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Q&A with Frederic Laloux on Reinventing Organizations

| Posted by Ben Linders on Feb 06, 2015. Estimated reading time: 19 minutes |

 

In the book Reinventing organizations Frederic Laloux researched 12 organizations who use fundamentally new ways to manage work and their employees. These so called evolutionary-teal organizations are self-managing, agile and adaptive, and they deliver extraordinary results says Frederic.

At the Dare Festival 2014 Frederic gave a presentation about adopting innovative ways to manage organizations. InfoQ interviewed Frederic about how evolutionary-teal organizations manage themselves, practices for start-ups, self-organizing organizations, renewing approaches for managing the performance of employees and results that have been realized in evolutionary-teal organizations.

InfoQ: Your book starts by exploring different organizational models. The evolutionary-teal model is about organizations that have achieved breakthroughs in they way that they manage themselves. Can you briefly describe this model? What makes it different from traditional organizational models?

Frederic: Humanity has made a few leaps in the course of history. Pretty much all historians, philosophers, psychologist that have looked at humanity’s evolution agree that people’s worldview made a fundamental shift when we went from a tribal world to the agrarian world, and then again when we got to the scientific/industrial revolution, etc. Because of these changes in worldview, at every of these junctures, humanity invented new technologies, new means of production, new forms of government, etc. This is well known, well researched. What few people realize is that at every of these steps we also invented a new form of management, a new “organizational model”. At every stage, we developed organizations that were capable of dealing with a whole new level of complexity, and were able to achieve things that previous organizations couldn’t even imagine.

What I have researched in the book are a number of truly pioneering organizations that already operate at the next stage we are just starting to enter.

This new organizations model is so radically different from today’s that it’s hard to summarize in a few sentences. But let me still try!

  • The first breakthrough of this emerging new management model has to do with power. Some organizations I researched have cracked the code to operate at large scales (hundreds, thousands or tens of thousands of employees) based on natural hierarchies rather than power hierarchies. In these organizations, no one is the boss of anyone else, there is no more pyramid, there are no more layers of hierarchy, almost no staff functions. Instead they use different types of self-managing structures and peer based processes that prove to be much more powerful, inspiring and agile than the staid old pyramid. Just to be clear: we are not talking about empowerment, about an inverted pyramid, we are not talking about some self-managing teams here and there, but the entire organization that operates in peer-based fashion.
  • In almost all organizations, sometimes without realizing it, employees, managers and leaders alike feel that they need to behave and show up in certain ways, and hide important parts of who they are. It’s ok to show up with our ego, to fight for a promotion or simply to win an argument in a meeting, but other aspects of ourselves feel out of place. To be caring, authentic, vulnerable, to express our deepest hopes for humanity and the planet, to let our soul really speak its truth, that feels very risky in most work places. What the organizations I have researched have realized is that when people cut themselves off from these essential parts of themselves, they also cut themselves off from a huge part of their passion, energy and creativity. And so rather than to encourage employees to show up “professionally”, they have put in place wonderful practices to invite people to show up as a whole person, in the full glory of their selfhood.
  • The third breakthrough is one we could call “evolutionary purpose”. Because organizations are considered to be living systems, there is no more need to try to force the organization onto a certain course (through strategy, 3 year plans, budgets, targets) which we do when we consider that organizations are machines that someone needs to give a direction to. Instead, in these organizations, people have developed a number of practices to constantly listen to what’s changing in the environment, where the organization is meant to go, and adapt accordingly. Rather than trying to force reality to stick to some plan we have made up, we adapt our plans constantly to reality. Out go the budgets, mid-term plans, targets and incentives. Instead come a number of wonderful and soulful practices to listen collectively to where the organization’s energy is at, where it’s meant to go.

InfoQ: Can you elaborate on the third breakthrough? What do you mean with “evolutionary purpose”?

Frederic: We have this notion today that the role of leadership in organizations is to provide a vision, a strategy, and then to ensure that execution happens in line with the strategy. Before I started this research, this made absolute sense to me. How could it be any other way?

But then I stumbled on these extraordinary organizations who have been founded (or at some point taken over) by people who believe that the organization is a living system, and that it has its own sense of direction, it’s own creative genius, it’s own thing to do in this world. And so the role of leaders (and if these organizations are self-managing, everyone can take up leadership roles) is not to make some good or bad claim to where the organizations should go. But the role of leadership is to “listen” to where the organizations wants to go.

Now this might sound like strange vocabulary! Listening to where the organization wants to go. Let me give you a very concrete example. Buurtzorg is a spectacularly successful Dutch home care organization that operates entirely in self-managing fashion. Its 8500 nurses work in 800 self-managing teams of 10 to 12 people. It has a clear sense of purpose, but not strategic document, no three-year and one-year plans. Just like in a living system, innovations keep happening at the fringes, and if they prove to be successful, spread throughout the system.

At some point, one of these local teams came up with the idea that Buurtzorg’s nurses should not only treat patients, but also do prevention. Old patients often fall down, and break a knee of a hip. So the team partnered with some physiotherapists in the neighborhood and taught its patients ways to prevent falling, and how to make changes to their homes to avoid stumbling and breaking a hip.

The team found it was a great success, and went to see Jos de Blok, the company’s founder to suggest to turn this into a nationwide program, to have all other teams also do prevention work. Now had the Blok been a traditional “CEO”, he would probably have tasked some team to make some analysis to decide whether prevention was a worthwhile business to get into. If the answer was yes, he would have decided on a global budget for the initiative, a deal with the national association of physiotherapists, and with a roll-out plan to bring this approach in waves to all 800 teams. The standard implementation approach.

De Blok did nothing of that. He suggested the team to write up their experience and share it on the company’s lively social network. If other teams felt this was something worthwhile, they would implement it. And so the team packaged its approach to prevention work so that other teams could easily implement it. And within a year, 90% of teams have become “Buurtzorg+”, the “+” indicating that teams also do prevention work. De Blok in essence said “who am I to know whether Buurtzorg should do prevention? Let’s listen to the energy in the system. ” It turns out there was great energy to go down this route. Going into prevention, which somewhat extended Buurtzorg’s offering, was never consciously decided upon by any one person. It’s the “evolutionary purpose” of the organization that naturally went down this path.

InfoQ: You book mentions three practices that start-up should think about to bake in self-management right from the start. Can you describe them?

Frederic: One common misconception about self-management is that it’s just your normal organization where you take hierarchy out, where no one is a manager anymore. When you do that, of course, you just get chaos and confusion. Self-management relies on a whole set of interlocking structures and practices, just as the good old pyramidal model did… just that it’s much more powerful and enjoyable!

Everything changes from how decisions get made, how projects are run, how performance is evaluated, how people are recruited, hired and compensated, etc.

As you point to, there are three processes that seem particularly foundational, and that I would advise any start-up that wants to make the leap past the pyramidal model to adopt from day one:

  • The so-called “advice process”. We’ve grown up believing that there are basically only two ways to make decisions: hierarchical (top-down) or consensus decision making. Both of these are essentially flawed. Self-management becomes possible thank to a third, much more powerful decision-making process that transcends these two, that one company I researched calls “the advice process”.
  • A conflict resolution mechanism. When two people disagree in a traditional company, they send their disagreement up the chain of command, and some boss will settle the matter. In self-managing organizations, there are no bosses, so it’s necessary to have an explicit mechanism (and to train people in the mechanism) for colleagues to resolve their disagreements directly.
  • Peer based evaluation and compensation mechanisms. Evaluations and money are a sensitive topic in any organization! Traditionally, it’s the boss that evaluates his or her subordinates and determines who gets a pay raise or a bonus. Some of the self-managing organizations I researched found wonderfully productive and simple ways to do this in a peer-based fashion. These methods cut through the usual politics, envy, haggling and complaining that we are used to in traditional organizations when it comes to promotions and compensation.

InfoQ: Your book provides examples how teal-organizations practice self-organization. InfoQ published case studies from companies like Spotify, Jimdo and ut7/ which also apply self-organization. Do you consider them to be evolutionary-teal organization?

Frederic: You know, I use the labels like “evolutionary-teal” (teal is a color, and it refers to a color scheme Ken Wilber uses for the successive stages of human consciousness) as a useful orientation, to show that at successive stages in history, we make a leap to more powerful management practices. In that sense I find these labels useful. I find it gets more difficult when we use these words to label organizations. Just as we don’t like to label people, because people are always more complex than a label, organizations are more complex than simple labels.

What we can say, though, is that certain practices used by organization x is inspired by this kind of managerial thinking, while another practice is inspired by a different kind of thinking.

When it comes to Spotify and Jimdo, from what I gather (and I haven’t looked at them in any extensive way), they seem to be quite advanced in terms of self-management, and much less so in terms in terms of wholeness and evolutionary purpose. I found it interesting to read about Ut7/. They are a very small organization (4 people), who seem to place a lot of value on wholeness and self-management. But it seems to me they are coming to self-management from a place of consensus, and that this proves exhausting. Larger self-managing organizations have had to find ways to operate with much more powerful methods than consensus, which is the key to become truly powerful and productive.

InfoQ: Some schools are exploring self-organization for education, like the Ashram college with eduScrum and Blueprint education and ESBZ in Berlin which is described in your book. In such schools children get more responsibility for their own learning. Can you give some examples what makes learning different at ESBZ?

Frederic: The basic premise of traditional education is that a teacher fills student’s head with knowledge. Students are essentially like widgets in a factory, processed and molded by lots of 20 or 30 through a uniform curriculum, with inevitably some units that have a quality defect and get discarded along the way.

I wish this would happen faster and at a much bigger scale already, but you currently witness a great number of schools that try to radically break with that industrial mindset. And that takes the form of having students self-manage their learning to a large degree or even entirely. They set their own goals, pace their learning, seek for help, collaborate, and self-evaluate. What many of these schools find is that its helpful to provide some framework within which the students self-manage. At the ESBZ, for instance, every student has a fixed time to talk with his tutor-teacher every week to discuss what she has done in the past week, what she plans for the next week, and any other topic on her mind. Having such a weekly rhythm and such a talk is important, and within that, we can trust children to get on with their own learning. What you see in all these schools is that results are great on all dimensions: students are much more engaged and energized, learning and grades go up (often the grade system gets a serious overhaul, of course), issues such as violence and drugs almost disappear, etc.

There are many other things that make a school like the ESBZ in Berlin wonderful. For instance, as of age 10, children have a class called “responsibility” every Wednesday afternoon. It’s not really a class at all. In counsel with their tutor-teacher, the children find themselves an activity where they can make a meaningful contribution while learning at the same time. Paul, a 10-year-old who wanted to overcome his shyness, volunteered to teach chess at his former primary school. The chess class he had loved so much would no longer take place, he had heard, because the teacher was moving to another school. Paul was sad that other kids wouldn’t enjoy learning chess the way he had. Suddenly it all made sense: Paul could teach chess; standing in front of a group of children fit with Paul’s goal of learning to speak in public―and doing so in front of younger children would be an easier way to practice. All he needed to do now was convince the principal of his former school to let him have a go at it. Just like Paul, all students find a place that suits them. Some work in retirement homes, while others organize school plays in kindergartens. It all depends on their interests and learning objectives. Children experience what it’s like to take initiative, to be needed, and to make a difference in other people’s lives.

In grades 8, 9, and 10, students have a class called “Challenge” (the beautiful German word “Herausforderung” literally means “being called to grow from the inside out”). They are invited to delve into some inner potential that lies dormant. During the year, they organize and prepare for a special three-week session, where they, alone or in small groups, will challenge themselves to step out of their comfort zone. One group of four students prepared for a three-week survival camp deep in the woods, where they lived in a shelter they built and on food they gathered. Daniel, a 16-year-old extroverted youngster, found his challenge in a three-week silent meditation in a monastery. Other students biked through Germany together, with little money, having to ask for accommodation and food along the way. The experience is often taxing, but students rave about their accomplishments and the personal growth they experienced, confronting their fears and growing beyond them.

Much of the problems we have in traditional schools comes from the fact that the learning is done to the student, and has no relevance in real life. Students just have so much life in them, and schools try to beat that life out of them. At the ESBZ, children feel that they are valued, that they have things to contribute, that they are trusted to do edgy things. They don’t need to act out, drop out or take drugs to feel alive!

InfoQ: I'm hearing more and more people from agile communities debating about performance management. They question if it is needed and how it is done in most organizations. Teal organizations use different, renewing approaches for managing the performance of employees. Can you give some examples how they do it?

Frederic: Well, the starting point of many traditional performance management systems is really that you need to monitor employees, who are intrinsically prone to slack off, if you don’t keep up the pressure. And the truth is that so many workplaces are so uninspiring, because of hierarchy, politics, bureaucracy and a lack of purpose that you’d be forgiven for not being very enthusiastic at work!

Trying to overcome these problems through stretched targets and evaluations is quite ridiculous, when you think of it. It’s saying to people: we know we have a lousy work environment where it’s hard to be motivated at work, so we’ll force targets on you to force you to want to work nevertheless! (laughs)

What the organizations I have researched have found out is that when people work in a self-managing fashion for a noble purpose, they can live out their potential fully and bring enormous energy to work. You don’t need to push them and monitor them. If someone in a team slacks off, there is reason for it, and the peers will be quick to notice and have a good conversation to understand what’s going on. Perhaps that person has a personal problem, or feels her contribution are not valued, or feels insecure and lacking skills. Whatever it is, what is needed is a good conversation, not an arbitrary target. In these organizations, there is a natural form of healthy peer support and healthy peer pressure that is very effective.

This makes that you can get rid of much of the control machinery of budgets, targets, KPIs, monthly meetings to explain the numbers, etc.

Of course, people and teams still need and want some data to see for themselves how they are doing. And all this data is publicly available to everyone. If results in a team are bad, this tends to triggers powerful self-correcting mechanisms. No one likes to work hard and then see disappointing results, so the data invites people to stop and think about what’s happening. In some organizations, there are coaches who are available to help a team in these moments to get to the heart of the problem and the solution.

The focus, generally, is on team performance, or the performance of a process step. But there are very beautiful and soulful ways to go about reflecting on people’s individual performance too. The goal here is to really honor everyone’s contribution and help people be seen in the glory of their strength and weaknesses. It might sounds strange, but in some organizations, people have moments with tears of gratitude in these meetings for being so deeply heard, and there are often hugs of appreciation at the end of such discussions.

InfoQ: BSO/Origin was a Dutch company that organized itself in autonomous cells to enable self-management. After the founder Eckart Wintzen left BSO/Origin the company reverted back to a conventional management style. Can you explain why this happened? What can we learn from this?

Frederic: BSO/Origin was an IT services firm that enjoyed enormous success for a decade, first in the Netherlands and then in many European countries and overseas. I found that there are two (and only two!) necessary conditions for organizations to function along these radically different methods. The first is that the CEO gets it, really wants to create a different kind of organization. And the board needs to be aligned, to support him or her, that’s the second condition.

In the case of BSO, the company was sold at some point to Philips. And the people in the board had a traditional perspective on management, and didn’t understand how BSO was operating. They quickly reinstated all the traditional arsenal of management practices and killed BSO’s mojo. As Wintzen later said “Two worlds collided, one of strict financial procedures combined with “check, check, double check” with one of “have trust, have trust.”

It’s quite amazing when you think of it: Philips bought a company they couldn’t make sense of, and quickly went on to destroy what they paid for.

InfoQ: Can you give examples of the results that have been realized in evolutionary-teal organizations?

Frederic: Oh, most often they achieve results that their competitors can only dream of. These companies seem to fire on all cylinders at the same time. They provide a space in which employees thrive; they pay salaries above market rates; they grow year in and year out, and achieve remarkable profit margins; in downturns, they prove resilient even though they choose not to fire workers; and, perhaps most importantly, they are vehicles that help a noble purpose manifest itself in the world.

I mean, what else could we expect? They are self-managing, and so much more agile and adaptive. People bring tremendous energy to work, because they feel powerful, because they can be fully themselves, show up with all of who they are, and serve a noble purpose. How could this lead to anything but extraordinary results?

There is a striking paradox here that I want to point out. These organizations aren’t obsessed at all with profits or market share. Remember, they have no targets, hardly anything you could call a budgets, no incentives, there are no CFOs and controllers. Simply, because the organizations is so healthy, the system naturally delivers great results, without anyone piling on pressure or anyone obsessing about results.

This also means that you have to adopt these principles of management because you are intimately convinced they are the right ones for colleagues to thrive, because they intimately make sense to you. If you want to adopt these mechanisms only to make more money, you are unlikely to be successful, because you will adopt the system only partially for lack of trust, because you will still feel a need to control people and results.

About the Book Author

Frederic Laloux is a man of many projects that he tries to square, not always easily, with his inner knowing that he is meant to live a simple life, spending much time with his family and whenever possible in the silent presence of trees. Among other things, Frederic advises leaders of organizations who feel called to explore fundamentally new ways of organizing. His research in the field of emerging organizational models, published in his book Reinventing Organizations has been described as “groundbreaking,” “spectacular,” “world-changing,” and “a leap in management thinking” by some of the most respected scholars in the field of human development and management.

 

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