Optimization

Getting the best results actually obtainable is, or should be, the goal of any organization.  Another way of looking at it is making the whole greater than the sum of its parts.  The larger the organization, the more resources are available to invest in getting those results.  In reality it seems the larger the organization, the more likely that the whole is less than the sum of its parts. 

As an organization grows larger there is a need to subdivide in order to maintain some semblance of order.  When the span of control exceeds the capacity of a leader, control tends to break down.  Therefore the whole is divided into parts; each of which is sized within the tolerance of its leader.  With this division comes a very natural phenomenon: those within the new boundaries are on the same team, while those outside the boundaries are not. 

The leader of the division, or function, or business unit will also very naturally attempt to optimize his part of the organization.  Therein lies the problem, for if you optimize a part, you suboptimize the whole.  Conversely, if you want to make the whole greater than the sum of its parts, you must suboptimize the part.  This principle is extremely counterintuitive to functional or business unit leaders.

The antidote to suboptimization is keeping the focus on the big picture.  Each of the leaders of the parts of an organization must retain at all times a consciousness of the performance of the whole.  This consciousness can be had with a two-pronged effort: 1) transparency of performance throughout the organization,  and 2) rewards contingent on a combination of performance of the whole and performance of the part.  As far as rewards are concerned there is one overriding concern: if the whole has not created the wealth necessary to support rewards, there are no rewards to distribute.