The IQ of organisations
IQ is controversial. Some educationalists think that it proves nothing, that it’s not possible to measure intelligence. But, right or wrong, it appears to have predictive value when it comes to life’s outcomes. IQ is correlated with educational achievement, employment, income, health and happiness. Of course, it’s not the whole story. The current consensus is that around half of your life chances are determined by genes (for which IQ is a crude proxy) and half by environment (for which parental income is a crude proxy).
So, IQ has utility at an individual level. Does it have any meaning for organisations? Is there such a thing as organisational IQ?
Do organisations have intelligence?
If books, magazines and newspapers are to be believed, organisations must strive to be smart. We’re bombarded with examples of “smart” companies. The tech sector, apparently, is full of smart companies; the public sector, apparently, not so much. Putting politics to one side, we know from our own experiences of working in different organisations that there is such as thing as smart (and not so smart) ways of working, and that organisations differ in this regard. We also know that the biggest challenge facing successful organisations is staying successful. As companies grow, they get more complex and more bureaucratic; the small, fast, agile company becomes bloated, slow and rule-bound. These characteristics (flexibility, agility, creativity, etc.) are associated with being “smart”.
In a literal sense, organisations obviously do have IQs — in the sense that they’re made of people, each with an IQ, which can be added to arrive at an organisational IQ. But I’m not suggesting that organisational IQ is simply the sum of individual IQs. So, what do we mean by “intelligence” when applied to organisations?
What is an intelligent organisation?
The “smart organisation” appears to be more than hype. So what makes an organisation smart?
Smart organisations focus on talent
The knowledge, experiences and abilities of the people who work in organisations are their raw material. Talent is the foundation layer of the smart organisation. Sports team know this. The players’ abilities are fundamental. It doesn’t matter how nice the stadium, how well the coach speaks, how slick the marketing; the collective talents of the team is what matters. A sports team also recognises different talents and tries to combine these into a successful team.
Smart organisations have low friction
“Friction” is the stuff that gets in the way of you doing your job. It’s your inbox, instant messages and meetings. It’s performance management and “team days”. It’s belligerent IT departments, whose rules and regulations prevent you using tech to its full potential. It’s complicated processes about things that don’t matter to you. It’s anything and everything that stops you getting on with the job you’re paid to do. Friction is rising. Engineers don’t have time to engineer thanks to friction; nurses don’t have time to nurse; sales people can’t sell. Smart organisations consciously seek to reduce friction. This means confronting the dictatorship of the inbox and avoiding countless meetings. It means ensuring people have time and space to get on with their jobs.
Smart organisations have low hierarchy
Smart organisations have low hierarchy, with few positions separating the bottom from the top; not-so-smart organisations have lots of job roles and grades. In smart organisations, most of the workforce produce. In dumb organisations, most people manage and measure.
Smart organisations know their purpose
What does Microsoft do? Or Ford? Or your local school? It’s not hard for outsiders to answer those questions (create software, manufacture cars and educate children). Insiders find it much more difficult. They lose sight of their fundamental purpose. A smart organisation knows its business — and organises around it. The smart software company organises around its software engineers; the smart school around its teachers; the smart hospital around its doctors and nurses. I don’t mean that other people don’t matter. School administrators and school janitors are important but everyone needs to understand the fundamental purpose of the school.
Smart organisations are digital
Bill Gates claimed that the pandemic brought forward the modernisation of work by a decade. I think he’s being conservative. Work hadn’t changed for 100 years until we were told to “go home”, in March 2020, with a laptop under our arms and a fresh copy of Microsoft Teams. To the surprise of many senior management teams, it worked. Digital transformation means a lot more than laptops and Teams, but it was a start. Unfortunately, for many, it was also the end.
Smart organisations learn
Google famously gives its workers discretion over 20% of their time to pursue personal (work-related) projects. It’s the exception. Most organisations consider learning to mean on-the-job training or highly focused professional development. A smart organisation has organisational learning built into its processes. This means that everything is evaluated: every project is reviewed, every lesson is learned, every process is lean.
Smart organisations are data-driven
Every organisation claims to be data-driven but the reality is that most aren’t. Of course, they know their bottom- and top-lines but a truly data-driven organisation means everyone in the organisation thinks in terms of data. It also means that everyone has data skills, not just a small team of analysts handing down wisdom from on-high. Data-driven doesn’t mean data-dictatorship. Data informs decisions; people make them.
Organisational IQ
There’s not an IQ test for organisations, as there is for individuals, but there is a set of characteristics you can associate with smart organisations.
I’ve tried to put the characteristics into some kind of order. They’re all important but some more than others. I think three things matter most: focusing on the purpose of your organisation, recognising and valuing talent, and giving people the time and tools to innovate and create.
You could create a scorecard from these characteristics to derive some sort of organisational IQ but I’m not suggesting that. If you did, you’d finish up with the usual bell curve of the normal distribution, with most organisations sitting in the middle, displaying some of the characteristics of the high IQ organisation. The Flynn Effect identified rising IQ in people, and I think organisational IQ is rising too — and not just because the workforce is getting smarter. Many organisations are trying to work smarter, and are actively trying to change.
Why bother?
There’s a cost to being smart. Talent isn’t cheap. Management likes to manage. People like promotion and titles. Complicated processes look good. Meetings feel productive. So why bother?
People prefer to work in smart organisations. They like the trust, flexibility and creativity that comes with it. So what? Who cares if people like their work? Work is about providing products or services, not keeping the workforce happy. There are good business reasons. For one thing, smart organisations attract (and retain) talent. The pandemic has made people realise that work will not love you back, and re-evaluate their lives. I believe that smart organisations create better products and provide better services.
Automation and AI is gradually replacing routine work — leaving humans to do the creative work. In the long run, machines might replace us all but for the foreseeable future your organisational IQ will differentiate you from the rest.
