XX.XII. Management Cycle

The 12th system architecture pattern: The mechanism of running business
Dr. Albert Künstler

the previous guides we saw two converging streams: customer acquisition and supply, the mechanism that almost every Business has to acquire clients and deliver value. Now we will explore how this mechanism is being coordinated.

Management is a set of cyclic activities of coordination and decision-making at different levels, aimed at prioritization of high level strategies, planning of mid-term activities, and efficient use of existing assets on a daily basis. For brevity’s sake, we will cover the lifecycle management in the next Asset Lifecycle guide, and will focus now on general principles of management.

Research landscape of Management Cycles

A well-designed and maintained management mechanism is a system of connected cycles of different duration. The Cycle architecture has already been discussed in a separate guide. It is recommended to take a look so we could save time not repeating the main particularities, features and flaws of the cyclic processes.

The simplest management cycle involves two sides: the manager and the resource (asset, machine, people, money, etc.) that is being managed, and also consists of 3 elements: Plan-Do-Check. This is the elementary building block for more sophisticated management structures. Such structures may have more sides and more layers of management. Their steps may depend on the type of resources under management.

Examples: Among the most known management frameworks are PDCA cycle: Plan-Do-Check-Act, HADI cycles: Hypothesis-Action-Data-Insight, Lean Startup cycle: Build-Measure-Learn, OODA cycle: Observe-Orient-Do-Adjust, Project cycle: Initiate-Plan-Execute-Monitor-Close, Release cycle: Plan-Build-Test-Release-Operate-Monitor, and many other variations.

We do not want to reinvent the wheel. We want to give credit to all existing management frameworks, however, for the sake of a structured and generalized approach in our study, we will distinguish 5 elements of the cycle: Objective-Plan-Execution-Review-Analysis. The cycle has 3 layers. Upward (strategic) layer — Analysis+Objectives, middle layer (Plan+Review), and downward layer (Execution).

The reason we prefer this architecture over the others, is that the OPERAtional cycle is an ideal building block, a gear for larger structures.

If you are a manager who is responsible for the cycle, you shall connect the upper (“clients”: customers or your own managers) layer where the orders and requests come from with the lower (“servers”: tools, employees, subordinate assets) layer where the value is created. Through this connection, knowledge and resources are transferred from layer to layer.

OPERA: management cycle

Here is your process:

bjectives. At the upper strategic level you work together with the “client” — a customer or the upper management. You work together to synchronize the high-level vision of what should be accomplished. The “client” provides knowledge about their needs and makes commitments to provide necessary resources, including funding.

lans. At the middle operational level you need to come up with the plan. Who will do what? What is the definition of “done”? When are the deliverables expected? In order to create a good plan, you interact with the “server”, the subordinate level, which can be either your direct employees, subcontractors, service providers, suppliers, or other assets that will perform the work. You disaggregate the larger objectives and work items into smaller chunks and decide who of your subordinates will be responsible for which activity. Here is where the next level of hierarchy connects to your cycle. From the perspective of your service providers, you are the “client” and they work with you to synchronize vision, define objectives, and request knowledge and resources required for their smaller piece of work.

xecution. At this lower level, the subordinates and assets do their job. They do what you’ve planned together. They may have their own subcontractors, suppliers, and subcycles involved, or they may do everything with their own hands. If everything is organized the right way, you basically should just wait and not interfere.

eview. Here is time for you to get involved again. Your assets have been doing their job and now they have got some results. You need to review and compare these results against your initial plans and make sure that everything goes as intended. Some unforeseen circumstances may also occur that you need to respond to. If the schedule falls apart, it will be necessary to jump back to the planning step of the cycle and replan, change tasks or responsibilities in order to achieve the high-level objectives agreed with the “client”.

nalysis. At the later stages, after a large chunk of work is done, you assemble the results from several providers and pass it to the upwards for review with your “client”. You did everything possible to meet the objectives and manage your subordinates, but there may be some that you were not able to keep under control. It is not that much important for your “client” how exactly you accomplish the objectives. Your plans are your inner workings, but the “client” cares if the designated objectives have been failed. So, you need to analyze the reasons for deviations and adjust the objectives and expectations of your “client” accordingly.

Thus, every management cycle is a coordination between the upper level with their expectations, vision and objectives, and the lower level with their performance and motivation. When you are in charge of rotating your wheel of the mechanism, your attention is to provide clarity and resources to your servers, transparency and results to your clients, and fast response to unwanted events.

Multilevel management architectures

A growing business faces the need of designing, implementing, and improving their management systems, which can become a real challenge when a new level becomes necessary.

For example, a small startup may be quite effective being one united team with a single management cycle until the number of people in the core team is 5–9 people doing the most work.

Growing further requires separation of teams, each of which having their own cycle and a second layer of management and synchronization between teams. The leaders of the group are now involved in both organizing their cycles with their direct subordinates and taking part in coordination cycles with the central management and each other. This two-layer structure may exist until the business grows to 60–90 people, when another layer of management becomes necessary.

Being at that size means that the company already found a profitable business model and there are repeatable customer acquisition and production/service processes. Further growth depends on how successfully the company can reach out to new, distant sources of demand and how well it can standardize its operations and maintain quality. When the processes are standardized and at the lower layer cycles are pretty much similar, that gives a huge boost for scalability and can bring the company to hundreds of people.

Further growth requires more than one profitable line of business, several products at different stages of their lifecycle, and co-existence of several business models inside one company. That requires a growing number of management layers and increasing complexity.

Let us briefly consider several common multilevel architectures specific to different business models and management approaches.

Centralized hierarchical architecture

The centralized architecture is a very old and natural form of management having origins in military organization of armies, chiefdoms, clans, and absolute monarchies. The central node of this structure accumulates the power, knowledge, and resources of the entire organization. The subordinate units have less power, less resources, and less information. In such architecture all main decisions are made at the central node, the head office. The subordinate levels receive orders and resources and according to these objectives must develop their plans and accomplish the business objectives imposed from above.

In a centralized business model, the functions are controlled by the central office. Sales and marketing function executes the Customer Acquisition function, while Operations take care of the Production and supply chain and Service cycles. These functions obey the central office, and are quite often in a feudal conflict with each other. The central office may be very efficient in accumulating power and resources and conducting massive decisive actions. However as the company grows, the central office can easily lose sight of the changes taking place on the ground, wallow in bureaucracy and be paralyzed by feudal contentions.

Such hierarchical structures may exist for ages especially if they dominate in a geographical niche and their core business model does not suffer much from competition.

Federated architecture

The federated architecture is a multi-level management structure with higher autonomy of the subordinate nodes. The central node is still important for synchronization but it does not have full control. The power, knowledge, or resources are spread across the nodes and neither of these nodes can or want to accumulate and play the dominant role. Although some decisions are made at the central office level, most of the autonomy lies with the subordinate nodes, as they are well knowledgeable of the local geographic or niche specificity.

This architecture becomes more sustainable in fragmented markets and in situations when expertise is concentrated in the hands of local performers, not in the central office. This is opposite to the hierarchical military practice where the generals are superior and more knowledgeable than recruits who do the hard work. In professional services, a university, a merchant republic, or a lawyer’s guild, the expertise is not centralized, but distributed. The central management is incompetent to effectively specify who needs to do what. Thus such structures are driven by synergy, shared responsibility, and the need for unity in the face of larger challenges.

Platform architecture

One more notable architecture is a platform, the decentralized structure with very rigid standards in a narrow area of operations. The platform is not a governing, but very powerful underlying structure. Platforms are a power from below. The platform does not give orders, what you need to do, but rather specifies what rules you need to follow if you decide to take advantage of the platform.

Examples: The municipality, the power grid, and the operating platform vendors do not give you direct orders, but if you decide to open business in the local area, consume electricity, or use a software platform, you will be very limited by the rules imposed by these platforms. This is a “take it or leave it” game, where you have no choice but to accept the terms or abstain, which may not be in your best interest.

Platforms provide you a service you can’t refuse, which makes them very powerful without dictating you the objectives. You are free to choose what you want to do, but not quite free to choose what underlying tools you employ. Of course, platforms can not push too hard and it is always a compromise of convenience and freedom, but the platform is one of the most scalable and desirable architectures for most ambitious businesses nowadays.

Problem Analysis

If something went wrong during the Execution phase of the Management cycle and you discover it timely at the Review step, your responsibility is to rePlan and find another way to achieve the Objectives. This is exactly what managers are expected to do.

However, the Objectives might not always be accomplished. For that there might be three possible reasons, and that is why you do your Analysis:

  1. The bar was too high. If your analysis shows that the objectives were beyond reach, you need to adjust with the “client”.
  2. Unforeseen circumstances or unwanted events had occurred. Again the objectives should be reconsidered. Also, you need to think about how such unwanted events may be mitigated next time.
  3. The performance of your assets was below expectations. This performance is your responsibility, so as a manager you should analyze further and uncover the necessary improvements.

Analyzing underperformance and failures

When the assets under your control did not perform as expected, this is another important area for your analysis.

Incompetence of subordinates. In case of a failure it is easy to blame the subordinates, but that is short-sighted. If you are a manager and you have to work with less capable subordinates, you should be providing adequate measures, such as more detailed Planning, descriptions of expected results, more frequent Reviews, and more careful expectations management on Objectives with the “client”. If you work with a new resource that you have never worked with before, it is your responsibility to manage the steps of the lifecycle, including assessment, set up or training of a new resource, as well as a necessary duplication and reserves.

Poor condition of an asset. Even a resource that performed well before can degrade over time or lose performance. It is your responsibility to keep your resources in proper working condition. You must be aware of the state of your assets and take care of cleaning, repairs, and upgrades of your tools, and training, awareness, and motivation of your people in order to reduce failures.

Complexity and risks. A complex task requires many steps, alignment of all involved elements, and a little bit of luck. A failure may be caused by even a small but unfortunate mistake or coincidence. In such situations, unforeseen failures may occur. But a wise manager should have thought about possible events and have a plan for abnormal situations. When prepared, the failures can be addressed with alacrity. Agility in responding to an unfortunate mistake speaks in favor of the leader in the eyes of both clients and subordinates.

Uncertainty and novelty. When you do something for the first time or act in an uncertain environment, you yourself can not be well-prepared. A lack of confidence interferes at all stages. Objectives may well be unattainable, Plans unrealistic, and Reviews blind to the harbingers of a failure. In these situations, failure is not just the most probable, but also most important outcome. Wise managers must change their mindset and plan with multiple margins. They should deliberately organize experimental activities in the gray zones. Those will help encounter failures and explore limitations. And when the time comes for a mission-critical task, they are ready already.

Do we need more meetings? More documents?

Management is done through decision making and knowledge transfer. Adjusting vision and order objectives require conversations with the upper level, planning and review requires conversations with the lower level. This conversation may be done through meetings or documents.

The balance should be kept. When meetings and documents are not enough, everyone is starving for transparency and information. When meetings and documents are too many, people get overwhelmed.

There is no golden rule of how many meetings are needed, but here are some general ideas:

Keep a balance between meetings and documents. Verbal communication is faster and more emotional. Written communication is more accurate and scalable.

When people are disorganized and dispirited, add more meetings to synchronize vision.

Management in a rapidly changing environment requires more frequent meetings and the ability to react to those changes.

Less competent resources are easier to find but harder to manage. They require more frequent reviews and feedback.

More mature and reliable resources are hard to find or develop, but easier to manage.

When people are overwhelmed with constant distractions and meaningless communications, reduce the frequency of meetings and the number of people in one meeting.

When everyone is busy and has no time for deliberation, be bold enough to make decisions without having everyone’s full involvement and approval. You are responsible for results, not meetings.

If you have not spent enough time on planning, you will spend more time on review and even rework.

If you have not spent enough time on specifying vision and objectives, even with a good planning and execution, some of the results will go nowhere as they are not aligned at the strategic level. This shows the difference between doing the things right, and doing the right things.

Leveling guide

Management culture usually goes through several levels of maturity which we will associate with our 4 level model:

Ad hoc and micromanagement. Ad hoc management can be well called a Placeholder because there is no actual management cycle. The team is managed spontaneously, on the energy of a superhero leader who acts reactively. When a new challenge or opportunity arises, the manager rushes to solve it followed by a few acolytes. Such superhero leaders keep the vision in their head, without trying to harmonize and coordinate it with other participants. Not devoting enough time to Planning and Reviews, they have to do half the work themselves and blame their stupid assistants who do everything wrong.

Plan-Do-Check management. Things get better when Planning and Review activities take up persistent slots on the work calendar of the manager. The leader understands his role of getting things done by the hands of their subordinates, not their own hands. The subordinates do their job driven by fear of failure and punishment, without understanding the strategy, but trying to please their boss. It is still Quick & Dirty, but many organizations and groups remain on this level for years.

Regular management. Larger and more mature companies establish Good Enough management processes with several layers, clear responsibilities, synchronized calendars, and repeating daily, weekly, monthly, quarterly, and yearly cycles of different processes and decision making activities. Good management practices define levels of management and coordination procedures, as well as rules for budget allocation and empowerment. Managers not only distribute tasks, but also work on strategy, synchronize and update vision and Objectives, which gives more autonomy and flexibility for subordinates. Regular Analysis and improvement of the processes allows the companies to stay in business even in times of trouble and react to market shocks and competition.

Organized self-organization. The most remarkable State-of-the-Artmanagement structures are able to combine the hard power and rigidity of hierarchy with the soft power and resilience of distributed autonomy. The proper combination of freedom and discipline can drive miracles and keep multiple proactive and ambitious leaders united working in concordance to achieve amazing results. This balance is hard to find and maintain. It requires a lot of wisdom and willpower. But those organizations able to design such management structures become legends in their industries.