It’s not cash flow, not ROI, not COGS.

It’s actually the length and depth of the human capacity to absorb details.

Why do our documents have executive summaries?  Why do we need to present the “50,000” foot view?  Why do managers always strive to get out of the “weeds”?

It’s because attention spans are finite and humans can only keep so much information in their heads at once.

Let’s take a real world example involving trash pickup. (Our town recently implemented some changes to our garbage pickup, which were top of mind this weekend).

When the proposal to modify trash pickup was presented to our town government, I bet it looked something like this (sliced at each level of granularity).

Objective: Save money on the town budget

Strategy: Lower cost of labor and reduce injuries (lowering cost of injury leave) for trash pickup workers

Implementation: Give every house in the neighborhood a new rolling trashcan that can be picked up by a mechanical arm attached to the trash truck.  Attach a mechanical arm to the trash truck that automatically lifts and dumps the trash into the trucks. Reduce trash pickup to 1x per week.

Implementation details: Drag the carts to the curb and hook them up to the arm on the end of the truck, press the lever.  Drive to the next house.  Works best if you give the can one last shake before letting it down.

The objective was set by the town Mayor – the highest level stakeholder who oversees many departments at once. The Mayor only has the mental capacity to know a little bit about each department, but he does know that he needs to save money on the town budget. If you were to talk to the Mayor about the implementation details of this particular cost cutting measure – it would be completely lost on him. He doesn’t have the time or attention to learn about anything but the highest level objective and strategy.

Next is the General Foreman who is responsible for the department of public works in our town. He picks up where the Mayor left off. He understands the strategy and proposes an implantation (tactics) that support the strategy.

Then is the head of garbage pickup who understands the implementation and develops the implementation details to train the team of garbage workers.

It’s all one beautiful waterfall where everyone knows exactly what they are suppose to be doing and no one has to keep more information in their heads than they can handle.

Human mental capacity – what an incredibly powerful variable to master.

The Most Important Business Variable
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  • I frequently hear it referred to as “bandwidth” as in:

    “I don’t have bandwidth this quarter.”

    “I need to cut down on some of this stuff, I don’t have the bandwidth I need for other things.”

    I regard the key purpose of organizations to be chopping up work so that it’s “bite-sized” – I don’t know what your work is like, most of the time, but what I see is that a lot of work goes on just so that an entire project can be broken down into small bits of work each of which can be done by one person. In a surprising number of cases, the work is broken down such that the “worker” only has to spend ~20 minutes looking something up and writing an email.

    Note: I think this is why hierarchies are so effective in organizations, and why flat organizations that don’t address this rarely work out very well.

  • Fun thought for you:
    How do you evaluate the value of “experience”, and the impact of the role?
    On the one hand, experience at something allows you to ignore the extraneous information. Essentially, if you gives you more mental bandwidth to focus on the important things.
    However, that’s a filter. If the world is static, that filter might be useful for a while. If the underlying reality has changed a lot, then the filter is actually a *negative*, not a *positive*.
    Is experience in a company more valuable than experience in an industry, because knowledge about people has a high half life? How valuable is that in a company with high role turnover?
    Are some roles designed to have high turnover, i.e. to require very little bandwidth to do?
    Are more senior roles more flexible, and thus require more bandwidth to do effectively? How do people in senior roles control the bandwidth available to them? How important do relationships become, as a way of increasing bandwidth?
    Are relationships used to increase bandwidth? In what ways? Trust? Ability to predict behavior?

  • Lots of interesting questions here. I like the concept of bandwidth, that resonates with me. Kind of like the entire organization is one efficient network.

    Regarding experience, I think experience can do two things. 1) It can make you more efficient at your current role and therefore allow you to take on more work or 2) it can teach you about what’s going on at the level of granularity above where you sit, and allow you to be promoted in the organization. I think both kinds of experience are important.

    Regarding company vs. industry experience – I usually crib Ben Horowitz in that there are thee kinds of experience that are important 1) Company experience 2) industry experience 3) Vocation/function experience. Horowitz talks about these three types of experience when hiring executives – he says you have to have 2/3 to be successful as an exec – which i’ve found to be true.

    Agree with your point about flat organizations not working in the long term. I think they can sometimes be very effective in the short term thought (e.g. if you’re sprinting against a specific project, flattening the org can make sense to allow for more agility).

    Thanks for the comments.

  • Yes (as usual) I agree with Horowitz as well :)

    Regarding flat organizations – one nice thing about a lack of structure is that **structure become emergent.** So, you don’t get the benefit of a clear hierarchy — but you also don’t inherit a pre-existing structure that might not be appropriate.

    If you reward structure is in place (and good), then you can **learn** the ideal company structure for your domain/industry/problem. People fall into roles, accumulate influence/power. It’s probably the best approach if you’re dealing with a totally new problem domain. The thing is – that reward function has to be **really** good. Or it rewards the wrong things (e.g. grabbing a beer with the project/company lead after work).

    The trick is to transform that into real hierarchy once it happens, otherwise you get some of the horror stories coming out of Zappos (people don’t know who has power, people don’t know what they should do, people don’t understand what’s going on, etc).

  • I’ve heard of emergent strategy. Emergent org is new for me, but I think you bring up a good point. Sometimes it’s best for the org to do its own thing. However structure is a must to productively scale.