We’ve been seeking enterprise 2.0 and social business for several years now with some notable success, but still quite a lot of “vague,” and some level of fatigue.
We have found some easy fixes (employee social streams), and discovered challenges that are devilishly difficult (aligned and coordinated, but still autonomous action and decision-making, or convincing boards of directors that sometimes employees and customers need to precede shareholder value).
The recent announcement by Zappos that it was changing its organizational structure to a “holocracy” suggests that forward-thinking companies are taking it all very seriously. They recognize the emerging proof that a more collaborative organization is a more profitable one.
So what does this mean for the rest of us? What of big, hierarchical, traditional organizations – especially public ones – can they change? Should they? How can we make this happen? Now command and control is only one of several recognized models of leadership and organizational design. Alternatives are no longer fringe ideas, but increasingly mainstream.
Organizational design has a huge impact on decision-making and collaboration, and both reflects, and often creates, the level of collaboration and autonomy with and amongst the workforce. Culture may eat strategy for lunch but decision-making, reporting and budgeting structures can either birth or strangle both culture and strategy with both hands tied behind its back.
At this stage we have four primary organizational models along a continuum from command and control to cooperative and anarchic. From GM to Valve, we might call it with a Basecamp and a Zappos thrown in to complete the picture. Each has strengths and weaknesses.
This new diversity of models is a good thing, and in the long run different orgs will benefit from different models. What works, for example, in an R&D environment may not work in retail or restaurants (Or maybe it will, eventually.)
What are their relative strengths and weaknesses? What could catalyze a shift from one model to the next? Some reflections:
1. Command and control (push) hierarchies.
We are all familiar with this. Decisions are made at the top by one or a few people and pushed down to people who are expected to act on orders, not to question them. Those below the point of decision-making are rarely asked to contribute to a decision. Discipline is strict. Fear is the primary motivator along with the potential to rise in the ranks.
Strengths:
- Consistency: Reliable, repeatable systems.
- Rapid, if not always optimal, decision-making.
- Efficiency of scale, in many domains.
- Thrive in in highly stable environments, and can use relatively unskilled or illiterate workers (some will argue that they are “exploiting” rather than “making use of”)
Weaknesses:
- Inflexible. These organizations are not quick to learn, or change in response to changing events. This depresses innovation, along with most employees that have achieved any level of consciousness themselves. There are exceptions of course.
- Employees are only rarely engaged or committed to the work. They may or may not be aligned with a mission that they may or may not understand.
- Capabilities are generally limited by the decision-makers themselves. So the strengths and weaknesses of the oligarchy are in effect the strengths and weaknesses of the entire organization, for better or worse.
2. Pull hierarchies
Decision-making is still concentrated at the top. The difference between push and pull hierarchies is management style and communications pathways. Management “pulls” insight and contributions from the team. Leadership approach is the key difference. Leaders ask their teams to inform answers and decisions. Leaders are meant to help their teams collaborate, grow as individuals, do great work, build mastery and commitment from their teams in service to a mission or purpose that is broadly recognized.
Strengths: More Rapid Learning, high(er) employee engagement, more flexibility and innovation than pull hierarchies. Leaders encourage and value collaboration, recognizing the difference between leadership and management. The potential of collaboration, diversity are better captured. Employees are more respected for having information and capabilities that management doesn’t.
Weaknesses: Success depends on leadership capabilities and philosophies of each manager. Decision-making can be complex, slow, and ambiguous. Conflict has the potential to undermine the model – it works well when things are going well, and can seize up when times are hard. There are few formalized practices for dealing with conflict, so a lot depends on people’s willingness to cooperate. These organizations are often uneven, with some managers or leaders understanding their role well, and others taking a more C&C approach.
How to transform a Push to a Pull Hierarchy:
Change leadership – to make the change from push to pull, one must either change the hearts and minds of existing leadership or replace them wholesale. The challenge is that this is almost always a gradual and uneven process, difficult to measure, and can create lots of conflict in the transition. The transition depends on the conversion of the former command and control leadership. While some grassroots efforts have impact in some teams and some organizations, ultimately it is the commander in chief – in whatever guise – that must buy in to make it work.
3. Holocracies
Holocracy is new to me. I learned about it along with most of you, around the time of the Zappos announcement that it was going hole. Many fine writers have commented on this structure. Steven Denning’s somewhat skeptical review of Holocracy was the first I read, and I followed a number of his links to original sources of Holocratic thinking. In essence, the business becomes a hierarchy of self-directed and self-organized teams, governed by a constitution (at least it’s not a manifesto.) This is somewhat reminiscent of the early work in Agile software development, with which it has some values and processes and general concepts in common –a ritualized structure and process for achieving highly flexible organizations.
Holocracies are purpose-driven and use well-defined processes to of distribute decision-making. One of Holocracy’s proponents wrote an interesting response to the Denning article. He is from a company called Holocracy One. Holocracy is their brain child and a registered trademark. Hmm.
Strengths: Distributed decision-making and self-direction better capitalize on human potential. Rituals and procedures oversee potential areas of conflict, clarifying decision-making in areas that a pull hierarchy struggles with. This theoretically will maximize learning, business outcomes and individual development.
Weakneses: The general public doesn’t have much exposure to real life holocracies yet. Zappos is not the first to go Holocracy, but it is the largest. We aren’t familiar with how it scales. I would not be surprised if Holo followed a similar path to agile in terms of becoming a mainstream idea over the course of a couple of years, adopted by some and mangled by many, if not most.
How to change form a Pull Hierarchy to Holocracy:.
This would require deep commitment from the board, the c-team and their core teams. It would require extensive education and training for the entire organization. It is a wholesale and intentional re-org.
Did Zappos fire all the managers? Get them to agree to non-manager roles? Convert them all to “team leaders”? Adjust their salaries? Did they need to? Did they have a month of company-wide training in Holocracy practices and procedures? I haven’t yet found any information on this. It would be interesting to hear how this reorg is being received now and how employees will feel about it a year or more from now. It’s a gutsy move, and I applaud it, but wonder how it will work in reality.
4. Wirearchies
Some information: Wirearchy is a term coined several years ago by Jon Husband. It’s a perfect term for the emergent, collaborative structures of a heavily connected community of peers. It gives a name to a kind of idealized organization – what Stowe Boyd would call a cooperative. It focuses on creating and sustaining flows of information. One could argue that Valve is sort of a wirearchy (thought it could also be a variant of an holocracy). Valve describes its approach as “spontaneous order” and actually have a very interesting economist thinking through their organizational challenges with them. They consider their organization an economy of merit. (The next big discussion we need to have about all of this is the role of scale and emergence. Emergent entities like economies (and cultures) act very differently at different scales.)
At valve, employees choose which projects they want to work on and how much time to devote to each. The idea being that the best ideas and people will draw in the best resources.
Strengths: optimizes individual contribution, emergence and opportunity space.
Weaknesses: Top-down planning extremely difficult. Ensuring coverage of the mundane can be extremely difficult. Outstanding, but potentially unreliable results. (By unreliable, I really mean unpredictable. Which is ok, in many situations, but may not be in life or death situations. This is where we still have a lot of learning to do – this balance on the edge of optimization and rigor, emergence, resilience and dependability. Faith and knowledge. Where business begins to resemble eastern philosophies.)
This type of organization may work best at very small or very large scale. The middle places –where the vast majority of business is done – is tricky.
How to transform a Holocracy to a Wirearchy: I am not sure you can. It would be a matter of faith. It would have to be undertaken in such a way that the downside risks of unpredictability are low – either because there isn’t much to lose or worry about.
This may be the kind of structure that you need to be born into. An organization born with these principles will have a vastly greater opportunity to succeed than a command and control organization that dreams of something different. The change would challenge every notion of business, making the transition painful and difficult for existing people.
Do Hierarchies dream of wired sheep?
If you believe that “command and control” never dreams of wirearchy, you may be wrong. In many large organizations, especially the ones where the outcomes are “real” – beyond shareholder value – I’m talking about hospitals, and government, and energy and the military and education – people are recognizing that there are new models out there. There is a nascent optimism that the intractable problems of generations shimmer with new potential. That in a giant leap of faith, we can step away from our expectations of the past and reimagine a future without limits.
You may not travel far down this path with any one organization. Or perhaps you may. The profound thing here is that there are real options and real experience to begin to learn from. We are no longer limited to the idea that one model fits all. It’s a new opportunity to be creative and to test centuries old assumptions.
Go forth and report back, please.
The best is yet to come.
Product Four 
I like the focus you put on the constraints of existing org structures, it’s key and often missed but when you say “Culture may eat strategy for lunch but decision-making, reporting and budgeting structures can either birth or strangle both culture and strategy with both hands tied behind its back.” …I know what you’re getting at but those things are just tools being used within an existing culture. So we’re back to culture eating everything, even its offspring.
Hi Mark – Thanks for your thoughts here. The thing about culture is this. Its not a thing that’s well defined. I tend to think of it as an emergent property of the system that is the organization. So – in a sense its everything and in a sense its nothing. That means that its not a hugely useful concept for us to work with. If we can’t define it, we can’t think tactically about how to do something about it. So when I talk about company structure – yes, its part of a culture, but its a very specific and very powerful construct on its own. Org structure is one of the most impactful elements in determining how people work together – one that can completely subsume most other elements. So that’s really the point I’m making.