Organizing Principles

On Gary Hamel’s WSJ Management blog he recently asked:

So, dear reader, what advice would you give to Drew? What have you learned about turning followers into leaders—and then leading the leaders? And is it possible to dis-integrate an organization without fragmenting it?

I provide an answer worth sharing here:

The best framework I’ve seen for turning “followers into leaders” and then “leading the leaders” is Holacracy. In Holacracy the organization is structured in ‘circles’, which I believe align with your “communities of passion” idea. In each circle there is a “lead link” which is accountable for carrying the larger vision to the circle and setting boundaries to the circle’s action. However, within the circle the lead link has no more authority for settings the roles, accountabilities, policies, and activities than any other member of the circle.

Any circle member can bring a proposal to a “governance meeting” where the actual operating practices of the circle are changed. These proposals must go through a facilitated process and have objections integratedbefore being accepted by the Circle. In this process the facilitator treats the Lead Link in exactly the same manner as other circle members. The process does not seek consensus. No one can “second” or “agree with” a proposal. All perspectives are treated non-personally, as a perspective of the circle, instead of the individual egos.

This practice creates true self-organization; but it does not allow for self-direction. Let me explain: the cells in our body are self-organizing, each fully autonomous with respect to it’s internal functioning. However, when a cell becomes self-directing, acting without regard for the larger whole, we call it Cancer. The same must go for groups in an organization. They must have the autonomy to freely control their internal functioning, while at the same time working in concert with the larger whole. Holacracy provides concrete practices for achieving this in a formal way. It is the best answer I’ve found to your question about “disintegrating” without “fragmenting”.

The main point worth emphasizing is the need for organizational groups to have two things given to them:

1. An aim that serves the larger whole
2. The autonomy to freely work toward that aim

Point 1 has an importan corollary: groups also need boundaries. They need to know what is not part of their aim. Groups do need to have a say into what their aim should be, but that decision must be made by the next higher level of organization to ensure that the group is not acting counter to the larger vision and strategy. In Holacracy each Circle is given a voice in this decision through a “Representative Link”. A person from the affected circle sits on the next higher level circle and has the same opportunity to make proposals as other circle members. 

These two links, the “Lead Link” and the “Rep Link” form the necessary bi-directional connection between groups to effectively de-centralize or “disintegrate” and organization without resulting in chaotic fragmentation.

I made a recent comment on David Anderson’s blog regarding the underlying assumptions of two software development practices. The point of my reply is useful outside of the domain of software development and I’d like to include some of it here.

In his blog David made the claim that one development process, named Scrum, has an underlying assumption: ”that trying to map the creative process that produces software is futile and there is no point in trying.”

I would say that differently. From my experience, the underlying assumption in Scrum is that the environment surrounding the team(s) is so chaotic that mapping the internal process of the team would not be useful, as it is unlikely that it would usefully describe the activities of the team when they bite off the next chunk of work.

This articulation of the assumption provides a useful dimension for decision-making between various processes. We can ask of our context - how chaotic is the environment? If we make a map of our current activities, how likely will the map be useful in 2-4 weeks?  

The fact however is that many of our working environments are /not/ chaotic. They are simply complicated and maybe a little complex. Perhaps this is the range where different practices, like Kanban, apply more directly.

A question I would pose is whether the use one methodology over the other has more to do with the characterization of a company’s environment, than it does with the usefulness of the process.

What I mean is, if you look broadly at the media, everyday we are told that the world is a chaotic place, just on the edge of chaos, about to fall apart. There is some good evidence for this. We have the financial crisis, the environmental crises, the political characterizations of a “democractic crisis”. Recent change management methods reinforce these beliefs with metaphors like the “burning platform” or the “melting iceberg”.

All of this  attention to crises has created a lens on reality where we are prone to look for more crises. From this perspective a process for making progress in a crisis or in chaos is valuable. 

But if we honestly ask, if our daily work-life is really in crisis, our answer is more likely to be “no”.   There is a fair chance that the work we will be doing next month is a lot like the work we are doing this month. If this is true, then Scrum may not be the process for you. Whether Scrum forces a revolution or not is not important, what is important is if your *context* is in revolution. If it truly is, then Kanban may not be the process for you.

The point is that our context sets the parameters for what a useful work process looks like, and that one significant criteria for deciding what process to use is how fast our context is changing.

If the context is relatively stable, we want to be able to carefully refine our process over time to optimize for the environment. If the context is unstable and rapidly changing, we want to be able to make progress toward an aim despite the surrounding chaos.

Best,

Evan Leonard

Listen to David Bryne talk about how the vessel that receives our creative passion will shape the form that our will passion will take. 

Listen to the bird songs at different heights of the forest.

Consider our organizations as the vessels for our passions. They constrain, limit and mold the way our creative genius takes shape.

Open our eyes to the context of our organizations. What does a Carnegie Music Hall Organization sound like? What does a CBGBs Organization sound like? 

What does your organization sound like?

Ideally, I believe that organizational designers are the ones responsible for crafting an environment where the three motivational factors identified by Daniel Pink, purpose, autonomy and mastery, can flourish.

Organizational design is more about cultivation and “gardening” the organization, than it is about controlling it. It is more about creating opportunities for interaction, rather than planning transactions. 

Think of an architect who designs a small space into a large room. In that small space are two chairs and a small table. What is that space other than an opportunity for interaction? It calls people from the large environment into the small and supports a certain kind of communication to take place. 

Organizational designers should take the same attitude about organizations. To create “small spaces” for individuals to find their purpose, discover their autonomy and develop mastery. These things can’t be forced, but they can be supported or suppressed.

To understand what a corporate conscience might look like, it will be worth exploring first the opposite: What mades good people do evil things. The book The Lucifer Effect, by Philip Zimbardo, explores just this thing.

The Lucifer Effect tells, for the first time, the full story behind the Stanford Prison Experiment, a now-classic study I conducted in 1971. In that study, normal college students were randomly assigned to play the role of guard or inmate for two weeks in a simulated prison, yet the guards quickly became so brutal that the experiment had to be shut down after only six days.

The Stanford Prison Experiment is an often cited example about how context influences behavior more than we realize. Our blindness to the power of context on peoples’ actions has come to be known as the Fundamental Attribution Error. 

The interesting point is that we tend to recognize the power of context on our own behavior, but deny others the same deference. 

In organizations one of the main contextual forces we are subject to is the power of groups. How can we take steps to ensure that this power is a positive one? And how does this power relate to the notion of a corporate conscience?

Howard Zehr, a leader in the field of Restorative Justice, summarizes for us 10 points from the Lucifer Effect about how to resist unwanted influence. 

If there are powers in groups that can cause us to do evil, are there also powers that will cause us to do good?

Good things come in small articles. In this article from Harvard Business Review the authors reveal their research findings of a “century’s worth of legal theory and precedent”. 

Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time.

Consider for a moment what this truly means. A business, once incorporated, is free to act as it chooses. Executives are not legally obligated to uphold shareholder value at all costs. It turns out that this belief has in fact been a legal fallacy.

Managers and lawyers have failed to meaningfully collaborate on defining directors’ role. That lack of communication has led to the election of directors who, frankly, don’t know what their legal duties are. Indeed, they’re being taught the wrong things. The case still most often used in law schools to illustrate a director’s obligation is Dodge v. Ford Motor (1919)—even though an important 2008 paper by Lynn A. Stout explains that it’s bad law, now largely ignored by the courts. It has been cited in only one decision by Delaware courts in the past 30 years.

The “Delaware” mention is important because that is where the majority of US businesses are incorporated - not in the state of their headquarters.

Stop and really think this one through for a moment: we have been listening to a false story for decades. Consider who might have perpetuated this story. Think who might have benefited from this story. Now realize that there is another way.

If corporations are not solely accountable to shareholders, who else do they serve? Their customers? Their employees? Their suppliers? Their environment? Their peers?

This is not to say that corporations are free to abuse any one of these stakeholders. As in the case of an individual like myself, I have freewill but am counted on by my family, my boss, my friends, and so on. Consequently, I act in the way that I believe will best benefit all these groups. I do so because to do otherwise would be against my conscience. What then would be analogous to the conscience in the corporation?

How can a corporation choose to act in the best interest of all of its stakeholders? and not against its corporate conscience?

I find it very interesting that so many companies seek “business agility” but when it comes to actually making a change to basic operating procedures very few have anything resembling a consistent process for rolling out change.  The apparent choice seems to be between stagnation via consensus based analysis paralysis or hack and slash via executive mandates. Finding the middle-way here via is the focus on my work.

How does an organization balance its “top-down” needs for vision and direction with its “bottom-up needs” of stability and participation?

What’s needed is a framework for people who embody these forces to negotiate.

 Currently, as a culture we lack the skills to effectively participate in these interactions. In general we tend to experience them as conflicts rather than collaborative discussions. As a result they are avoided rather than engaged. The frequency of this behavior might qualify as an epidemic. 

No theory, model or idea will effectively integrate these forces. They manifest in and through people. Consequently any method aimed at resolving them must deal with the messy realms of emotion, interpretation and argument.

Through these interactions between people the ultimate way forward may be recognized. The key to moving ahead and not getting stuck in the dark well of ego-battles is to see individuals in an organization as the sensors for larger forces. 

With more or less skill each of us perceive a slice of reality through different lenses. Uniting these glimpses into a coherent picture requires a new type of collaborative practice that I call Interactive Governance.

Usually when we think of inter-cultural conflict national and ethnic divisions come to mind. However, within every organization there are significant cultural differences that impede communication and stir conflict. I can name three such divides. They are: temperament, interaction style, and placement within the organizational structure.

Each of these lenses reveal subgroups in an organization that have distinct shared values and meaning. And each layer of these subgroups creates a tension within the organization that becomes a source of potential conflict. Kenwin Smith and David Berg have suggested that paradoxes in the form of tensions like these are a natural part of group life [4]. John Lederach goes on to say, “To deal with [these tensions] constructively it is necessary to identify the opposing energies that form the poles of the paradox, provide space for each, and embrace them as interdepedent and necessary for the health of the group” [5].

For the three cultural divides already mentioned, this series of posts will aim to do just that.

References:

1. Linda Berens, Understanding Yourself and Others: An Introduction to the 4 Temperaments - 4.0 (Huntington Beach: Telos Publications, 2010).
2. Linda Berens, Understanding Yourself and Others: An Introduction to Interaction Styles - 2.0 (Huntington Beach: Telos Publications, 2008).
3. Barry Oshry, Seeing Systems (San Francisco: Berett-Koehler Publishers, 1996).
4. Kenwin K. Smith and David N. Berg, Paradoxes of Group Life (San Francisco: Jossey-Bass, 1987).
5. John P. Lederach, Building Peace: Sustainable Reconciliation in Divided Societies(Washington: United States Institute of Peace Press, 1997).

Yes. This post articulates the discomfort I’ve had with the word “Leader”. The word “Leader” made sense in old 20th century organizations where there were followers. In an enlightened organization where “co-creation” has taken hold, followers don’t exists any more. Consequently, leaders don’t need to exist anymore.

But — fear not — curent leaders, there is a new role for you: Builder.

It will be your new work to Envision the future, be inspired by it, and call people to join you there. No longer will you cajole, persuade, or incentivise.

No longer will you explain how every detail should be done. Now you will reveal whything should be done, and support others in finding the way.

No longer will Leaders seek to exploit, command, dominate, and profit. Builders will create organizations that seek to realize, connect, create, and measure.

It is time for leaders no longer.

While there are many one line wonders in this little gem, overall I found there to be one unspoken assumption underlying the entire book:

“All companies should be small”

The authors never came out and said it, but statements like these say it all:

• “[Big companies] talk instead of act. They meet instead of do.”
• “You can afford to teach, and that’s something [Big Companies] will never do.”
• “Do you have a Marketing department? If not, good.”

As a side-effect the book seems confused about who its target reader is. At times is seems to be written for entrepre- oops I mean “starters” and at other times they seems to be speaking to broader audience.

For instance, the advice to “never hire anyone to do a job until you’ve tried to do it yourself first” makes sense for a person starting a company, but for a manager joining an existing company this makes no sense. All of the jobs existed before she got there!  

The principle behind this statement makes sense: “Know the reality of your business before delegating it.” Lean Manufacturing points at this with the saying, “Go. Look. See.” 37Signal’s articulation of the principle shows their bias. 

I appreciate the book’s trend-bucking of startup companies’ backwards orientation with chapters like “Outside money is Plan Z” and “Building to flip is building to flop”. I also found their essays “Start at the epicenter” and “Be at-home good” helpful for thinking about how to identify real business value.

However, I found that when the authors tried to generalize their experience to the realm of “big companies” they would rely on superficial stereotypes and come up short. I sent them an email to try to ask more about this. I hope to hear back from them soon.

Hey Guys,

Just finished Rework and have a couple questions for you. The book paints a pretty stark (black and white?) contrast between “Big companies” and small ones. My reading of it would be something like “Big are all boring and inefficient and nasty, and small companies are all green field potential (so don’t f**k it up and be like a Big company!)”. Is this something you really believe?

Do you believe that small is always better than large? Or is there another axis of thought that I’m missing? 

I’m on board with the fact that most big companies grew-up during the industrial revolution and tried to turn people into cogs, which turned out to suck. But what I’m curious about is whether you have given any thought to how big companies might not suck? 

I understand that you’ve chosen to keep 37 signals small, and Rework reflects your own experience. Do you see anything that might help point big companies in the right direction? Any insight on how the principles behind Rework might play at their level of scale?

Or is Rework simply a cookbook for others to pick up and and use to answer that themselves?

Evan

For an interesting read from someone who has worked at big companies, try this post: Big Companies Can Innovate, if they Act Small