What does it mean to have a 'balanced' organisation?

The pursuit of ‘balance’ seems to be an unstated objective of organisations. But what do we mean by balance?

In general use, the term balance refers to equilibrium, symmetry or parity. The classic image of balance is the two pans of a scale weighted such that they are even. Unbalanced scales look wrong and leave us with a sense there is a problem to be addressed. The objective is to match the weights in order to achieve balance.

There is an artistic view of balance that has an underlying sense of poise, grace or dignity. There is harmony between the parts that give rise to the whole. Here, balance might be interpreted as the coherence that emerges from the interconnections between the individual elements. Harmony, coherence and balance arise through interaction.

An image of physical balance can be found in the exploits of funambulists. Tightrope walking (or funambulism) requires the acrobat (or acrobats) to constantly adjust their balance. The tightrope walker offers a view where balance is not an end in itself but rather a means to get to the other side. For the funambulist, maintaining balance involves constant physical adjustment—mostly very small but precise adjustments.

In evolutionary terms, the image of balance is an organism perfectly and efficiently adapted to its environmental niche—it is an image of stability. We might draw on Charles Darwin's wedge metaphor of nature to better explain this sense of balance.

Imagine the ecosystem is like a surface with 10,000 wedges hammered in tightly so they fill all the available space. This is an image of balance and efficiency. A new wedge (or a new species) can only gain entry into a community by driving itself into a tiny chink that forces another wedge out. It is an image of balance through competition—this is an image that is very attractive to business leaders. The weak are replaced by the strong and the inefficient by the efficient.

But it can also be seen as a metaphor about the relationship between neighbours. Each wedge is using resources in such a way that it ‘competitively’ cohabits with adjacent wedges— it is balance through relationship.

Ultimately, balance seems to be an image of stasis or stagnation.

Interestingly, a highly efficient organism that has co-adapted with its neighbours becomes progressively less flexible and responsive to shifts in its surroundings. In a business sense, a shift in technology or consumer preferences or government direction can quickly make well-balanced and very efficient organisation (or community of organisations) look lost and unstable.

The philosophy of balance through efficiency is the one that most underpins modern business thinking. Efficiency assumes stability, control and predictability. It suggests that a balanced organisation has all the capabilities to achieve its goals without unnecessary redundancy.

But in uncertain times, the notion of a ‘balanced organisation’ loses some its practical meaning. This is because the philosophy that underpins balance collapses uncertainty into simple risk—it says there are knowable probabilities about future events that can be projected from past experience. It assumes away uncertainty.

This is not to say the pursuit of stability is wrong; indeed, just as the tightrope walker requires a solid physical foundation to succeed, so too all organisations require a strong sense of stability and continuity. Only, alone it is not enough. In changing circumstances, stability may be riskier strategy than it first appears.

The idea of balance has the potential to influence strategic direction, organisational structure and capability development. But, as I have tried to show, balance is a complicated word. That we need a balanced organisation is a statement of the obvious: why would we aspire to an 'unbalanced organisation'?

Well, we might ask ourselves, for example, to what extent does pursuing a strategy of balance stifle innovation?

A balanced organisation innovates by responding to negative feedback. Negative feedback tells the organisation how far it is from 'equilibrium' and leads to incremental adjustments to maintain balance. In practice, the effect of negative feedback is to dampen the range of behaviour in order to maintain a focus on our predetermined target, goal, objective or KPI. The aim of negative feedback is always to maintain parity with a balanced position. Not unlike the tightrope walker, the organisation is constantly making incremental changes to maintain the balance required for forward movement.

Where does this incremental approach leave organisations in times of change?

A persistent view is that established firms fail because they don’t keep pace with the developments in their competitive business niche. If we continue with Darwin’s wedge metaphor, businesses that become more competitively efficient through new developments are able to use resources more efficiently and can expand the size of their wedge. In doing so, they dislodge underperforming wedges.

But this competitive destruction of organisations doesn't match reality. Again, sticking with the wedge metaphor, research suggests that neighbouring businesses are usually well aware of new innovations in their niche, but they do not have the capacity required to mimic the change when it first becomes available. Mainly, this is because they cannot afford to take scarce resources away from maintaining existing activities.

All the signals tell the organisation to change but the strength of internal processes that support a balanced strategy constrains the organisations ability to adapt. All resources are being consumed in 'efficiently' sustaining the current position. The organisation is surviving but no longer thriving; and consequently, it slips further off the pace.

So, to answer the earlier question, in order to be competitive an organisation may need to be unbalanced in order to innovate.

To survive in the competitive environment of Darwin’s wedge world an organism must be resilient as well as balanced. It must, in response to unexpected threats, have the capacity to absorb disturbance and reorganise while adapting to the changed environment. It must have the capacity to maintain the current capability while also developing new capabilities. This goes to the need to tolerate redundancy such that it can be redeployed to new activities. Organisations must have the capacity to transform without creating an ‘intolerable threat’ to the core functions that are central to effective day-to-day operational performance. This constant tension between sustaining today's organisation while also maintaining (and deploying) the capacity to reform is critical to long term success in high change environments.

The difference between balance and resilience is fundamental. Balance involves evaluating the ability of the organisation to manage a variety of contingencies, whereas resilience concerns the ability of an organisations systems and infrastructure to detect, prevent and handle to adapt to unforeseen challenges. Balance and resilience are related but not equivalent terms. Consequently, the idea of a balanced organisation in not incorrect but it is incomplete.

All organisations are constantly changing in response to their environment; unfortunately, they rarely change in the way or direction leaders, managers or planners can anticipate. We need to consider the contribution of ‘balance’ and ‘unbalance’ to organisational performance but also what contributes to organisational resilience or the ability to adapt. Often these features of organisational life will present contradictions through which we must all find a path. That’s where leaders step up.