toward the learning organization: the case of circular re-engineering

Knowledge and Process Management Volume 5 Number 3 pp 158–164 (1998)

" Case Study

Toward the Learning Organization:The Case of Circular Re-engineering

Georges Romme*

Maastricht University, The Netherlands

Recently, researchers and practitioners in the area of knowledge and process management have been movingfrom a largely IT-driven approach to a more holistic, people-focused approach, recognizing that the ITperspective was insufficiently appreciative of the human dimension. This paper deals with circularre-engineering which focuses on the decision-making system as a potentially powerful learning andcommunication infrastructure. Circular re-engineering differs from other engineering approaches in its focus onhuman decision making as the key business process, and is done in two stages. First, a learning andcommunication (or circle) structure is added to the organization’s administrative structure, and subsequently,this new structure is used to re-engineer and re-organize work processes. The case of the industrial companyMatrex illustrates how an organization’s learning disability can be reduced by way of circular re-engineering.? 1998 John Wiley & Sons Ltd and Cornwallis Emmanuel Ltd.

INTRODUCTION

Recently, researchers and practitioners in the area ofknowledge and process management have been movingfrom an IT-driven approach to a more holistic, people-focused approach, recognizing that the IT engineeringperspective was insufficiently appreciative of the humandimension (Bartlett and Ghoshal, 1995; Watts, 1997). Thismay also be the main explanation of the high failure rates ofIT-driven re-engineering projects (Hall, Rosenthal andWade, 1993; Holland and Kumar, 1995) as well as IT-drivenknowledge management projects (Lucier and Torsilieri,1997).

Although the movement to more holistic and people-centred approaches is both necessary and inevitable, theimplications are not so self-evident. A single coherentapproach to knowledge and process management is not yetemerging. This article describes the so-called circular

CCC 1092-4604/98/030158-07$17.50? 1998 John Wiley & Sons Ltd and Cornwallis Emmanuel Lt

approach to knowledge and process management which, incontrast to other engineering approaches, takes humandecision making as its starting point and explicitly addressesthe tension between processes of knowledge creation andthose of managing operational processes. This approachimplies that a parallel learning structure is added to thebusiness management structure, specifically for the purposeof knowledge creation.

Circular re-engineering emerged from the pioneeringwork of a Dutch engineer and manager, Gerard Endenburg,and has been applied in about thirty organizations, mainlyin the Netherlands, but also in Canada, the USA and Brazil.In the next sections, the background and principles of thecircular approach are described in more detail, also in viewof how several companies have applied these principles.Subsequently, the implications of this approach for the stateof the art of knowledge and process management areexplored.

BACKGROUND

Endenburg Elektrotechniek, a company active in theDutch electrotechnical industry, was founded in Rotterdam(Netherlands) in 1950 by Endenburg senior and his wife.Over the years, Endenburg Elektrotechniek’s productsbecame reputed for their quality and reliability. Endenburg

Georges Romme is associate professor in the Department of ManagementSciences, Maastricht University, The Netherlands. He has published widelyon self-organization, strategic change, organizational learning, and neworganizational forms. He is involved in several re-engineering projects inDutch organizations, including a major project in the area of educationalprocesses at Maastricht University.*Correspondence to: Georges Romme, Department of ManagementSciences, Maastricht University, P.O. Box 616, 6200 MD Maastricht,The Netherlands. E-mail: [email protected]

d.

CASE STUDYKnowledge and Process Management

Elektrotechniek currently focuses on the design, production,installation and renovation of electrotechnical installa-tions, control systems, switching boards and electronicinstruments. Its most important customers are companies inthe manufacturing, ship building, offshore, house buildingand utility building industries, both in Europe and elsewhere(Middle East, Indonesia, etc.).

In 1968 Gerard Endenburg, a trained electrical engineer,took over his father’s position as managing director of thecompany. As a condition of accepting this position at thehead of the company’s workforce of some 100 people,Endenburg requested that he be allowed freedom to exper-iment, both technically and organizationally. In the early1970s Gerard Endenburg decided to stop the company’sgrowth in order to give more attention to organizationaldevelopment and renewal. He started to experiment withsome of the ideas he had about decision making andorganizational structures. These experiments were inspiredby ideas taken from the (in the late 1960s and early 1970s)emerging discipline of system dynamics.

The circular method was severely tested during itsexperimental development, also in the context of severalreal crisis situations. In these situations it proved to be anexceptional tool for exploiting local information and exper-tise to the benefit of the company* as a whole, or in themodern management jargon, organizational learning.

In practical operation since the mid-1970s, the circularmodel has progressed beyond the experimental stage and isbeing used rather successfully in organizations as diverse asEndenburg Elektrotechniek, several other industrial com-panies, a consultancy firm, an agricultural company, a chainof hairdressing shops, a high school, and several healthcare organizations in Brazil, Canada, the USA and theNetherlands. All these organizations have reported produc-tivity and efficiency increases of 30–40%, and both workersand managers seem to like working in them.†

CIRCULAR RE-ENGINEERING

Circular re-engineering is based on several straightforwardideas, some of which are well known among BPR prac-titioners while others are less familiar. A familiar idea is thefocus on the customer of the business process, particularlyby adopting a systematic and process-oriented approach.Rather unfamiliar is the idea of focusing on human learningand decision making rather than work as the key businessprocess. This kind of mind shift is also recommended in theliterature about organizational learning (e.g. Senge, 1990).

The focus on learning and decision processes also followsfrom a system dynamics viewpoint, which implies that the

The Case of Circular Re-engineering

best solution to important problems will very likely comeout of localness, the collective wisdom of those closest to theproblem, regardless of their formal position or groupmembership (Romme, 1995; Senge, 1990). When theorganization is managed and organized on the basis ofhierarchical principles, circular re-engineering involves thefollowing two steps.

Adding the circle structure

The first and most important step is to add a so-called circlestructure to the existing administrative hierarchy. The ideahere is that a hierarchical work organization as such isquite effective for the purpose of organizing large numbersof people, while retaining clear accountability (who isresponsible for what). The fundamental problem withhierarchy is its learning disability (Romme, 1997; Senge,1990). Reducing the organization’s learning disabilityrequires a focus on communication and learning processes,in addition to the traditional emphasis on work processes.Circular re-engineering thus tries to maintain the strengthsof the hierarchical approach by adding another infra-structure that is particularly geared toward organizationallearning, and thus reduces the burden usually resting on theadministrative hierarchy. In this respect, the circle structureacts as a company-wide communication system which ispermanently available, but only becomes operative if one ofthe participants ‘picks up the phone’ and asks for a meetingof his circle (see Figure 1).

The circle structure, as a learning and communicationinfrastructure, is based on a number of principles. First, eachindividual in the organization belongs to at least one circle,a group of people with a shared work objective. With this

*The development of the circular method in Endenburg Elektrotechniek hasbeen described in detail elsewhere (see Romme and Reijmer, 1996).†Ten cases have been studied in detail. See Romme and Reijmer (1997) foran overview of these case studies.

Figure 1 The circle structure as a learning and communicationinfrastructure

159

Knowledge and Process ManagementCASE STUDY

objective in mind each circle establishes its own policy in acontinuous circular process of leading, doing and discover-ing (see Figure 2). In this regard, leading involves makingpolicy in terms of establishing the boundaries betweenwhich the work process and its outcomes should fall; doinginvolves the actual work process; and discovering involvescollecting quantitative or qualitative measures of how thework is done.

Decision making takes place on the basis of the idea thatcircles are the key learning units in which free and creativeexploration of complex and subtle issues is possible. Theteam-like nature of circles implies that decision makingshould be done in a collegual atmosphere in which allparticipants are equivalent (Senge, 1990). In the circularapproach, this kind of decision making culture is safe-guarded by the so-called decision rule of consent, definedas the absence of argued objections. Note that decisionsabout implementation issues are taken in the administrativehierarchy, and are therefore largely taken on the basis of theprinciple of unity of command. For example, in a depart-mental circle the department’s supervisor will have theauthority to decide on implementation issues, within thepolicy boundaries set in circle meetings. In principle, alsoother decision methods (e.g. democratic majority) can beused but in practice there seems to be no need to go beyondconsent as the governing decision rule and unity of com-mand by the functional leader as the decision rule fordirecting work processes.

A very interesting design precept for the circularstructure is the so-called double linking between verticallyordered circles. Double linking implies that in largerorganizations, in which there are at least three hierarchicallevels (executives, management and workers), a circle isdouble linked with the next higher circle, involving atleast one chosen representative as well as the functionalleader. Both the functional leader and circle representa-tive(s) are appointed by consent, but the decision on thefunctional leader rests with the next higher circle whereasthe decision on the representative is taken by the lowercircle. Double linking thus redirects and balances thedownward and upward flow of power between allhierarchical levels. Figure 3 shows how two circles A andB are linked in terms of the process of leading, doing anddiscovering in each circle. The functional leader of circle Arepresents the link between the doing stage in B and the

160

leading stage in A. The chosen representative(s) acts asthe link between the circular process in A as a whole andthe discovering stage of circle B.

Re-engineering business processes

In most cases the circle structure is created on a preliminary,try-out basis. Subsequently, it can be used as a communi-cation and learning infrastructure to redesign andre-engineer business processes, which in turn may also leadto changes in the administrative hierarchy. The key advan-tage of creating a circle structure before starting to work onbusiness processes is that the information and expertiseneeded is more easily obtained and exchanged throughoutthe organization. Moreover, this approach also acknowl-edges that human productivity and creativity is the drivingforce behind any business process.

The general management circle is the group of peoplewho typically start up the re-engineering project, in somecases supported by a temporary project team that reports tothe general circle. Being located at the centre of thecommunication and learning system, this circle has access toall local expertise and information flows, and in addition,can secure the support of the top circle during critical stagesof the re-engineering process.

The instrument used for diagnosing and restructuringbusiness processes is a straightforward process model, basedon the well-known input–transformation–output division.This model can be learned and applied without much priorknowledge in the area of BPR. There are four key steps inreorganizing a circle’s business processes:

(1) Formulate the circle’s goal. A shared goal serves as thebasis of existence of the circle. Goals should be set by

Figure 2 The circular process of leading, doing and discovering

Figure 3 Double linking between circles A and B

G. Romme


consent of the circle’s membership, and must be reviewedregularly to be sure they are leading to the desired results.A well-formulated goal meets the following criteria: thedesired result (service, product) is clearly stated; how itdistinguishes from other aims must be included; and the‘customer’ must be able to recognize and understand theformulation of the goal.(2) Design the work processes needed to realize thatgoal. Regardless of how complex the organization is, it canalways be organized by means of the simple principle ofinput–transformation–output. The input, transformation andoutput stage can in turn be subdivided in three similar steps,which leads to the kind of general work process modeldescribed in Figure 4. This subdivision is of great practicalvalue, and can be repeated as often as necessary.(3) Design a network of tasks to realize the work process. Thisstep adds the circle process to the series of tasks identi-fied in step 2. Adding the circle process is necessary inorder to guide and manage the transformation, or work,processes. Without the circle process, management andintervention will be haphazard, leading to lower pro-ductivity and less added value for the internal or externalcustomer. The connections and relationships betweenactivities form a network of doing, discovering and leadingtasks.(4) Delegate the tasks in the network to members of thecircle. The last step is to delegate the tasks to circlemembers (or other resources). Delegation takes place


periodically in circle meetings by consent decision after anopen discussion.*

CIRCULAR RE-ENGINEERING: THE MATREXCASE

One of the organizations which applied circularre-engineering was a medium-sized industrial company,Matrex Spuitgietmatrijzen, located in the south of theNetherlands. This case is particularly interesting because there-engineering process was done in a crisis situation, whichnormally leads to the adoption of turnaround managementrelying on a top-down approach with few opportunities forparticipation by employees.

Matrex is a company producing industrial matrices whichare tailor-made for companies using these matrices toproduce components for a wide range of products. In theearly 1990s Matrex was confronted with the threat of anumber of new competitors located in Eastern Europe. RuudGeboers, the CEO of Matrex who was highly involved inmanaging operational activities on a daily basis, realizedthat Matrex’s learning capability was underdeveloped,which in turn made Matrex extremely vulnerable withregard to (new) external threats. This situation was

*For these decisions a well-tested procedure is available from the author.

A. Input process: The determination of the exchange (relation)B. Transformation process: The generation of exchange objectsC. Output process: The exchange.

A. Input process: The determination of the exchange (relation)

1. Searching/finding the exchange partner2. Mutual consultation and adjustment in order to formulate the exchange (relation)3. Verification and confirmation of the exchange agreement (e.g., in a written contract)

B. Transformation process: The generation of exchange objects

4. Creation of conditions for the generation of exchange objects (e.g., production planning)5. Generation of exchange objects (e.g., producing, serving)6. Internal verification and confirmation that exchange objects meet the specifications established in step 3 (e.g., internal quality control)

C. Output process: The exchange

7. Creation of conditions for the exchange8. Actual exchange of objects (e.g., delivery of products)9. Verification and confirmation of the exchange

Figure 4 Work process model: the goal-realization process (in 9 steps)

161


aggravated when several of Matrex best engineers left thecompany in order to start their own companies. Geboersdecides to hire a consultant with expertise in circularre-engineering, in order to develop Matrex’s capability fororganizational learning.

A few days after the consultant’s first visit to Matrex, itbecame clear that the financial situation of the company wasextremely critical when the company’s bank announced itsplans to present a bankruptcy petition against Matrex. RuudGeboers nevertheless obtained additional financial supportfor a ‘last shot’ by way of circular re-engineering. Theconsultant therefore adopted a ‘quick-and-dirty’ version ofthe circular approach in order to get the company out of thefire zone. In a few hours, a general management circle andseveral unit circles were created. The consultant chaired thefirst meetings of the general circle, in which she explainedthe basics of working in a circle meeting while immediatelyalso starting up a discussion of the problems Matrex wasfacing. In the role of chairperson, she also worked with theother circles in a series of six meetings in order to superviseand train them in solving problems in their own units andthe interaction between units. Within several weeks thisapproach resulted in substantial improvements in Matrex’swork processes, also in the work flow between differentunits.

An important step in this episode was the diagnosis ofthe work flow from acquisition of orders to customerservice. Using the process model outlined earlier, severalproblems were identified. For example, too often matriceswere manufactured that were not according to the specifi-cations agreed with the customer, and the productionplanning was not done effectively. The general managementcircle decided to adopt a project-based approach with thecircle structure as the main starting point.

An even more important result involved the leadershipstyle of the CEO. In the period of the first circle meetings,he almost immediately started acting differently as amanager. Whereas in the past he tended to be involved asone of the main problem solvers in many operational issues,he now more easily concentrated on his role in the businesspolicy process in the general circle. The result of the circularre-engineering project in Matrex was a dramatic increase inproductivity as well as the restoration of profitability,within one year after the financial crisis became apparent. Inthe second year after the start of the circular re-engineeringprocess, Matrex also decided to install a top circle,which had not been created yet because in the first yearpriority was given to solving the most urgent businessproblems.

IMPLICATIONS

The Matrex case illustrates how the introduction of thecircle structure appears to stimulate learning and com-munication throughout the organization, and thus to

162

increase the organization’s problem-solving capacity.Circular re-engineering also appears to lead to an effectivecombination of the traditional idea of hierarchy and themore modern idea of egalitarian decision making in teamswhich tends to be crucial for knowledge creation andorganizational learning. The circular approach integratesteam learning processes into an existing hierarchicalstructure, and in this way increases the learning andproblem solving capacity needed for a subsequent re-engineering project (Romme, 1996). This also sheds newlight on the debate between those arguing that hierarchy isthe most important obstacle to the transformation oforganizations toward learning organizatons (e.g. Mills,1991; Peters, 1987; Senge, 1990) and others arguing thathierarchies are necessary and inevitable elements of largerorganizations, for example as layers of accountability(Jaques, 1990) or as structural buffers (Carley, 1992). Circu-lar re-engineering renders this debate largely irrelevantbecause team learning can be effectively embedded in ahierarchical structure. Of course, in many large organiz-ations such as IBM and Philips hierarchical structures haverecently been the source of a great deal of trouble andinefficiency. Problems of excessive layering, crampedaccountability, and low productivity of managers have thusled many companies to redesign and delayer their adminis-trative hierarchies. In other words, hierarchy has beenmis- and overused in these companies, but this does notundermine the applicability of the hierarchy concept in thefirst place.

In this respect, circular re-engineering starts from adialectical worldview, recognizing the need to transcend theeither-or approach prevalent in the West. According toNonaka and Takuchi (1995), many organizations in Europeand North America suffer from the deeply rooted belief in‘false’ dichotomies, such as between individual and organiz-ation, and between hierarchy and task forces. Circularre-engineering thus emphasizes the importance ofcircularity, the ability to switch from a project-basedteam-like structure to the administrative hierarchy, and viceversa. The team-like (circle) structure and the hierarchicalstructure co-exist as two different but complementarysystems.

An important element of circular re-engineering here isdouble linking between circles. For traditional organiza-tions structured on the basis of the single linking pin,double linking requires a complete shift in thinking aboutmanagement leadership. Most organizations in fact neverquestion the effectiveness of the single link betweenhierarchical levels, and perhaps do so because they assumethe two linking functions of leadership and upward feed-back can be combined in one person. The circle structure,however, is a learning and communication system whichrecognizes the fundamental difference between top-down-like leadership and upward feedback and the differ-ent kinds of individual competence required for thesefunctions.

G. Romme


IMPLEMENTATION OF CIRCULARRE-ENGINEERING

Circular re-engineering can only be done with strong topmanagement support and can be misunderstood as arevolutionary tool to be used against management, to ‘getrid of the boss’. In fact, when properly implemented, thecircular approach makes the antagonism between workersand managers largely irrelevant. Circular re-engineeringplaces control of work processes in the hands of bothmanagement and workers, using both formal authority andequivalence as organizing principles.

If implemented with care, circular principles can beintroduced into the organization without disrupting currentwork processes. The first step here is an analysis of thecurrent strengths, weaknesses, threats and opportunities.Does the organization have problems which can be fixedthrough the application of other methods, including otherBPR approaches? If the organization is basically sound butthere is evidence of, for example, miscommunicationbetween departments or a mismatch between marketdevelopments and the organization’s core competences,the situation calls for experimentation with circularre-engineering. In situations in which the organization’sproduct is clearly not marketable, the application ofcircular re-engineering may be too complicated and painfuland experiments with circular re-engineering are notappropriate.

Top management should take the second step by makinga commitment to support the introduction of the circleorganization, at least for the duration of an experiment.Moreover, any violation of the consent principle by topmanagement, especially by using authoritarian managementstyles, will be sensed throughout the organization and beperceived as manipulation.

The third step is to draft an implementation plan whichoutlines a circle structure and circle operating procedures.This implementation plan also includes training and educa-tion of all circles. These training and education activities canbe adapted to local and cultural circumstances or to timeconstraints (as in the Matrex case), and also to the educa-tional level and professional background of the circlemembers. In addition, it is important to acknowledge anyprior experiences with hierarchical or other managementsystems.

LIMITED TRY-OUT

If the organization is uncertain about the usefulness ofcircular re-engineering, it is possible to experiment withlimited try-outs in certain areas of the organization whereeffective delegation and empowerment are particularlyessential. This kind of try-out in a small unit or departmentalso offers an opportunity to build experience with circularre-engineering. When these experiences turn out to be


positive, other units can be introduced into the circularapproach.

When first confronted with the idea of consent decisionmaking in circles, many participants are uneasy because itappears that either reluctance to make objections or anobstructionist’s desire to object to everything can makethe process ineffective. However, experience shows thatneither of these tendencies is a real problem. The solution toboth tendencies is to learn to see objections as positive,indispensable contributions to an ongoing dialogue. Just aswe can learn to obey authority or learn to participate indemocratic processes, consent decision making goes moresmoothly with experience and training. Moreover, the riskof the obstructionist using a ‘veto’ to undermine the circle’sperformance is quite easily reduced by regulations, such as,for example, the rule that if a circle does not reach a decisionon a certain issue in two or three subsequent meetings, thisdecision automatically will move upward to the next highercircle. In practice this kind of rule puts extra pressure on thecircle to solve the problem directly, or to agree on someother procedure to solve it (e.g. by getting help from anexternal expert).

CONCLUSION

Circular re-engineering and other business processre-engineering approaches share the goal of reunifying tasksinto coherent, customer-oriented business processes. However,the actual toolbox used by these approaches differs substan-tially. The received wisdom on business process engineeringtends to focus on work processes and the customer of theseprocesses (Hammer and Champy, 1993). Using BPR tech-niques and information technology, re-engineering workprocesses can thus have a dramatic impact on overallperformance of the organization.

Circular re-engineering, by contrast, focuses on humandecision making as the key business process. This approachappears to solve the classic dilemma between hierarchy andlearning processes. The key step in circular re-engineering isadding a parallel learning and communication structure inorder to solve the learning disability of the organization’sadministrative hierarchy. Thus, the large human potentialthat remains unexploited in most organizations can bereleased more easily when egalitarian learning processes aregiven their own time and place in a circle structure. In sum,circular re-engineering appears to provide an interestingtool which may increase the effectiveness of re-engineeringand change projects.

REFERENCES

Bartlett, C.A. and Ghoshal, S. (1995) Rebuilding behavioralcontext: Turn process reengineering into people rejuvenation.Sloan Management Review, Fall, pp. 11–23.

163


Buck, J.A. and Endenburg, G. (1984) The Creative Forces ofSelf-Organization, Sociocratic Center, Netherlands.

Carley, K. (1992) Organizational learning and personnel turnover.Organization Science, Vol 3, pp. 20–46.

Endenburg, G. (1988), Sociocracy: The Organization of Decision-making, Sociocratic Center, Netherlands.

Hall, G., Rosenthal, J. and Wade, J. (1993) How to make reengi-neering really work. Harvard Business Review, November–December, pp. 119–131.

Hammer, M. and Champy, J. (1993) Reengineering the Corporation—A Manifesto for Business Revolution, Nicholas Brealey, London.

Holland, D. and Kumar, S. (1995) Getting past the obstacles tosuccessful reeningeering. Business Horizons, pp. 79–85.

Jaques, E. (1990) In praise of hierarchy. Harvard Business Review,Vol 68, January–February, pp. 127–133.

Lucier, C.E. and Torsilieri, J.D. (1997) Why knowledge programsfail: A CEO’s guide to managing learning. Strategy & Business,Vol 9, no 4, pp. 14–28.

Mills, D.Q. (1991) Rebirth of the Corporation, John Wiley, NewYork.

164

Peters, T. (1987) Thriving on Chaos, Pan Books, London.Romme, A.G.L. (1995) Non-participation and system dynamics.

System Dynamics Review, Vol 14, pp. 311–319.Romme, A.G.L. (1996) A note on the team-hierarchy debate.

Strategic Management Journal, Vol 17, pp. 411–417.Romme, A.G.L. (1997) Organizational learning, circularity and

double linking. Management Learning, Vol 28, pp. 149–160.Romme, A.G.L. and Reijmer, J.M. (1996) Sociocracy in Endenburg

Elektrotechniek. In Stacey, R.D. (ed.), Strategic Management& Organisational Dynamics, 2nd edition, Pitman, London,pp. 352–365.

Romme, A.G.L. and Reijmer, J.M. (1997) Kringorganiseren enhet dilemma tussen centrale sturing en zelforganisatie. M&O,Tijdschrift voor Management en Organisatie, Vol 51, No 6,pp. 43–59.

Senge, P.M. (1990) The Fifth Discipline, Doubleday Currency,New York.

Watts, J. (1997) Foreword. Knowledge and Process Management,Vol 4, No 1, pp. 1–2.

G. Romme

toward the learning organization: the case of circular re-engineering

Documents