What organizational change is the most severe of all? Mergers are pretty dangerous, especially for the weaker company. Scaling back operations, “downsizing,” is extremely hard because of all the psychological stresses it puts on people. Turning around unprofitable companies is hard, as it takes grit to create a sustained momentum.
But top on my list of tough things is to let go of hierarchy and introduce advanced management systems. Why? Because you need to let go of the steering wheel. While managing a Merger, a Downsizing or a Turnaround is complicated because of so many uncertainties, at least it leaves Management with the hands directly on the controls of an organization. If you want something done, you can order it. The outcomes may not always be what you asked for, but you are in control of the actions performed.
By adopting advanced Management models, you need to let go of the steering wheel and transfer control to people who have the autonomy to act as they think best. Think of how hard it is to hand over an area of responsibility to a successor. Things you genuinely care about and invested a lot of time in – e.g. by building relationships and great solutions – are now done by someone, who will make changes you might not be fond of. How great the temptation to interfere if you think something is not done “properly”!
Devolving control is hard. But you are not out totally out of control. Think of it as a self-driving car:
- You task the car with getting you from A to B
- You relinquish control to the car
- The car chooses its route, determines its speed, distance to other cars, when to apply the brakes, and all the minutiae of driving
Likewise with organizations in an advanced management setting with flat, egalitarian hierarchies. The driver/manager is not out of control, she just relinquishes day to day control but remains in strategic control. This will feel pretty unnerving at first, but after a while, one will get used to it and focus on higher value-added things.
The Starting Point
To adapt Liberation or Holacracy, you need to make that leap of faith. So the very starting condition for those Management System is your faith. Without holding deep, inert convictions yourself and the willingness to personally invest yourself, suffer and learn, do not make the leap. It takes a benevolent dictator in capitalistic systems based on private property rights to start. Are you that benevolent dictator?
How deep must your convictions be? Here is a test:
- Get introduced to the concept of TEAL, best by reading this Article on HBR or even better chapter one of Frederick Laloux’s “Reinventing companies.” The picture below provides a clue what a Teal organization is
- Then ask yourself: Do you think mostly from a state of “Teal”? Do you accept contradictions, complexity, uncertainty and embrace a good deal of spiritualism?
- If the answer is no and this all seems a bit too alien to you: Do not start. Read more and try some Management 3.0 or Agile Workouts to build up more experience
- If the answer is a wholehearted yes: Go for it and liberate your Company through either Liberation or Holacracy
With Management 3.0 you do not necessarily need to hold those deep convictions that the other two system require. Management 3.0 allows you to experiment with this or that agile practice, thereby learning and shaping your and your team’s beliefs in the process. Management 3.0 offers two things that the other two systems are lacking:
- An evolutionary, explorational path to devolving control to more and more autonomous people and groups
- It enables any manager of any level in the organization to introduce agile principles. Holacracy and Liberation you can only start if you are the CEO of an organization. If not, your experiment will fail as the resisting forces of the hierarchy will come crashing down on you and your autonomous, liberated teams in times of a pinch, for example by HR descending upon you with some reasonable corporate standards policies on titles, etc.
Barriers to Adoption
Once that leap of faith is done, there is a period where the effort to maintain the system is high. Everyone involved needs to learn new ways of thinking and acting. The intake of new values to heart and coming to grips with new practices takes time. This places a heavy demand on the time of Managers, who need to coach the organization and individuals intensively in the initial period.
Therefore, opting for the adoption of advanced management systems in times of crisis may be more of a measure of last resort. Best to go for it during reasonable stable times.
Due to the flexible nature of Management3.0, single practices can be tried here and there, consuming only as much effort as one is ready to invest at a certain point in time. These small-scale introductions can be pictured as a low benefit – low-cost interventions into the existing organizations. Over time, the benefits might add up to a sizeable number, as a self-reinforcing feedback loop of learning get’s going.
Brace for brittleness
I like the term “Brittleness.” An organization is brittle if small strains on it tear off more and more parts until eventually, it breaks. The parts torn off may be of any kind, e.g., lost revenue or employees leaving the company.
An increase in brittleness is a part of every organizational change. The larger the change, the more brittle (“less robust”) an organization becomes, at least in the immediate period after the intervention has been made.
After introducing Holacracy, organizations become extremely brittle. Zappos, for example, experienced about 30% of employee attrition p.a. in the first two years after introducing Holacracy (Attrition is the proportion of employees leaving the company relative to the total number of staff). A benchmark for businesses in the e-commerce sector is about 8 to 10%. There is much speculation about the root cause of this attrition, but the consensus view seems to be that people have difficulty finding their role in a Holacracy driven organization vs. the clearness offered by command and control.
This tension is inherent to all advanced management systems, but it is accentuated in Holacracy, as organizations are governed by a constitution which standards are rigorously enforced. Liberation is more accommodating, as it focuses on values and behaviors and let people seek their own structures. Nevertheless, while data is difficult to get, war stories indicate increased attrition, too.
In the long run, however, attrition should end up at a level below any that can be achieved by running the organization as a hierarchy. The promise of all advanced management systems is self-fulfillment, so all things being equal, people choose not to leave the reformed organization.
Liberated Companies are very much dependant upon implicit guidance that a commonly felt purpose, values, and social norms provide. If this guidance is defunct, for example by values that mean different things to different people, nasty things are bound to happen.
In the much more rule-bound system of Holacracy, this risk is much less acute. Here, the written constitution is very crisp about the core inner workings of the company. But that is achieved by incurring a different risk.
Roles are central pieces of Holacracies operating system. There are “link” and “representative” roles that connect one team to another. While roles are designed to be only temporarily assigned to any single person and roles may be transferred by a decision made in a group, there is a clear bias in everyone minds. The bias is to equate these leading roles with a higher hierarchical position. After all, Kindergarten, School, and previous Work experience have deeply ingrained in us the thinking patterns of hierarchy. Taking away roles is socially challenging, as it can be pictured as a humiliating move to demote the primus inter pares. Over time, another kind of hierarchy becomes a de facto reality in all but name. There is a lot of egalitarian attitudes necessary for an Alpha type character to move back to the ranks.
With Management3.0 the biggest risk is that nothing gets done at all. Just using a small work-out here and there can quickly be interpreted as gimmickry. Modern cooperations are full of corporate gimmickry, for example, team building sessions, “embrace the value” exercises, Football tables, follow-up fewer sessions full of Post-it notes or whatever soft skill training you suffered during your career.
Used in a disconnected and inconsistent manner, all Agile and Management3.0 exercises won’t get you anywhere. Therefore you need to have a master plan ready. Don’t go and waste good Agile or Management3.0 work-outs here and there. Instead, plan your path systematically by…
- Creating a rough master plan that starts from the current state of the organization, the customer, the business environment and the team members. Plan maturity stages, results, and behaviors accordingly
- Establish rituals that allow groups to reflect their work, their communications, and their emotions
- Build a shared sense of purpose over time
- Introduce only those work-outs that work well together and only when the foundations for their success has been laid. It’s no use to demand “total transparency” when there is no sufficient base of trust
The flexibility of Management3.0 is a blessing and a curse. It allows the incompetent manager to dabble with it and frustrate people even more. It may fail to provide sufficient momentum for any lasting impact on the organization. Management 3.0 practices may simply be crowded out by all the rest of the cooperate initiatives and noise, if not applied with sufficient force, without it being a “Schwerpunkt” of the Agenda of an organization.
A personal story of learning
Let me prepare the wrap-up of this series with a personal story about my experience with advanced Management Systems. I have read Mr. Laloux’s work, which can be seen as providing the foundations of all advanced management systems, shortly after its publication in 2015. I loved the case studies in the second part of the book, but I regarded the first part as a bit too esoteric to swallow for anyone in management.
Oh, I have been blessed to be associated with some very enlightened, highly successful, value-driven organizations during my career. I am deeply thankful for that. But I am still convinced, that most Managers are driven by an ethos of achievement that relegates values to the realm of glossy books: Values are not to be found in daily actions.
So I discarded the first, “esoteric” chapter about human stages of evolution and the rather awkward foreword by Ken Wilber. But two years later, after learning more and more about advanced management systems, this all makes much more sense to me. It’s like the underlying structure of all there is to reshape organizations. It’s like looking at a building: I needed to have a look at the facade first, then the interior, then got interested and dug deeper and deeper. Finally, in 2017 I was ready to face the level of abstraction that is required to understand the conceptual foundations.
It takes deliberate effort to understand more about all the layers there are to people and organizations.
It takes this understanding to reshape long-held beliefs.
So finally – after 8 long posts with over 16.000 words – which of the four systems is “best”?
The Best System of Management there is!
Oh well, you know it’s complex.
I am fond of Liberated Companies:
- There are a lot of positive examples of companies using this model, e.g., well-known brands such as South West Airlines, Michelin, Spotify, and Patagonia. I love the model of the 14.000 employees working for the Nursing Company Buurtzorg
- There is a lot of positive momentum for this model in the market as more and more people get onboard
- I think it can be applied to any kind of organizational challenge, not just knowledge work. From Nursing to running a nuclear submarine to manufacturing and retail stores – anything
- I am convinced it will beat the hierarchical model by length, even in some low complexity, low uncertainty situations. By utilizing the cognitive and brain power by everyone in the organization, which always come in a package with the muscle power, even routine work will improve
The two largest pains I have with Liberation is that
- it takes a whole company to adapt Liberation. It can not be done piecemeal, unit by unit.
- It takes a “messiah” like CEO: Enlightened, Spiritual, Disciplined and quite heroic.
This is strange quirk: For a higher state of organizational performance and human existence at work, we have to rely on a brave leader again. Like in the days of Julius Caesar and Napoleon.
The good news is: Over time this heroic CEO will appear less and less heroic, as companies like Silicon Valleys Google, IDEO, Netflix, and AirBnB or companies like Gore, Buurtzorg, South West Airlines, Atlassian, and Michelin continue to win more and more in the marketplace. It will just make good business sense to liberate businesses and it there will be much more CEO’s ability to operate from a “Teal” mindset.
This path is paved by the planned, robust and decisive application of Agile and Management3.0 practices. With an Agile mindset and with an end in mind, in a systematic and sustained manner.
I am optimistic.
Appendix 1: Apps and Nuggets
There are a couple of Apps out there that facilitate different aspects of advanced Management Systems. This list is not exclusive. There are more apps out there. Can you recommend some? If so, leave a comment on the blog.
These Apps support the organizational modeling, maintenance, and communication of loose network structures:
- Holaspirit – supports not only Holacracy
- Glassfrog – the classic Holacracy App
- Agilityscales – a new app created by a company set-up by Jurgen Appelo (under construction)
Apps that are critical to foster the free, spontaneous and transparent information flow across the organization:
- Slack: The most advanced whiteboard and communication app there is
- Jira: The Swiss Army Knife for Tracking
- Trello: A multiuser Kanban board for any device. Integrates neatly into Jira.
Knowledge Management Apps
There are a lot of knowledge management apps in the market. One of the most significant problems with these apps is that they are not integrated enough in day to day business. The limited usability often results in these systems being out of date and incomplete.
Confluence circumvents this because it integrates neatly into Jira and Confluence. But you may choose to use any other system. Just remember this: It’s never a single tool that will help you most, it is the integrated tool-scape.
Appendix 2: Other Management Systems: Sociocracy, SAFe, LeSS, and Nexus
This series focused on three advanced, comprehensive Management systems. There are some other systems. But those have either…
- limited usability outside the realm of Software Development (SCALe, LeSS, and NEXUS)
- or have limited traction in the business world (Sociocracy)
Sociocracy, an alternative to Holacracy
There is a third way between the fast and speedy decisions provided by hierarchies with its sole decision maker and the slow and tedious, but ultimately more just and participative decisions of systems relying on majority or consensus votes (e.g., Democracies). Sociocracy is such a system which originates in a system described in 1926 by a dutch reformist educator.
Holacracy is a modern application of Sociocracy, but it is not the only one. An alternative to Holacracy is Sociocracy 3.0, albeit with less traction in the business area.
SAFe – the “Scaled Agile Framework” describes how to scale small, agile projects to large projects or even entire organizations.
While it is has a sizeable number of adoptions in larger businesses, it is heavily criticized by the founders of Scrum for its complexity and top-down nature. It basically installs a top-down layer of control to multiple agile teams. Therefore it is logical, analytical, provides some agile stardust, but remains founded on hierarchy in its core – and this is precisely what it makes so attractive to established businesses.
LeSS – Large-Scale Scrum: A lightweight framework to scaling Scrum. Useful for large-scale software engineering.
Nexus is a lightweight framework to scale Scrum, too. Just like Less. There appear to be few significant differences to LeSS.
I hope you enjoyed this 8 part series of long posts devoted to comparing Liberated Companies, Holacracy and Management 3.0.
In the next post, I like to dig into the central concept of Servant Leadership by extracting the lessons learned from a story of liberating the crew of a nuclear attack submarine. Transferring control in this “mother of all critical work environments” to work level is quite impressive.
Last, not least: The final Comparision Table:
- Frederick Laloux, “Reinventing Organizations,” 2015
- Issac Getz et al. “Freedom 2.0”, 2017
- J. Appelo, “Management 3.0”, 2010
- B.J. Robertson, “Holacracy,” 2015
- J. Gotthelf, “Lean vs. Agile vs. Design Thinking”, 2017
- L.D. Marquet “Turn the ship around”, 2015
All sources and a short review can be found on ManagementDigital.net/Sources