Institutionalized Competing Interests: Part II
Why Do Institutionalized Competing Interests (ICI) Happen and How Can We Resolve Them?
In Part I, I argued that many companies suffer from Institutionalized Competing Interests (ICI).
To recap, I define Institutionalized Competing Interests as follows:
“When the different internal goals, incentives, and power structures within an organization cannibalize each other, preventing effective collaboration between teams, groups or departments.”
Institutionalized Competing Interests mean your people will all be pulling in different directions to impede each other’s progress. One of the most telling symptoms is that everybody is working their butts off, but they are all producing extremely little progress.
The bigger an organization becomes, the more likely it is to see ICIs impeding collaboration and value creation.
In this article, I would like to explore the following questions: why and how do companies end up with ICIs? And what might we do about ICIs?
Let’s dig in!
Institutionalized Competing Interests Start with Departments
Departments, by nature of being a department, have very different interests at heart. A finance department is interested in finance, a security department is interested in security, and so on.
For effective collaboration to exist between departments, it is crucial to have a healthy tension between the various areas of interest and expertise. Departments must possess curiosity and interest in areas of expertise other than their own.
It’s fine when departments have different interests and areas of expertise, which they bring to the table in discussions. It becomes problematic when their department and area of expertise is THE thing they care about, which drowns out and silences whatever others may bring to the table.
In companies suffering from Institutionalized Competing Interests the tension between departments reaches an unhealthy level. The default mode of interaction shifts from collaboration to competition.
Every department is chasing different local optima instead of a shared global optimum. Different departments or groups of people are unable to effectively collaborate because their own interests and areas of expertise are more important than doing what’s best for the business.
In other words: ICIs mean that departments or teams will end up operating in silos. Dealing with unreasonable and demanding counterparts who are disinterested and uncaring about your world is both frustrating and exhausting. It’s much easier to retreat into the bubble of your expertise: the silo.
Why do so many organizations end up with a siloed organization where Institutionalized Competing Interests rule?
The Gravitational Pull of Institutionalized Competing Interests
Organizations are naturally pulled in the direction of institutionalized competing interests because:
Organizations structure themselves around pockets of expertise, also known as departments.
Because we organize around expertise, we interview primarily for possession of said area of expertise.
Because we prioritize that specific area of expertise, we neglect to ensure a sufficient understanding of the surrounding areas of expertise, which is necessary for effective collaboration.
We end up with departments overloaded with narrow expertise that suffer from expertise tunnel vision. These people mostly care about their area of expertise and little else.
Since we have departments that mostly care about their area of expertise, they will push for an organizational system that snugly wraps itself around their area of expertise.
Eww. Why should we deal with the messiness caused by other areas of expertise with which we must interact? Let’s build our own little kingdom. We can keep it pristine so we can do things right from the vantage point of our area of expertise.
However, the problem with expertise is that it rarely exists in a vacuum. When the experts we hire lack understanding of how their work fits in the bigger picture, we end up with departments that care more about their department than the company.
The problem with ICIs is obvious in hospitals. You might have five appointments for something that could have been handled in a single appointment. If only the different departments could understand and coordinate with each other.
Sometimes, hospitals even ignore problems that don’t fit their area of expertise. I stumbled on a telling example from Maurice Kleine on LinkedIn, who described how his sister suffered for 9 months from a problem that was diagnosed in 5 minutes by ChatGPT.
She was diagnosed with a disease that only has 2 specialists in the Netherlands. The disease was not on the radar for the other specialists they spoke to. It didn’t fit their area of expertise, so they passed on the baton to the next department, who also passed it on to the next department, and so on.
In summary, we end up with an organizational system that exhibits institutionalized competing interests as an unintended consequence of hiring for departmental expertise.
Each department works hard for what it cares about without understanding how it fits into the bigger whole. For collaboration to work, you need specialists and generalists, and when hiring, we tend to mostly focus on expertise, and as a result, we’re biased toward specialism and expertise.
Now that we’ve painted a picture of the suffering caused by institutionalized competing interests, what can we do about it?
Teams and Departments Must See The Big Picture
Departments go for local optimization not because they don’t care about the company, they definitely do. But if you’re unable to connect the dots and see how your work connects to the bigger whole, then you’ll be stuck making decisions from your limited perspective and doomed to perform local optimization.
It’s like a plumber who suggests the best location for a kitchen in a restaurant based on what will make their plumbing job the easiest, without understanding the impact of the kitchen location on the whole messy and stressful affair of running a successful restaurant.
Companies must have experts who also possess a broad understanding of how your business creates and captures value, together with how the different areas of expertise relate to each other and how important they are for success. We want to be exploring and chasing a global optimum together, not competing and chasing our own local and competing interests.
I want to stress that you don’t need experts who are experts at everything. They must have enough expertise to understand where others are coming from and the implications of what’s happening in their area of expertise on the big picture. Through mutual understanding and rapport, we can prevent being trapped in what works best for one isolated area of expertise.
The problem with only hiring for expertise is that if they don't have sufficient understanding to integrate the expertise of others, then you're doomed to perform local optimization.
The end result of purely focusing on expertise: you believe you’re doing a magnificent job, but you’re actually doing a terrible job.
Think of the Security Officer who is being a pain in the ass because they only look at the world from their little fiefdom. Or the unreasonable marketing department wants to know the exact due date three months in advance before a feature will go live, as otherwise, they won’t be able to do their job.
Collaboration is difficult, and it’s doubly difficult when you limit the playing field to only what you care about based on the misguided belief that your expertise is the only thing that matters.
In system thinking, the POSIWID acronym means "The purpose of a system is what it does" (POSIWID). The acronym explains that one can’t understand a system's purpose from the intentions used to design it, as the intentions may produce very different results.
Many organizational systems hire for expertise. The intent is good. We want to make sure people are experts in their specific area. However, organizing around expertise means they actually end up with organizations that prioritize the comfort of their expertise over the discomfort of collaborating with others in their areas of expertise.
Organizations organized around pockets of expertise have a natural tendency to focus on resource efficiency over flow efficiency. Resource efficiency can be improved in isolation, while flow efficiency is difficult to improve in isolation. It’s way more uncomfortable and disconcerting to collaborate on improving flow efficiency as it means descending down from our ivory towers - the comfort of our silos and pockets of expertise.
Yes, we all bring our unique areas of expertise to the table, but what we should care about the most is what all our combined efforts will put on the table for our customers in a way that also works for the business. It’s not only about efficiency but also about effectiveness.
And when you take that perspective, our area of expertise definitely isn’t good enough. It’s just a starting point for collaboration.
If we only want to do what’s best and most convenient for our department, we can be sure we won’t be doing what’s best for our customers and the business.