Change is a constant factor in the universe, both in large and small doses. In a broader sense, humanity and civilization change to adapt to different elements, such as the environment, political upheaval, or large-scale conflicts. Even human consciousness can change—the way we think today is far different than the way our ancestors thought.
In a business sense, change is necessary for a company to keep up with consumer trends and demands. The products and technology we use today are miles beyond those made a hundred years ago, and business organizations are much different as well.
That said, change can feel intimidating or overwhelming, particularly for a company that is well-established. However, without change, the business could stagnate and fall behind the competition. One way of looking at how a company can change is to pay attention to its organizational paradigm. Then, based on various factors, executives and leaders can determine whether a paradigm shift is necessary.
What does that all mean? Let’s dive in and explore the mechanics of organizational paradigms and how to change them.
What is an Organizational Paradigm?
An organizational paradigm is a collection of norms, values, and practices that encompass the way a business operates. A paradigm encompasses everything, including internal and external environments, people, technology, and processes.
Think of organizational paradigms as machines. The paradigm is the collective inner workings of that machine. If you look “under the hood,” you’ll see how the mechanisms work from top to bottom (aka, the organizational structure of the business).
It’s imperative to recognize that a paradigm is more than just a business model. While a business model is an overview of how the company makes money and operates, a paradigm is both broader and more detailed.
That’s also not to say that a paradigm has to include every aspect of the business. Instead, you can look at it as a set of principles and operational components that guide the company, which can be applied to different individuals and departments.
To get a better understanding of paradigms, let’s look at some examples.
Types of Organizational Paradigms
One of the founders of the concept of organizational paradigms, Frederic Laloux, came up with a color scheme to describe different types of business structures. There are six different options, so let’s look at each one in more detail.
Also, the color doesn’t necessarily mean anything. For example, a red business organization is not necessarily better or worse than a teal one. However, if the current hierarchical organization isn’t generating the right results, a company can facilitate a paradigm shift to a different color to adapt.
Red Organizations
Red paradigms are much more direct and rely on managers and executives to keep workers in line. Rather than creating a sense of autonomy within the organization, managers have control over most or all aspects of the business.
This kind of paradigm thrives in chaotic environments because it’s highly reactive and excels in short-term planning. For example, an event-based company may use this kind of paradigm. Since workers are temporary or seasonal, it’s not conducive to training them for full autonomy. Instead, event managers must call the shots and adapt to changing situations by directing individuals where they’re needed most.
Amber Organizations
Amber organizational theory relies on stability and structure—the opposite of the chaotic energy used in a red-type business. In this case, there is a clear chain of command, and those at the top value individuals who can fit within the rigid hierarchy.
Amber organizations are also less willing to adapt than other types of businesses. Success depends on what worked in the past. While it’s possible to change the company’s trajectory, doing so requires realignment of the entire structure from the top down.
Many organizations and corporations would fit within the Amber organizational model, especially those with a long history. Typically, if a large corporation wants to try something new, they practice pilot programs within specific departments before implementing those changes company-wide.
Orange Organizations
With an orange organization, competition is the key to success. Rather than relying on what worked in the past, an orange business looks at how it can beat its competitors to achieve specific goals. In some cases, this system may rely on taking over other businesses to capture their market share.
Many startups would fall into the orange category, particularly those in the tech sector. Innovation is essential to overcome a crowded marketplace, and when a startup has limited funding, it has to be lean and competitive to get ahead.
Green Organizations
A green organization would have a traditional pyramid structure, with executives at the top and workers at the bottom. However, rather than a direct, top-down approach to management, a green organization focuses on empowering those at the bottom.
Generally speaking, a green organization focuses on fostering a strong company culture so individuals can move up the pyramid and grow with the business. While turnover is inevitable, the primary goal is to create higher-quality employees to push the company forward.
Some newer corporations take this approach and have clear paths for individual workers to rise through the ranks. Overall, the goal is employee retention and development. Having better workers means the business can thrive during challenging periods.
Turquoise Organizations
These kinds of businesses don’t have a pyramid shape since everyone is part of the same team. These organizations are fueled by evolution and growth, and leaders share power with everyone within the company. While there is some hierarchy, it’s not as rigid. In some cases, workers may have multiple job descriptions to help the business adapt and thrive.
Typically, smaller companies and startups can fit within this color scheme. Once a business reaches a certain size, it’s much harder to blur the lines between hierarchies, especially when there are many low-level employees.
Teal Organizations
This organizational structure is similar to turquoise, but there isn’t as much power-sharing. Instead, the company tries to grow and evolve as necessary to reach its objectives. The hierarchy system is a bit more fluid, but there are still divisions between workers and managers.
Some modern companies fall into the teal category, but there isn’t one industry that benefits from this structure specifically. Instead, teal organizations are adept at meeting and overcoming challenges within their market, no matter how large or small.
When is it Time for a Paradigm Shift?
Reinventing organizations doesn’t happen overnight, and there may not be a single inciting incident that triggers a change. For a paradigm shift to occur, there has to be systemic change from one operational norm to another.
While each business is different, some indicators that a shift is necessary may include:
- Stagnant Growth – If the company saw steady growth at first but is now stagnating, it could be using the wrong organizational structure.
- High Employee Turnover – Some businesses have high turnover no matter what. However, if turnover is higher than normal or hurting the bottom line, it’s worth looking at the specific cause.
- Reduced Market Share to Competitors – Competition is another fact of life, and businesses need to stay competitive to maintain or increase their market share. If a competitor is outpacing the company, the paradigm may be the problem.
Again, there is no single indicator or “red flag” that signals when a paradigm shift is necessary. Also, depending on the size and nature of the business, trying to switch to a new organizational structure may be a massive undertaking.
That said, creating this change is often required to ensure long-term success. So, knowing how to approach the subject can help spur new development.
How to Facilitate a Paradigm Shift Within Your Organization Structure
There are a few steps required to trigger and facilitate a successful shift in the way the company operates. These steps include:
- Identifying the Current Paradigm – Before you can make a change, you have to know what kind of organization you have right now. Which color best describes your business? Are you a mixture of multiple colors?
- Identifying the Ideal New Paradigm – It’s not enough to look at a color and decide that’s what you want. The driving factors for a paradigm shift should be broader than just “I like that structure.” How would the ideal paradigm help facilitate growth and success within the company? Will it be necessary to shift to a different paradigm at a later point?
- Identifying the Key Players – For an organizational shift to happen, everyone has to be involved and on board. In some cases, top executives may just have to sign off on an action plan. In other cases, everyone within the company may need to be part of the transition.
- Developing an Action Plan – The details of a paradigm shift will depend on many factors, such as who’s involved and how the organization will run moving forward. One option is to write out how the business is organized right now and how the ideal business should be organized. Then, focus on changing individual aspects to reach the ideal structure.
This process is long and complicated, so don’t assume you can make changes immediately. Also, you may think that one paradigm is best, but it turns out that a different one is better for the business.
Leadership Training Can Help With Your Organizational Structure
To create change within a company, you have to be an excellent leader. Leadership training from Peaceful Leaders Academy can help you achieve your personal goals so you can tackle system-wide challenges. If you’re ready to become the leader you need to be, contact us to schedule certification sessions.
