“We have a systems problem.” 

Confident skilled businesswoman explain marketing data paper report financial results analysis to multi-ethnic colleagues, company staff gathered at meeting brainstorming thinking strategizing concept
August 2, 2022 | Leadership and Organizational Development

In an interview with Janice Köser, Academy Manager at Staufen AG, Niels Pfläging says that the systems that prevail in many companies and organizations are outdated and detrimental to the need for learning. He appeals for leadership at eye level and a return to the lean movement that began in the 1980s. 

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Cell Structure Design 

The business economist would like to see companies that are future-oriented and resilient become more agile and radically self-organized organizations. In his book “Cell Structure Design,” which he wrote together with the economist Silke Hermann, he explains how such organizations can emerge: According to the authors, this requires a stringent, principle-based social approach, which they call “social technologies.  

Their second book, “OpenSpace Beta,” provides instructions on how to implement change across the entire workforce within 90 days, without resorting to the conventional change management process. The duo’s soon-to-be-released third book is also about equipping companies with tangible tips on how to transform themselves. 

Decentralization is key 

Markets have undergone extremely rapid change over the last few years, and they have become considerably more volatile and complex. “Quite a number of organizations continue to try to counter this fact using the ‘mechanical model’ commonly used in the past,” explains Pfläging. As a result, he does not see the problem as lying with the employees, but instead clearly rooted in the system: The inherited structures do not allow enough space for the mind to flourish and for new approaches to be introduced. “The major challenge of our time is that we can only manage market complexity if we give working people back the power to make decisions,” says the business economist. Only this form of decentralization can effectively counter the current dynamics of the market. 

BetaCodex network for actual change 

In 2008, Niels Pfläging founded the BetaCodex network: “This is a movement for those who have the will”, i.e. for people seeking a meaningful alternative to old organizational forms with centralized control mechanisms. According to Pfläging, the best people are leaders, managers and entrepreneurs who, by virtue of their function, can make decisions on how to change their organization. Change that really makes a difference and does not simply gloss over a problem is profound. “To achieve this, we really have to be willing to work on the system,” Pfläging emphasizes. 

This willingness costs energy because in most cases the change has to be accomplished on the fly. In addition to the daily tasks and challenges, initiating and sustaining this kind of change is an incredibly difficult undertaking.  


You become more flexible by decentralizing decisions.

Niels Pfläging,
Speaker, consultant, entrepreneur, author

You become more flexible by decentralizing decisions.

Niels Pfläging,
Speaker, consultant, entrepreneur, author

Between the market and internal control 

Markets that are increasingly more complex and dynamic are a huge challenge for companies. Typically, companies tend to approach the numerous, widely diverse demands by applying a structured internal control process, for example with 

  • Budgeting
  • Corporate planning
  • Strategic management
  • Target agreements
  • Incentive systems
  • Target-actual comparisons, and
  • A variety of different rules and guidelines

However, prescribed mechanisms quickly lead to a lack of flexibility. “Ultimately, this means that everyone is trapped between internal control, which in many cases goes nowhere, and the power of the market. It simply has to fail,” says Pfläging. The more rules in place, the more bureaucratic and rigid the company’s processes become, and the harder it is to respond adequately. This is where Pfläging and Herrmann come in: “You become more flexible by decentralizing decisions.” In the book “Cell Structure Design,” they explain in a comprehensive detail that cells, i.e., small teams, are far better equipped to act in a way that is market-driven and thus more entrepreneurial than large, inflexible units. 

This is not a new approach, as it is already the basis of lean thinking. Yet, implementation is still a problem today. Except: Implementation has always been the problem, even today. 

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The effects of the pandemic 

Pfläging is opposed to the widespread view that the pandemic has given development in companies a decent boost. “In fact, I don’t think we’re going to come out of this pandemic smarter than we went in,” he explains. On the contrary, he believes that a renaissance of thinking is still necessary, a speeding up of learning, in schools and at other educational institutions, but also in companies. Here, the pandemic could at best provide a push. In large corporations, he adds, what needs to be done is for thousands of people to learn things at the same time: “This is a major challenge of our time, given that the world is undergoing significant change yet our thinking is still lagging behind when it comes to complexity and dynamism.” 

dm Drogeriemarkt, Toyota and Handelsbanken 

 According to Pfläging, some excellent companies already exist where management is dialog-based and at eye level: Götz Werner, the founder of the drugstore chain dm, who passed away a few months ago, structured his company in this way. Taiichi Ono provided a comparable structure at Toyota, and Jan Wallander at Svenska Handelsbanken. In each case, the company’s organization is radically decentralized, and branches make many of their own decisions. “This has been implemented consistently there and with fantastic performance transparency, just not in an encroaching, non-patriarchal way,” Pfläging emphasizes.  

Patriarchal organization in the company is a relic 

Patriarchal educational methods in families and schools were quite common until well into the second half of the 20th century, not only in Germany, but are now largely a thing of the past there. Pfläging believes that the last strongholds of patriarchy, which make learning and self-determined work impossible, are actually businesses. A culture of fear is primarily responsible for this, he says, fear of making mistakes and, as its consequence, fear of responsibility. Fear, however, impedes learning by standing in the way of further development.  

It’s time for a new culture of learning 

For companies to be able to meet the challenges of volatile markets, Niels Pfläging is convinced that there must be a fundamental change in how companies are managed. Leadership at eye level is absolutely essential. This is the only way companies can be agile and capable of taking action regardless of their management – no matter who is CEO at the time. Creating the space and freedom for a new culture of learning is only possible by eliminating superfluous hierarchies and rules. Examples of how this can be done include dm, Toyota and Svenska Handelsbanken.  

Moderation Janice Koeser

Janice Köser

Manager Academy

Gesprächspartner

Niels Pfläging

Speaker, Consultant, Entrepreneur, Author

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