Category Archives: Sociocracy in the Workplace

Sociocracy in the Workplace discusses ways to implement sociocracy as an organizational system or as personal guidelines Adopting democracy changed our civic lives but not our work lives. Democratic values are almost universally absent our still autocratic workplaces.

Structural Issues in Government

NoParkingIn my neighborhood we have a large email list designed for neighbor to neighbor conversation and requests for help. A frequent request is a phone number for help with city services. The current problem is needing the city to enforce parking regulations when a life may be at risk because a driveway is blocked. The lack of response from city governments reveals structural issues that as in other bureaucracies will be hard to fix.

The person whose driveway is often blocked is referred by 911 to the parking violations department. Parking violations treats it like an expired meter. They ticket when they ticket. No response to a potentially critical issue. They aren’t designed for that. Their only recourse is to place  the complaint  at the bottom of a long list of towing tasks.  Days later when the tow truck shows up, the car is no longer there. The next day another is in its place.

In the moment, the severely asthmatic won’t reach the emergency room without an expensive ambulance ride and the added anxiety of waiting.

A blocked driveway is different from an expired parking meter or a car parked too close to a corner. The existing policy means the workers are bound to fail. Unless they violate the policy.

Structural Issues in Government

The lack of response is the result of a structural issue, not a personal or department failure in a specific instance. Since a representative of a council member’s office has now intervened to solve the problem, that is probably how it will appear inside the department. Easier to blame one person or team of people than to address policy.

If the city had an appropriate policy, this would be classified as a life or death risk, not a parking violation. It would receive a response designed to avoid emergencies. With permission, the parking  department might also make recommendations to the homeowner for making the driveway appear to be more obviously active, not like an unused alley. Parking people are on the street every day and know the characteristics of places where cars park illegally as well as legally. I wonder if the street and design department talks to the parking violations department? The Meter Maids?

The need is for a clear definition of the problem and a change in policy and practice. As in most bureaucracies, a policy decision like this can only be made at the top levels by a commissioner or even the city council. A single potentially dangerous parked car, however, in a city of parked cars can’t compete with a failing educational system or a city-wide epidemic. Correcting parking policies isn’t a priority. It can take years to change them.

Policy Decisions at Appropriate Levels

In a dynamically organized government based on the principles of sociocracy, the structure would allow a policy to be developed and implemented by the responsible department. Within the larger policies governing the city, the people responsible for safe parking would decide how they will accomplish their purpose.

Many governments follow the practice of defining objectives, measuring effects, and evaluating performance. But this is often done at an abstract level. Numbers, often collated with the statistics from other departments, seem unrelated to day-to-day operations. In response to numbers, changes are made by those several levels removed from those governed by them. Instead of corrections in policy and  structural issues, evaluations often result in personnel changes or reorganizations. Morale falls and new problems emerge.

In dynamic governance, the organization would:

  1. recognize a blocked driveway as a distinct policy issue not covered in the parking violations policy, and
  2. allow policy to be determined by the department.  They directly experience the problem and can most quickly and effectively address it.

In addition to being more effective, correcting structural issues avoids all the unnecessary sturm und drang and time wasted in trying to apply ineffective policies.

Are Policy Decisions at the Level of Parking Enforcement Possible?

I know your first objection will be that the parking meter people and the tow truck drivers are not equipped to make policy decisions. And they are not in charge of their own budget. But I think we need to give it a try because;

  1. These people know more about parking and parking problems than any of us. We only know our own parking problems.
  2. They are our neighbors and are as smart as we are. Inattention and playing dumb is one way to get complaining citizens off your back when there is nothing they can do.
  3. They might not know how to phrase a policy in formal government language — which is probably a good thing— but they know which words work in parking. That’s all they need to know.
  4. Dynamic governance also requires continuing education for everyone (5% of budget) so they can learn about practices in other cities and how city planning effects parking.

When a department’s numbers come out dramatically better in the next review, it will get the budget it needs and be trusted to spend it wisely. But more probably, performance will be so much more effective and their workload brought under control, so more funds will be available within the existing budget.

A related issue is job satisfaction. While some people just want to show up for work and push a broom where they are directed to push it. Others are deeply involved with the issues of green cleaning and more effective service. Organizations, especially governments, often fail to recognize or use this energy.

Misconceptions about Sociocracy

In an excellent article in the 10 September 2015 issue of the Harvard Business Review Georges Romme analyzes the misconceptions in the press about Holacracy and about sociocracy, “The Big Misconceptions Holding Holacracy Back.” Romme has been centrally involved with Gerard Endenburg and sociocracy for decades. The following is a summary and commentary on Romme’s article, which I also encourage you to read.

A key management practices is concentrating leadership in top management and suppressing or ignoring any ideas or concerns from other levels of the organization. Self management, like that in sociocracy, is believed to correct autocratic leadership but the misconceptions about how it does that have seriously affected the willingness of organizations, businesses in particular, from adopting it.

Misconceptions about Sociocracy

Romme focuses on three misconceptions:

  1. It is non-hierarchical,
  2.  Implementation specifics aren’t important, and
  3.  The board’s functioning shouldn’t be affected.

Since sociocracy approaches the whole concept of organization from an unfamiliar direction it is often misunderstood, as can be clearly seen in descriptions in the news media of the implementation of Holacracy at Zappos. While certainly not the first corporation to implement principles and practices of self management — there probably thousands of businesses, non-profit organizations, and associations using sociocracy and other self management structures—Zappos has received the most attention for doing so.

Misconception 1. Abandonment of Hierarchy

Although self management methods are fundamentally different from command-and-control structures, they still have a hierarchy that provides an overall purpose and direction for the organization. A lack of hierarchy leaves an organization without a clear sense of who is accountable for what. While some are moving to a structure more similar to a network, they still have a clear patterns of coordination and accountability between nodes.

Self management, self-organization,  and distributed policy decisions balance and complement the hierarchy of daily operations. “Power and authority can flow in virtually any direction, but with an eye to maximizing efficiency … Instead of conferring authority, the hierarchy establishes an unambiguous sequence of levels of accountability.”

Misconception 2: The goal justifies any means.

Once the blueprint of the new organizational structure has been adopted, the misconception is that any implementation strategy is acceptable. The ends justifies the means. At Zappos, the CEO sent a memo to employees — embrace holacracy or accept a buyout. Empowering employees was thus expected to be the result of exercising authority. A mixed message that could lead to mixed results.***

The implementation process must itself be empowering and include employees’ ideas and ensuring that they understand and embrace the change. The best approach is for the top executives to tend to their own responsibilities and allow the employees to self-organize with the help of a dedicated implementation team.

“The pace of change must also be deliberate and well-orchestrated. The brand-strategy consulting firm Fabrique, for example, first defined shared objectives and had a project team pilot-test whether sociocracy served to realize those objectives. Then, on the basis of the evidence collected, it had the project team, together with the executive team, make a shared “go/no-go” decision (the result was a “go”). An approach like this signals top managers’ deep understanding of distributed management and leadership and establishes them as role models.”

Misconception 3: The boardroom is unaffected.

Executives and directors often try to take themselves out of the process as if the change only affects operations and middle managers. They assume they will still have autocratic power over any decisions made. But sociocracy requires a fundamental redistribution of authority in the whole organization. There are mechanisms for measurement and correction but how a team or department accomplishes its mission is under their control as long as it doesn’t negatively affect the work of another or is in conflict with the purpose of the organization.

The distribution of management optimally extends to a financial restructuring so neither owner or shareholders can unilaterally sell or close the company. The company should “own itself” and be financially self sustaining. Endenburg Elektrotechniek and MyWheels,  in the Netherlands, and the Terra Viva Group in Brazil are examples of companies that have restructured financially to ensure their independence and continuity.

A self-sustaining company is different from an employee-owned company. Employee owned companies are just as often managed autocratically as private companies and stockholder owned corporations. A completely sociocratic company is controlled equally by all its members,  not the board.

Integral Education & Distributed Management

Another practice in sociocracy, one not mentioned by Romme, is that the move toward distributed management and self-organization is balanced with strong support for continuing education. Referred to as “Integral education” it requires a  plan for personal and team development as part of annual planning. One estimate is that organizations should devote 5% of their budget to education and research for employees, not only for top management and aside from that delegated to a research department. That is 5% distributed to each employee at all levels of the organization.

Integral education ensures quality in every detail of operations, engages the intelligence and energy of each employee, and develops the skills required to assume greater responsibilities. The expectation of self-organization develops leadership, which further ensures the sustainability of the company.

Georges RommeGeorges Romme  has a background in economics and business administration, with a MSc in economics (cum laude) from Tilburg University and a doctoral degree in business administration from Maastricht University. Previously, he was on the staff of Tilburg University and Maastricht University. His current position is professor of Entrepreneurship & Innovation at Eindhoven University of Technology (TU/e). From 2007 to 2014 he also served as dean of the Industrial Engineering & Innovation Sciences department. He is author of the forthcoming The Quest for Professionalism: The Case of Management and Entrepreneurship (Oxford University Press). 

*** An added comment on Tony Hsieh’s memo of  26 March 2015 to Zappos employees:

While Tony Hsieh did say “we are going to take a ‘rip the bandaid’ approach to accelerate progress towards becoming a Teal organization (as described in the book Reinventing Organizations),” he also went on to explain at length how further implementation of Holacracy at Zappos would take place and how. The process was very well considered and explained.

The very long memo gave many options for understanding the reasons for acceleration toward self-management, including readings. His memo was described in the press as an “ultimatum” and there would be a tendency for employees accustomed to an autocratic leadership to view it this way. In fact, it was a request that employees inform themselves and offering a buy-out to those who did not want to accept self-management.

I softened the language in this passage and in several places used “self management” instead of “distributed management.” It is more accurate to describe the organizational structure as “self management” and “distributed policy decisions.”

The full memo is online in Aimee Groth’s article published on Quartz.

Who Stole the American Dream

Crushing Middle-Class  Prosperity

The American Dream is of obtaining middle-class prosperity and socio-economic mobility. Hedrick Smith analyzes how it was lost in America.

The American middle class in the 1960s was the largest and most prosperous in the world. Now, the disparity between top and bottom is huge. Even the wealthiest 5% are falling behind the super-rich 1% that controls 2/3 of the nation’s wealth—trillions of dollars. The remaining 99% earn the remaining 1/3. America has the largest income disparity in the world.

Who Stole the American Dream, in its analysis of the socio-economic interactions between society, the economy, businesses and government,  also provides an excellent foundation for analyzing how a sociocratic society could function to restore the American dream.

(I’m not being revolutionary or extreme here. Just suggesting that even an understanding of sociocratic principles and  practices  would have prevented these events. They would have helped individuals make better decisions.)

Who Stole the American Dream

In Who Stole the American Dream, Smith presents a history and analysis of the 2008 economic crisis and the political ineffectiveness of Congress in correcting the systems that caused it.

Hedrick Smith was a journalist at the New York Times when he shared a Pulitzer Prize for his work on the Pentagon Papers series. He won another Pulitzer for his international reporting on Russia from 1971-1974. He has written several books, including, Russia, that are both best-sellers and used in college and university courses. His Emmy Award-winning PBS series examined systemic economic and political problems in the United States.

The book is an eminently readable, though long— 426 pages of text and another 131 of pages of back matter: Acknowledgments ; a Timeline of Key Events, Trends, and Turning Points, 1948-2012; and Notes.

I usually don’t post recommendations until I’ve completed a book.  But for that reason they sometimes don’t get posted at all. By the end of the book, I’m ready to move on to the next book and often have so many notes and comments that I don’t have time to write them. The book sits by my computer for “later” when I have the time, which never comes.

And readers would probably be so filled up from reading my comments they wouldn’t want to read the book.  So this time, I’m recommending a book before I finish its 557 pages. (Yes, I read endnotes.)

Relationship to Sociocracy

It will be a long time before we have leaders who have even heard of the fundamental principles and practices of sociocracy but an understanding of them would not only have helped individuals make better decisions, but understand why they were better. Many other books on socio-economic realities and possibilities are valuable in understanding sociocracy, but this one is particularly valuable for its analysis of what created the losses of the middle class, the 2008 financial crisis, and the incredible disparity in incomes. The facts and figures are Smith’s and the sociocratic analysis is mine. I hope I have made the distinctions clear.

The Deception of Free Markets

In 1971, the theory of free markets began to take hold. Businesses and trade associations began heavily lobbying Congress for advantageous laws and regulations. The number of companies with lobbying offices in Washington DC grew from 175 in 1971 to 2,445 in 1981. In 2012, the number of business lobbyists outnumbered members of Congress 130 to 1. The markets were hardly free, they were heavily influenced by corporate interests.

By the late 1970s, corporate CEOs began taking stock options as compensation. Sales of businesses, which often leave the workers with no pensions and end job security became very profitable for CEOs as investors.

The new market economy led to deregulation, lower taxes, and free trade that was supposed to raise the quality of life for all. Instead, middle-class wages stagnated and the rich got richer. In 2012, 60 million people were considered upper class with incomes over $100,000 in 2012, but 90 million lived at or below the poverty line of $40,00 0 for a family of four. Three million people received 2/3 of the country’s income while 300 million received 1/3. For Princeton University economist Alan Krueger this is mind-boggling. And he is used to big numbers.

Our  political leaders are in constant conflict and polarized, unable to solve basic problems.  Thinking sociocratically, majority vote could be blamed for political jockeying for position and winning elections rather than focusing on governing the country. Smith’s analysis shows that business interests may be a greater force than majority vote because they exert the power of money. Sufficient money can produce almost anything it wants.

A People in Crisis

Congress is unable to govern because it is powerless, lost in a sea of opposing forces who are not interested in the welfare of the nation. There is no common aim as there was from World War II into the 1950s. A common aim is sociocracy’s foundation. It is the basis for decision-making. Instead we have a house divided, which shall fall in one way or another.

Smith quotes British historian Arnold Toynbee’s analysis that a crisis arises in a mature society when participants no longer feel a part of that society, no longer feel they matter.  The late head of the pubic advocacy group Common Cause John Gardner said the people are part of the problem when they become cynical and disaffected. In a sociocratic society neither of these things could be true. There would be greater transparency and more accountability.

In a reversal of the dictum that power corrupts, grass-roots organizer Ernie Cortes says, “Powerlessness also corrupts.” Smith’s analysis of the economic crisis of 2008 shows how the powerlessness of middle management and white-collar workers also led to corruption. They acted as if they were no longer participants in a social economy. They were themselves lost at sea and scavenging whatever they could get, along with their co-workers.

Know Your History in Order to Change It

Those who don’t know history are doomed to repeat it. This analysis will help to understand  what could be right in a sociocratic society and why. All the analysis is here. You just have to read between the lines and apply sociocratic principles and practices to understand how the crisis could have been prevented and how the American Dream can be restored.

Links to Amazon

Who Stole the American Dream? by Hedrick Smith (Hardcover, 2012)

Who Stole the American Dream? by Hendrick Smith (Softcover,

Self-Management at Zappos

Zappos Logo Several articles have appeared in the last month or so on the implementation of  self-management at Zappos. After having adopted Holacracy, which is based on the principles of sociocracy, Tony Hsieh, CEO of Zappos, sent a memo on 24 March 2015 to employees offering three months of salary to any employee who would read a book on Holacracy and quit if they were still not happy in an organization based on self-management.

It was a long complex memo, and not a simple command to “self-organize or leave” as it has been portrayed. Hsieh said:

Our main objective is not just to do Holacracy well, but to make Zappos a fully self-organized, self-managed organization by combining a variety of different tools and processes.

The full email/memo is on the Quartz site.

Zappos has regularly paid new employees if they decided the new job wasn’t for them and quit in the first month or so. But for this offer 14% of Zappos employees, 210 people, quit. Undoubtedly many were planning to leave for other reasons,  like the move in 2013 to downtown Las Vegas. This was just a convenient time to leave. Thus far there hasn’t been an analysis published on why the employees left. It may well have been poor implementation and confusion, not the expectations to self-manage and self-organize.

And we also don’t know why the 86% of Zappos employees stayed. It may also have nothing to do with liking the new system.

Why Self-Organizing and Self-Management Are So Hard

Why Self-Organizing is So Hard is a blog post by Bud Caddell, a founding member of the NOBL Collective. NOBL is a consulting network that works with organizations to empower “the creativity and capability required for a world of constant change.” They work to “to re-align teams, refocus products, and re-imagine work for the 21st century.” Caddell has worked in an organization using Holacracy and NOBL uses elements of sociocracy, Holacracy, and other self-governing methods in their work.

 

Caddell’s analysis compares Holacracy to a game of Dungeons and Dragons:

Holacracy, itself, is too complex, dogmatic, and rigid. It feels like playing a game of Management Dungeons and Dragons. Everything you already understand about working in teams is reinvented with confusing language (e.g. circles, tensions, IDM, etc.) and a confusing process. Because of this frustration, some companies are trying to pioneer a cognitively slimmed down version. Blinkist, for example, calls theirs Holacracy Lite.

The same can be said of sociocracy when people begin emphasizing structure before purpose, playing the language card—go directly to jail, do not pass go, do not collect $200—when someone says agree instead of consent. Or insisting on the distinction between a top circle and a board of directors. It diverts the emphasis from “a more humane way of organizing” to “the right  way.” As if the right language will produce accomplishment of the purpose.

Unless the right word means the accurate and commonly understood word that conveys meaning naturally, it is an impediment to those who are trying to get their work done.

Too often, right means “our word or your word but only in the way we define it.”

Ordered or Programmed?

It’s a thin line between order and homogenization.

An organization isn’t an operating system. It is like an operating system in that all the parts need to work together without conflict so they all contribute to  achieving the same purpose. That doesn’t make people plug-ins for a software program. A big difference.

The Place to Start

Caddell has four recommendations for the implementation of   governance methods based on self-organization:

  1. Focus on self-management first.
  2. Adapt your own model.
  3. Dedicate a Complexity Reduction Officer (CRO).
  4. Tell more human stories.

The last recommendation is a nice one. In the articles on Hsieh’s so-called command to self-organize and the people who left, there are no personal stories from the people who left and those who stayed. Maybe that comes next.

More articles related to self-organization and management:

Internal Memo: Zappos is offering severance to employees who aren’t all in with Holacracy by Aimee Groth on the Quartz website. Includes the full text of the memo asking that employees “take 30 minutes” to read it.

Inside Zappos CEO Tony Hsieh’s radical management experiment that prompted 14% of employees to quit by Richard Feloni on the Business Insider UK website. A history of Zappos unique company culture which is atypical to say the least, and the story of its adoption of Holacracy. A long article on the historical context of Hsieh’s leadership.

Is Holacracy Succeeding At Zappos? by Steve Denning on the Forbes  website. An excellent discussion of the contradictions in the implementation of Holacracy given the difficult language of the constitution and the many, sometimes contradictory premises. One being the ability of the CEO to take back his power as a CEO Includes links to several other articles.

At Zappos, Banishing the Bosses Brings Confusion by Rachel Emma Silverman on the Wall Street Journal website. I wasn’t able to read this because I don’t have a subscription but it begins with a story from the personal experience of an employee at Zappos so it may be promising. (With all my software programs and online journals going to monthly subscriptions, my budget is blowing in the wind.)

Bylaws for a Sociocratic Business

The following example is modified from the operating agreement for a Limited Liability Company (LLC) incorporated in Delaware. It contains the key clauses that can be used in many forms of sociocratic operating agreements and bylaws including nonprofit organizations, associations, local government agencies, etc.

In the United States, LLCs are now legal in all 50 states and the District of Columbia and currently provide the most efficient mechanism for establishing a fully sociocratic company that owns and governs itself. While a sociocratic company allows investors and protects the interests of investors, it does not grant them the exclusive right to sell or to control the company.

The key clauses can also be used as the basis of bylaws for a C or S corporation, but in these cases a “double corporation” strategy is required to enable the company to raise capital without giving stockholders the right to override consent decision-making. An explanation of the double corporation is outside the scope of this book but it involves setting up a foundation to hold the controlling stock. The members of the board of the foundation and the board of the corporation are defined as identical and the decisions of one to be those of the other.

This operating agreement is an example only and does not constitute legal advice. Because laws differ between jurisdictions, professional legal advice is required to address specific circumstances.

The Creative Commons License and a PDF copy can be found at the end of this page.

Operating Agreement
of a Sociocratic Limited Liability Company (LLC)

Article 1  The Sociocratic Circle-Organization Method 

1.1  Organizational Model

The LLC shall be structured and governed in accordance with the sociocratic Circle-Organization Method, the underlying principles of which are as follows:

1.1.1  The Principle of Consent  

The principle of consent governs decision-making. This means that not every decision requires consent but that there will be consent about the policies by which decision-making takes a different form. Consent means there are no argued and paramount objections. In other words, a policy decision can only be made if no member of the circle raises a argued and paramount objection to it.

1.1.2  The Principle of Circles 

The organization is composed of a hierarchy of semi-autonomous, self-organizing circles. A circle is a group of persons who are operationally related. Each circle has its own aim and has the authority and responsibility to execute, measure, and control its own activities and to maintain an appropriate level of knowledge and skill, assisted by a program of development conducted by the circle.

1.1.3  The Principle of Double-Linked Circles 

All circles are double-linked. A lower circle is always linked to a higher circle in such a way that at least two persons, that is, the operational leader and at least one elected representative from the lower circle, belong to and participate in the decision making of the next higher circle.

1.1.4  The Principle of Election of Persons 

Persons are elected to functions and tasks exclusively by consent after open discussion.

1.2  Structure 

The organization of the LLC shall be a hierarchy of double-linked circles, in the following order, from top to bottom:

1.2.1  Top Circle

The top circle shall be the highest circle of the LLC, the powers and responsibilities of which are set forth in the articles of organization and this operating agreement. The composition of the top circle is defined in Article 2.

The top circle shall manage and direct the business and affairs of the LLC with full power to engage in any lawful act or activity under the General Limited Liability Company (LLC) Law of [name of jurisdiction] unless otherwise limited by the provisions of this operating agreement.

1.2.2  General Circle

The general circle shall consist of the chief executive officer (CEO), operational leaders of the department circles, and at least one representative from each department circle. The general circle shall manage the operations of the LLC within the limits set by the top circle.

The general circle shall:

(a) Determine and control policy to realize its own aim(s) within limits set by the top circle.

(b) Delegate part of its decision-making authority to the department circles so their aims can be achieved.

(c) Assign functions and tasks to its own members to execute its own policy.

(d) Decide, in its sole discretion, whether new department circles should be created or whether existing circles should be split up, combined, or dissolved. The department circle in question may not participate in the decision to dissolve its circle. The consent of the representative of the department circle in question shall not be required for the general circle to act, but such representative may participate in such discussions in the general circle.

1.2.3  Department Circles

Each department circle shall consist of (1) either an operational leader and the members of the department circle or an operational leader and the operational leaders of the section circles and (2) at least one representative from each section circle. The department circle shall:

(a) Determine and control the policy to achieve its aim within the limits set by the general circle.

(b) Assign tasks to its own members to execute its own policy.

(c) Decide, in its sole discretion, whether a new section circle should be set up or whether existing circles should be dissolved. The section circle in question may not participate in the decision to dissolve its circle. The consent of the representative of the section circle in question shall not be required for the department circle to act, but such representative may participate in such discussions in the department circle.

1.2.4  Section Circles

Each section circle shall consist of (1) either an operational leader and the members of the section circle or an operational leader and operational leaders of the unit circles and (2) at least one representative from each unit circle. The section circle shall:

(a) Determine and control policy to achieve their aims within the limits set by the department circle.

(b) Assign tasks to their own members to execute their own policy.

(c) Decide, in its sole discretion, whether new unit circles should be set up or whether existing circles should be dissolved. The unit circle in question may not participate in the decision to dissolve its circle. The consent of the representative of the unit circle in question shall not be required for the section circle to act, but such representative may participate in the discussions in the section circle.

1.2.5  Unit Circles

Each unit circle shall consist of an operational leader and its own members. Unit circles shall:

(a) Determine and control policy to achieve its aim within the limits set by the section circle.

(b) Assign tasks to its own members to execute its own policy.

1.2.6  Further Subdivision

The hierarchical pattern established in sections 1.2.2-1.2.5 shall be repeated for any levels below unit circles.

1.3 Investing and Working Partners

Persons can become members of the LLC by investing money or by performing active labor or both. People or organizations that have made investments in the LLC shall be called hereafter “investing partners.” Those who perform labor shall be called hereafter “working partners.” Members of the general, department, section, and unit circles, and any circles below unit circles shall be working partners. A natural person can be both a working partner and an investing partner. A legal person, for example, another LLC, S corporation, or C corporation, can be an investing partner but not a working partner.

[The decision to have “working partners” or “employees” has tax and other implications that require legal advice. The intention is that everyone be able to participate in decision making on an equivalent basis. The term “partner” is not intended to infer greater authority nor “employee” less authority.]

ARTICLE 2  TOP CIRCLE

[Top Circle is the generic term for the highest governing level of the organization. It retains the circular process connotations and links to the primary sociocratic theory. Organizations may wish to adopt other terms to reflect their culture and environment.]

2.1  Composition and Number

The top circle shall consist of no less than six (6) nor more than twelve (12) members, as such number may be established from time to time by resolution of the top circle. This number shall include:

(a) external experts,

(b) the CEO of the LLC, and

(c) one or more representatives of the general circle of the LLC.

2.2 External Experts

[The importance of the title “board of directors” varies amongst legal jurisdictions and not all organizations are required to have a board. When a board is required, there may also be a requirement that it be composed entirely of persons from outside the organization, the external experts. If that is the case, the following clause can be used: “The top circle shall totally encompass all the duties of the board of directors. Every meeting of the top circle shall be considered a meeting also of the board of directors. The board of directors shall not meet separately from the top circle.” If a board is required by law, it may also be necessary to have a separate article defining the board and its responsibilities. If so, it can be modeled after the clauses used for the top circle.]

The external experts, chosen from outside the organization, shall represent each of the following roles:

(a) A person with expertise in financial matters relating to the business of the LLC.

(b) A person with expertise in the area of human resource management, small business management, or other management specialties.

(c) A person with expertise in sociocratic (dynamic self-governance) or other technical areas in which the LLC may choose to conduct its business.

(d) A representative of the governmental or legal community.

2.3  Separation of Roles

The CEO, elected representatives from the general circle, and the person with expertise in financial matters must be separate persons. These persons and other members of the top circle who are not working partners of the LLC may fulfill one or more than one of the other above roles at the same time unless this could result in a statutory, operational, or legal incompatibility.

2.4  Designation of Roles

The top circle, by resolution, shall designate the roles that each of its members fulfills.

2.5  Election, Terms, and Reimbursement

The members of the top circle, except for the financial expert, may be proposed by an external organization with consent from the CEO and elected representative(s). If such external organizations are not available, the top circle may elect persons with expertise in these areas to participate in the top circle for specified terms. The experts’ terms shall be staggered and up to two years in duration, renewable at the invitation of the top circle. The top circle may choose to reimburse these experts for their services.

2.6  Resignation; Vacancies

Any member of the top circle may resign from the top circle at any time by submitting a letter of resignation to the secretary of the top circle

Any newly created membership or any vacancy occurring in the top circle for any cause may be filled by a person selected by the consent of the remaining members of the top circle and each member so elected shall hold office until the expiration of the term of office of the member of the top circle  whom he or she has replaced or until his or her successor is elected and qualified.

The CEO shall be elected or re-elected at two-year intervals at the first top circle meeting after the annual investors’ meeting. The representative(s) from the general circle shall be elected at intervals of up to two years on a schedule set by the general circle.

2.7  Regular Meetings

Regular meetings of the top circle may be held at such places within or without the [name of jurisdiction] and at such times as the top circle may from time to time determine, and if so determined, notices thereof need not be given.

2.8  Special Meetings

Special meetings of the top circle may be held at any time or place within or without the [name of jurisdiction] whenever called by any member of the top circle. Notice of a special meeting of the top circle shall be given by the person or persons calling the meeting at least forty-eight (48) hours before the special meeting.

2.9  Telephonic Meetings Permitted

Members of the top circle may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this operating agreement shall constitute presence in person at such meeting.

2.10  Consent Decision Required for Action

The principle of consent by all parties shall be organized as follows: At all meetings of the top circle one-half of the members of the top circle or at least 2 members of the top circle, whichever number is the greater, shall constitute a quorum for the transaction of business. All decision-making by the top circle, however, shall be according to the principle of consent; that is, whether or not a member of the top circle is present, consent is required of all the members of the top circle to all proposed decisions.

Any member of the top circle absent from a meeting of the top circle shall be notified within forty-eight (48) hours of the proposed decision(s) of the top circle. Unless the absent top circle member objects to a decision of the top circle within seventy-two (72) hours of receipt of such notice, he or she will be deemed to have consented to such decision.

If an absent top circle member objects to any action of the top circle in a timely fashion, the matter will be placed upon the agenda for the next meeting of the top circle, which meeting shall be held within seventy-two (72) hours of the receipt of such objection. Any member absent from such top circle meeting shall be deemed to have consented to the decision that the top circle reconsiders.

2.II  Organization

Meetings of the top circle shall be presided over by the president of the top circle or another person chosen by consent of the top circle. In the absence of the president or other chosen person, a chairperson chosen at the meeting shall preside over the meeting. The secretary shall act as secretary of the meeting, but in his or her absence the person presiding may appoint any person to act as secretary of the meeting.

2.12  Informal Actions

Any decision required or permitted to be made at any meeting of the top circle may be made without a meeting if all members of the top circle consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the top circle.

ARTICLE 3  EXECUTIVE OFFICERS OF THE TOP CIRCLE

3.1  Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. 

The top circle shall annually elect executive officers from amongst its members: a president, secretary, and treasurer and it may, if it so determines, choose a chairperson (or facilitator) of the top circle and a vice chairperson (or second facilitator) of the top circle from among its members. The top circle may also choose one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, and one or more assistant treasurers. Each such officer shall hold office until the first meeting of the top circle after the annual meeting of investing partners next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal.

Any officer may resign his or her executive office at any time upon written notice to the secretary of the LLC. The secretary may resign at any time upon written notice to the president. The top circle may remove any officer from his or her executive office at any time without necessarily removing him or her from the top circle. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the LLC.

Any number of executive offices may be held by the same person unless prohibited by governing law. The top circle at any regular or special meeting may fill any executive officer vacancy occurring in any office of the LLC by death, resignation, removal, or otherwise for the unexpired portion of the term.

3.2  Power to Require Security 

The top circle may require any of its members, and any officer, agent, working member, or employee of the LLC to give security for the faithful performance of his or her duties.

ARTICLE 4  CIRCLE MANAGEMENT

4.1  General Provisions

Management of all circles of the LLC with the exception that management of the top circle shall be in accordance with the following procedures only to the extent that such procedures are not inconsistent with Article 2 or Article 3 hereof, or any other provisions of this operating agreement, the articles of organization, or the laws of [name of jurisdiction].

4.1.1  Circle Regulations

Each circle shall be a separate organ of the LLC and shall be empowered to draft its own regulations with respect to the tasks, authority, and responsibilities of the circle, which regulations shall not be in conflict with this operating agreement or any regulations that the top circle may adopt.

4.1.2  Assisting Circles

A circle is authorized to form assisting (or helping) circles to prepare decision-making recommendations for the circle. The assisting circle may be composed of persons from the circle, other circles, and external advisors.

4.1.3  Circle Decisions and Limits

Circles may make decisions within certain limits agreed on in the next higher circle; individual members may make independent decisions within the limits drawn up by their own circles.

4.2  Decision Making

4.2.1  The Principle of Consent

Decision-making shall be in accordance with the principle of consent or “no objection.” Decision making does not require consent to be used for every decision of the circle, however, but it must be used to establish an alternative means of decision making for a specific decision or for a specific class of decisions.

4.2.2  Objections

Should there be a paramount objection to a decision, arguments for the objection must be given. An objection without reasoned argument will not be considered.

4.2.3  Second Meetings

If a circle is unable to reach a decision on a particular matter, a new meeting of the circle shall be convened after at least forty-eight (48) hours, with the same subject on the agenda.

4.2.4  Referring Decisions

If a circle is unable to reach a decision on a particular matter in a second meeting of the circle, the chairperson may refer the matter to the next higher or lower circle for decision or recommendation.

4.2.5  Annual Decision-Making Audit

An independent auditor shall review the decision-making process in each circle annually and shall report to the top circle whether the decision making of the circles conforms to this operating agreement.

4.2.6  Assuming Decision-Making Authority

The next higher circle is responsible for assuring that decision making in a circle functions according to this operating agreement. If the next higher circle concludes that the decision-making within a circle does not function according to this agreement, the next higher circle may take over the decision making of that circle on an interim basis.

The circle shall continue to make recommendations to the next higher circle concerning its area of responsibility. The next higher circle shall take such action(s) as it deems necessary to re-establish the circle’s performance according to sociocratic (dynamic self-governance) principles as soon as possible. The next higher circle shall restore decision-making authority to the circle as soon as either the next higher circle or the independent auditor determines that decision-making is functioning according to sociocratic (dynamic self-governance) principles.

4.3  Selection of Persons

4.3.1  Officers and Representatives

Each circle shall elect a chairperson (or facilitator) of circle meetings and a secretary from amongst its members. Each circle shall also elect one or more representatives of the circle in the next higher circle, whether or not that person is a member of the circle, provided the representative is in some way connected to the LLC. These elections shall be conducted annually, or as deemed necessary by the circle, at a meeting convened for this purpose, according to the consent principle and after open discussion.

4.3.2  Multiple Functions

Persons may fulfill more than one function at the same time, unless this could result in a statutory, operational, or legal incompatibility, provided that the operational leader (elected by the next higher circle) and the representative may not be the same person.

4.3.3  Procedures for Appointment and Dismissal

Each circle shall determine procedures for the appointment and dismissal of members of the circle, in accordance with the law, this operating agreement, and the articles of organization. A circle shall make decisions as to the appointment or dismissal of its members only after the person involved has been given an opportunity to present his or her arguments. However, the person involved may not participate in the making of this decision.

In the absence of a written agreement to the contrary between an individual working partner and the LLC, these procedures shall not constitute a contract between any person and the LLC and all working partners of the LLC shall continue as working partners at the will of the LLC.

4.3.4  Objections to Appointments or Dismissals

In the event a circle objects to the appointment of or seeks to dismiss a representative of the next lower circle, the circle shall submit objections to the next lower circle concerning the functioning of its representative in the circle. Should the consideration of these objections not result in consent between the higher circle and the next lower circle, the higher circle may deny the representative the right to represent the lower circle in the higher circle.

Such denial of representation is an extreme remedy and the higher circle should only undertake it as a final resort and should take all necessary action to restore representation of the next lower circle as soon as possible.

4.4  Circle Meetings

4.4.1  Frequency

Circles shall meet at regular intervals, at least six times per year.

4.4.2  Convening and Notice

Regular circle meetings shall be convened by the chairperson (or facilitator) of the circle. All members shall receive notice of the meeting, the agenda, and any relevant information necessary to make decisions on matters to be discussed at the meeting within a reasonable time prior to the meeting.

4.4.3  Special Meetings

The chairperson shall convene a special meeting within seven (7) days of a request therefore from any member of the circle.

Should the chairperson fail to convene such a meeting within seven (7) days after the receipt of such a request, the circle member who made the request may convene the meeting.

4.4.4  Members Present (Quorum)

It is not necessary for all the members of the circle to be present to hold a meeting, however, consent is required from all members of a circle before a decision can take effect. Each circle shall establish its own written policy defining a quorum for conducting business and its procedures for obtaining consent from absent members.

4.4.5  Delegation of Participation

Members who are unable to be present can delegate their right to participate in decision making to another member of the circle. The right to participate, however, does not constitute a proxy consent or veto. The delegated right to participate is the right to present arguments on behalf of another circle member.

4.4.6  Recording Decisions

Any decision made during a circle meeting shall be recorded in circle minutes or notes to be circulated to all members of the circle and to other circles with which the circle is linked within three (3) days of the meeting in the format determined by the organization.

4.4.7  Amending or Repealing a Delegated Decision

Amending or repealing a delegated decision is possible provided the consent of the circle involved has been obtained.

ARTICLE 5 COMPENSATION AND PROFIT SHARING

5.1  Fixed Compensation

Both investing partners and working partners engaged in active operations shall receive fixed compensation to be reimbursed only from earnings from operations. The fixed part of the investing partners’ reimbursement will be calculated at the end of fiscal year at the then prevailing prime lending rate. Working partners will be reimbursed throughout the business year at a fixed rate analogous to wages or salaries.

5.2  Variable Compensation

Both investing partners and working partners will receive variable reimbursements to be reimbursed only from earnings from operations. The reimbursements will vary depending on profitability. Variable compensation will be in the form of short-term measurement (STM) and long-term measurement (LTM) payments. STM payments will be made only when profits for the month exceed the targeted profit percentage. If profits for a month fall below the targeted profit percentage, that shortfall must be covered before any STM payments can be made. LTM payments will be made once or twice annually at the discretion of the top circle.

5.3  Determining Fixed and Variable Payments

5.3.1  At least annually, the top circle shall determine the amount targeted for company reserves and the targeted profit percentage.

5.3.2  At least at the end of each fiscal year, the top circle or person(s) delegated by the top circle will normally deduct the targeted reserve from the profits, calculate the amount of fixed payments due to investors per Section 7.1, and subtract that amount and the amount of the targeted reserve from the profits available for variable payments to the parties. The variable payments, however, are so important to the measurement process, a key component of the LLC management, the top circle can choose to make variable payments before fully paying investors’ fixed payments.

5.3.3  The top circle or person(s) delegated by the top circle will calculate an STM payment for the investing and working partners each month and an LTM payment once or twice a year.

5.3.4  The top circle shall decide whether to have the company pay taxes on retained earnings at the corporate tax rate or to pass all earnings through to the partners.

OTHER ARTICLES 

[Additional articles may be necessary to address such issues as indemnification, conflict of interest, fiscal year, corporate seal, and so forth. Care must be taken to ensure that these clauses do not contradict  or undermine the provisions of Articles 1 through 6.]

ARTICLE X MISCELLANEOUS

Amendment of This Operating Agreement

This operating agreement may be altered or repealed and new agreements made by the top circle applying the principle of consent in accordance with the provisions of these agreements, with a minimum of thirty (30) days notice to all members of the LLC including investing partners, working partners, and board of directors members of intent to amend this operating agreement. The purpose of such notice shall be to allow all levels of the circle structure, including the investing partners, time to call special meetings, if necessary, to deliberate, and to select representatives to attend the deliberations of the next higher circle.

ADDENDUM
CONDUCT OF MEETINGS OF INVESTING PARTNERS

Article 1  Meetings of Investing Partners

Meetings of investing partners shall be conducted in accordance with the sociocratic (dynamic self-governance) method. By consent, the investing partners may choose methods and structures of decision-making other than consent for a meeting of investing partners.

Article 2  Notice of Meetings 

Whenever the investing partners are required or permitted to take any action at a meeting, a written notice of the meeting shall be given to investing partners which shall state the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the articles of organization, or these operating agreements, the written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to the investing partners. If mailed, such notice shall be deemed to be given when deposited in the email or mail, postage prepaid, directed to the investing partner at its address as it appears on the records of the LLC.

2.1  Annual Meeting of Investing Partners

The investing partners shall meet annually for the purpose of electing a representative(s) to the top circle and determining the date and time of the next meeting. Only persons who have made monetary investment in the LLC plus the CEO plus the representative(s) from the general circle to the top circle shall participate in said meeting.

2.2  Special Meetings of Investing Partners

Special meetings of the investing partners may be called with at least 15 days notice by one or more of the investing partners, CEO, or elected representative to the top circle. Only the investing partners, the CEO, and the representative(s) to the top circle from the general circle shall be entitled to participate in such meetings. Special meetings will be for the sole purpose of considering the removal and/or replacement of the investing partners’ representative(s) to the top circle.

2.3  List of Investing Partners Entitled to Participate in Annual and Special Meetings of Investing Partners

The secretary of the top circle, upon notice of an annual or special meeting of the investing partners, shall prepare and make, at least ten (10) days before such meeting, a complete list of the investing partners entitled to participate in the meeting, arranged in alphabetical order, and showing the address of each investing partner and the percentage of equity registered in the name of each investing partner. Such list shall be open to the examination of any investing partner in a designated electronic location.

Article 3  Quorum 

Except as otherwise provided by law, the articles of organization, or this operating agreement, at each meeting of the investing partners the presence in person or by electronic means of a person or persons representing at least one-half of the total investment in the LLC plus the CEO or a  Representative of the general circle shall constitute a quorum.  The investing partners may, at their sole discretion, form a legal entity.

Article 4  Organization of Investing Partners Meeting

Meetings of the investing partners shall be presided over by the CEO, by a representative of the general circle, or by another person elected at the meeting by consent. The meeting attendees shall elect a secretary or direct the CEO to appoint a person to act as secretary of the meeting.

Article 5   Participation in Meetings 

Each investing partner in attendance shall be entitled to participate in the consent decision-making process in the investing partners meeting. Members who are unable to be present can delegate their right to participate in decision making to another member of the investing partner’s circle. The right to participate, however, does not constitute a proxy to consent or veto. The delegated right to participate is the right to present arguments on behalf of another circle member.

Article 6  Fixing Date for Determination  of Investing Partner of Record

6.1  Fixed Record Date

In order that the LLC may determine the investing partners entitled to notice of or to participation in any meeting of investing partners or any adjournment thereof; or entitled to receive payment of any funds or other distribution or allotment of any rights; or entitled to exercise any rights in respect of any change, conversion, or exchange of partnership equity; or for the purpose of any other lawful action, the top circle may fix a record date. The record date shall not precede the date upon which the resolution fixing the record date is adopted by the top circle. The record date

(a) shall not be more than sixty (60) nor less than ten (10) days before the date of the next scheduled meeting of the investing partners;

(b) nor in the case of any other action, it shall not be more than sixty (60) days prior to such other action.

6.2  No Fixed Record Date

If no record date is fixed,

(a) the record date for determining investing partners entitled to notice of or to participate at a meeting of investing partners shall be at the close of business on the day preceding the day on which the meeting is held;

(b) the record date for determining investing partners for any other purpose shall be at the close of business on the day preceding the day on which the top circle adopts the resolution relating thereto.

A determination of investing partners of record entitled to notice of or to participate at a meeting of investing partners shall apply to any adjournment of the meeting; provided, however, that the top circle may fix a new record date for the adjourned meeting.

Article 7  List of Investing Partners Entitled to Participate 

The person or persons responsible for calling an annual or special meeting of the investing partners must give the secretary of the top circle notice of the meeting at least fifteen (15) days in advance of the date of the meeting.

From: We the People: Consenting to a Deeper Democracy by John Buck and Sharon Villines (Sociocracy.info Press, 2007)

 

“Operating Agreement & Bylaws for a Sociocratic Business” is published under a Creative Commons License.  It may be reused with attribution, shared with others, and transformed as the basis of another document, but it is not released for commercial use without specific permission.

For permission, please contact Sharon Villines at https://www.sociocracy.info

The PDF version: BylawsCC

Consent vs Consensus : Laird Schaub on Sociocracy

Laird Schaub
Laird Schaub

Laird Schaub helped found and has been living in Sandhill Farm, an intentional, income sharing community in Rutledge, Missouri since 1974. His community is very small, less than 10 adults, but his experience is very broad. He has been doing training and consulting in governance and consensus decision-making since 1987. He gives several workshops on decision-making, facilitation, proposal writing, delegation, etc., at the annual Cohousing Association Conferences. He is the Executive Secretary  and Development Coordinator of the Foundation for Intentional Communities (FIC) and writes frequently for Communities Magazine. He travels most of the year to work with communities and organizations all over the United States. He does intensive workshops with facilitators who meet once or twice a month over an extended period of time. In short, he’s on the road a lot, on his feet a lot, and has seen a lot. He is also very well-respected.

Laird’s blog is Community and Conensus. In his Monday 18 August 2014 post, “Critique of Sociocracy,” he presents his “reservations” which are deep and well-stated. Some are quite justified and others misunderstandings. Just like anything else, it’s easy to get the wrong information. This is the first of several posts addressing both the points I think are valid and those that are at least partly in error. I’ve divided them into separate posts where the subject changes. Laird has 6 points of contention.

Stalking Consensus

Laird’s reservations are expressed “paying particular attention to how this contrasts with consensus, which is the main horse that sociocracy is stalking.”

Well, true and not true. It is true that for many years consent vs consensus was taught as if they were totally different animals. Not just horse vs zebra, it was elephant vs fruit fly. Having worked with consensus for more than 30 years and having studied the teachings of the major consensus trainers, I never understood this. Consent is given by one person and consensus is the result of multiple instances of consent. Both consent and consensus mean agreement to proceed, not necessarily full agreement to exclusion of other possibilities.

That’s the only meaningful distinction between them that I can find: the singular and the collective plural. Consent vs consensus is more likely to be a comparison between the worst understanding of consensus with the best understanding of consent.

The Singular and the Collective Plural

The distinction between the singular and the collective plural, however, can be meaningful: The emphasis in sociocracy on gaining the consent of each person, “no objections,” rather than the consensus of the group. In sociocracy, the focus is on each individual and their ability to consent to a decision. In groups using consensus, the focus is more likely to be on the ability of each person as part of a group to develop and accept a group decision. “In the best interests of the community” is often heard in groups using consensus.

In sociocracy the standard of consent is more likely to be a question to an individual “can you work with this” or “is this within your range of tolerance.” Not particularly friendly phrases those, but I think one can see the difference.

I’m exaggerating a bit to show what can often be a subtle difference. On the other hand, the recognition of the individual is important as a measurement:

  • In a small community where everyone lives-in, the standard will be one’s ability to still want to live in the community if the change under consideration is made. “Will you still love having coffee on your balcony in the morning?”
  • In an intentional community devoted to expressing strong humanitarian or environmental living standards, the question will be “Does this activity violate your sense of the appropriateness in terms of your personal or the community values.”
  • On the factory floor, the focus will be on one’s ability to perform their job if this change is made. “Will you still be able to move comfortably to finish the final process?”

A Practical vs a Higher Purpose

The focus in all three contexts—a friendly live-in community, a political or values-based community, and a workplace—is whether effectiveness will be impaired.  But “effectiveness” in each case is based on a different desired outcome. Consent emphasizes the understanding that a group is a group of individuals who all have to be able to fully commit to a purpose before it can be accomplished optimally. People who use consensus not infrequently have in their hearts and minds a more spiritual union. A commitment to a “higher purpose,” one larger than the individual. Higher even than the group.

A sociocratic organization could adopt a higher purpose statement as a policy decision. Such perceptions are not banned in sociocracy. It is used in a variety of religious organizations. But that belief is not inherent in sociocracy as it is sometimes felt to be in the traditional practice of consensus.

The practice of consensus itself is often regarded as indicating that this group of people is more advanced or of higher morals. This makes tradiitonal consensus unworkable in a workplace. In this sense, consent vs consensus is a meaningful understanding, if not a real difference.

Workplace vs. Social Action Groups

Gerard Endenburg developed the Sociocratic Circle-Organization Method to reproduce the traditional consensus model he had lived with at Kees and Betty Boeke’s residential school, the Children’s Community Workshop. Instead of everyone caring for each other, Endenburg needed a definition that worked in the high pressure, fast moving production of electrical  engineering systems. People are hired in businesses and other organizations to fulfill roles with specific responsibilities, not to care for the other engineers, whom they probably don’t even know.

In engineering and manufacturing decisions are based on the responsibilities of the person to fulfill their roles and responsibilities, not a perceived higher purpose. But overtime the empathy required to understand the role requirements of each person and appreciation for their insights and support, do create a tighter bond between people.

Because the Sociocratic Circle-Organization Method is taught as it developed in Endenburg Electric, and in many other businesses all over the world since the 1970s,  the engineering and business vocabularies often overtake the fundamental purpose of using consensus in the first place: collaboration and respect instead of competition and disdain.

Comparing an Elephant to a Fruit Fly

The major distinction is that sociocratic decision-making operates within a governance structure designed to support consensus decision-making. Groups that use traditional consensus typically make many decisions as a full group or are completely flat with all decisions made by the full group. Some have a governance structure loosely and sometimes directly based on conventional social and governance structures designed for majority decision-making. Because of this, they are limited in size.

While comparing consent to traditional consensus isn’t a very meaningful, comparing sociocracy with traditional consensus really is like comparing elephants to fruit flies. One is a governance method and the other a decision-making method and they work synergistically.

Policy vs Operational Decisions

Another difference is that consensus is specifically used only for policy decisions. The operations leader makes  day-to-day operations decisions within the policies set by the workgroup. This takes advantage the power of efficient decision-making in the moment and collectively made policy decisions by all members of the work group.

Groups using traditional consensus tend to make almost all decisions as a group and delegation is feared as a re-introduction of autocratic, hierarchical control.

Groups using traditional consensus are also unlikely to apply cybernetic principles or use scientific methods for evaluating the effectiveness of their decisions, but that is a subject for another day. Many of the practices and processes used by sociocracy are also best practices used generally in businesses and organizations.

No Magic in Decision-Making

Neither have  magical qualities. Decision-making can be hard no matter what you call it or how you structure it. If it were easy, it wouldn’t need to be taught and wouldn’t need a governance structure at all.

These are both the reasons why sociocracy has been perceived as “stalking consensus” and the reasons why it is not. Sociocracy is an elephant that is dependent on the fruit fly.

(Part 2 is still unwritten and given the amount of time taken to write this, it may be a few days.)

Inclusion and Hierarchies: New Articles on Zappos

Three new articles discussing inclusion and hierarchies, and other issues raised by the Zappos adoption of Holacracy. These are real articles examining the pros and cons of the promises of Holacracy and sociocracy, not reactions or quotes from press releases.

1. Andrew Hill of The Financial Times: Zappos and the Collapse of Corporate Hierarchies.

2.  A response from Norman Pickavance of Blueprint for Better Business in Linton, N. Yorks, UK: The Four Levels of Decision-Making.

3. Sally Helgesen, author of The Web of Inclusion: Architecture for Building Great Organizations (2005 reprint of 1995 edition) on the Strategy+Business site: An Extreme Take on Restructuring: No Job Titles?

We desperately need professional, published accounts with full measurements of organizations that have adopted sociocracy. That’s what business people need before they pay attention. Scientifically acceptable measurements. Peer-reviewed and published. 

 

Yves Morieux: Smart Simplicity

Yves Morieux speaking on stage.A wonderful discovery today, “As work gets more complex, 6 rules to simplify,” a TED Talk by Yves Morieux. Morieux is a senior partner in the Washington DC office of the Boston Consulting Group (BCG)  and director of the BCG Institute for Organization. He studies how changes in structure can improve motivation for employees.

“Smart Simplicity” uses six key rules that encourage cooperation to solve long-term problems. Not by just reducing costs and increasing profit, but also by maximizing engagement in all levels of the organization.

The focus of Morieux’s work is very compatible with sociocracy. He stresses collaboration over rule-making, self-organization over central authority,  and effective action over complex, multi-layered planning.

A 350˚ Increase in Complexity

In his TED Talk, Morieux first critiques the increasingly complex designs for business plans that might have 5 headings with 25 subheadings under each one, resulting in 125 cogent topics, each with numerous subcategories. Combined with an equally complicated workflow and organizational structure chart, it produces a brilliant, mind-numbing, and wholly unimplementable plan. Impressive in good graphics but hopeless in practice.

The need for an emphasis on smart simplicity is supported by a study done by BCG that reported:

We’ve created an “index of complicatedness,” based on surveys of more than 100 U.S. and European listed companies, which measures just how big the problem is.The survey results show that over the past 15 years, the amount of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed in each of those firms has increased by anywhere from 50% to 350%.

A wonderful part of the video is when he recites an example of such business plans with their myriad of meaningless words. He has the memorization skills of an actor and the facility of a professional fast talker so he got himself through it without notes and within 12 minutes. If he had a teleprompter, speaking that fast would have burned out its circuits.

Feedback Loops & Decentralization

Morieux emphasizes that self-organization is dependent on feedback loops to make decentralization work. In a Harvard Business Review article from 2011, he says:

There are six smart rules. The first three involve enabling—providing the information needed to understand where the problems are and empowering the right people to make good choices. The second three involve impelling—motivating people to apply all their abilities and to cooperate, thanks to feedback loops that expose them as directly as possible to the consequences of their actions. The idea is to make finding solutions to complex performance requirements far more attractive than disengagement, ducking cooperation, or finger-pointing. When the right feedback loops are in place, cumbersome alignment mechanisms, ranging from compliance metrics to the proliferation of committees—can be eliminated, along with their costs, and employees find solutions that create more value.

This is has been an important point for theories of circular organization since the 1970s and for understanding sociocracy. Feedback loops are necessary to implement decentralization and impelling cooperation and self-organization.

Morieux’s Smart Rules

  • Rule 1: Improve Understanding of What Coworkers Do
  • Rule 2: Reinforce the People Who Are Integrators
  • Rule 3: Expand the Amount of Power Available
  • Rule 4: Increase the Need for Reciprocity
  • Rule 5: Make Employees Feel the Shadow of the Future
  • Rule 6: Put the Blame on the Uncooperative

For More: Two Readings

From the Harvard Business Review,
“Smart Rules: Six Ways to Get People to Solve Problems Without You.” September 2011.

Book Cover: Six Simple RulesMorieux’s book at Amazon: Six Simple Rules: How to Manage Complexity without Getting Complicated. 2014

There is also a French edition with a much better title: Smart Simplicity: Six règles pour gérer la complexité sans devenir compliqué (2014).

Morieux divides his time between leading research and advising senior executives of multinational corporations and public-sector entities in the United States, Europe, and Asia-Pacific on their strategies and organizational transformations. He has been featured in articles on organizational evolution in Harvard Business Review, The Economist, The Wall Street Journal, Fast Company, and Le Monde.

Encouraging Self-Organization

Logo for Interaction Institute for Social ChangeIn a workshop I conducted last Sunday, one of the participants asked, “How do you encourage self-organization?” By some miracle, probably related to my being on every mailing list on anything related to sociocracy and governance, I received in my mailbox a link to an article on the  Interaction Institute for Social Change. You guessed it on  Tips for Encouraging Self-Organization by Curtis Ogden.

After some editing and additions, here are some ideas:

Encouraging Self Organization in the Environment

  • Create spaces where people from different social and work groups encounter each other in the course of the day.
  • Create open space and unscheduled time at home and the office.

In Meetings and Conversations

  • Expect engagement with decisions by asking open-ended questions.
  • Encourage people in finding their own answers
  • Ask “What should we do next?” and “What haven’t we done?” to encourage curiosity and questioning.
  • Reward innovation and risk-taking. Encourage making corrections and trying again.
  • Emphasize that we learn from mistakes. No mistakes, no  risk, no innovation.
  • Encourage people to focus on their strengths and collaborate with others who have different strengths.
  • Actively share information. Practice transparency.
  • Demonstrate self-organization in your own actions.

Most people are not encouraged to self-organize as children or adults. Most workplaces find self-organization disruptive. It’s hard to break the training of waiting for directions and not working outside them.  Changing takes both expectation, insistence, and support. Support alone won’t do it.

Decentralized Governance of Corporate Intranets

Nielson Norman Group LogoOne of the newsletters I read is AlertBox from the Nielsen Norman Group, Jakob Nielson has long been considered the expert on website usability. NN/g does extensive research for major corporations makes the information available to the public. His newsletter this morning included a piece on trends in intranet portals, which make extensive corporate information available for use by employees. In this report I came across a surprise—a section on governance! Most often such reports refer to “management.” This one out and out uses “governance,” talks about “roles” as central in governance, and stresses that in the last year, decentralized governance has been found increasingly beneficial.

Governance Becoming More Decentralized

As enterprise portals mature and grow so does the need for more structured, yet disbursed, portal governance. Portal teams are learning that since the intranet portal touches all layers of the organization, so should the governance. The new case studies reveal a move toward a decentralized or matrix governance model, as opposed to past years where governance was more centralized — being created, communicated, and policed by the enterprise portal owners.

Some organizations find themselves creating governance where once there was none, while others flesh out more specific details of their portal governance structure to accommodate touch points across the organization.

For example, the Carle Foundation has created a governance structure that is both formal and flexible, with defined roles, responsibilities, and workflows. The governance team is drawn from all levels of the organization and has assigned tasks to staff from nearly every operational area across the organization. From the senior sponsor to the individual content contributor everyone has a role to play in ensuring the upkeep and ongoing development of the intranet portal.

Governance, like most aspects of portal development, is marathon not a sprint, and portal teams realize that governance must evolve, as does the portal. (Emphasis added.)

NN/g’s recommendations are based on 83 intranet portals. The corporations studied in this research report were:

  • The Carle Foundation
  • City of Olathe, Kansas
  • Coca-Cola Enterprises Ltd.
  • Consumer Financial Protection Bureau (CFPB)
  • FDC Solutions, Inc.
  • Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V.
  • Fraunhofer Heinrich Hertz Institute
  • Municipal Design and Survey Unitary Enterprise “Minskinzhproekt”
  • National Archives and Records Administration (NARA)
  • Northern Arizona University (NAU)
  • Palm Beach County Board of County Commissioners
  • Persistent Systems Limited
  • Resource Data, Inc.
  • Think Mutual Bank
  • Department of Transport (Canada)
  • Yara International ASA

Excerpt from “Intranet Portals are the Hub of the Enterprise Universe” by Patty Caya and Kara Pernice on June 29, 2014

Worker Cooperatives Correcting Wealth Distribution

Cooperative ownership doesn’t guarantee that a cooperative will be a worker cooperative, nor do they necessarily correct inequities in wealth distribution.

Shaila Dewan titled her New York Times Sunday Magazine article on worker co-operatives, “Who Needs a Boss?”, undoubtedly reflecting the publicity from Zappo’s recent decision to try Holacracy, a governance method developed from sociocracy. A flurry of articles that included some variation of “no more bosses” or “no titles” became very popular. The problem with “no bosses” is that most co-operatives, like sociocratic and holocratic organizations, do have bosses. In cooperatives they can still function quite autocratically.

All organizations need leadership. Better than eliminating leaders or pretending to, is organizing sociocratically as collaborative, self-owned, and self-governed.

Worker Co-operatives

Arizmendi Bakery entrance

At the Arizmendi Bakery in San Francisco, a co-operative business of 20 or so bakers, the $3.50 for a latte and the $2.75 for their sourdough croissant go to the workers. Each baker makes $24 an hour, more than double the national median, and receives health insurance and paid vacations. While most co-operatives are small, the largest co-operative in the United States, Co-operative Home Care Associates in the Bronx, has more than 2,000 employees. Mondragon Corporation, a Basque co-operative that has more than 60,000 employees and €14 billion in revenue. They have 189 centers in 97 countries, a university for their employees, and sells products in over 150.

In worker co-operatives, the workers own the business, as opposed to consumer co-ops that are typically owned by members who shop at a discount. Historically, the number of worker co-operatives has increased when labor is distressed as it is now.

Correcting the Economy

Dewan reports that internationally, leaders are recognizing that our extremely inequitable income distribution, with its plummeting wages and depletion of low- and middle-income jobs, has no solution in the current capitalist economy. They believe the co-operative business model can correct the economy without a long legislative process or large-scale regulatory reforms.

In his best-selling book on economics, Capital in the Twenty-First Century, Thomas Piketty argues that the rich will continue to receive the largest share of income, and nothing in our current system will stop it. In support of cooperative efforts, the author of Democracy at Work: A Cure for Capitalism, Richard Wolff, says, “Don’t distribute income unequally in the first place.”

In February of 2014, a commission in Wales announced that conventional approaches were insufficient for economic development; it needed co-operatives, and the New York City Council held a hearing called “Worker Co-operatives — Is This a Model That Can Lift Families Out of Poverty?”

If worker co-operatives can address the root cause of economic disparity, what will encourage growth in their number and success?

Sociocracy: Co-operative Governance

Diwan reports that research on employee-owned compared to investor-owned businesses have found that they are as good or better. Co-operatives are “more productive, less susceptible to failure, more attentive to quality, and less likely to lay off workers in a downturn.” The employee-owned British retailer John Lewis has almost outpaced its corporate rival, Marks & Spencer.

But these are large well-established co-operatives. Most co-operatives in the United States have about a dozen employees. Because there are few organizations that will loan co-operatives money, growth is often slow and limited to labor-intensive industries with low start-up costs. Banks doubt co-operatives viable business models.

The Working World Logo

An exception is the micro-finance company Working World  that loans money to co-operative organizations in Latin America and the United states. Founder Brendan Martin, instead of seeking quick returns, accepts no loan repayments until the borrowing co-operative is on its feet. “We create the real economy, which is slower but it has less risk,”

Often co-operatives struggle because they are unable to pay consultants for management and financial advice or are suspicious of such advice. This suspicion is often warranted because the consultant’s training and experience are likely to come from autocratic, top down, corporations in which investors and top-level management are more important than workers. This bias is often subtle and unrecognized by consultants but is embedded in their assumptions and advice.

The advantage of sociocracy for co-ops is that it provides a fully developed method of co-operative governance, excellent business practices, and a respect for the spirit of co-ops, which value workers as equals.

In sociocracy, each worker is self-organizing and works as a member of a semi-autonomous, self-organizing team. Leaders guide daily operations but work as equals to make the policies that guide them. The decision-making methods and structure of representation prevents an autocratic hierarchy from developing. Financial records are readily available. Transparency is the norm.

By adopting sociocracy, co-operatives can grow beyond a small number of workers and still avoid the autocratic devaluing of workers and the drop in effectiveness that too often increases with the size of the organization.

Data is from an article, “Who Needs a Boss?” by Shaila Dewan, economics reporter at the New York Times. It appeared on the New York Times website on 25 March 1914 and a version will appear on 30 March 2014 in the Sunday Magazine. Accessed 25 March 2014.

Valve Software: Guiding Principles

Valve LogoIn 1996, we set out to make great games, but we knew back then that we had to first create a place that was designed to foster that greatness. A place where incredibly talented individuals are empowered to put their best work into the hands of millions of people, with very little in their way. This book is an abbreviated encapsulation of our guiding principles. As Valve continues to grow, we hope that these principles will serve each new person joining our ranks.

If you are new to Valve, welcome. Although the goals in this book are important, it’s really your ideas, talent, and energy that will keep Valve shining in the years ahead. Thanks for being here. Let’s make great things.

Valve Software, Handbook for New Employees, “Preface”, 2012.

The Six Problems With Holacracy, and Others

William TinCup on the Fist Full of Talent website
William TinCup on the Fist Full of Talent website

My disclaimer… (1) I am NOT an expert in holacracy, (2) I love new stuff, and (3) I absolutely love people and concepts that challenge the status quo. That’s that.

Why am I discussing a commentary on Zappos adoption of holacracy that begins with that particular picture of the author and that particular quote from the author? Because the picture is fun and the comments are good. When he says he knows nothing he means nothing more than he has read at the Holacracy, “Holacracy” at Wikipedia, and the Medium websites. And then to watch this video of Brian Robertson explaining Holacracy. While this isn’t direct experience and Tincup hasn’t become a HolacracyOne graduate, that is pretty much all there is to know. I encourage you to read them too.

What Tincup does is present the confused response to the issues that Holacracy, sociocracy, dynamic governance, and other forms of circular organization will have to conquer before they will be accepted. Every governance method has to address these misunderstandings and prove itself capable of addressing, even democracy.

What happens when things go badly? To quote Tincup, The answer to all these questions is… a resounding… I don’t freaking know… and neither does anyone else. And that should terrify you.”

My response is “the same thing they do everyday.” Making decisions is hard even when things are going right—everyone has to make choices. The same people make decisions in “bad” times as in good times.

Who will and won’t thrive in Holacracy? “(1) people that have a problem with authority, (2) people that can consume ambiguity, and (3) independent thinkers and doers.”

This is nowhere indicated except in the headlines saying there will be no bosses. Circular organizations are very structured and in particular have feedback loops that guarantee that everyone stays on target, even the Board.

Holacracy has well-defined roles. Sociocracy has log books for each member of the organization with job descriptions; circle responsibilities; vision, mission, aim statements; organizational charts, notes of circle meetings, etc. Ackoff’s Circular Organization is well-charted and clear.

“A clever attempt to create homogeneity—likeness… and I’m not talking about white people. I mean people that are really similar to one another. They will argue that it’s an efficient system, a lean system, and it will be at the expense of diversity.”

No sure why this would be true except that people tend to hire people like themselves. If a central authority were hiring everyone would tend to be like them. Instead, the understanding that poor performance affects the outcome of everyone else’s work the more likely scenario is that the circle would understand that they need someone different from themselves to bring a broader perspective and complement, not duplicate, their own strengths. This leads to diversity, not homogeneity.

What happened to my values—our values? “They have been replaced by holacracy. That’s the value system. That’s the code. Kind of seems cultish, right?…Again for holacracy to have a fighting chance, you have to hire to it, fire to it, live it… each and every day. Bye bye values.”

There are times when any new method of any kind sounds like a cult, but to say that an organization has to abandon its values in order to reorganize is rather strange. The Vision, Mission, and Aim statements express the unique values of an organization. Those are unaffected by holacracy.

How will it scale? “At the end of the day, holacracy might be great for 20 programmers in Silicon Valley. But will it work in retail in Tampa? Will it thrive at a hospital in Duluth? Light manufacturing in South Texas?”

Circular organization methods similar to holacracy are currently work in hundreds of organizations and businesses around the world. Some are very large and others very small. Ackoff become famous when he implemented one at Anheuser Busch in the late 1970s, a rather large and complex organization. Sociocracy is being used in a large agricultural firm in Brazil. Semco, also in Brazil uses a similar system in several factories. Many organizations in Europe and the United States use sociocracy including small businesses, corporations, university departments, housing complexes, healthcare facilities, and schools. There are many companies using part or all of the principles and methods and they have been doing so for decades.

How do I manage my career? “Wait, the churched up version of that is a term called career pathing. Holacracy is about flatness What I do know is that we all—all as in every single one of us—think about the next thing. So, in an extremely flat organization… What the hell is next? Darkness floats about.”

Here I have to resort to my knowledge of sociocracy. Salaries are set by the market for particular skills. From hiring on they are determined by across the board increases and performance increases, just like other organizations. To remain competitive salaries also have to compete. There are many jobs within the organization. The janitors are unlikely to be paid the same salary as the software programmers. One can develop new skills, assume a higher level of responsibility, etc. In holacracy, these are defined as “roles” and each role has a job description that won’t be the same as another person’s. That all jobs are the same is not what “flat” means.

How will they manage bad apples? “How will they identify these rotten apples and, more importantly, get rid of said apples? Group think? Call a tribal council meeting? Sounds bureaucratic and slow. If you are thinking of adopting holacracy, dig in and ask tough questions regarding the treatment of bad apples.”

My experience it is that management rarely gets rid of bad apples and they are totally unreliable in their judgement of who is a bad apple. Management wants to avoid the issue as long as they aren’t drowning in low performance. Even then they are more likely to reorganize than get rid of people.

“Make no mistake about it, this is a new religion.… If you understand what holacracy is all about, then you are one of us. If you don’t then, re-join the cavemen and cavewomen.”

I agree that some of the literature and speeches on this do sound messianic but so does campaign literature, school brochures, promises for every new diet, mouthwash ads, etc. It’s enthusiasm for something the speaker has mastered or is selling plus a good deal of marketing. That doesn’t mean it doesn’t work.

It also doesn’t mean it’s based on blind faith. There is good research and demonstrated performance data on the principles and methods of sociocracy. Holacracy is much newer but to the extent that it has incorporated the principles and methods of sociocracy, and uses them appropriately, it is based on the same research and demonstrated performance.

Circular organizations have a clear performance path since the 1960s in businesses and decades old performance paths in community organizations.

Oh, and the marketing of holacracy is about to take over our HR worlds.

This is certainly true. Brian Robertson is an expert in marketing but that isn’t necessarily bad. If he has all his T’s crossed and his I’s dotted, he can take the pressure. He’s done a professional job of developing, teaching, and promoting his specific application of sociocracy and the concepts of a circular organization.

Consent

The issue that Tincup didn’t discuss is the guarantee of consent decision-making. This is essential if all members of the organization—not just the managers—have control over their working conditions. In sociocracy, each circle has a defined domain, or in holacracy a role. Within that domain, their area of responsibility, everyone must be equivalent. If a decision is being considered that will affect their ability to do their job, to fulfill their responsibility, they have the right to object. Their objection must be resolved before the proposal can be implemented.

This is a very important assurance when people are expected to take on the responsibility of self-organization. How can I do a good job if decisions are made that screw up my ability to do that job? I would rather have a manager responsible in that situation. I would become much more passive and resistant, as many or most workers are.

The original Tincup post is here:  Six Problems With Holacracy, and Other

WILLIAM TINCUP, SPHR, is the CEO of HR consultancy Tincup & Co and one of the country’s leading thinkers on social media application for human resources, an expert on adoption of and HR technology. He has been blogging about HR related issues since 2007. He’s a contributor to Fistful of Talent, HRTechEurope andHRExaminer and co-hosts a daily HR podcast called DriveThruHR. Tweet him@williamtincup and check him out on Facebook and LinkedIn. He serves on the Board of Advisors for InsynctiveCausecastWork4Labs,PeopleReport, Jurify, TrackMavenSocialEarsAppLearn, StrengthsInsight, The Workforce Institute,PeopleMatterSmartRecruitersAjax Workforce Marketing and is a 2013 Council Member for The Candidate Experience Awards. He also serves on the Board of Directors for Chequed and is a startup mentor for Acceleprise. Tincup is a graduate of the University of Alabama of Birmingham with a BA in Art History. He also earned a MA from the University of Arizona and a MBA from Case Western Reserve University.

Holacracy, Zappos, Forbes

George Anders

An article by George Anders on Zappos in Forbes appeared this week. Anders writes about “innovation, careers and unforgettable personalities” for Forbes Magazine and formerly for the Wall Street Journal, two of the most respected and long-lived business sources. I honestly never thought I would see Holacracy, Zappos, Forbes in the same sentence. Kudos to Brian.

This is one of the more sensible articles on the Zappos adoption of Holacracy, less sensationalistic though Anders characterizes Holacracy as “a New Age approach to leadership that involves no job titles, no formal bosses, and lots of overlapping work circles instead.” Any mention of “new age” is fairly sensationalistic and it is inaccurate that either sociocracy or Holacracy have no job titles and no formal bosses. And of course it was not the invention of “business guru” Brian Robertson, nor is Zappos, at 1,500 employees, “by far the biggest company” organize based on these principles.

What Robertson and Zappos have done is attract the attention of many strategy consultants, journalists, and business school professors. Partly this is because Zappos even before deciding to adopt Holacracy was known for innovative thinking on leadership, customer service, and human resources. It is not unexpected that Zappos would adopt a circular organization that respects its employees as it does its customers. The Zappos core values even before Holacracy were to:

The bulk of the article, however, is a summary of William Tincup’s post on the Fistful of Talent blog which raises six points that will challenge Zappos. The original Tincup article is here. I will be doing comments on that article tomorrow.

Posted 9 January 2014 at 12:34 on the Forbes Magazine website, accessed on  11 January 2014:

http://www.forbes.com/sites/georgeanders/2014/01/09/gurus-gone-wild-does-zappos-reorganization-make-any-sense/

Zappos Goes Democratic

An article by Jena McGregor In her column, “On Leadership,” appeared in the Washington Post today on Brian Robertson’s contract with Zappo’s, “Zappos Says Goodbye to Bosses.” Zappos is owned by Amazon but runs independently and has long been known for its unusual employee-responsive culture.

The unusual approach is called a “holacracy.” Developed by a former software entrepreneur, the idea is to replace the traditional corporate chain of command with a series of overlapping, self-governing “circles.” In theory, this gives employees more of a voice in the way the company is run.

John Bunch, Zappos “As we scaled, we noticed that the bureaucracy we were all used to was getting in the way of adaptability,” says Zappos’s John Bunch, who is leading the transition.

The article is not particularly clear in explaining holacracy and doesn’t make the connection to sociocracy or other egalitarian organizational methods like Ackoff’s circular organization or  Semler’s round pyramid. McGregor is also confusing when explaining the change from “managers” to “lead-links.” Holacracy’s lead-links are described very much like managers. No mention of policy setting by all members of the circle to guide the actions of the lead-link.

The article reports that “Twitter cofounder Evan Williams uses it at his new company, Medium, and time management guru David Allen uses it run his firm — but Zappos is by far the largest company to adopt the idea.”

Robertson began his first company, Ternary Software in Exton PA, in 2001 based on the unique model of forming partnerships with many of the companies for which it developed software. This gave Ternary a vested interest in the performance of the software they designed and allowed promising but still developing companies to access to quality software. In 2006 and 2007, Robertson published two articles on his use of sociocracy at Ternary: “The Sociocratic Method,” in the 2006 strategy+business issue of Booz Allen Hamilton’s internal newsletter,  and in 2007 in the Wall Street Journal, “Can a Company Be Run as a Democracy?”.

Outside Experts on the Board of Directors

Image from the Getty Museum of a Council of war from the 19th century.Residential communities customarily do not have board of directors members from outside the organization. Corporations normally do, but they may not be chosen by their ability to balance expertise. Non-profit organizations and independent schools often choose board members based on their ability to raise money or influence government or foundation decision-makers.

Balanced Expertise

Balanced expertise on the board of directors steers the organization from multiple perspectives. Balance can be achieved with experts on larger community issues, on financial and  legal requirements, and areas specifically related to the mission and aim of the organization. An independent school would have an expert in education, perhaps fundraising, perhaps child development, etc. A soup kitchen will benefit from experts in food service and preparation, nutrition, perhaps motivation, perhaps efficiency in service.

From Outside

Outside expert directors can bring advice and judgements that are not influenced by possible internal biases. And they contribute new information. They cross-pollinate with ideas and cautions learned from other organizations. Condo leaders to other condo leaders. An outside expert in housing would bring information from government agencies, architects, financial institutions, etc. They may be better able to identify possible risks to the organization.

Diversity of experience is as important as technical expertise. Outside experts also relax the organization. They can confirm that the organization is following best practices and any problems are, or are not, being experienced by other organizations,

On the Board

The importance of having experts on the board of directors is the synergy created by discussion. Most organizations have a lawyer on retainer, an accountant, an insurance broker, a banker, etc. When they are on the board, however, they respond to questions and issues together, not in isolation. The legal expert comments on the advice of the food service expert. Concerns by one expert about the effect of a decision on another expert’s area can be answered in the moment. The advice of one raises concerns for another that can be discussed and resolved. The concerns of one can be resolved by a solution from another.

Even though it may seem costly and time consuming in the end it saves time. Normally a board of Directors meets 3-4 times a year for 1-2 hours. For non-profit organizations, there may be no charge for this time. In businesses, these experts are often on retainers already. In the end the time saved by not having individual meetings or telephone calls. Saved time from having to repeat conversations or making costly mistakes pay for themselves. The increased value of having more informed advice is invaluable.

With Decision-Making Authority

It is important that boards are not advisory. Decision-making authority creates accountability. Decision-makers take decisions more seriously than advisors. Some fear that decision-making power will create a board-dominated organization. That the attempt to create a more democratic organization will be undermined by “outsiders” who impose negative opinions.

However, in a sociocratic system, boards make decisions within their specific domain. The domain of the board is long-term strategic planning, financial sustainability, assessing risk, and connections to the larger environment—its market or industry. The board can be asked to make a decision when another domain is unable to resolve it. Otherwise, the board should not micro-manage or make autocratic decisions except in emergencies.

As Part of a Whole System

An organization is a system with each part having a responsibility that is essential to the whole. The whole controls its parts. The board of directors is one part of a whole system, not the controller. The board has a different responsibility than the marketing department or the kitchen or the front desk but not more power.

Outside members on the Board of Directors strengthen the organization.

(In sociocracy, what most jurisdictions call a “Board of Directors” is called a “Top Circle” to emphasize that it functions according to the rules for a circle, not the traditional rules of a Board of Directors. When a Board with the traditional rights is required by law, it is formed within the Top Circle.)

Sociocracy at Endenburg Elektrotechniek

Statement from the Endenburg Elektrotechniek Website about their sociocratic governance:

A Circle Meeting at Endenburg Elektrotechniek
A Circle Meeting at Endenburg Elektrotechniek

The word “sociocracy” is derived from the Latin word socius,  neighbor or fellow, and the Greek word kratein, to rule. As a form of governance, sociocracy is based the equivalence of individuals, but not in the sense that “the majority rules,” as in democracy. In sociocracy a decision may only be made if one has a well-founded counter-argument. (This is called the consent principle). Sociocracy offers the individual thus more participation in decisions. So much for the theory.

At Endenburg we have known the sociocratic tradition since the 1970s. Our employees have a voice in policy, and that happens through service (department) circles, business (management) circles, and the top circle. In the service circles, all employees meet with their departments. The business circle formed by MT members and elected representatives from the service circles. In addition, we have a so-called Top Circle which includes the management, delegates from the business circle, and external experts.

Our sociocratic foundation leads in practice to greater involvement and job satisfaction among employees. This is demonstrated by the quality of service. And thus the contributions of sociocracy also contributes to better work for our clients.

The Original in Dutch:

De term sociocratie is afgeleid van het Latijnse woord ‘socius‘ (= medemens) en het Griekse woord ‘kratein‘ (=regeren). Als bestuursvorm gaat sociocratie uit van de gelijkwaardigheid van individuen, maar niet in de betekenis dat ‘de meeste stemmen gelden‘, zoals bij democratie. Bij sociocratie kan een besluit alleen genomen worden als niemand een gefundeerd tegenargument heeft. (Dit noemt men het consentbeginsel). Sociocratie biedt het individu dus meer beslissingsinspraak. Tot zover de theorie.

Bij Endenburg kennen we sinds de jaren 1970 een sociocratische traditie. Onze medewerkers hebben zeggenschap in het beleid, en dat gebeurt via de dienstkringen, bedrijfskring en topkring. In de dienstkringen hebben alle medewerkers zitting van de betreffende afdeling, de bedrijfskring wordt gevormd door MT leden en gekozen afgevaardigden vanuit de dienstkringen. Daarnaast kennen we een zogenaamde TopKring waarin o.a. de directie, afgevaardigden vanuit de bedrijfskring en externe deskundigen zitting hebben.

Onze sociocratische grondslag leidt in de praktijk tot grotere betrokkenheid en meer werkplezier bij de medewerkers. Dit werkt aantoonbaar door in de kwaliteit van de dienstverlening. En daarmee draagt sociocratie ook voor onze opdrachtgevers bij aan ‘het betere werk.‘

http://www.endenburg.nl/endenburg-profiel.php?item=7 Last accessed  2 September 2012.

 

Aptivate, Cambridge, England, UK

“Ethical IT for International Development”

Aptivate company logoWebsite and software developers providing technical  support for international development initiatives by other non-profits, charities, NGOs, facilitators, and trainers. Aptivate provides hosting services and advice on strategy, policy, implementation and procurement and build robust, accessible and usable software, mobile and web services. Specializes in low-bandwidth solutions for the web .

Mission

Aptivate believes in the power of knowledge and communication to alleviate poverty, suffering and conflict, and in the right of every individual to inform and be informed.

We are dedicated to developing ICT services that facilitate communication for unconnected communities, empowering ordinary people across the developing world to improve their lives.

Policy Statements

Our Ethical Policy
Aptivate’s ethical policy exists to ensure we stay true to our mission. Every project we undertake should help us achieve our goals. Sometimes it is necessary to turn down a project or proposal because we feel that it does not fit into our ethical framework or does not advance our mission. We evaluate proposals against our ethical policy, and our staff collectively decide on whether the organisation should pursue them.

Our Environmental Policy
Climate change already affects the livelihoods of many people across the developing world, often the poorest and most vulnerable. Organisations such as the Intergovernmental Panel on Climate Change have called for significant reductions in carbon dioxide emissions and other polluting activities to avert potentially catastrophic consequences.

We believe that climate change must be considered when evaluating activities related to development. While most human activities involve some level of environmental impact, it is necessary to consider this against the perceived benefits of an activity, reduce impact where possible and find alternatives if necessary.

We are committed to reduce our own environmental impact by:

  • using alternatives to travel, such as conferencing technology;
  • using alternative means of transport to short-haul flights;
  • shutting down IT systems when not in use;
  • investigating ways to mitigate the pollution generated by the manufacture, running and disposal of IT equipment;
  • recycling or re-using all possible office consumables;
  • engaging with other organisations on the issue of climate change.

Nathaniel Whitestone of Decision Lab transformed their “decision-making by endurance” in which those how couldn’t last all night had no voice by implementing over a three year period a sociocratic design with formal processes and decentralized power.

Changing the World by Changing the Way We Make Decisions“, AxiomNews. Accessed 8 Aug 2011. Features an interview with Nathan Whitestone of Decision Lab.

Are Sociocratic Corporations Legal?

Sociocratic corporations are perfectly legal. All the laws that constrain corporate functioning can be met while applying sociocratic values, principles, and methods.

Laws governing corporations, both for profit and not for profit, are generally written to prevent abuses that corporations have committed in the past, often with investors’ or donors’ money. In writing the law, the government is presenting its solution to that problem. If you can determine what the law intended to prevent, you will have a good guide to functioning within the law and build a sociocratic structure.

For example, in the US, there is often a requirement that the Board of Directors function by majority vote. The law was intended to ensure that “at least” a majority were in favor of an action. It is a minimum standard, not a maximum standard. Consent contains within it the majority. There is no contradiction in the numbers.

Corporate legislation requires an organization to have a Board of Directors with full authority to govern the organization, but the board can delegate its authority. This is what higher circles do when they create lower circles.

The legal protection for investors and donors is that if the lower circles do not carry out their delegated duties, the Board has the authority to take control. The Board can delegate authority as long as it retains responsibility for the results. This is also perfectly sociocratic since a higher circle can decide to eliminate a lower circle that is not functioning properly.

Even if you are confronting an old law that protected someone 200 years ago, however, the worst thing you can do is to try to convince the government that they are wrong at the same time you are trying to become incorporated. Get legally incorporated, then demonstrate the superiority of the sociocratic structure. Until you have done that, no one will listen to you.

We had this problem with cohousing communities getting approved by town zoning boards. Most cohousing communities are legally structured as condominiums. There are very clear laws about “common interest” real estate in which each owner has a percentage interest. Instead of explaining how the cohousing project met all the legal requirements for condominiums and was financially sound, groups were going to banks and zoning boards talking about shared meals, consensus decision-making, supportive environments for children, changing the world, recycling, etc.

This information was distracting the banks and boards and creating uncertainty about totally sound real estate developments. Cohousing groups were routinely turned down until they found a conventional developing partner, a very sympathetic banker, or began sounding like the legally established condominium that they were.

To ensure that you are both within the law and not undermining the self-optimizing sociocratic structure, you only need a lawyer and a sociocratic consultant with the level of training required to set up a complex organization.