase exposure and

acceptance (Cohn, 2013). When selecting the team is it good to make a mix of different people.

Diverse teams should always be the goal (Rigby et al., 2020), but in this case, three

characteristics are especially important. It should be a mix of Agile lobbyists, willing optimists,

and fair skeptics. The Agile lobbyists usually know a bit more about Agile principles and their

bias toward Agile will push them so try to succeed, whatever it takes. Willing optimists see the

need for change and are just eager to learn new ways. These people are a catalyst for the learning

process. Fair skeptics are skeptical about Agile. Fair skeptics are useful because it is very well

possible that they will change their minds and are willing to admit that. This will help with the

acceptance of further expansion of Agile throughout the organization. You want to avoid

employees that are so skeptical – unfair skeptics – that they will actively try to derail the project

(Cohn, 2013).

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Assuming CT has the necessary awareness, desire, and ability to change toward an Agile

enterprise, CT has to choose patterns for adopting Agile. The first choice is the size of the

transformation. CT chooses an all-in approach. Because currently all departments are

interdependent and it is hard for CT to detach one part of the organization in a project like

fashion, the all-in approach appeals to CT’s management. Secondly, CT has to choose how

explicit they will make the change and what strategy to use for the implementation. Because

the organization has chosen the all-in approach, CT chooses an explicit transition with a

split and seed strategy.

Now the Clean Textile corp. has determined how it wants to change, they will install an

ETC to guide the change. The ETC department is placed above the organization and will

guide the change process and will ensure that the organization keeps improving even when

the organization can be characterized as an Agile enterprise.

When that is all in place, the first project has to be chosen. As mentioned CT does not

operate project based, but they can’t change the entire organization on its own. CT’s

management acknowledges that the sterile laundry service is already more standalone form

the rest of the line. For the sterile service, CT has more specialized machinery, specialized

personnel, it is the only service that is in need of control for all laundry and cannot do with

checking some samples because of the high requirement standards their customers expect.

Also packaging is different to prevent any form of contamination in transport.

The sterile laundry department is created. Since this sterile laundry is small batch work it is

possible to create teams that handle all steps form maintaining relations with clients till the

packaging. Only logistics is kept apart right now. CT’s management thinks it is important

to have internal operations in order and directs the ETC that integrating logistics into Agile

has lower priority and has to be done later. Every team gets one account manager that holds

clients that request sterile laundry service. And every team consist of one or two employees

form every functional silo that is certified to handle sterile laundry.

The Agile first project structure of Clean textile corp.

Figure 23: Case CT: Agile first project structure

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Agile design logic in the framework

As described above, also the implementation is based around teams. The strategy differs very

much from the reference set. Two differences are obvious. First is the lack of a deliberate design

step. Secondly, even though there is a choice presented for an all-in approach, Agile does not

opt for a large episodic intervention. Agile advocates an incremental rollout. It prescribes to

start with one project and learn and expand from there. This process is constantly supported by

the ETC setting new goals for Agile improvement.

Figure 24: Case CT: Ideal Agile structure

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4.4 Agile in the framework

Reference set

(sociotechnical

approach)

Lean Agile

Goals Increase customer

value

Decrease waste

Innovation

Productivity

Employee

engagement

Quality of

organization

Main focus on

decreasing

production time and

the controllability

over order

realization.

Main focus on

innovation and

reducing cycle

times.

Control over

realization present

but more implicit.

Quality of work Some quality of

work aspects can be

found within Lean,

but it is very

possible to become

‘mean’ because the

quality of work is

not anchored in the

goals.

Focus on employee

engagement.

Ability to learn and

controllable stress

conditions also are

provided.

Design parameters Flow,

Pull,

Aim for perfection,

Participatory

management

Teams,

Project size,

Authority,

Feature-based

Functional

concentration

Low (by creating

flows based on

product family)

Low (by

involvement in

complete projects)

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Operational

differentiation

Medium (Giving

workers in the

production structure

more preparation

and support tasks

but keeping staff

departments for

some tasks)

Medium (providing

some support tasks

to teams, but also

keeping staff

departments for

some)

Operational

specialization

Low (by increasing

task scope in

production cells)

Low (by creating

multidisciplinary

teams and

providing them

with whole

projects)

Regulatory

differentiation in

aspects

Medium (some

aspects are kept

together, for some

dedicated

department remain)

High (different

aspects are

assigned to

different parts of

the organization)

Regulatory

differentiation in parts

Low (Workers who

perform a certain

task are also

encouraged to

perform all parts

within their

abilities)

Medium (Some

parts are assigned

to different tasks)

Regulatory

specialization

Low (By widening

the scope of

operational tasks,

regulatory tasks

follow)

High (dividing

output and process-

related regulatory

activities among

different tasks)

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Separation of

operational and

regulatory tasks

Low (Workers with

operational tasks

also get the

corresponding

regulatory tasks)

Medium (some

regulatory tasks are

assigned to

operational tasks

some are

voluntarily

accessible and

some are split form

operational tasks)

Behavior formalization High (Standardize

both process and

input to increase

flexibility, reduce

mistakes, and

support continuous

improvement.)

Low (a lot of room

to choose own

processes)

Causal relationship

between goals and

design parameters

Increase regulatory

potential

Decrease disturbances

The seven forms of

waste:

Over-production,

inventory, motion,

waiting,

transportation,

over-processing,

and not right the

first time.

Design logic Macro to micro level

production structure

and micro to macro

level control structure

Getting started

Create a new

organization

Installing business

systems

Complete the

transformation

Incremental

implementation

strategy.

Table 3: Framework summary Lean and Agile

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5. Principles of Holacracy

Holacracy is an organizational design theory, similar to Agile, originating from the software

industry (Bernstein et al., 2016). The inventor of Holacracy, Brian J. Roberson, has worked in

both Lean and Agile structured organization before he developed Holacracy in his own software

company (Robertson, 2015). Where those two structure building theories are mainly focused

on the production structure and how the products and services are created, Holacacy has its

main focus on the control structure (Robertson, 2015). It can be argued that it is not a complete

design theory because it offers no prescription on what the production structure should look

like. Holacracy prescribes a decision-making system that should gradually lead to an optimal

production structure and it prescribes what process to use to distribute tasks (Roberson, 2016).

It proposes a different way to structure decision making compared to the most common control

structures. Usually, the control structure is based on a hierarchical structure – referred to by

Kuipers et al. (2018) as the bureaucratic regime – or a democratic structure. Both leading to

problems (Robertson, 2015). Hierarchy leads to situations in which issue selling has to climb

through the organization and decision making is disconnected from the actual work because of

the many layers of managers and lack of decision-making power at the lower levels (Kuipers et

al., 2018). Democratic control structures lead to the necessity to persuade coworkers of certain

problems. This means problems have to be felt by the majority, or the majority has to be

persuaded in a political process that something is a problem. This makes problem identification

and solving a slow political process that is vulnerable to dismissing valid problems felt by only

a few (Robertson, 2015). Holacracy tries to solve this by introducing a so-called constitutional

control structure. The constitution prescribes who has the decision power over what (Robertson,

2015). This might sound a bit fuzzy for now, but in the next paragraphs the goals, design

principles, and design logic will provide the necessary background.

5.1 Goals

Holacracy Goals

The most common decision-making structures come with the problem of ‘desensitizing’ the

organization. When someone has the idea that there is a disturbance, or tension as it is called in

Holacracy literature, the chance that this sensed tension leads to action is small (Robertson,

2015). There is a whole issue selling process necessary to get the issue on the agenda – whether

it is upselling to superiors or political persuasion of colleagues – let alone producing an action

leading to change (Dutton, Ashford, O'Neill & Lawrence, 2001). Tensions are defined as

someone’s sense that something is not as it should be. It is the feeling of a gap between the

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current state and a better or desired state. This can be in all aspects of the organization. It can

be a needed change in structure and division of roles, the strategy, the offerings of the

organization, a process not performing as it should, anything as long as it represents a gap

between how something is and how it should be (Robertson, 2015). In traditional hierarchical

organizations, the decision power is with managers who have to decide from the overwhelming

amount of tensions that are brought to their attention what is worth pursuing (Robertson, 2016).

Usually, these power-holders are dislocated from the tension felt. In practice this might look

like this: the problem you feel on the work floor and that you have chosen to express cannot be

changed by your team leader or his boss (Kuipers et al., 2018). The person with the authority

to take some form of action is located a few managerial layers up in the organization. That

means the chance that issue selling is successful is small (Dutton et al., 2001). Because of the

distance between the authority and the felt problem is so big, the solution might not tackle the

problem at all. This can be compared to the problems with a high parameter value control

structure described in paragraph 2.3. Tensions, in that case, are disturbances and regulators are

not able to deal with this disturbance timely and adequately. In the case of a more democratic

control structure, colleagues have a say in a particular matter and have to be persuaded that

something you see as a problem is a problem. This leads to an elaborate negotiation process in

which relations, owed favors and personal interests are more important than the problem. When

translating this problem to the level of the organization as one entity, this means that the

organization is desensitized (Robertson, 2015). This can, and in reality does often, lead to

organizations missing major warning signs because of its control structure. This is part of what

leads to what Achterbergh & Vriens (2019) call a self-inhibiting structure. That is an

organizational structure that is not able to change (Achterbergh & Vriens, 2019) or can only

change toward a more bureaucratic state without an episodic intervention (Kuipers et al., 2018;

Achterbergh & Vriens, 2019). Holacracy aims to sensitize the organization. The theory has been

created to enable the organization to follow through on all tensions felt by employees. To

achieve this Holacracy has two sub-goals. The decentralization of authority and flexibilization

(Robertson, 2015).

Decentralization of authority is the abandoning of the hierarchical control structure in which

everyone has a boss who has to sign off on activities and priorities. It distributes to the adjacent

job. Holacracy prescribes that the person who is performing the task is also responsible for the

execution, the result of their task, and all decisions related to their task (Robertson, 2016).

Flexibilization of the organization means letting go of the old ‘predict and control’ mechanism

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in the organization. The ‘old’ way of organizing is based on a more stable environment in which

it was possible to predict where the organization needed to go. But the economy has become

way too volatile and demands agility from an organization. Because of the predict and control

paradigm, organizations were not designed to change much. Nowadays organizations must

evolve rapidly resulting in a need for rapid decision making (Robertson, 2015).

Holacracy goals in the framework

Holacracy has an important property. The theory and goals are focused on the control structure

of the organization (Robertson, 2015). In the theories of the sociotechnical approach

(Achterbergh & Vriens, 2019), Lean (Womack & Jones, 2003), and Agile (Cohn, 2013), the

production structure is central. Changing the control structure is in service of the improvement

of the production structure and operational tasks. The prescribed control structure is proposed

to help achieve production-oriented goals. In the end, a well-performing production structure is

the center of a well-performing organization. Holacracy on the other hand turns this around. A

well-designed control structure is key to a well-performing organization. The theory assumes

that a well-designed control structure and accompanying processes facilitate the regulation by

design activities in such a way that a good production structure will develop over time

(Robertson, 2016). In paragraph 2.3 the two properties of an adequate structure were described.

A structure should 1) in itself not be a source of disturbances and 2) comprise the means to deal

with disturbances (Achterbergh & Vriens, 2019). According to Roberston (2016), the second

property is important. The properties of an adequate production structure will follow naturally.

Holacracy is determined to improve the flexibility of the organization (Robertson, 2015).

Flexibility is also a goal mentioned in the reference set. But the reference set implies three

operational oriented goals that should constitute the flexibilization. The goals in the reference

set, short production cycles, sufficient product variation, and sufficient product mix, focus on

the production structure. Holacracy tries to achieve flexibility by facilitating fast decision

making. Instead of reducing production cycle time, Holacracy reduces decision making time.

The theory shows no resemblance to the other goals that are said to lead to flexibility. The other

quality of organization goals, control over order realization, and potential for innovation, are

not reflected at all in the Holacracy goals.

For the quality of work goals, it can be argued that the Holacracy goals find ground in the

reference set. In particular, the goal of making employees feel more involved. By decentralizing

decision power Holacracy improves employee involvement, especially in decision making.

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Sensitizing the organization can be characterized as both a quality of organization and quality

of work goal. When the organization does not deal with all tensions, this will reduce the

performance of the organization Robersen (2015). But Robersen (2015) also describes that he

felt useless as an employee and felt falling short as a boss. That can be translated as a feeling

of not being involved and not able to involve subordinates. Besides having a positive impact on

organizational performance, Holacracy does take into account that it tries to structure an

organization in a way that also improves the quality of work.

5.2 Design parameters

Holacracy design parameters

Holacracy theory does not explicitly name their design principles but the design principles can

be defined by these three issues: The constitution, a natural structure, and governance

(Robertson, 2015).

Constitutionalism

Holacracy does not believe in hierarchical or democratic governance. This leads to a

desensitized and inflexible organization (Robertson, 2015). But governance has to have a

foundation. Holacracy prescribes constitutional governance (Robertson, 2015). Constitution

governance is comparable to governance within a constitutional democracy (without the

democracy part). In a constitutional democracy, the constitution is the basis for the governance

system. It describes how politics is conducted. How politicians have to behave, how laws can

be created, proposed, and implemented, who has what responsibility is based on the separation

of powers, and so on. It describes the rules of the game of politics. Constitutional regulation in

an organization works similarly. The constitution describes the framework for the organization

(Robertson, 2015). Most important in parts of the constitution is the description of how power

is distributed, and the process of decision making (Robertson, 2015). Besides the constitution,

there is also the law. A more elaborate set of rules, that are more easily changed over time and

govern day to day conduct. In Holacracy this principle is captured in the governance records.

The governance records describe the current organizational structure with the responsibilities

and accountabilities. If some tension is felt, something in the organization has to change. The

constitution describes the process of how this change (proposal) has to come about. The

governance records show who (which role) has the authority to come up with and implement

the change (proposal) (Robertson, 2016).

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A reader might wonder what is so different about constitutionalism as a control structure. The

organization might have job descriptions and work descriptions and rules for power distribution

and decision making. An important difference is that the constitution is specific (Robertson,

2015). Usually, job descriptions are vague and leave room for interpretation. The constitution

and governance records do not (Robersen, 2016). When you expect work from someone and a

part of what you expected to get has not been done by this person, you can check the governance

records. Usually, this is a wiki-style environment with a menu-style and visual representation

of the organization's structure (HolacracyOne, n.d. a; Holaspirit, n.d.). If it appears that the

governance records explicitly state that this is part of that particular role, you can hold someone

accountable for it. If this expectation is not stated as part of a role, you have found a tension

that can be resolved, but currently, you cannot hold your colleague accountable because it was

not part of his role (Robertson, 2015). When such a situation occurs, the structure has to be

changed. Changes to the structure are made through governance meetings. After these changes

have been made, the governance records are updated (Roberson, 2015). The second difference

is that the constitution or governance records don’t describe how someone who fulfills a role

has to do its job. It only states the authority and the accountability of that role (Robertson, 2016).

What the constitution does state is how the decision-making process has to be conducted when

a decision does transcend one role (Robertson, 2015).

Natural structure

The structure of an Holacracy powered organization should be based on a natural structure.

Such an organization should function as a so-called holarchy. A holarchy, as defined by Arthur

Koestler (1967), is a whole consisting of connected parts that can be seen as wholes in itself.

These parts are called holons. A structure that is found throughout nature. From cells to

complete ecosystems. Robertson (2015) illustrates this by using the analogy of the human body.

Our cells are holons. Defined whole entities but also linked forming a larger whole, your organs.

Your organs are the holarchy but in turn, also holons forming your body (Robertson, 2015). In

an Holacracy powered organization, these parts are made up of roles and circles. Roles and

circles form the building blocks of an organization. The smallest, cell-like parts are the roles.

Multiple roles combined form circles. Multiple circles can be grouped in larger circles. This

can go on until you reached the circle that forms the whole organization (Robertson, 2015).

Let’s first discuss roles. Roles consist of three parts. The purpose, the domain, and the

accountabilities (Robertson, 2016). The purpose describes why a role exists and what it has to

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accomplish in broad terms for the organization. The domain describes what the role has

authority over. Accountabilities are the activities a role has authority over and can be held

accountable for (Robertson, 2016). The connection between the accountabilities and authorities

is very important. They must be designed as such that they are mutually inclusive. This means

that the accountabilities all fall within the domain. This prevents the possibility of being held

responsible for something you don’t have the authority to do (Robertson, 2015). This also

means that the domain and corresponding accountabilities do not provide room for any overlap

with another domain (Robertson, 2015). What the purpose and the domain of a role is and what

it is accountable for are clearly defined in the governance records. As previously mentioned,

when it is not explicitly mentioned in the governance records the role cannot be held

accountable. When it appears that someone is not accountable for something someone else

expected of this role, this is a tension that has to be resolved formally. This expected task can

be added to an existing role or a new role can be created during a governance meeting

(Robertson, 2015). In traditional hierarchical organizations, you are usually accountable to your

boss. Even though what you do is seldom for your boss. It might be for your customer, your

coworker, or another stakeholder, but most of the time not for your boss. A role within a

Holacracy powered organization is not accountable to its boss but directly to whomever, the

role is delivering something it is accountable for (Robertson, 2016).

The authority a role holds – defined by the domain – describes also the authority to make

decisions. Every role is allowed to make all necessary decisions within their domain as long as

it only impacts its own role. No one has to sign off on any decision as long as this is the case

(Robertson, 2015). When a decision also impacts other roles, these roles have to be consulted

in the decision. But the roles must be formulated in such a way that it is clear who is allowed

to make that decision. When different roles have overlap in their authority or it is ambiguous

who has the authority, then a tension is found and has to be resolved (Robertson, 2015). How

this is process works will be elaborated upon in the next paragraph on governance.

An attentive reader might have noticed that, when speaking of a role, it is referred to as ‘it’ and

not ‘he’ or ‘she’. This is an important distinction within Holacracy. Authorities and

accountabilities are assigned to a role, not to a person. Relationships in the organization are

always between roles, not persons. Roles are assigned to employees but a role is not someone’s

job. A role is a small set of related activities. (It is always a set of activities because it contains

at least one operational activity and the corresponding regulatory activities.) The combination

of roles assigned to someone constitutes a task. It is perfectly possible that someone has multiple

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roles spread out through the organization (Robertson, 2016). Someone in an organization that

provides courses, has the role of ‘trainer’ in the ‘courses’ circle, training customers as well as

having a role in product development in the product development circle. As long as the roles

with their authorities and accountabilities are well defined and that person possesses the skillset

to perform these adequately. This means that when activities are added, they are added to a role,

not to the person currently holding that role. In Holacracy both the role and the role holder can

constantly change (Robertson, 2015). One restriction exists in the creation of roles. A role

cannot be more comprehensive than what can be expected of one employee. If that becomes

the case, the authorities and accountabilities have to be redistributed or have to be assigned to

a new role.

A role could look something like this

Social media marketeer Filled by: john doe

Purpose:

Getting people excited about our company and products

Domains:

Companies social media accounts

Role accountabilities:

• Creating an online presence

• Appeal to target audience on social media platforms

• Maintain company image through social media platforms

• Get conversion to sales through social media platforms

Figure 25: Holacracy role example. Adapted from Robertson (2015)

Now roles have been defined, the forming of circles will be discussed. Circles do not correspond

directly to a level in the organization. Larger circles can be the equivalent of departments.

Smaller ones can be seen as teams. The largest circle is called the anchor circle. Ideally, this is

the entire organization (Robertson, 2015). In the analogy of the human body, the anchor circle

is the body itself. Small organizations may suffice with only the anchor circle, but most

organizations contain circles and sub circles. These circles function as standalone units with

fundamental autonomy, but they are not fully interdependent (Robertson, 2015). They are

linked with other circles that together form a larger whole (Robertson, 2016). A circle, just as

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a role, has authorities and accountabilities assigned to it. When circles are formed, it is

important not just to cluster roles that have authorities and accountabilities in the same area or

to cluster roles that have to collaborate. The formation of a circle should be necessary to enable

autonomy and define the authorities and accountabilities of a part of the organization

(Robertson, 2015). Circles are created to break down a single function into smaller functions.

Breaking down the large and comprehensive authorities and accountabilities into smaller more

apprehensible ones assigned to a particular circle (Robertson, 2015).

As mentioned, circles have authorities and accountabilities and the autonomy to act

accordingly. But the circles are not fully autonomous. They are still a holon, liked together with

other holons to form a holarchy (Robertson, 2016). Would a circle become fully autonomous,

it would become separate from the organization, not contributing to the function of the holarchy.

To make sure that holons remain linked, Holacracy prescribes separate roles that have the

accountability to align and link the circle with the other circles. These are the Lead link and

Rep link (Robertson, 2016). More on this in the next paragraph on governance.

Figure 26: Holacracy structure. Adapted from Roberson (2016)

Governance

The regulation in the Holacracy powered organization has two important goals. It is in place to

make sure that the organization stays linked and aligned and that the organization is constantly

adapting to felt tensions (Robertson, 2015). Holacracy divides its regulation into three distinct

aspects. These parts are ‘governance’, ‘operations’, and ‘strategy’ (Robertson, 2016). The

reference set also divides regulation into three aspects. What De Sitter calls regulation by design

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is called governance in Holacracy terminology. Governance is the activity of maintaining the

infrastructure by changing, adding, or eliminating roles and circles.

Operations coincides with operational regulation and with some strategic regulation. Operations

concerns itself with ‘actions’. Actions are the activities that come with a role. Operations

concerns itself with determining and prioritization of actions. Actions that have been prioritized

to fulfill a role’s accountabilities or keep a project move forward are called ‘next-actions’

(Robertson, 2015). Besides prioritizing actions, operations also is concerned with making

projects and next-actions transparent and directing attention and resources to the relevant next-

actions (Robertson, 2016).

The last aspect is ‘strategy’. This aspect of regulation corresponds to strategic regulation.

Holacracy is very distinct about what strategy should be. According to Holacracy strategy is

not the alignment of the activities in the organization, and it is not planning for the future. As

would be the case with strategic activities in a predict and control form of strategy (Robertson,

2015). Aligning activities is decentralized and executed by ‘link’-roles that have the

accountability to link the circle to the circle above (Robertson, 2015). Planning for the long-

term future is in the eyes of Holacracy impossible because we cannot know the future. Besides,

it goes against the idea that the organization adapts to the tensions felt by the organization

(Robertson, 2015). This is what strategy is not in a Holacracy powered organization. But what

is ‘strategy’ in a Holacracy powered organization? It is the guidance in the prioritization. So:

Currently prioritize activities concerning X over tasks concerning Y. A younger organization

might focus on product development over mass customers. Focusing only on customers that

can deliver valuable feedback for further improvement. Another organization might prioritize

getting as many customers as possible and less on development. Important to recognize is that

both tasks concerning X and Y have a positive outcome on the organization. When X is

something positive and Y something with a negative outcome, Y activities should never make

it to a next-action list during operational regulation. This way of forming strategy guides the

organization in what is currently important to realize and makes it easy to change prioritization

when the organization or its environment changes and a different prioritization is required

(Robertson, 2016).

These three aspects are kept apart very strictly. For every aspect of regulation, Holacracy

prescribes a different type of meeting. The governance-, tactic-, and strategy meetings. These

meetings are highly structured. Outcomes of a meeting can only be in line with the type of

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meeting (Robertson, 2015). When an employee brings a tension to a governance meeting and

it appears that this tension does not correspond with something that can be decided during a

governance meeting, this will be cut short and the proposer has to bring it to the right meeting.

There is room for a causal investigation during the meeting. When a tension is bought up, it can

at face value appear that it will not lead to an outcome valid for this type of meeting. But when

examined closer this is only a symptom and the cause is within the authority of the meeting

(Robertson, 2015). Don’t confuse this with high regulatory differentiation into aspects. The

aspects are handled separately, but tasks contain all aspects.

It was just mentioned that aligning circles to the rest of the organization is not part of the

strategy in a Holacracy powered organization. But that does not mean that the circles in an

organization don't have to be linked (Robertson, 2015). Otherwise, the circles would lose their

property of a holon and be fully autonomous entities. This linking is decentralized and in each

circle, two special roles are created to accomplish this. The lead link and the rep – or

representative – link (Robertson, 2015). The lead link is appointed by the super circle – so the

circle in which the circle of our current perspective finds itself – and makes sure that the circle

is aligned with the strategy and activities of the super circle. The rep link is a representative

chosen by the circle. He represents the circle in the super circle (Robertson, 2015). To give an

example: Our circle is the social media circle. The social media circle finds itself in the

marketing circle. It is the job of the lead link to ensure that the social media circle is aligned

with the marketing circle and its overall marketing strategy. Keep in mind that the lead link is

not a boss. The lead link is not managing the circle. It represents the interest of the super circle.

When a tension is felt, for example, the marketing strategy is aimed at traditional marketing

channels and does not fit with social media channels, it is the task of the rep link to address this

tension in the super circle. The rep link is part of the circle and represents its interests in the

supper circle (Robertson, 2016).

Connection between design principles and goals

Rules of the game

Constitutionalism is an important part of Holacracy. Its main task is to enable the first goal,

decentralization of authority. The constitution provides the rules of the game of doing business.

When an organization would abandon hierarchical or democratic decision making it is

necessary to have another system in place (Robertson, 2015). Without another system, the

organization would become an anarchy. The rules provide guidelines for the distribution of

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authority. It enables the possibility of providing every role with its own domain and the

authority to make all necessary decisions concerning that domain (Robertson, 2015). The rules

provide the framework in which every employee can live his daily life and make their own

decisions.

Structural enabling

The natural structure of roles and circles is the structure part that enables the decentralization

of authority. Where the constitution provides the legal framework to enable distributed

authority, the natural structure gives the institutional structure. By creating holons the structure

facilitates that every holon can possess the needed authority (Robertson, 2015). By organizing

in a way in which circles and roles act as holons, it becomes possible to easily change small

parts of the organization. Also separating the role from the person improves flexibility. Roles

can be altered, created, or removed based on its function in the organization, regardless of the

(potential) role holder (Robertson, 2016). By being semi-autonomous and detached from

persons the structure provides limited interdependence when changes have to occur. This

decreases the ripple effect with unintended consequences which in turn helps the organization

to be flexible.

Decision-based enabling

Decision-based enabling points to the effect that decision making enables flexibility in the

organization. Every employee is able to indicate tensions and propose changes to the

organization (Robertson, 2015). By decentralizing the decision-making and assigning a domain

to which every role holder has the authority to make decisions. Working with clear domains

and corresponding authorities makes clear what decisions and what proposals someone can

make. It also clarifies when others have the right to object to proposals (Robertson, 2015).

Working in this way makes the organization able to make decisions faster, so it can react faster

to internal and external changes. Making the organization more flexible.

Holacracy design parameters in the framework

The design principles will be compared by scoring them on the parameters described in

paragraph 2.2. After the scoring of the above-mentioned design principles, some extra remarks

will be made.

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Functional concentration

Holacracy focuses mostly on the design of the control structure and less so on the design of the

production structure (Robertson, 2015). Circles are created based on a domain the circle gets

authority over (Roberson, 2016). This could suggest that the organization will be structured

with a high functional concentration. But it is also possible to do this based on product type or

another order characteristic. There is no clear statement on whether circles and roles are

designed that they handle all order types (so a high functional concentration) or handle just a

small set of order types (so a low functional concentration). It has to be concluded that

Holacracy literature does not provide enough information and so this parameter is unspecified.

Differentiation in operational tasks

As has been mentioned, Holacreacy does not provide extensive principles for the production

structure. Based on the little description available it is possible to score functional

concentration. There are not enough theoretical descriptions of the differentiation of operational

tasks to make a solid claim about the parameter value. Two principles give some indication.

The notion that the new production structure can and should be based on the existing structure

(Robertson, 2016) points, assuming the current structure is hierarchical and falls within the

bureaucratic regime (Kuipers et al. 2018), to a structure that differentiates operational tasks.

The strict description of roles, their authorities, accountabilities, and domain bound roles to

what they encompass and what not (Robertson, 2015). This can also be an indication that the

way roles are defined, differentiates operational tasks. But it is possible to describe a role’s

authority, accountability, and domain that it does encompass preparation, support, and making

tasks. Giving a score to Holacracy’s operational differentiation would be based too much on

assumptions. Therefore the level of operational differentiation will not be specified.

Degree of specialization of operational tasks

Roles have a narrow focus. They are designed to come with a very narrow set of responsibilities,

the authorities, and accountabilities (Robertson, 2015). One thing has to be kept in mind though.

That is the separation between persons and roles. Employees hold roles, but they are not the

same. Holding a role means that the authorities and accountabilities are currently bestowed

upon this employee, but this can change fairly easily (Robertson, 2016). A role is not the same

as a task. In a Holacracy powered organization, the employee is first and foremost an employee

of the organization instead of [a function of] his job. Someone’s job is the current set of roles

the employee holds. Here is an important notice. ‘The set of roles’. During the design of a

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Holacracy powered structure, it is encouraged to design in such a way that employees hold

multiple roles spread across the organization (Robertson, 2015). It is not the case that someone’s

set of roles have to find themselves within a certain circle. It does depend on the design choices

made. For now, the assumption is that the designer will follow the advice of the design logic.

The roles are designed and divided in such a way that employees hold multiple roles across the

organization. This leads to the conclusion that the degree of specialization within Holacracy is

low.

Degree of differentiation of regulatory activities into aspects

The three aspects of regulation – operational regulation, regulation by design, and strategic

regulation – are directly reflected in the three forms of regulatory activities in Holacracy.

Respectively operations, governance, and strategy. Each of these regulatory aspects comes with

its own form of meeting (Robertson, 2015). These meetings are highly regulated. An important

part of this regulation is that the constitution does not allow for a meeting to step outside its

constitutional authority. The output of such a meeting can only fall within the boundaries of the

authority attributed to it. If not so, it will be cut off and the proposer has to take it up at the

appropriate meeting (Robertson, 2015). But the separation of the regulatory aspects does not

mean the same as differentiation. Differentiation means that different tasks hold different forms

of these regulatory aspects (Achterbergh & Vriens, 2019). Also heavily regulated is who should

be at what aspect of meeting of a certain circle or project. It is quite strict. When some role is

supposed to be there it is mandatory, when someone’s task does not contain any role that is

supposed to be at the meeting, that the employee is not allowed to (Robertson, 2016). Looking

at the three aspects, starting with operational regulation, operational regulatory capacity always

resides with the operational domain of a role. And when the authority does not suffice the role

holder is part of the tactical meeting to consult the necessary colleagues (Robertson, 2015).

Every circle has its governance and strategic meetings. These meetings are respectively

designed to handle regulation by design and strategic regulatory activities. Every role in a circle

is part of these meetings and can propose respective changes to the circle’s structure or strategy

(Robertson, 2015). So every employee has the regulatory capacity to handle regulation by

design and strategic regulation activities. When the circle contains not only roles but also sub

circles, the rep links of the circles represent the circles in the relevant meetings. In this way, a

circle is always represented at higher levels of regulation by design and strategic regulatory

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activities. Because roles possess all aspects of regulation or are directly represented by a rep

link, Holacracy prescribes a low differentiation of regulatory aspects.

Degree of differentiation of regulatory activities into parts

How the different parts of regulatory activities are executed in Holacracy is different for the

different aspects of regulation. Operational regulation is metric based. Roles can be assigned a

metric corresponding to their role in a project. It is the role’s responsibility to report on the

metric. This could be seen as the monitoring part of operational regulation. During a tactical

meeting, every role reports its metric(s). This part is the metric review. After the metrics have

been reviewed, process updates are shared. After the process updates have been shared, the

agenda is being built based on the reported metrics and progress updates. Agenda building is

the process of determining operational tensions that have to be resolved. This process

corresponds to the assessment part of operational regulation. This is followed by the item holder

– the person holding the role and the corresponding issue – expressing what is needed to resolve

the item. Based on this, requests can be made and next-actions formulated for the role that holds

the necessary accountability. This last part is the acting part of operational regulation. Based on

this it can be concluded that a role holds all regulatory parts for its corresponding operational

regulation (Robertson, 2016).

When it comes to regulation by design, the process is a bit vaguer. Tensions are based on the

tensions felt by employees. Even though these tensions are usually based on concrete

experiences, it is not metric based. So the line between monitoring and assessing becomes a bit

vaguer. But everyone can address a tension in a governance meeting. When someone does so,

he has performed both the monitoring and assessing tasks and has concluded that the tension

resides in the structure of the organization and thus should be addressed in a governance

meeting. When an employee does so, first it is to the employee himself to provide a proposal to

resolve the tension. Only when the employee has no clear idea of what the solution might be,

other meeting attendees will pitch in thinking about an appropriate solution. Though the process

is a bit different, also regulation by design parts all remain part of the same task (Robertson,

2016).

What holds for regulation by design also holds for strategic regulation. The process is a little

different. The strategic process on the current state of the organization and the current state of

the landscape. Strategic tensions are a bit more abstract and the process involves more

collaborative discussion. But the similarity is in the integrative form of strategy building.

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Circles have their own strategy within their domain and the roles involved in the strategy

building process have the authority to monitor and assess for themselves and propose actions

(Robertson, 2016). So it can be concluded that the differentiation of regulation into parts is low.

Degree of specialization of regulatory activities

Holacracy advocates that every role should have all regulatory responsibilities that correspond

with the role. The role holder and only the role holder has the authority to make decisions that

correspond with the operational tasks assigned to the role. This holds directly for operational

regulation in the sense that there is no boss or manager that must sign off on anything

(Robertson, 2015). It is a bit more indirect when it comes to regulation by design, but the

authority is with the role holder. As should be described in the constitution, you are only

allowed to raise tensions and present proposals that impact the domain of one of your roles or

when explicitly requested. This means that the scope of regulatory activities is as big as the

scope of the combination of roles an employee holds (Robertson, 2015). This might sound

restrictive. But it also means that there is no situation where the regulatory activities of a role

are not divided. The scope of regulatory activities is, following these principles, not narrow –

narrow, equals high specialization – but it can also not be defined as broad because it is

restricted to the domain of a role. So it is a medium degree of regulatory specialization. The

illustration below demonstrates the scope of regulatory activities for every role

Figure 27: Holaracy degree of regulatory specialization

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Degree of separation between operational and regulatory activities

Based on everything previously mentioned in paragraph 3.3 on Holacracy it can already be

concluded that separation between regulatory and operational activities is low. All forms of

regulations on the level on which a role operates reside with the role that has the authority over

that domain (Roberson, 2016). When going to higher levels in the organization, the circle is

directly represented by a member that holds the role or by the rep-link. The rep-link is a member

of the circle and usually fulfills one or more roles within the circle, otherwise, it is

constitutionally impossible to be elected to hold the rep-link role (Robertson, 2016).

Behavior formalization

Holacracy is a constitution-based organizational structure theory. The constitution describes in

detail how regulatory processes go. How decision making goes – in the form of dedicated

meetings – on the operational, the design level, and strategic level. It prescribes who is allowed

what authority and how the process of such a meeting goes in detail (Robertson, 2015). The

governance records describe the authorities, accountabilities, and the domain of a role or circle

in detail. The role should be clearly defined, but it will not describe how a role holder should

do his job on the operational level (Robertson, 2015). The metaphor of the law applies well. It

prescribes what is allowed, what is not, and what the obligations are, but not how it has to be

done. When you stay within the law you can live your life the way you like. When you break

the law, for example, you commit fraud, the law does not state how you have done that but it is

written in such a way that regardless of how you have committed fraud, you still did it. The

process of the investigation and trial you are facing are heavily formalized. The whole

procedure is cut out. Every participant is only allowed to do his part. Holacracy has strict rules

and regulations in place to create the desired flexibility. The framework in which all activities

happen and regulations guiding them are highly formalized. So it is concluded that behavior

standardization is high within Holacracy.

Remark about design principles

One major assumption is grounded in the Holacracy design theory. Employees are excellent at

sensing tensions. Humans are extraordinary in sensing dissonance in the present and seeing the

potential for change (Robertson, 2015; 2016). Secondly, Holacracy related literature sometimes

speaks about projects and how its related operational regulatory activities should be controlled

(Robertson, 2015; 2016). Between the lines, there appears to be some assumption that the output

of the organization is achieved with a project-based process.

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5.3 Design logic

Holacracy design logic

The implementation of Holacracy is based on five steps. Because the constitution is so

important and the driving force behind Holacracy, the first step is to adopt the Holacracy

constitution (Roberson, 2015). The second part of Holacracy is the way governance – the

regulation by design – is the guide for the organization. So the second step of implementing

Holacracy is setting up the system for governance records. The third step is defining the initial

structure of the organization. Fourth is holding the first governance meetings. And last

scheduling regular tactical and governance meetings (Roberson, 2015).

Constitution adoption

The constitution is the core or Holacracy and the Holacracy powered organization. The

constitution provides the rules of the game of doing business (Roberston, 2015). Adopting the

constitution is the first move towards Holacracy. Current powerholders must adopt the

constitution because they are going to have to hand in their current power. It is also an important

display to show that the current powerholders have ceded their power. And it is to show that

the organization is going to play by the rules of the constitution. No one is above the law

(Roberson, 2015).

Governance record system

The governance records that show which circles and roles have what accountabilities and

authorities and what their respective domains are, are very important. These records also show

things like metrics, checklists, and projects. Employees will consult these records daily. They

are needed to understand the organization and to be able to change the organization (Roberson,

2015). So a good system that is transparent and easily changed. Robertson (2013) advises

building this record system in a wiki-style. Without it, the organization cannot become a

holarchy. Not having a system will lead to a failed implementation of Holacracy and a system

that is not suited for its intentions will lead to disturbances.

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Define initial structure

It is time to define the structure of the new organization. The design process starts with defining

the anchor circle (Roberston, 2015). The anchor circle is the largest circle and the demarcation

of the redesign process. It will function as the macro part of the new structure. Ideally, this

encapsulates the whole organization, but the reality might be that the only part of the

organization initially starts organizing according to the Holacray principles (Roberson, 2016).

The choosing of the anchor circle also leads back to the first step. The persons in charge of what

is to become the holarchy (Roberson, 2015), the company’s CEO, board, department manager,

or other leaders have to take the lead in adopting the constitution to show that they cede their

powers. They also appoint the lead-link for the anchor circle (Roberson, 2015). When the lead-

link has been appointed, the role holder is responsible for defining the initial structure

(Roberson, 2016). This structure does not have to be perfect. Flaws straighten themselves and

the organization will always adapt to the changing conditions. The new structure does not have

Clean Textile corp. is implementing Holacracy. The first step CT takes, is the adoption of

the constitution. Leadership at CT sign the constitution and automatically sign away a part

of their authorities. A governance records system is installed. In the next step the initial

structure will be included in the governance records system. After the initial structure, a

digital page in the governance records might look like this when the sorting circle is selected:

Sorting Circle

Overview Roles Members Metrics

Purpose

• Separate different types of laundry

Domains

• All incoming laundry

Accountabilities

• Handling incoming laundry

• Sorting laundry by treatment and

customer

• Making shure all landry gets to the right

treatment track

All circles and roles are clickable. Every circle and role contains the necassecery information

and can be edited by person holding the secretary role of the circle.

Figure 28: Case CT: Holacracy governance records

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to deviate much from what the organization has now. The new structure can be based on the

current departments the organization has (Roberson, 2015). The roles can fill the activities that

are performed in these departments. One thing is important to keep in mind. The authorities are

inherently connected to the domains of roles. So there should be no ‘boss’ or ‘manager’ role

(Roberson, 2015). Also have caution that the organization, especially when it is a smaller

organization, does not design circles for the sake of having circles. If you can do with one or

two roles, no circle with assigned authorities and accountabilities is needed. A circle is not made

to be a department in the classical sense of working together (Roberson, 2016). It is to break

down a single function into sub-functions. Only when the initial structure is finished, lead-links

can be appointed and people assigned to different roles (Roberson, 2015).

Holacracy is clearer when it comes to the control structure and less clear how to design the

production structure. It even assumes that the production structure will form itself as long as

the control structure – especially the control structure focused on regulation by design – is

designed properly. The structure will be adapted to circles based on the current structure of

CT, but every circle gets a lead- and rep-link. Following these principles the structure of CT

will look like this: (roles, except lead- and rep-links, are ignored)

Figure 29: Case CT: Holacracy structure

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First governance meetings

It is time to hold the first governance meetings. These first governance meetings are all about

elections. There are several roles in Holacracy powered organizations that are elected. Namely

the facilitator, responsible for the orderly conduct of the meeting. The rep-link, representing the

circle in the larger sub circle. And the secretary, responsible for maintaining the governance-

records and scheduling the necessary meetings (Roberson, 2015). At first, it is advised to

postpone the elections for the facilitator. Working within a Holacracy powered organization

and holding strict meetings guided by the rules of the constitution is a skill that has to be learned

(Roberson, 2015). It is advised to appoint an external coach – read consultant – who has

experience with Holacracy and its strict ways. Only when the organization gets a better grasp

of the Holacracy way, is it wise to elect a facilitator (Roberson, 2016).

Schedule regular tactical and governance meetings

The governance meetings are the tool to adjust the organization's structure. The tactical

meetings are the tool to align with roles that have accountabilities toward projects. So it is

important, especially in the beginning, that these are scheduled regularly and that those are

given priority. If tactical and governance meetings are not held regularly, the organization will

probably not be able to learn the new habits and hold on to them. The organization will slip

back to its old habits and Holacracy will not bring the desired results (Roberston, 2015).

Holacracy design logic in the framework

Holacracy only provides a new structure for the control structure. There appears to be an

assumption that the production structure of the organization will reshape itself through

regulation by design processes based on felt tensions. What also stands out is the way Holacracy

related literature describes the redesign process. Or actually, the lack of descriptions or

prescriptions. It fits the way Holacracy advocates running an organization. It provides

information about who is responsible for the redesign and its principles provide a picture of

how it should look like, but it does not describe how the design process has to be executed. An

important question that could come to mind is what to do with bosses and managers. Holacracy

notoriously hammers on the decentralized authority. No one has the right to sign off on

anything. Decision making belongs to the domain of the function. But hierarchical

organizations have a structure of bosses and managers as proclaimed by Roberson (2016). What

also stands out is that the ‘design’ of a holarchy – remember that a holarchy is something that

consists of autonomous but linked parts called holons – is based a lot on the first executions of

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the principles. Adopting the constitution and holding meetings. This focus on ‘do not put too

much energy in trying to create the perfect structure’ and on ‘make sure the constitution is

adopted and the right meetings are held’ confirms the underlying assumption that the structural

redesign will emerge when the principles are followed instead of deliberately design the

structure.

5.4 Holacracy in the framework

Reference set Lean Agile Holacracy

Goals [Expressed goals] Increase customer

value

Decrease waste

Innovation

Productivity

Employee

engagement

Decentralization of

authority

Flexibilization

Quality of

organization

Main focus on

decreasing

production time and

the controllability

over order

realization.

Main focus on

innovation and

reducing cycle times.

Control over

realization present

but more implicit.

Focus on short

decision-making

cycles

Quality of work Some quality of work

aspects can be found

within Lean, but it is

very possible to

become ‘mean’

because the quality of

work is not anchored

in the goals.

Focus on employee

engagement.

Ability to learn and

controllable stress

conditions are also

provided.

Making employees

more involved

through

decentralization of

authority.

Design

parameters

[Expressed

parameters]

Flow,

Pull,

Aim for perfection,

Participatory

management

Teams,

Project size,

Authority,

Feature-based

Constitutionalism,

Natural structure,

Governance

Functional

concentration

Low (by creating

flows based on

product family)

Low (by involvement

in complete projects)

Unspecified

(Literature does not

provide enough

information to

determine the level)

Operational

differentiation

Medium (Giving

workers in the

production structure

Medium (providing

some support tasks to

teams, but also

Unspecified

(Literature does not

provide enough

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more preparation and

support tasks but

keeping staff

departments for some

tasks)

keeping staff

departments for

some)

information to

determine the level)

Operational

specialization

Low (by increasing

task scope in

production cells)

Low (by creating

multidisciplinary

teams and providing

them with whole

projects)

Low (by giving

opportunity to hold

multiple roles over

the entire

organization)

Regulatory

differentiation in

aspects

Medium (some

aspects are kept

together, for some

dedicated department

remain)

High (different

aspects are assigned

to different parts of

the organization)

Low (domains of

roles and circles

come with all parts of

regulation)

Regulatory

differentiation in

parts

Low (Workers who

perform a certain task

are also encouraged

to perform all parts

within their abilities)

Medium (Some parts

are assigned to

different tasks)

Low (Domains are

responsible for all

three parts of

regulation)

Regulatory

specialization

Low (By widening

the scope of

operational tasks,

regulatory tasks

follow)

High (dividing output

and process-related

regulatory activities

among different

tasks)

Medium (Scope is as

large as the domain

of a role or circle)

Separation of

operational and

regulatory tasks

Low (Workers with

operational tasks also

get the corresponding

regulatory tasks)

Medium (some

regulatory tasks are

assigned to

operational tasks

some are voluntarily

accessible and some

are split form

operational tasks)

Low (all roles have

both operational and

regulatory authority

of their domain)

Behavior

formalization

High (Standardize

both process and

input to increase

flexibility, reduce

mistakes, and support

continuous

improvement.)

Low (a lot of room to

choose own

processes)

High (Authorities,

decision making,

meetings are highly

standardized in the

constitution.

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Causal

relationship

between goals

and design

parameters

Increase

regulatory

potential

Decrease

disturbances

The seven forms of

waste:

Over-production,

inventory, motion,

waiting,

transportation, over-

processing, and not

right the first time.

Rules of the game,

Structural enabling,

Decision-based

enabling.

Design logic Macro to micro

level production

structure and

micro to macro

level control

structure

Getting started

Create a new

organization

Installing business

systems

Complete the

transformation

Incremental

implementation

strategy.

Constitution

adoption,

Governance record

system,

Define initial

structure,

First governance

meetings,

Schedule regular

tactical and

governance meetings

Table 4: Framework summary Lean, Agile and Holacracy

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PART THREE

The third and last part works toward a conclusion of this research. The two chapters

in this part answer the last sub question and the research question stated at the

beginning of this thesis. Chapter six answers the first part of the last sub question. It

makes the comparison between the three design theories based on the framework. The

chapter describes the differences and similarities in approach and outcome in the light

of the framework. The structure of chapter six remains the same as the previous

chapters.

Chapter seven answers the second part of the lats sub question and the main question.

Going through the different parts of the organizational design theories for one last time

will reveal differences but also similarities. Towards the end of the chapter the

research question will be answered. The similarities and differences described in

chapter six are used to conclude how similar the theories are and to work out

implications for the design theories.

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6. Lean, Agile, and Holacracy compared

In the previous chapters, the three organizational structure theories have been discussed against

the background of the theoretical framework developed in chapter 2. In this chapter Lean, Agile,

and Holacracy in the framework will be compared to each other. This chapter will be structured

the same as previous chapters. First, the goals will be compared, followed by the design

parameters and design logic. A description of the similarities and differences between the three

design theories will be provided. What the implications of these similarities and differences are,

will be left for the discussion chapter.

6.1 Goals

If we compare the goals of Lean, Agile, and Holacracy it turns out that these goals show a

difference in focus, as is summarized in the table below. Lean tries to combine a goal focused

on the internal organization with a goal with a focus on the outside world. Agile has a focus on

innovation combined with a productivity increase and improvement of employee engagement.

The Holacracy goals only focus on control structure goals.

When it comes to the quality of organization goals, Lean and Agile both try to reduce production

cycle time. Decrease of waste in Lean and improvement of productivity in Agile are both goals

aimed at achieving this. Lean presents this in the form of a negative formulation in decreasing

everything that is not productive (Womack & Jones, 2003), and Agile presents a positive

formulation only doing what is productive (Rigby et al., 2020). Lean has a focus on the outside

world and the value created in the entire value stream. The reduction of waste in the value

stream is emphasized (Womack & Jones, 2003) indicating the importance of efficiency. Agile

focuses on innovation. In the innovation process, Agile advocates paying attention to the

outside world but the focus is on direct customers. The rest of the value stream is not taken into

account. Improving innovativeness in Agile is emphasizes decreasing innovating cycle times

and improving the success of innovations (Rigby et al., 2020). When it comes to the quality of

work goals, Lean is under-represented. The goals do not focus at all on improving the quality

of work conditions for employees. Womack & Jones (2003) do mention this as a pitfall and

advocate that an organization has to have some systems in place that ensure the quality of work.

Lean does prescribe guidelines that focus on quality of work (Womack & Jones, 2003), but in

Lean it is not part of the goals. The lack of quality of work goals has led to examples that show

organizations focusing so much on the goal of reducing waste that this impairs the working

conditions (Kinnie, Hutchinson, & Purcell, 1998). Agile, on the other hand, does present quality

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of work goals explicitly. Agile pays attention to all of the quality of work goals (Cohn, 2013).

Holacracy has a focus on improving engagement in regulatory tasks (Roberson, 2015).

Holacracy provides the quality of work goals. But the goals are meant to improve the quality

of organization as well as the quality of work. The goals are meant to make employees involved

to improve the speed of decision making by providing them regulatory potential and (Roberson,

2015).

Lean and Agile both present a set of goals that covers the reference set largely. With their

respective two and three goals it is less explicit and less broken down in subgoals. By

corresponding to most of the quality of organization goals and quality of work goals, Agile

presents the most complete set of goals. Holacracy provides the smallest set of goals when it

comes to covering the goals in the reference set. These goals are also used as quality of

organization and work goals.

Reference set Lean Agile Holacracy

Goals [Expressed goals] Increase customer

value

Decrease waste

Innovation

Productivity

Employee

engagement

Decentralization of

authority

Flexibilization

Quality of

organization

Main focus on

decreasing the

production cycle time

and on the

controllability over

order realization.

Main focus on

innovation and

reducing cycle times.

Control over

realization present

but more implicit.

Focus on short

decision-making

cycles

Quality of work Some quality of work

aspects can be found

within Lean, but it is

very possible to

become ‘mean’

because the quality of

work is not anchored

in the goals.

Focus on employee

engagement.

Ability to learn and

controllable stress

conditions are also

provided.

Making employees

more involved

through

decentralization of

authority.

Table 5: Framework summary Goals

Lean touches upon innovation and has some common ground with sufficient product variations

and a sufficient product mix. It could be argued though whether these are goals provided by

Lean. The improvement of innovation could also be a consequence of deducing waste in the

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entire organization including innovative processes. The product- variations and mix are

underrepresented in all three theories. It could be argued that customer focus and the creation

of value do correspond with sufficient product variations and a sufficient product mix. All of

these concepts relate to the offerings of an organization. But non of the design theories express

it in a sense that the variations and mix of products are composed in a way that provides the

flexibility to react to fluctuations.

6.2 Design parameters

The design parameters will be discussed based on the reference set. But this paragraph starts

with a short comparison of the expressed parameters. This is followed by the eight parameters.

Expressed parameters

Taking a glance at the summary table below, there are some major differences in the means to

achieve the respective goals. There is one match – though not in name – among the parameter

of the different theories. That is a form of decision-making decentralization. Lean demands for

participatory management. Employees become part of problem-solving teams. These teams

help employees learn to detect problems and make adequate decisions to solve them. When

problems are bigger or require a larger intervention, employees are still involved in the

decision-making process through these problem-solving teams (Womack & Jones, 2003). Agile

tries to distribute authority to teams by making them responsible for their output. Teams in

Agile organizations report to a hierarchy but are supposed to have decision making power. The

decision making power contains the authority to make decisions on the process and decisions

that fall within the achievement of the set goals for the team (Cohn, 2013). Holacracy provides

individuals the authority to make all necessary decisions concerning the tasks they are

responsible for. Through strategic, governance, and tactical meetings employees get a say in

the relevant strategic regulation, regulation by design, and operational regulation (Roberson,

2015).

Table 6: Framework summary expressed parameters

Lean Agile Holacracy

[Expressed

parameters]

Flow,

Pull,

Aim for perfection,

Participatory management

Teams,

Project size,

Authority,

Feature-based

Constitutionalism,

Natural structure,

Governance

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Further, the parameters that are expressed by the design theories vary. Lean focuses on the

production structure and guides the organizational structure building by taking a value stream

perspective. This is done with the use of flow and pull (Womack & Jones, 2003). Efficiency is

improved over time with an aim for perfection and participatory management. Agile does take

a team-centered approach. Everything is looked at from a team perspective. This is also seen in

the approach it takes to managing projects and prescriptions on structuring the organization

beyond teams. When activities are too large to be handled by one team (Cohn, 2013; Rigby et

al., 2020). Holacracy takes the perspective from a control structure perspective. All revolves

around who has what decision power and who can be held accountable for what. Unambiguous

and rapid decision making is at the center of Holacracy (Roberson, 2015).

That these theories do take different approaches and perspectives to build an organizational

structure, does not necessarily mean that the end result does differ. The next paragraphs will

compare the three design theories based on the reference set. This will show what differences

and similarities these different approaches have.

Functional concentration

Lean lowers functional concentration from a value stream perspective. An organization should

be structured according to value streams (Womack & Jones, 2013). This leads to a structure in

which departments handle certain order types that fit the value stream. Agile takes another

perspective. The perspective of the team, in many instances in combination with a project-based

perspective. Agile prescribes that teams should handle complete tasks (Cohn, 2013) and that

team members should be full-time devoted to the tasks assigned to the team (Rigby et al., 2020).

The task of the team should encompass a full contribution of value (Cohn, 2013) in contrast to

functional silos that all ad partial value before handing it over to another functional silo.

Table 7: Framework summary functional concentration

A clear split becomes apparent when it comes to Lean and Agile versus Holacracy. Lean and

Agile do something very similar. They base the structure on the value created. The value stream

in Lean and output in Agile terminology. Both advocate that functional departments/silos in the

Lean Agile Holacracy

Functional

concentration

Low (by creating flows

based on product family)

Low (by involvement in

complete projects)

Unspecified (Literature

does not provide enough

information to determine

the level)

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production structure should be redesigned toward product type centered departments. Focusing

on the product has one drawback. De Sitter mentions order type but provides a broader

definition of order type than just product type (Achterbergh & Vriens, 2019). So even though

both Lean and Agile strive for a low functional concentration similarly, only taking product

type into account might lead to missing pragmatic solutions based on other order type

characteristics. Holacracy takes a whole different approach. Design is reached through

decentralized regulation by design activities (Roberson, 2015). An initial design is based on the

current one (Roberson, 2016) so the functional concentration might be high or low.

There is a difference between Lean and Agile though. Agile, by taking a team perspective,

initially advocates that every team handles their orders or projects. Only when these become

too large, the order will be divided (Cohn, 2013). Lean takes an approach in which teams have

some form of sequential interdependence (Womack & Jones, 2003). All considering, Agile tries

to push for a lower functional concentration when possible.

Differentiation in operational tasks

What immediately springs out when it comes to operational differentiation is the lack of any

mentioning of support and preparation tasks by Holacracy literature. This is in line with the

focus on the control structure and lack of information about the production structure. Lean and

Agile on the other hand again try to accomplish more or less the same. Both Lean and Agile are

advocates of decreasing operational differentiation to some extent. Lean advocates that

employees should perform basic support and preparational tasks as a form of decreasing waste.

When the employee can handle these basic tasks he should perform them to prevent idle time

or to implement small changes that reduce some form of waste (Womack & Jones, 2003). That

is about individual support and preparation tasks. When it comes to larger support and

preparation tasks, Lean prescribes to design staff departments that functionality performs these

tasks. This is for example engineering or purchasing. A support department like planning still

exists in a Lean redesign but their task changes (Womack & Jones, 2003). Agile advocates two

principles. Teams should be all-encompassing in its capabilities. This means that a team should

be able to perform all tasks that are necessary to accomplish its goals and avoid dependency on

others (Cohn, 2013). Secondly, it advocates that preserving staff departments suits best for

support tasks (Rigby et al., 2020). So Lean and Agile come to the same conclusion. Some

preparation and support tasks can be decentralized and coupled with operational tasks, but for

others, separate staff departments are the best solution.

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Table 8: Framework summary operational differentiation

Degree of specialization of operational tasks

The degree of specialization is an interesting operational parameter. All three design theories

aim for a lower specialization of operational tasks, but they achieve that differently. Lean for

example breaks down functional operations and creates operations based on flow. By designing

flows, sequential teams can be designed in such a way that the tasks assigned to the team

become broader (Womack & Jones, 2003). So teams perform more different tasks within one

flow instead of a few tasks as a function of the entire organization. Lean also advocates that

team members ideally are able to perform all tasks assigned to their team so they can perform

the broader array of activities (Womack & Jones, 2003). Agile also breaks down functional

operations, but instead of flow assumes an output-based structure. Teams should ideally not be

sequential and produce something of complete value (Cohn, 2013). In contrast to Lean that

wants only value-adding steps in the flow, but every step provides partial value. As long as the

output of the flow is the complete value (Womack & Jones, 2013). The Agile team should be

filled with specialists in certain areas that contribute to the different parts needed in the process

of value creation. Instead of team members that can perform all tasks, in Agile, team members

contribute according to their specialty (Cohn, 2013). So, both Lean and Agile broaden tasks for

teams and team members. Compared to each other, Lean prescribes narrower tasks for teams

but team members that can perform the complete set of activities assigned to their team. Agile

prescribes broader activities for teams but does not expect team members to perform all

activities.

Table 9: Framework summary operational specialization

Lean Agile Holacracy

Operational

differentiation

Medium (Giving workers

in the production structure

more preparation and

support tasks but keeping

staff departments for

some tasks)

Medium (providing some

support tasks to teams, but

also keeping staff

departments for some)

Unspecified (Literature

does not provide enough

information to determine

the level)

Lean Agile Holacracy

Operational

specialization

Low (by increasing task

scope in production cells)

Low (by creating

multidisciplinary teams

and providing them with

whole projects)

Low (by giving

opportunity to hold

multiple roles over the

entire organization)

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Holacracy has an entirely different approach. Holacracy prescribes that roles are narrowly

defined. Roles are small and very specialized (Roberson, 2015). Holacracy still strives for low

operational specialization. Remember that roles are separate from the person performing the

role. The role is defined narrowly, but an employee is encouraged to hold multiple roles

(Roberson, 2016). These different roles also do not have to be closely related as long as the role

holder has the right skill set for the task assigned to the role. Assigning multiple roles to an

employee should lead to a low degree of specialization (Roberson, 2015). A designer should be

aware that it is easy to end up with narrow tasks in Holacracy. When a task consists of roles

that are closely related, the scope of the task is still narrow.

The contrast especially between Agile and Holacracy is noteworthy. Agile advocates that teams

and tasks should be designed in such a way that the tasks are broad and that team members

devote 100 percent of their time to the team and its goals. Team members should only be part

of that team and hold no responsibility toward other departments (Rigby et al., 2020). Holacracy

on the other hand takes the opposite approach. Roles are small and specific. Employees hold

multiple roles with responsibilities towards different parts of the organization (Roberson, 2015).

Degree of differentiation of regulatory activities into aspects

The differentiation of regulatory aspects is handled differently by the different design theories.

This time it also leads to different scores on this parameter for the different design theories.

Agile has a high score on these parameters because different parts of the organization perform

different aspects (Cohn, 2013). For strategic regulation, a more traditional hierarchy is used.

Regulation by design is handled by an Enterprise Transition Community. A sort of department

that sets goals and prioritizes organizational design changes and delegates them to Improvement

Communities that implement these design changes (Cohn, 2013). Operational regulation is

mostly handled by the teams themselves with the support of the Agile master (Cohn, 2013).

Lean keeps the regulation by design aspects and operational regulatory aspects combined. Both

are performed by employees also responsible for operational tasks. These regulatory aspects

are handled through special change processes called kaizen and kaikaku (Womack & Jones,

2003). It is assumed that regulation by design is intertwined with operational regulation.

Regulation by design activities should lead to more permanent solutions for operational

disturbances (Womack & Jones, 2003). Strategic regulation is handled separately. Strategic

regulation is handled by management and supported by staff departments (Womack & Jones,

2003). Holacracy is the only design theory of these three that strives for low regulatory

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differentiation into aspects. Holacracy assigned all authority to the domain held by a role. This

means that this role also has the authority to make decisions concerning operational regulation.

Regulation by design proposals concerning the domain of a role are always allowed to be made

and have to be executed unless there is evidence that it might harm the performance of the

organization. In collaboration with colleagues, the authority of a domain also contains the

corresponding strategic regulatory tasks (Robertson, 2015).

Table 10: Framework summary regulatory differentiation into aspects

Degree of differentiation of regulatory activities into parts

Lean tries to lower the regulatory differentiation into parts by authorizing and training

employees to monitor, assess, and act upon regulatory tasks within the realm of their operational

tasks. Assessment can conclude that operational regulation or design change is a solution.

Employees are also allowed to change these within their improvement teams (Womack & Jones,

2003). Lean encourages employees to perform all tasks for operational regulation and

regulation by design, but Lean assumes that operational employees can only go so far. For more

complex problems there are teams dedicated to assess and act upon disturbances (Womack &

Jones, 2003). Within Holacracy every role has complete authority over its domain. That holds

also for the three parts (Robertson 2015). With this approach, Holacracy strives for a lower

degree of differentiation into parts than Lean does.

Agile on the other hand has a control structure that somewhat differentiates into parts. This is

most apparent with regulation by design. The parts are differentiated among an ETC

(monitoring and assessing) and an IC (acting) (Cohn, 2013). Within a team, the Agile master is

responsible for monitoring and assessing. The Agile master is a team member so differentiation

is limited, but Agile master is a task differentiated from other team members. So this time Lean

and Holacracy sow similarities but Holacracy assumes that role holders are always capable of

all parts and Lean assumes that there is a threshold and support is needed for complex tasks.

Agile on the contrary completely deviates from these approaches by prescribing some

differentiation into parts.

Lean Agile Holacracy

Regulatory

differentiation in

aspects

Medium (some aspects

are kept together, for

some dedicated

department remain)

High (different aspects are

assigned to different parts

of the organization)

Low (domains of roles

and circles come with all

parts of regulation)

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Table 11: Framework summary regulatory differentiation into parts

Degree of specialization of regulatory activities

Regulatory activities in Lean and in Holacracy are associated with the corresponding

operational tasks. Even though this is the case, Lean gets a low score on this parameter, and

Holacracy a medium score. This difference is caused by the way tasks are constructed. In Lean,

operational specialization is lowered by increasing the scope of the task by adding activities

(Womack & Jones, 2003). This directly corresponds to an increase in regulatory scope. In

Holacracy the scope of the tasks is increased by adding different roles to someone’s task. For

every role, there is a set of regulatory responsibilities (Roberson, 2015). Because every role has

responsibility for its domain, this responsibility is quite narrow. For some regulatory activities,

the scope is linked to the scope of their circle (Roberson, 2015). This balance leads to a medium

score. Agile divides regulatory activities into two types and assigns the two types to different

tasks. Agile differentiates regulatory activities into outcome-related activities and process-

related activities. The outcome-related activities are assigned to the product owner and the

process related activities are assigned to the Agile master (Cohn, 2013). Lean and Holacracy

have the same philosophy when it comes to assigning certain regulatory activities, but their

production structure leads to differences in the outcome. Agile presents a different structure for

managing regulatory tasks deliberately decreasing the scope of regulatory activities.

Table 12: Framework summary regulatory specialization

Lean Agile Holacracy

Regulatory

differentiation in parts

Low (Workers who

perform a certain task are

also encouraged to

perform all parts within

their abilities)

Medium (Some parts are

assigned to different

tasks)

Low (Domains are

responsible for all three

parts of regulation)

Lean Agile Holacracy

Regulatory

specialization

Low (By widening the

scope of operational tasks,

regulatory tasks follow)

High (dividing output and

process-related regulatory

activities among different

tasks)

Medium (Scope is as

large as the domain of a

role or circle)

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Degree of separation between operational and regulatory tasks

In the previous paragraph on the degree of specialization of regulatory activities, it has already

been concluded that Lean and Holacracy follow a similar philosophy in the assignment of

regulatory activities to tasks. This is also reflected in the separation between operational and

regulatory tasks. The philosophy is to assign the regulatory tasks to the same person (or role)

that performs the corresponding operational tasks (Womack & Jones, 2003; Roberson, 2015).

Agile, again, follows different principles. The high differentiation into aspects and medium

differentiation into parts have the consequence that there is at least some separation between

operational and regulatory tasks. Some regulatory activities, namely operational regulation, are

assigned to the team responsible for the operational activities. Strategic regulation is assigned

as separate tasks in a more hierarchical fashion. Regulation by design is assigned to a separate

part of the organization, the Enterprise Transition Community. Operational personnel can

volunteer for regulation by design tasks through an Improvement Community (Cohn, 2013).

Table 13: Framework summary separation of operational and regulatory tasks

Behavior formalization

The last parameter from the reference set, behavior formalization, shows differences among the

three design theories. In a Lean organization, standardization is very important for operational

activities (Womack & Jones, 2003). Agile does not prescribe an extensive standardization for

primary or control activities (Cohn, 2013). Holacracy does provide extensive standardization

for regulatory activities. Operational activities are not standardized in a Holacracy structure

(Roberson, 2015). Lean prescribes extensive standardization for operational activities for two

main reasons. The first is quality improvement (Kim et al., 2006). The second is an increase in

flexibility (Swank, 2003). When an organization wants to optimize processes and eliminate

mistakes, a standard is needed because there needs to be a standard to improve upon (Kim et

al., 2006). Secondly, to be able to perform a broader array of tasks and the ability to take over

tasks from coworkers whenever needed means that activities need to be performed in the same

Lean Agile Holacracy

Separation of

operational and

regulatory tasks

Low (Workers with

operational tasks also get

the corresponding

regulatory tasks)

Medium (some regulatory

tasks are assigned to

operational tasks some are

voluntarily accessible and

some are split form

operational tasks)

Low (all roles have both

operational and regulatory

authority of their domain)

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way (Swank, 2003). Agile leaves more room and does not standardize much. It assumes

procedural freedom to facilitate innovation (Cohn, 2013). Holacracy has a different philosophy.

Holacracy assumes that high standardization through the constitution is needed to enable

everyone with regulatory responsibilities. Without this standardization, there is going to be a

hierarchy or democratic system that leads to problems. Standardization in the regulatory process

also should achieve that the structure can change itself constantly (Roberson, 2016). So for the

formalization of behavior, the three design theories provide very different views that lead to a

very different approach.

Table 14: Framework summary behavior formalization

6.3 Design logic

The design logic is an important part of the design theories that is supposed to guide consultants

and change agents through the process of redesigning the organization. The three design

theories and the reference set all take a different approach. The reference set prescribes the most

deliberate design approach. Lean, Agile, and Holacracy do not prescribe a stage in which an

elaborate design is made before starting the implementation. Lean does provide a design process

that is at least based on analysis, however. The core foundation to base the flow structure upon

is the value stream. So Lean at least prescribes to map the value streams (Womack & Jones,

2003). After these value streams are mapped, Womack & Jones (2003) advocate that it is

important to just start. The first flow based on the value stream analysis has to be put in place.

Machines needed for the operational tasks should physically be placed in a sequential flow.

Agile has an unpremeditated process. This does not mean that the organization has no intention

of transforming the organizational structure. It does mean that there is no grand plan or

predetermined design. Starting with one team or a few teams performing one project, Agile

should be spread incrementally throughout the organization. When the Agile principles are

followed in every expansion of the number of Agile teams, the organizational structure will

become Agile (Cohn, 2013). Holacracy finds itself in a kind of middle ground. Adopting the

constitution and changing the control structure consists of a deliberate set of steps. Holacracy

Lean Agile Holacracy

Behavior

formalization

High (Standardize both

process and input to

increase flexibility, reduce

mistakes, and support

continuous improvement.)

Low (a lot of room to

choose own processes)

High (Authorities,

decision making,

meetings are highly

standardized in the

constitution.

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pays less attention to the production structure, as has been mentioned throughout the previous

chapters. There is an assumption in Holacracy that the best production structure will develop

organically over time. Holacracy does present a step in which the organization is theoretically

redesigned before implementing the redesign, but it assumes that the current structure is the

basis for the new control structure and provides no guidance on how to come to an

organizational design. With the control structure in place, the production structure will form

through bottom-up regulation by design activities (known as governance meetings) (Roberson,

2015). Holacracy’s design logic focuses most on the visible actions like adopting the

constitution and organization the first meetings according to the new control structure

(Roberson, 2016). All three design theories have different approaches for implementation but

they all advocate that making change (visibly) happening is more important than deliberate

planning.

Table 15: Framework summery design logic

Reference set Lean Agile Holacracy

Design logic Macro to micro

level production

structure and

micro to macro

level control

structure

Getting started

Create a new

organization

Installing business

systems

Complete the

transformation

Incremental

implementation

strategy.

Constitution

adoption,

Governance record

system,

Define initial

structure,

First governance

meetings,

Schedule regular

tactical and

governance meetings

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7. Discussion and conclusion

In the previous chapters three prominent design theories, Lean, Agile, and Holacracy have been

compared. The previous chapter compared the three theories to each other based on the earlier

analysis with the framework. In this chapter, conclusions will be drawn from this comparison.

Broader implications of these differences and similarities will be provided here. The three

design theories have a different heritage. They stem from different industries and different time

frames. This is apparent in literature and in the comparison. Lean is the oldest of them (Womack

et al., 2007). This results in an extensive amount of scientific literature. For many different

industries, a form of Lean is available and for almost every problem that might come up, there

is an article prescribing solutions. Sticking to the basic principles is important to prevent

unnecessary complexity. Agile is middle-aged compared to the other two (Rigby et al., 2020).

This means a decent amount of literature, but Agile stems from an aggregation of multiple

methods (Rigby et al., 2020). That means that the overall structure and principles are the same,

but different forms and perspectives within Agile exist for more detailed techniques. Holacracy

is the most recently developed design theory (Roberson, 2015). That has become apparent in

two ways. First, the availability of literature is considerably less compared to the other two

design theories. Secondly, it is not as extensively worked out as the other two theories. Ideas

about the production structure are lacking (Roberson 2015, 2016), making Holacracy an

incomplete design theory. The assumption that only changing the control structure and basing

the new structure on the current production structure will lead to a situation in which the

production structure will evolve naturally (Roberson, 2015), is at odds with the principle of

self-inhibiting structures (Achterbegh & Vriens, 2019) that regularly appear in bureaucratic

regimes (Kuipers et al., 2018). Self-inhibiting structures are structures that are not able to

improve themselves through regulation by design activities. The changes that are possible

without a large-scale episodic intervention do not improve the organization. It maintains the

status quo or worsens the situation (Achterbergh & Vriens, 2019). Holacracy might hold some

hidden assumptions on industry and initial structure, that do not become apparent in Holacracy

related literature.

7.1 Goals and parameters

When the goals of these different design theories are compared in paragraph 6.1, it becomes

apparent that Lean, Agile, and Holacracy express their goals very differently. But during the

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analysis, similarities have been found. This balance indicates a common general direction, but

variations in the execution.

The expression of the goals reflects the heritage of these theories nicely. Lean stems from the

production industry. In particular the post-war car industry (Womack et al., 2007). The goals

reflect a view focused on efficient production of physical goods. Agile stems from the era of

the dot com bubble in the 1990s and early 2000s (Rigby et al., 2020). Production of software is

always an innovative process because every piece of software produced is new. These

organizations are also characterized by a highly educated workforce, more complex tasks, and

a higher need for specialist skills. So the focus of Agile is on innovative processes and employee

satisfaction is important because such firms experience high competition over skilled workers.

Holacracy is developed in an era of technology-based firms. The product is not a software

program anymore. The software is a platform for other services. Zappos is a good example. Its

main business is the retail business, but they are internet-based so maintaining their online

environment is one of their core activities. And even though Spotify is structured according to

Agile principles (Ribgy et al., 2020), this would also be a perfect example of this era Holacracy

is designed for. Such platforms provide constant feedback in the form of data. These enormous

amounts of data have to be interpreted and acted upon fast. This leads to a design theory focused

on decentralized rapid decision making. Holacracy is also created in an era in which Lean and

Agile have been widely adopted. Roberston (2015) even states that he worked in organizations

with both a Lean and Agile structure. This might be an explanation of why Holacracy focuses

solely on the control structure.

The harritage becomes even more apparent in the way Lean, Agile, and Holacracy express their

design parameters. Lean has physical places in mind in which machines can be physically

moved. It envisions a world in which larger value streams exist in which multiple firms deliver

a valuable contribution in the form of semi-finished products (Womack & Jones, 2003). Within

a firm flow can be created by sequentially performing steps in the production process. Pull can

be created by only acting when the customer places an order (Womack & Jones, 2003). Agile

is developed in an industry in which teams are important (Rigby et al., 2020). Especially in

innovative processes, different people with different skills and different views complement each

other toward the end result (Wulfen, 2012). The project-based activities are central in the

process of value creation (Rigby et al., 2020). Holacracy is the odd man out because it only

focuses on the control structure (Roberson, 2015). It takes a completely different approach by

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seeing organizations as a kind of society that performs best when there are a constitution and

law (e.i. the governance records) to guide behavior (Roberson, 2016).

Compared to the reference set Lean, Agile, and Holacracy provide a narrow set of goals. The

difference in focus induced by the goals implicates that they lead to different ideas about

structure and in turn different scores on the parameter values. The Lean goal of becoming more

efficient by decreasing waste has led to the standardization of processes and providing

operational workers to optimize these processes by decentralization of regulation by design

activities. The innovativeness Agile tries to achieve leads to the creation of operational freedom

by decentralizing operational regulation. Flexibilization of the Holacracy organization leads to

strict decision-making rules and extreme decentralization of all regulatory activities. These

differences have been discussed more elaborately in chapter six and the implications of these

differences will be discussed later in this chapter. The reference set is designed to be a complete

set of goals for an organizational design. The finding that none of the theories presents a

complete set of goals shows that the three design theories have a particular focus on what to

achieve and what is deemed a well-performing organization.

7.2 Production structure

At face value, Lean, Agile, and Holacracy seem very different theoretical organizational design

perspectives. To get a better understanding of how different the theories are, the design theories

have been referenced to the framework. The following paragraphs will go into the parameters

of the reference set. In this paragraph, the first three parameters concerning the production

structure will be discussed. A conclusion is drawn on the effects of the different design

principles based on the first three parameters in the framework. In the next paragraph, a

conclusion will be drawn on the effect of the control structure, and in paragraph 7.4 on the

separation of operational and control activities and the behavior formalization.

Theory on Lean is the clearest on how the production structure should be structured. The most

focus is on the meso structure, but the micro and macro structure get their fair bit of attention

as well. Agile is a bit vaguer on the layout of the whole organization with the focus on teams.

Most of the literature focuses on the composition of teams. How teams relate to each other is

less explicitly mentioned. But the analysis was able to also lay bare the principles for the macro

and meso structure. Holacracy just keeps the production structure just as it is with the

assumption that it will change over time.

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The table that summarizes the design theories referenced to the framework, already predicts the

conclusion that can be drawn from the comparison. Lean and Agile score the same on the three

parameters concerning the production structure. The same parameters scores suggest that they

structurally prescribe the same. This is indeed the case with Lean and Agile. There are subtle

differences but designing the production structure using one or the other follows the same main

principles. Both theories want to abandon a functionally differentiated structure. The structure

should, according to both theories, have a low functional concentration. At the macro and meso

levels of the organization, the concentration of departments should be based on the output of

these departments. Lean does that by creating flows based on the value stream (Womack &

Jones, 2003). Agile creates a structure by scaling Agile projects (Cohn, 2013). The underlying

assumptions determine their approach. Lean assumes a production company that ads value in a

value stream. Agile assumes an organization that works mostly project-based. But in the end,

they strive for the same production structure. The macro and meso structure eventually follow

the same principles. A structure based on output. Also, both theories have the same idea about

preparation- and support tasks. They both advocate that basic preparation- and support tasks

must be added to operational tasks. For other larger preparation- and support tasks, traditional

staff departments are the best solution (Womack & Jones, 2003; Rigby et al., 2020).

There seems to arise a discrepancy between Lean and Agile at the micro-level. Both theories

lower the operational specialization, but they have a different approach. Lean argues that teams

should have a smaller set of tasks (compared to Agile) and all team members ideally are able

to perform all of them (Womack & Jones, 2003). Agile argues on the other hand that teams

should have a complete set of tasks and specialized team members that add their part to the

process (Cohn, 2013). But this is just a matter of perspective that causes a different emphasis.

When Womack & Jones (2003) set out how the innovation process in a Lean organization

should be structured, they advocate not to use a process with sequential interdependency but a

process in which all parts of the process are integrated from the start in a multidisciplinary

process. Agile, on the other hand, acknowledges that processes can become too complex for a

team to be fully interdisciplinary and independent. In such a case Agile allows for a sequentially

interdependent microstructure (Cohn, 2013). So the emphasized difference in microstructure is

a matter of their goals and assumptions. Both take another starting point but work towards a

similar production structure.

Holacracy does provide a completely different idea of the production structure. Decreasing

specialization by creating very specialized roles and assigning multiple roles to employees

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(Roberston, 2015). This can indeed decrease the amount of operational specialization way

further than is possible in a Lean or Agile organization. But it comes with the risk that a role

holder holds multiple roles that are very closely related or multiple unrelated and narrow roles.

This does not improve the scope of tasks in the sense that it improves the overview of the

process. This makes the approach depending on the execution. Maybe an initial designer holds

this in mind but since the regulation by design is decentralized with no central control

mechanisms, this can change easily over time.

Both Lean and Agile reduce go for low parameter values when designing the production

structure. They reduce variability in the network of relations by structuring the organization

according to product characteristics (Womack & Jones, 2003; Cohn 2013). The reduction of

variability is positive but product characteristics is only one of the four types of order

characteristics besides input-, demand-, and client characteristics (Achterbergh & Vriens,

2019). Not considering the other order types, could result in unnecessary complexity and

variability. Bringing operational differentiation to a medium parameter score and operational

specialization to a low parameter score aims to reduce the relations in the network of relations.

This reduces the complexity of the organizational structure (Achterbergh & Vriens, 2019).

Retaining some staff departments that perform preparation or support activities, leaves some

structural complexity in place. Rigby et al. (2020) argue though that for some of these activities,

it might be more pragmatic.

It has been concluded that Holacracy does not specify principles that change the functional

concentration and operational differentiation. The operational specialization is changed.

Following the principles to the letter would decrease the specialization of tasks. It would be

rash though to conclude that this reduces the number of relations in the network of relations.

Roles remain very specialized. It is possible to assign completely different roles to one task

which could mean that a task is a combination of different very small activities with very small

scopes. This potentially increases the number of relations and in turn the complexity of the

organization. It can be expected that Holacracy does not change the extend to which the

production structure is a source of disturbances in its initial redesign. Changes are possible

based on how roles are defined. Changing the organizational structure according to the

principles of Lean or Agile is expected to reduce variability and complexity, resulting in a

structure that in itself is the source of fewer disturbances. This is expected to the same extent

for both theories since they follow similar principles.

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7.3 Control structure

Now it has been concluded that Lean and Agile prescribe the same production structure

principles and Holacracy does not, it is time to see what happens with the control structure. In

contrast to the production structure, Agile and Lean do think differently about the control

structure. Lean and Holacracy do have some resemblance in parameter values but they both

have very different views on what the control structure should look like.

Agile takes a more traditional approach that fits more with a bureaucratic regime compared to

Lean and Holacracy. In chapter one, it was stated that Agile teams are self-steering. And that is

true, but only when it comes to operational regulation (Bowen & Youngdahl, 1998; Schwaber,

2004; Cohn, 2013; Rigby et al., 2020). Agile differentiates regulatory activities into aspects to

a high amount and parts to a medium extend. This can lead to situations in which regulators

become detached from the primary process (Achterbergh & Vriens, 2019). Lean and Holacracy

on the other hand try to decrease the differentiation of regulatory activities. Holacray succeeds

best in reducing differentiation. The Holacracy method of assigning all regulatory tasks to the

corresponding operational tasks has as its advantage that there is no differentiation in regulatory

aspects or parts because all aspects and parts are assigned to one domain. One disadvantage

though. This can potentially lead to narrow regulatory tasks. In that case, an overview and

alignment might be jeopardized (Achterbergh & Vriens, 2019). Lean decentralizes regulatory

activities and tries to find a reasonable amount of differentiation. As low as possible and

pragmatically justifiable.

The specialization of regulatory activities varies widely among the three different design

theories. Lean tries to decrease the specialization (Womack & Jones, 2003). Agile on the other

hand encourages specialization. The scope of some regulatory activities corresponding to

operational tasks is deliberately divided among different tasks (Cohn, 2013). Holacracy can

increase the scope of regulatory tasks, but there are limitations. The scope can become narrow

when connected to narrow operational tasks. Especially when the combination of roles someone

holds, leads to a narrow set of tasks.

In contrast to the paragraph on the production structure, Holacracy does provide an adequate

control structure. The Holacracy control structure should – based on the parameter values – be

able to deal with disturbances in a timely and adequate manner. Lean is also expected to deal

with disturbances in a timely and adequate manner. Some regulatory aspects are divided but for

the other regulatory parameters, the values are low. This results in a decreased complexity and

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decreased detachment from activities that have to be regulated. The regulatory capacity of an

Agile organization is expected to be lower. A complex control structure is promoted by medium

to high differentiation and specialization of regulatory activities. This results in reduced quality

of decisions made and increased time to make decisions (Achterbergh & Vriens, 2019)

7.4 Separation and formalization

The last two parameters in the reference set are the separation between operational and

regulatory tasks and behavior formalization. Lean and Holacracy advocate that is it good for

the organization when employees that process operational tasks, also have authority over the

corresponding regulatory tasks (Womack & Jones, 2003; Roberson, 2015). Holacracy takes the

reduction of separation between operational and regulatory tasks very seriously. The design

theory is built upon the conviction that operational tasks and regulatory tasks that fall within

the same domain, should always be performed by the same person (Roberson, 2015). Agile

separates regulator activities from operational activities more extensively. Agile is convinced

that teams should be as independent as possible from the rest of the organization. That translates

to the assignment of operational regulation activities to the team responsible for operational

tasks. Strategic regulation and regulation by design are separated from operational activities

though.

The low separation of operational and regulatory tasks helps Lean and Holacracy providing

adequate and timely regulatory responses. The medium separation – by providing operational

regulatory activities to teams – does improve the control structure of Agile. It helps teams make

faster and more adequate decisions when it comes to disturbances that can be solved using

operational regulation. Cohn (2013) advocates that Agile teams, especially when starting with

Agile, have support from executives or upper management to cut through red tape. This

indicates that teams would benefit from lower separation and less differentiated and specialized

regulatory tasks. So it can be expected that Agile organizations deal slower and less adequately

with disturbances related to the infrastructure or strategic aspects compared to Lean and

Holacracy.

When it comes to the last parameter, Holacracy and Lean have the same philosophy. To enable

systematic improvement, standardization is crucial. Things (e.i. processes and structures)

cannot be improved if there is no standard for doing those things (Womack & Jones, 2003;

Roberson, 2015). Agile has a view that is based on personal improvement. It describes a process

in which reflection takes place often. This reflecting must lead to a learning process for teams

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and individuals, improving their expertise (Cohn, 2013). There is little formalization of

operational and regulatory processes within Agile. Both operational and regulatory personnel

have a lot of freedom in how to perform their tasks as long as their goals are achieved (Cohn,

2013).

In the remarks about the design principles of Lean and Agile was stated that both theories reduce

the number of relations and variability, but Lean focuses on the reduction of variability and

Agile focuses on the reduction of the number of relations in the production structure. This is

evidenced by the high behavior standardization in Lean. Agile on the other hand is vocal about

reducing the dependency of teams on the rest of the organization to a minimum (Rigby et al.,

2020). This reinforces the conclusion that Lean is focused more on efficient processes and Agile

on innovation.

7.5 implications

In the previous paragraphs, it has been concluded that there is a lot of overlap between the three

theories but also some important differences. Lean and Agile have very similar if not the same

principles for the design of the production structure. Agile deviates however with respect to the

control structure. Compared to Lean and Holacracy, Agile does advocate for a more

bureaucratic, hierarchical structure. Holacracy shows a different approach that has led to similar

outcomes on the parameter values to Lean.

The question remains; what do these differences and similarities implicate for their respective

use in practice? Since all three design theories differ at least on a few parameters, this will lead

to a different experience (Kuipers et al., 2018) when implemented according to the basic

principles discussed in part two.

The goals play an important role in the outcome realization (Steers & Porter, 1974). One

example is the warning by Womack & Jones (2003) that it is easy to create toxic work

environments by using Lean. Employee wellbeing can be lost out of sight since it is not

formulated as a goal for the organizational design. Looking at the goals, the following focus

becomes clear. Lean is mostly focused on organizations that especially need to improve their

efficiency. Agile is mostly focused on organizations that deal with innovative and made-to-

measure processes. Holacracy focuses on organizations that seem to have lost touch with their

environment and experience problems because of hierarchical decision making. The respective

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goals and the resulting approach of the design theories, make that literature focusses most on

these respective issues.

But for a complete picture, the parameters and design logic need to be taken into account. The

organizational regimes by Kuipers et al., (2018) will provide the first implications. It has

already been concluded that all theories aim to abandon the bureaucratic regime in favor of a

flexible regime. Lean and Agile live up to that claim. Holacracy on the other hand might not be

characterized as a flexible regime. Holacracy claims that its control structure leads to

incremental improvement of the production structure (Roberson, 2015). Following the principle

of self-inhibiting structures, the implementation of Holacracy alone might – contrary to the

claims made by Robertson (2016) – not be enough to improve the organization's structure. This

does not mean that Holacracy is completely useless. It has a particular advantage over Lean and

Agile. The focus of Holacracy is on rapid decision making and fast adaptation. Besides that

Holacracy dismisses long-term planning. Compared to Lean and Agile, Holacracy has an

extremely decentralized control structure with clearly defined authority. The ability to make

decisions and changes rapidly leads to a very flexible organization. The conviction that long

term planning is impossible and the focus on rapid decision-making suits particularly with a

hypercompetitive environment (De Wit, 2017). A structure that is focused on a

hypercompetitive environment can be characterized as a hyper-flexible regime (Kuipers et al.,

2018). So Holacracy can be very useful in volatile markets but based on the previous reasoning,

it is advised to not use Holacracy on its own. Holacracy should be combined with another

organizational design theory to redesign the production structure to reduce the number of

relations, variability, and prevent the situation of a self-inhibiting structure.

Lean and Agile both fall within the flexible regime, so their distinction has to be sought

somewhere else. Their differences make them suitable for different kinds of processes.

Christensen, Grossman & Hwang (2017) describe a process-types scale with two extremes. On

one side there are the intuitive processes and on the other side are the precise processes. Precise

processes are defined as simpler processes with a precisely predictable outcome (Christensen

et al., 2017). These processes are usually based on long linked technology. Technology in this

sense is defined as the way activities in the primary process are related. Long-linked technology

are processes characterized by sequential interdependence (Thompson et al., 2003). Since

precise processes have a precisely predictable outcome, the focus is on efficient value creation

through high standardization. These processes also require less specialized personnel

(Christensen et al., 2017).

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On the other side of the spectrum, there are intuitive processes. These are complex processes

with an unknown outcome (Christensen et al., 2017). Such processes are based on intensive

technology. The process is cyclical or spiraling in nature. This means that steps in the process

are interdependent, iterative, and rely on feedback induced by the process (Thompson et al.,

2003). Intuitive processes are characterized by a focus on problem-solving. The iterative nature

of these processes requires low standardization. Since these processes are complex, they heavily

rely on experts and require high specialization (Christensen et al., 2017).

Lean is the best fit for precise processes. It has been concluded that Lean prescribes high

standardization. At the micro level of the organization, Lean assumes a design with sequentially

dependent steps (Womack & Jones, 2003). And last, Lean lowers the specialization of

individual tasks. It expects that employees can perform a broad array of activities.

Agile fits best with intuitive processes. Agile prescribes low standardization and provides lots

of space for operational regulation to teams. This is suitable for processes with an iterative

character. At the microstructure, Agile assumes a design with teams with a low dependency on

the rest of the organization focused on complex tasks (Cohn, 2013). And last, Agile lowers the

specialization of teams but keeps tasks within teams relatively specialized with highly

specialized team members that contribute their skill to the process.

This is further supported by the remark that Lean has a bigger focus on the reduction of

variability and Agile has a bigger focus on the reduction of the number of relations. Lean

provides more strategic regulation and regulation by design activities to operational personnel

and keeps differentiation low. This fits best with long linked technology characterized by more

sequential dependence. The efficiency of these standardized processes and the chance for

defects are highly dependent on their design. Decentralized regulation by design provides more

flexibility when it comes to the efficiency of the whole process and reduction of defects.

Decentralized operational regulation and minimal relations of teams to the rest of the

organization in Agile, does benefit intense technology. Processes within teams are iterative so

the team benefits from operational regulatory potential. This does not mean however that

intuitive processes do not benefit from low regulatory parameter values. A less differentiated

and specialized control structure would decrease the complexity of regulation. This would

improve the timeliness and adequacy of regulatory activities compared to Lean and Holacracy.

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Conclusion

Over the course of this thesis the three design theories, Lean, Agile, and Holacracy have been

compared to find out in which manner they differ from an organizational design perspective

and what that implicates for these theories. In part one, the framework was designed which

formed the basis of the comparison. Part two described the three design theories in their basic

form. Besides this description, the first comparison was made. This comparison compared the

three design theories to the reference set. Lean follows the idea behind the parameters presented

by De Sitter. For an adequate organizational structure, the design theory should strive for low

parameter values. Agile only follows that principle when designing the production structure.

The control structure sows medium to high parameter values. Holacracy is the odd one out. It

does not present a complete set of principles. Holacracy focuses mostly on the control structure.

But for the parts, Holacracy does prescribe principles the resulting parameter values are low or

in one case medium.

In part three the design theories were compared to each other. Every design theory has its own

shortcoming. Lean and Agile are complete design theories suited for the flexible regime.

Although Agile structures might be improved by a low parameter value control structure. They

present different goals and approaches but the same principles when it comes to the production

structure. The differences in goals (Lean: efficiency in creating customer value versus Agile:

innovativeness and employee satisfaction) translates each to their shortcoming. Lean does not

prescribe goals focused on the quality of work. Lean does present principles to keep in mind

the quality of work. Not integrating these principles into the goals leaves Lean vulnerable

creating unfavorable working conditions. Agile differs from Lean and Holacracy by prescribing

a structure that results in a high parameter value control structure. This can result in a structure

that is less able to deal with disturbances timely and adequately. Holacracy is an incomplete

design theory. This can result in a structure that is the source of disturbances and is not suited

for incremental changes. On the positive side. The focus on the control structure that is designed

for rapid decision making makes the Holacracy control structure suited for the hyper-flexible

regime.

The difference between Lean and Agile can be found in their goals. The goals presented by

Lean, provide a focus on efficiency. This results in a structure that prescribes a sequential

interdependency between teams. Also, Lean prescribes a high amount of behavior

formalizations. This makes Lean more suitable for organizations with standardized processes

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that lead to a predictable output. The low parameter value control structure enables the

perfection of these processes over time. The focus of the Agile goals is on innovation. This

results in a structure with teams that have as little interdependence as possible. Also, Agile

prescribes a low amount of behavior formalization. Improvement of the process is achieved by

improvement of expertise through periodic reflection. This makes Agile more suitable for an

organization with processes that lead to unpredictable outcomes because teams are less

interdependent and can adapt to unforeseen circumstances. Agile provides a structure suiting

intuitive processes but such processes do benefit from a lower parameter value control structure.

Chapter one raised the question of whether these design theories are different or some

concoction of the same principles to keep scholars and consultants busy. This comparison has

found substantial differences but also some remarkable similarities. Holacracy is a different

design theory that presents a distinct set of principles. Agile and Lean are more closely related.

The production structure is based on the same principles. Different choices within these

principles are made based on the goals presented by Agile and Lean that provide a different

focus. When it comes to the control structure and behavior formalization, differences become

more apparent. These parts of a structure are based on different principles. So it can be

concluded that even though some principles are shared, differences among the design theories

exist with consequences for the design and its performance.

7.6 limitations

There are two main limitations to this thesis. The first has to do with the theories and their

respective literature. The second limitation has to do with the theoretical nature of this thesis.

Based on the nature of this thesis, the decision has been made to use the basic forms of the

respective theories. This decision has been made with the timeframe and scope of a master

thesis in mind. This does not provide time to build a comprehensive overview of the complete

body of literature available for these theories. To still be able to make the comparison literature

has been chosen that represents the basic principles of the respective theories best. This means

that the conclusions of this thesis hold for the basic principles of these theories as they are

discussed in chapter two. More specialized forms of Lean, Agile, and Holacracy might mitigate

the suitability in certain situations. For every theory, this has some implications. Lean is mostly

based on the work of James Womack and Daniel Jones. The advantage is that this work is highly

influential when it comes to Lean and that it provides a clear and relatively complete overview

of Lean. The disadvantage though is that this work is older. Over time Lean has been evolved

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and different forms of Lean in different conditions have been developed (e.g. George, 2003;

Kim et al., 2006). Agile originates from different theories like Scrum and Extreme

Programming and ASD (Rigby, 2020). These methods have been united and a common set of

principles has been developed into Agile. For this thesis, the main principles of Agile have been

discussed sporadically supported with theory on Agile Scrum – the most common form of

Agile. Other more niche theories that belong to the realm of Agile and possible implications

are not taken into account. Holacracy is a fairly new theory. Literature on Holacracy is less

abundant and the theory hasn’t had an extensive development jet. This leads to a one-sided view

of Holacracy.

The second limitation is the theoretical nature of this thesis. The analysis made in this thesis is

purely conceptual. The description of the three theories is purely based on theory. Though the

conceptual comparison is interesting, it limits the transferability to practice. It would be

interesting to empirically test the differences in the design of the three theories. An empirical

study would show how the theoretical prescriptions translate to real structures and what

parameter scores real Lean, Agile, and Holacracy structures show. It could show that practical

implementation leads to bigger differences or more similarities. It could in the case of

Holacracy provide insight into how production structures are designed when those are not as

clearly provided. For Lean and Agile it might be interesting to see how much the production

and control structure differ in practice, since the production structure follows the same

theoretical principles and the control structure does not.

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