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Toward the learning organization: the case of

circular reengineering
ARTICLE in KNOWLEDGE AND PROCESS MANAGEMENT SEPTEMBER 1998
DOI: 10.1002/(SICI)1099-1441(1998090)5:33.3.CO;2-X

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Knowledge and Process Management

Volume 5

Number 3

pp 158164 (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 moving
from a largely IT-driven approach to a more holistic, people-focused approach, recognizing that the IT
perspective was insufficiently appreciative of the human dimension. This paper deals with circular
re-engineering which focuses on the decision-making system as a potentially powerful learning and
communication infrastructure. Circular re-engineering differs from other engineering approaches in its focus on
human decision making as the key business process, and is done in two stages. First, a learning and
communication (or circle) structure is added to the organizations administrative structure, and subsequently,
this new structure is used to re-engineer and re-organize work processes. The case of the industrial company
Matrex illustrates how an organizations 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 of
knowledge and process management have been moving
from an IT-driven approach to a more holistic, peoplefocused approach, recognizing that the IT engineering
perspective was insufficiently appreciative of the human
dimension (Bartlett and Ghoshal, 1995; Watts, 1997). This
may also be the main explanation of the high failure rates of
IT-driven re-engineering projects (Hall, Rosenthal and
Wade, 1993; Holland and Kumar, 1995) as well as IT-driven
knowledge management projects (Lucier and Torsilieri,
1997).
Although the movement to more holistic and peoplecentred approaches is both necessary and inevitable, the
implications are not so self-evident. A single coherent
approach to knowledge and process management is not yet
emerging. This article describes the so-called circular

Georges Romme is associate professor in the Department of Management

Sciences, Maastricht University, The Netherlands. He has published widely
on self-organization, strategic change, organizational learning, and new
organizational forms. He is involved in several re-engineering projects in
Dutch organizations, including a major project in the area of educational
processes at Maastricht University.
*Correspondence to: Georges Romme, Department of Management
Sciences, Maastricht University, P.O. Box 616, 6200 MD Maastricht,
The Netherlands. E-mail: s.romme@mw.unimaas.nl

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

approach to knowledge and process management which, in

contrast to other engineering approaches, takes human
decision making as its starting point and explicitly addresses
the tension between processes of knowledge creation and
those of managing operational processes. This approach
implies that a parallel learning structure is added to the
business management structure, specifically for the purpose
of knowledge creation.
Circular re-engineering emerged from the pioneering
work of a Dutch engineer and manager, Gerard Endenburg,
and has been applied in about thirty organizations, mainly
in the Netherlands, but also in Canada, the USA and Brazil.
In the next sections, the background and principles of the
circular approach are described in more detail, also in view
of how several companies have applied these principles.
Subsequently, the implications of this approach for the state
of the art of knowledge and process management are
explored.

BACKGROUND
Endenburg Elektrotechniek, a company active in the
Dutch electrotechnical industry, was founded in Rotterdam
(Netherlands) in 1950 by Endenburg senior and his wife.
Over the years, Endenburg Elektrotechnieks products
became reputed for their quality and reliability. Endenburg

Knowledge and Process Management

Elektrotechniek currently focuses on the design, production,
installation and renovation of electrotechnical installations, control systems, switching boards and electronic
instruments. Its most important customers are companies in
the manufacturing, ship building, offshore, house building
and utility building industries, both in Europe and elsewhere
(Middle East, Indonesia, etc.).
In 1968 Gerard Endenburg, a trained electrical engineer,
took over his fathers position as managing director of the
company. As a condition of accepting this position at the
head of the companys workforce of some 100 people,
Endenburg requested that he be allowed freedom to experiment, both technically and organizationally. In the early
1970s Gerard Endenburg decided to stop the companys
growth in order to give more attention to organizational
development and renewal. He started to experiment with
some of the ideas he had about decision making and
organizational structures. These experiments were inspired
by ideas taken from the (in the late 1960s and early 1970s)
emerging discipline of system dynamics.
The circular method was severely tested during its
experimental development, also in the context of several
real crisis situations. In these situations it proved to be an
exceptional tool for exploiting local information and expertise to the benefit of the company* as a whole, or in the
modern management jargon, organizational learning.
In practical operation since the mid-1970s, the circular
model has progressed beyond the experimental stage and is
being used rather successfully in organizations as diverse as
Endenburg Elektrotechniek, several other industrial companies, a consultancy firm, an agricultural company, a chain
of hairdressing shops, a high school, and several health
care organizations in Brazil, Canada, the USA and the
Netherlands. All these organizations have reported productivity and efficiency increases of 3040%, and both workers
and managers seem to like working in them.

CIRCULAR RE-ENGINEERING
Circular re-engineering is based on several straightforward
ideas, some of which are well known among BPR practitioners while others are less familiar. A familiar idea is the
focus on the customer of the business process, particularly
by adopting a systematic and process-oriented approach.
Rather unfamiliar is the idea of focusing on human learning
and decision making rather than work as the key business
process. This kind of mind shift is also recommended in the
literature about organizational learning (e.g. Senge, 1990).
The focus on learning and decision processes also follows
from a system dynamics viewpoint, which implies that the
*The development of the circular method in Endenburg Elektrotechniek has
been described in detail elsewhere (see Romme and Reijmer, 1996).
Ten cases have been studied in detail. See Romme and Reijmer (1997) for
an overview of these case studies.

The Case of Circular Re-engineering

CASE STUDY

Figure 1 The circle structure as a learning and communication

infrastructure

best solution to important problems will very likely come

out of localness, the collective wisdom of those closest to the
problem, regardless of their formal position or group
membership (Romme, 1995; Senge, 1990). When the
organization is managed and organized on the basis of
hierarchical principles, circular re-engineering involves the
following two steps.
Adding the circle structure
The first and most important step is to add a so-called circle
structure to the existing administrative hierarchy. The idea
here is that a hierarchical work organization as such is
quite effective for the purpose of organizing large numbers
of people, while retaining clear accountability (who is
responsible for what). The fundamental problem with
hierarchy is its learning disability (Romme, 1997; Senge,
1990). Reducing the organizations learning disability
requires a focus on communication and learning processes,
in addition to the traditional emphasis on work processes.
Circular re-engineering thus tries to maintain the strengths
of the hierarchical approach by adding another infrastructure that is particularly geared toward organizational
learning, and thus reduces the burden usually resting on the
administrative hierarchy. In this respect, the circle structure
acts as a company-wide communication system which is
permanently available, but only becomes operative if one of
the participants picks up the phone and asks for a meeting
of his circle (see Figure 1).
The circle structure, as a learning and communication
infrastructure, is based on a number of principles. First, each
individual in the organization belongs to at least one circle,
a group of people with a shared work objective. With this
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CASE STUDY

Figure 2

The circular process of leading, doing and discovering

objective in mind each circle establishes its own policy in a

continuous circular process of leading, doing and discovering (see Figure 2). In this regard, leading involves making
policy in terms of establishing the boundaries between
which the work process and its outcomes should fall; doing
involves the actual work process; and discovering involves
collecting quantitative or qualitative measures of how the
work is done.
Decision making takes place on the basis of the idea that
circles are the key learning units in which free and creative
exploration of complex and subtle issues is possible. The
team-like nature of circles implies that decision making
should be done in a collegual atmosphere in which all
participants are equivalent (Senge, 1990). In the circular
approach, this kind of decision making culture is safeguarded by the so-called decision rule of consent, defined
as the absence of argued objections. Note that decisions
about implementation issues are taken in the administrative
hierarchy, and are therefore largely taken on the basis of the
principle of unity of command. For example, in a departmental circle the departments supervisor will have the
authority to decide on implementation issues, within the
policy boundaries set in circle meetings. In principle, also
other decision methods (e.g. democratic majority) can be
used but in practice there seems to be no need to go beyond
consent as the governing decision rule and unity of command by the functional leader as the decision rule for
directing work processes.
A very interesting design precept for the circular
structure is the so-called double linking between vertically
ordered circles. Double linking implies that in larger
organizations, in which there are at least three hierarchical
levels (executives, management and workers), a circle is
double linked with the next higher circle, involving at
least one chosen representative as well as the functional
leader. Both the functional leader and circle representative(s) are appointed by consent, but the decision on the
functional leader rests with the next higher circle whereas
the decision on the representative is taken by the lower
circle. Double linking thus redirects and balances the
downward and upward flow of power between all
hierarchical levels. Figure 3 shows how two circles A and
B are linked in terms of the process of leading, doing and
discovering in each circle. The functional leader of circle A
represents the link between the doing stage in B and the
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Knowledge and Process Management

Figure 3

Double linking between circles A and B

leading stage in A. The chosen representative(s) acts as

the link between the circular process in A as a whole and
the 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 communication and learning infrastructure to redesign and
re-engineer business processes, which in turn may also lead
to changes in the administrative hierarchy. The key advantage of creating a circle structure before starting to work on
business processes is that the information and expertise
needed is more easily obtained and exchanged throughout
the organization. Moreover, this approach also acknowledges that human productivity and creativity is the driving
force behind any business process.
The general management circle is the group of people
who typically start up the re-engineering project, in some
cases supported by a temporary project team that reports to
the general circle. Being located at the centre of the
communication and learning system, this circle has access to
all local expertise and information flows, and in addition,
can secure the support of the top circle during critical stages
of the re-engineering process.
The instrument used for diagnosing and restructuring
business processes is a straightforward process model, based
on the well-known inputtransformationoutput division.
This model can be learned and applied without much prior
knowledge in the area of BPR. There are four key steps in
reorganizing a circles business processes:
(1) Formulate the circles goal. A shared goal serves as the
basis of existence of the circle. Goals should be set by
G. Romme

Knowledge and Process Management

CASE STUDY

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

B. Transformation process: The generation of exchange objects
C. Output process: The exchange.
A. Input process:

The determination of the exchange (relation)

1. Searching/finding the exchange partner

2. 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 exchange

8. 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)

consent of the circles membership, and must be reviewed

regularly to be sure they are leading to the desired results.
A well-formulated goal meets the following criteria: the
desired result (service, product) is clearly stated; how it
distinguishes from other aims must be included; and the
customer must be able to recognize and understand the
formulation of the goal.
(2) Design the work processes needed to realize that
goal. Regardless of how complex the organization is, it can
always be organized by means of the simple principle of
inputtransformationoutput. The input, transformation and
output stage can in turn be subdivided in three similar steps,
which leads to the kind of general work process model
described in Figure 4. This subdivision is of great practical
value, and can be repeated as often as necessary.
(3) Design a network of tasks to realize the work process. This
step adds the circle process to the series of tasks identified in step 2. Adding the circle process is necessary in
order to guide and manage the transformation, or work,
processes. Without the circle process, management and
intervention will be haphazard, leading to lower productivity and less added value for the internal or external
customer. The connections and relationships between
activities form a network of doing, discovering and leading
tasks.
(4) Delegate the tasks in the network to members of the
circle. The last step is to delegate the tasks to circle
members (or other resources). Delegation takes place
The Case of Circular Re-engineering

periodically in circle meetings by consent decision after an

open discussion.*

CIRCULAR RE-ENGINEERING: THE MATREX

CASE
One of the organizations which applied circular
re-engineering was a medium-sized industrial company,
Matrex Spuitgietmatrijzen, located in the south of the
Netherlands. This case is particularly interesting because the
re-engineering process was done in a crisis situation, which
normally leads to the adoption of turnaround management
relying on a top-down approach with few opportunities for
participation by employees.
Matrex is a company producing industrial matrices which
are tailor-made for companies using these matrices to
produce components for a wide range of products. In the
early 1990s Matrex was confronted with the threat of a
number of new competitors located in Eastern Europe. Ruud
Geboers, the CEO of Matrex who was highly involved in
managing operational activities on a daily basis, realized
that Matrexs learning capability was underdeveloped,
which in turn made Matrex extremely vulnerable with
regard to (new) external threats. This situation was
*For these decisions a well-tested procedure is available from the author.

161

CASE STUDY
aggravated when several of Matrex best engineers left the
company in order to start their own companies. Geboers
decides to hire a consultant with expertise in circular
re-engineering, in order to develop Matrexs capability for
organizational learning.
A few days after the consultants first visit to Matrex, it
became clear that the financial situation of the company was
extremely critical when the companys bank announced its
plans to present a bankruptcy petition against Matrex. Ruud
Geboers nevertheless obtained additional financial support
for a last shot by way of circular re-engineering. The
consultant therefore adopted a quick-and-dirty version of
the circular approach in order to get the company out of the
fire zone. In a few hours, a general management circle and
several unit circles were created. The consultant chaired the
first meetings of the general circle, in which she explained
the basics of working in a circle meeting while immediately
also starting up a discussion of the problems Matrex was
facing. In the role of chairperson, she also worked with the
other circles in a series of six meetings in order to supervise
and train them in solving problems in their own units and
the interaction between units. Within several weeks this
approach resulted in substantial improvements in Matrexs
work processes, also in the work flow between different
units.
An important step in this episode was the diagnosis of
the work flow from acquisition of orders to customer
service. Using the process model outlined earlier, several
problems were identified. For example, too often matrices
were manufactured that were not according to the specifications agreed with the customer, and the production
planning was not done effectively. The general management
circle decided to adopt a project-based approach with the
circle structure as the main starting point.
An even more important result involved the leadership
style of the CEO. In the period of the first circle meetings,
he almost immediately started acting differently as a
manager. Whereas in the past he tended to be involved as
one of the main problem solvers in many operational issues,
he now more easily concentrated on his role in the business
policy process in the general circle. The result of the circular
re-engineering project in Matrex was a dramatic increase in
productivity as well as the restoration of profitability,
within one year after the financial crisis became apparent. In
the second year after the start of the circular re-engineering
process, Matrex also decided to install a top circle,
which had not been created yet because in the first year
priority was given to solving the most urgent business
problems.

IMPLICATIONS
The Matrex case illustrates how the introduction of the
circle structure appears to stimulate learning and communication throughout the organization, and thus to
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Knowledge and Process Management

increase the organizations problem-solving capacity.
Circular re-engineering also appears to lead to an effective
combination of the traditional idea of hierarchy and the
more modern idea of egalitarian decision making in teams
which tends to be crucial for knowledge creation and
organizational learning. The circular approach integrates
team learning processes into an existing hierarchical
structure, and in this way increases the learning and
problem solving capacity needed for a subsequent reengineering project (Romme, 1996). This also sheds new
light on the debate between those arguing that hierarchy is
the most important obstacle to the transformation of
organizations toward learning organizatons (e.g. Mills,
1991; Peters, 1987; Senge, 1990) and others arguing that
hierarchies are necessary and inevitable elements of larger
organizations, for example as layers of accountability
(Jaques, 1990) or as structural buffers (Carley, 1992). Circular re-engineering renders this debate largely irrelevant
because team learning can be effectively embedded in a
hierarchical structure. Of course, in many large organizations such as IBM and Philips hierarchical structures have
recently been the source of a great deal of trouble and
inefficiency. Problems of excessive layering, cramped
accountability, and low productivity of managers have thus
led many companies to redesign and delayer their administrative hierarchies. In other words, hierarchy has been
mis- and overused in these companies, but this does not
undermine the applicability of the hierarchy concept in the
first place.
In this respect, circular re-engineering starts from a
dialectical worldview, recognizing the need to transcend the
either-or approach prevalent in the West. According to
Nonaka and Takuchi (1995), many organizations in Europe
and North America suffer from the deeply rooted belief in
false dichotomies, such as between individual and organization, and between hierarchy and task forces. Circular
re-engineering thus emphasizes the importance of
circularity, the ability to switch from a project-based
team-like structure to the administrative hierarchy, and vice
versa. The team-like (circle) structure and the hierarchical
structure co-exist as two different but complementary
systems.
An important element of circular re-engineering here is
double linking between circles. For traditional organizations structured on the basis of the single linking pin,
double linking requires a complete shift in thinking about
management leadership. Most organizations in fact never
question the effectiveness of the single link between
hierarchical levels, and perhaps do so because they assume
the two linking functions of leadership and upward feedback can be combined in one person. The circle structure,
however, is a learning and communication system which
recognizes the fundamental difference between topdown-like leadership and upward feedback and the different kinds of individual competence required for these
functions.
G. Romme

Knowledge and Process Management

IMPLEMENTATION OF CIRCULAR
RE-ENGINEERING
Circular re-engineering can only be done with strong top
management support and can be misunderstood as a
revolutionary tool to be used against management, to get
rid of the boss. In fact, when properly implemented, the
circular approach makes the antagonism between workers
and managers largely irrelevant. Circular re-engineering
places control of work processes in the hands of both
management and workers, using both formal authority and
equivalence as organizing principles.
If implemented with care, circular principles can be
introduced into the organization without disrupting current
work processes. The first step here is an analysis of the
current strengths, weaknesses, threats and opportunities.
Does the organization have problems which can be fixed
through the application of other methods, including other
BPR approaches? If the organization is basically sound but
there is evidence of, for example, miscommunication
between departments or a mismatch between market
developments and the organizations core competences,
the situation calls for experimentation with circular
re-engineering. In situations in which the organizations
product is clearly not marketable, the application of
circular re-engineering may be too complicated and painful
and experiments with circular re-engineering are not
appropriate.
Top management should take the second step by making
a commitment to support the introduction of the circle
organization, at least for the duration of an experiment.
Moreover, any violation of the consent principle by top
management, especially by using authoritarian management
styles, will be sensed throughout the organization and be
perceived as manipulation.
The third step is to draft an implementation plan which
outlines a circle structure and circle operating procedures.
This implementation plan also includes training and education of all circles. These training and education activities can
be adapted to local and cultural circumstances or to time
constraints (as in the Matrex case), and also to the educational level and professional background of the circle
members. In addition, it is important to acknowledge any
prior experiences with hierarchical or other management
systems.

LIMITED TRY-OUT
If the organization is uncertain about the usefulness of
circular re-engineering, it is possible to experiment with
limited try-outs in certain areas of the organization where
effective delegation and empowerment are particularly
essential. This kind of try-out in a small unit or department
also offers an opportunity to build experience with circular
re-engineering. When these experiences turn out to be
The Case of Circular Re-engineering

CASE STUDY
positive, other units can be introduced into the circular
approach.
When first confronted with the idea of consent decision
making in circles, many participants are uneasy because it
appears that either reluctance to make objections or an
obstructionists desire to object to everything can make
the process ineffective. However, experience shows that
neither of these tendencies is a real problem. The solution to
both tendencies is to learn to see objections as positive,
indispensable contributions to an ongoing dialogue. Just as
we can learn to obey authority or learn to participate in
democratic processes, consent decision making goes more
smoothly with experience and training. Moreover, the risk
of the obstructionist using a veto to undermine the circles
performance is quite easily reduced by regulations, such as,
for example, the rule that if a circle does not reach a decision
on a certain issue in two or three subsequent meetings, this
decision automatically will move upward to the next higher
circle. In practice this kind of rule puts extra pressure on the
circle to solve the problem directly, or to agree on some
other procedure to solve it (e.g. by getting help from an
external expert).

CONCLUSION
Circular re-engineering and other business process
re-engineering approaches share the goal of reunifying tasks
into coherent, customer-oriented business processes. However,
the actual toolbox used by these approaches differs substantially. The received wisdom on business process engineering
tends to focus on work processes and the customer of these
processes (Hammer and Champy, 1993). Using BPR techniques and information technology, re-engineering work
processes can thus have a dramatic impact on overall
performance of the organization.
Circular re-engineering, by contrast, focuses on human
decision making as the key business process. This approach
appears to solve the classic dilemma between hierarchy and
learning processes. The key step in circular re-engineering is
adding a parallel learning and communication structure in
order to solve the learning disability of the organizations
administrative hierarchy. Thus, the large human potential
that remains unexploited in most organizations can be
released more easily when egalitarian learning processes are
given their own time and place in a circle structure. In sum,
circular re-engineering appears to provide an interesting
tool which may increase the effectiveness of re-engineering
and change projects.

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G. Romme