Leadership and Structure: What has changed with the Digital Age

Quite a bit has happened since my last blog post. Due to a re-tweet of a popular writer, there have been about 600 views of Holacracy, Liberation and Management 3.0 – the first article in a series comparing those three Management Systems. Compared with the usual 50 views, that felt good!

What is more important: Comments came in, which highlighted some background of these Management Systems. That sent me into a frenzy of research about subjects like:

  • Sociocracy3.0, a system of governance which replaces hierarchy  – of which Holacracy basically is a popular application in a business environment
  • Prescriptions how to implement Agile Software Development in large, multi team environments like LeSS (Large Scale Scrum), SAFe (Scaled Agile Framework) and DaD (Disciplined Agile Delivery). Special thanks to Ralf Metz for pointing in this direction
  • The commonalities, overlap and supplementary nature of all those systems and their foundations like Lean, Scrum, eXtreme Programming,  KANBAN, etc.

The learnings?

  • It is the “principled anarchists” in Software Development who are pioneering a lot of new management techniques
  • People with other backgrounds, e.g. MBA’s or any other Person with a non-IT professional background, are overwhelmingly not involved or aware of new Management Models
  • There are a lot of good ideas which can be transferred from the realm of IT to other knowledge based work environments if only those Managers can be interested in understanding their trade as a craft, which they need to improve to prosper in the digital age

When I talk to interested managers, I find that they can see the advantages of Agile and its conflicts with traditional hierarchical management. But there is so much fragmented advice out there. A comprehensive but understandable management system would help them navigate.

So let’s continue exploring the differences of the three Management Models.

A. Leadership, aka: Heroically cleaning the office kitchen

As I said in The Foundations of Holacracy, Liberated Companies and Management 3.0: I do not care much about distinguishing Management and Leadership. It’s just semantics. Here are their definitions according to the dictionary:

  • Leadership: The action of leading a group of people
  • Management: The process of dealing with or controlling things or people

So once you are responsible for a group of individuals you are managing them, AND you are a Leader, too. There is no constellation in this where a Manager is not a Leader, and a Leader is not a manager. A “Leader” is a just a more grandiose name for someone who is a “Manager.” The act of leading by example by cleaning the office kitchen is as well an act of management as the multi Billion merger decision is.

Nevertheless, I use the term leadership as signifying the posturing of the Manager towards his group: The role that one adopts as a manager in relation to the group that is being led.


The Gardener

In a hierarchical organization, the role of a manager is “Command and control,” i.e. clearly stating what someone is to do and checking if it has been done. That role shifts towards the Gardner role in Liberated Companies and Management 3.0. Why a Gardener?

A Gardner is supposed to grow an organization, not build it. If the central metaphor for an organization is the “Organism” (Liberated Companies) or the “City” (Management 3.0), it is impossible to impose the will of a Manager. A Manager must grow an Organization by planning, seeding, growing and maintaining the organization. Please note that “Seeding and Growing” is wording that is well known in the world of Lean Start-ups, as in “Seed Capital” and “Scaling” (from zero to one or from 1: N, whatever). A pleasing symmetry, as a Gardener, must build hypothesis before seeding and refine her beliefs while watching the seed grow.

The Gardener role is supplemented with the role of the explorer – i.e. introducing ideas from the outside, nudge and destabilize the company from time to time to do things in new ways. And it is supplemented with the role of the coach, to foster the growth of skills and discipline in employees. Please note that not every Manager is a good coach. So Jurgen Appelo (the author of Management3.0) suggests outsourcing this activity to a professional coach. But coaching remains an obligation of the manager nevertheless.

Holacracy is different. Management is done away with. There are just “link” roles assigned to individuals, who practically acts as the Referee inside Holacracies operating system.  There is only one manager left: the CEO acting as a benevolent dictator who wants the system of Holacracy for her company.

A decrease in the number of managers

Let’s look at the span of management: In traditional companies there usually is an average number of 1 Manager to 8 employees. Management 3.0 is not specifying any number, but it seeks to increase that number by decreasing the number of middle managers. Holacracy is doing away with managers altogether, but it is recommended that coaches support the organization at a ratio of 1 coach to 50 employees, in typical organizations that I spoke to or read about.

Who appoints managers?

In a hierarchy a manager is appointed by a higher level manager. This is no different in Management 3.0. But in Liberated Companies managers are elevated by the group by vote or just by the fact that people choose to follow them. In a Holacracy, there are no managers to be appointed, but there are roles to be assigned. These are assigned by a vote by the members of a circle, requiring consensus or at least no veto from any member of the circle.

What about the power base of a manager?

Who appoints managers explains the power base of a leader. Wherelse a hierarchy bestows a manager with powers ( e.g. may direct others, decides on bonus payments, work location, promotion, etc.) that are linked to the position assigned, there are no defined positions and no positional powers in Liberated companies or Holacracy. Leaders in such companies have to rely on their skill to attract and retain followers. A feat where credibility and trust are key. Lose your followers and cease to be a leader. Not unlike leadership of a Viking tribe, in a Multiplayer Online Game or any effort to attract followers in crowd platforms like Instagram, Pinterest, Blog sites, etc.

I like to make a small amendment for Management 3.0. Even so, a hierarchy is still in place, a leader is supposed to take on a servant position ( see The Foundations of Holacracy, Liberated Companies and Management 3.0). And Servant Leadership needs social capital, e.g. trust and credibility, to work. Again, an excellent bridge build by this system between today’s reality of hierarchical systems and a less hierarchical future. It is a step. It is Realpolitik.


B. Structure, aka Silos and Networks

The first thing that a newly appointed manager usually does is to think about the structure of an organization in which to apply his skills. Which structure provides the best fit for the purpose of an organization at the current point of time?

The hierarchical organization answers this question with an organizational chart: Boxes of clearly defined responsibility, ordered by business function, geography, product or a matrix combination of these. The dominating belief is: There can be only one responsible for a box/ unit. Shared responsibility is a recipe for no one being responsible at all. For any kind of work and at any point of time, there must be someone who is in charge.

That belief does not change in any of the other management systems. What changes is how this responsibility is assigned.


Assigning Responsibility

In Hierarchies responsibility is directly assigned by a superior: Do this, do that.

Management3.0 provides the employee with more negotiating power because the manager is supposed to sell and win over the employee and not to impose a responsibility. Although there may be cases that a manager might be forced to impose her will, in the awareness that this will be depleting her social capital.

In contrast to this, Holacracy and Liberated Companies rely on people to volunteer for responsibilities. Volunteering is facilitated by a shared Mission, shared values, shared the understanding of the situation and social pressure of the team to do so. This is crucial: Without these four elements in place, neither of these three management systems (including Management 3.0) will work.

Networked, horizontal relationships

In a hierarchy, the most important relationship is the vertical one, to a superior or to a subordinate.

This changes in the other three management systems, there the horizontal relationship to the co-workers is much more important. This has profound implications: No longer is the winning career strategy for people to cuddle with their superior. It is now much more important to be valued by your coworkers.


The implications of Talleyrand’s dictum are immense:

  • Rebellious, nonconformist types of persons are able to rise in systems like Liberated Companies, Holacracy and Management 3.0
  • Subservient, some times devious types (“Courtiers”) of characters and behaviors aimed at pleasing the superior and gaining favors, that other do not enjoy, have less chance to succeed
  • People (“Demagogues”) being able to simplify matters and raise the emotions of coworkers have a better chance to rise to prominent positions because they are evaluated by their co-workers

Creativity will increase in networked, horizontal organizations. But tumult and change will increase, too.

Demagogues at work. What would you prefer to be:  A Courtier or a Demogoge?

Main source of contribution

The individual is the smallest unit of an organization where work is actually happening. That is the unit that the classical system of management is addressing. Give everyone something to do and coordinate all individuals.

But science has advanced since the days of Frederick Winslow Taylor. The phenomenon of Emergence has been discovered in System and Organizational theory:

Emergence is a phenomenon whereby larger entities arise through interactions among smaller or simpler entities such that the larger entities exhibit properties the smaller/simpler entities do not exhibit.

In other words: A team is able to perform better than the sum of the contributions of its individual members. The easy explanation is that people bouncing ideas on one another and complementing their skills lead to better solutions than anyone would be able to come up with on their own. The complex explanation can be found in Social Physics: The Revival of Science in Management.

The other three management systems recognize this scientific advance and focus more on the team as the main source of the contribution.

Maximum size of autonomous units

Ok, a team might be the most important unit for delivering performance within an organization. So an organization should be organized in teams (Liberated Companies or Management 3.0) or Circles (Holacracy). But at what size does an organization, that is made up of a number of teams, become inefficient?

For once, Liberated Companies delivers hard facts: 150 people – as a rule of thumb. If an organization grows beyond that number, split up and form a separate legal entity. If organizations fail to split up, coordination efforts will increase disproportionately leading to a reinstatement of the hierarchy or to chaos.

Holacracy does not impose any limits. The Online Shoe Retailer Zappos has 1500 Employees working under Holacraciy in one legal, organizational unit. The Operating System is supposed to scale to any number – just like classical hierarchies can be scaled to any number (e.g. Walmart with its 2,1 Mio employees).

Management 3.0 – true to its “complex” world view – does not give any exact number but recommends to keep organizational units small.

By the way: Wondering about the optimal size of teams? It is 5 plus or minus 2.  This is invariant to any management system and a result of the biologically given number of meaningful social connections that an individual is able to have.

(I love to give truly amazing, critical facts and just quickly move on…)

Attitude towards Uncertainty

This one is easy:

Hierarchies seek to analyze, reduce and mitigate uncertainty. Uncertainty is a disturbing factor that needs to be reined in.

Liberated Companies are embracing uncertainty as a chance to learn and grow. They refrain from fixing structure so that the organization is sufficiently flexible whatever the future brings.

Holcracy accepts uncertainty and sees an opportunity to learn. A Holacracy is flexible to change according to whatever the future brings, except for changes to the operating system of Holcracy itself. Uncertainty is just another of the things that the Operating system of Holacracy is build to deal with.

Yes, I am playing with words here; Holacracy is accepting change, Liberated Companies are embracing change.  The difference is subtle but important.

Management 3.0, as so often, takes the middle ground. The optimal way to react to uncertainty depends on the specifics of the situation. Sometimes it might be easier to just analyze and mitigate risks to achieve optimal execution in stable environments. And in other cases, it might be wise to act like a swarm of birds and flexible, nimbly navigating your way through adversity.

Main Mode of Thinking

All these structural elements listed above impact the things that are in the primary focus of the mind of an organization. In a hierarchy, thinking is all about Analysis. Understanding the situation and coming up with the “one best way” to do things (see F.W. Taylor above).

Within Liberated companies, it is really about Exploration. The structural elements are fragile. There are no barriers to exploration, except those of social control and personal ambition. The absence of barriers…

  • allow people to express themselves fully.
  • allow teams to assemble themselves in a way that they deem best
  • allows organizations to evolve through try,  error, and learning

In Holacracies the primary mode of thinking is Synthesis. To come up with a shared point of view to problems and how to tackle them. Synthesis is what is dictated by Holcracies operation system, that is expecting compliance to the rules and the consensus decision by the circle.

It is all about Complexity in Management 3.0. In fact, Jurgen Appelo starts and ends his book with excursions into complexity and general systems theory, stating that everything is conditional and there is no one best way. It is all situational, and the best solution can not be known.

Where do I stand on this? I favor thinking about Complexity. It’s the right mindset for a curious, learning mind. Yes, doubts can be discomforting, but they prevent complacency and lead to insights that feed the curious mind.

What’s next?

We are half way through this blog series that compares the classical and modern management systems. I guess I will need two to three more posts to finish this job.

I hope you find this work helps to understand your options on how to manage in the digital age better. If so and if not, let me know by commenting, linking, forwarding or re-tweeting this post. Let’s form an emergent team 😉

Last, not least: This week’s updated comparison summary table





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