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holacracy

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Organizational Learning in the Age of Ideas

Most organizations are “locked in an industrial mindset.”  They think of their workers as cogs in the wheels of progress, doing what they’re told, not smart enough to figure out how best to do their jobs or improve their organizations. Managers in these organizations are needed to tell workers what to do and how to do it.

That “Steam Engine” mindset, as described by Jonathan Gifford and Mark Powell in their new book, My Steam Engine Is Broken: Taking the organization from the industrial era to the Age of Ideas, creates a command-and-control culture that has become a barrier to success in companies today. The authors write:

  1. Many organizations have a culture that is still unconsciously modelled on the managerial, ‘Steam MySteamEngineIsBroken-cover-web2Engine’ mindset of the industrial era; a culture which is fundamentally unsuited to the modern workplace.
  2. There are a number of core Steam Engine behaviors which actively prevent or destroy the things that modern organizations know that they most need from their employees – engagement, commitment and creativity, amongst others.
  3. Addressing and changing these core Steam Engine behaviors – little by little and piece by piece – will in time achieve a radical transformation of the organization, creating a working environment suited to the Age of Ideas and freeing up the energies of the organization’s members.

Some organizations are experimenting with alternatives to the “Steam Engine”. For example, Zappos is shaping its own form of Holacracy , Semco Partners has become known for a radical form of industrial democracy, and the Valve Corporation has eliminated managers.

A culture of command-and-control is a barrier to organizational learning. It’s a barrier to creativity, innovation, job satisfaction, engagement, self-motivation, risk-taking, communication, adaptability, self-respect, and retaining talent. Without these qualities, an organization can’t learn.

Gifford’s and Powell’s conclusion is that leaders need to realize that they might be able to control some processes but they can’t control people. High performance organizations need a culture that allows workers to grow at their pace and in their own way.

The authors ask us a provocative question, "What do you observe as examples of organizations ...where the comfort blanket of management control is stifling the natural creativity of people in the organization?"

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Learning to Change Culture

The culture-change bandwagon appears to be off and running at a fast pace. Companies are jumping on because they are desperate to compete, create new services, and get products to market faster. They Bandwagon have automated the simple and routine tasks and now they want to be more productive with a smaller workforce.

My fear is that in the rush to change they will overlook the hard work of preparing and supporting employees through the transition. Announcing a new, maybe better, way of doing things is the easy part. Helping people learn how to work in the new system is the challenge.

Zappos, the billion dollar online retail shoe company has implemented “Holacracy”, an anti-bureaucracy culture that eliminates managers and shifts responsibility for leadership and results to every employee. CEO Tony Hseih's intent is to enhance employee engagement and be more creative, innovative, and productive. Employees will have to learn to function without managers, to take responsibility, to take initiative, to learn from successes and failures, and to be innovative.

Accenture, a 330,000 person global management consulting, technology services and outsourcing company, is changing its culture dramatically by eliminating annual performance reviews and its employee ranking system. Instead, managers will provide ongoing feedback to employees based on their assignments. This change has come about because CEO Pierre Nanterme believes that employees need timely, day-to-day feedback in order to improve performance. In this new culture, managers will have to learn how to give timely and helpful feedback, employees will have to learn how to make use of that feedback, and everyone will have to learn to communicate effectively and build trust.

Seattle Seahawks, a very successful professional football franchise, might be the last place you would expect to find a culture change. But the traditional confines of macho my-way-or-the-highway leadership has been transformed into “…a learning-based organization that is hungry to figure out the challenges of expressing human potential.” Of course, it helps to have a “relentlessly positive” coach in Pete Carroll who encourages players to express themselves and who listens to his players and staff. Players and staff have to learn how to effectively express themselves, how to stay positive like their coach, and how to support each other.

There have always been maverick leaders of small companies who have experimented with a different kind of organizational structure. What we are seeing now are mainstream companies of varying size and purpose saying that they want their organizational culture to be aligned with their values and strategic goals. This is not an easy change for employees whose only experience has been bureaucratic, command-and-control, demeaning work environments. They have much to learn in order to fit in and support these alternative workplace cultures.

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Reinventing Organizations: From Command-And-Control to Holacracy

I admire Tony Hseih, not because he built a billion-dollar shoe company that he sold to Amazon, or that he wrote “Delivering Happiness,” a book that has reached #1 on the New York Times Bestseller List, or that he is helping to rebuild downtown Las Vegas. All of those achievements are laudable. I admire Hseih because he is constantly experimenting in order to keep improving Zappos as an organization and as a place where people want to work and do their best. He has created a culture driven by values and improved through continuous learning.

About a year ago, Hseih implemented the Holacracy model in Zappos because he wanted greater employee involvement and commitment.  Now, because Hseih believes that Zappo’s employees “…haven’t made fast enough progress towards self-management, self-organization, and more efficient structures…,” he is shaking up the culture again.

He wrote in a recent email to employees:

Something key to note here is that Holacracy just happens to be our current system in place to help facilitate our move to self-organization, and is one of many tools we plan to experiment with and evolve with in the future. Our main objective is not just to do Holacracy well, but to make 51yHTga6taL._AC_SX60_CR,0,0,60,60_ Zappos a fully self-organized, self-managed organization by combining a variety of different tools and processes. Reinventing Organizations calls this type of organization a Teal organization. You’ll learn examples of successful Teal organizations below and in the book. Each of the companies cited below and in the book have different tools and processes to help with self-management and self-organization. We won’t necessarily adopt all of them, but instead we will experiment and figure out the right tools and processes for Zappos, using Holacracy as the initial starting point and continually evolving as we dive deeper into the world of self-management and self-organization.

As an outsider and knowing only what I’ve read about the company (and what friends have said about the high quality of products and service), I am reluctant to make any judgements until the data is in on Hseih’s latest experiment with culture. However, I do wonder about an apparent disconnect between the intention to create a company in which there are no managers and self-management and self-organization are highly valued, yet the decision to become that kind of company was decided by the CEO and is being enforced as if the company is still hierarchical and command and control. Zappo’s might aspire to be leaderless, but that will be very hard to achieve for a company in which the charismatic founder and inspirational leader is still around and the parent company is a much more traditional organization.  

Gianpiero Petriglieri, Associate Professor of Organisational Behaviour at INSEAD echoes my concern in a HBR blog post titled Making Sense of Zappo’s War on Managers. He writes:

Under the guise of freeing people up, self-management is often an effort to free the organization up first and foremost. Self-managed and self-organizing systems are meant to make a company more flexible in ever-shifting markets. They do so by increasing demands on its people.

They make it a requirement—not an option—to pour one’s heart into one’s job. While they abolish managers, they increase the amount of management. People work harder, and control gets more pervasive once it is exercised by everyone rather than by one boss. Issues have to be sorted out rather than delegated up.

Petriglieri is cautioning us that with self-management and self-organizing comes more individual responsibility and greater individual accountability. Although, this might be good for the kind of agile, adaptive organization that is needed in a highly competitive, global business environment, not every employee wants or can handle this kind of responsibility and accountability.

Kris Taylor, in her blog post, asks, “Is Holacracy a new organizational structure that will catch on?” She withholds judgment, expressing appreciation for some aspects of the model (roles more important than job descriptions, shared leadership and decision-making, breaking down organizational silos, fluid rather than fixed roles) but raises questions about whether Zappos’ values are compatible with a 39-page Holacracy rule book.

Frederic Laloux, author of Reinventing Organizations has, because of his research, become a strong proponent of the values underlying the Holacracy model. He argues that self-management and self-organization are not new ideas and that these concepts have decades of proof in very successful companies, such as W.L. Gore, Whole Foods (in the stores), Orpheus Chamber Orchestra, and Wikipedia.

I am rooting for Zappos. I don’t think hierarchical, command-and-control organizations can create the kind of agile, adaptive learning culture that we need in most businesses today. Companies need to be willing to experiment with new ideas and new ways of organizing themselves. Companies need to learn how to learn from experiments to create the structure and culture that aligns with their mission and values. I’m hoping that Zappos will become another example of an organization that has created and is sustaining a learning culture.

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Control, Trust, and the Future of Workplaces

Why do employees have to suffer in cheerless, hard-driving, demeaning workplaces? Where is it written that organizations have to be autocratic, bureaucratic, silos of competition? What makes founders of new companies and captains of industry hold onto the reigns of control as if the people they’ve hired are incompetent fools?

I understand the need to feel in control.  And I understand the fear of not succeeding and the fear that others will. These are human traits that some leaders are able to manage effectively but many others are not. Many leaders have great difficulty believing that their job is to make the people around them successful and great difficulty trusting the people they have hired.

Simon Terry writes in the ebook, Changing the World of Work. One Human at a Time:  

Trust is your first design choice. The answer to the trust question will shape all the subsequent choices that you make in the design of your organization and its future path in the market. Trust will determine your ability to leverage new ways of working and the future of work in your organization. Most importantly, trust determines whether you can ask your people to help.

If you don’t trust the people around you, then you have no choice but to create or maintain a traditional, hierarchical, top-down structure. That’s how you keep control over people you don’t trust.

However, if you do trust the people around you, then you have options for the structure of your Joy Inc organization. You can align that structure with your values and your strategic goals. There are examples of companies that are doing this effectively. For the most part, their designs are emergent; growing out of the values and beliefs of their leaders.

One useful theory for categorizing these organizational structures is Robert Quinn’s Competing Values Framework which posits four types of culture that influence structure:

  • Clan culture (internal focus and flexible)
  • Adhocracy culture (external focus and flexible)
  • Market culture (external focus and controlled)
  • Hierarchy culture (internal focus and controlled)

Another structure that is attracting much interest of late is holacracy, especially since the Zappos CEO has made it public that this is what he intends for his organization.  This structure is similar to Quinn’s “adhocracy”, an environment in which people self-organize in teams around purpose. In theory, hierarchy is absent in this type of organization.

The point is that you have options depending on the values and goals of your organization. You can create an environment in which employees feel respected and valued and feel joy in coming to work each day. This isn’t easy because of our natural tendency to want to feel in control and, for some, the difficulty in trusting others. But if you want to get the most out of our organization, you need to work at overcoming these fears. 

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