Tag Archives: Brazil

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.

Maverick by Riccardo Semler

This is a wonderful little book by the CEO of Semco, a corporation in Brazil. His father started the company and in 1980s passed it along to his rather young son who built a new kind of corporation using “open management” and advocating a “natural” and “democratic” workplace for “industrial citizens.”

In 1984, Semco acquired a Brazilian subsidiary of Hobart and Semler describes how he began changing the structure of management. It began with lunch hour talks between the managers and workers that convinced the managers the workers should be more involved in decisions about their jobs, the products they made, and their work environment. The women, for example, led a coup that not only got the smelly men’s locker room cleaned up but led to new lockers and the conversion of unused production space to a game room used at lunch and on breaks. Plants appeared on the shop floor the way they appeared in personal offices. Workers began to paint the shop, each worker choosing the color of the column nearest their station.

They formed a cafeteria committee to improve the world’s worst food “outside an institution without bars.” Then they changed the company policy of paying 70% of the cost of lunches to a sliding scale with top management paying 95% and the lowest paid floor sweepers paying only 5%. Workers share 22% of the profits.

From dirty lockers, plants, paint, and lunch subsidies, workers formed committees and began looking at production and products improving processes, safety, and economics as they developed new products, techniques, and finishes. All worker initiated, often on their own time. Semler says the strength of the groups was their diversity: factory workers, engineers, office clerks, sales reps, and executives. The leaders were chosen by the committees based on their capacity to lead — calling meetings and leading discussions.

The workers themselves established and posted scoreboards above the factory floor to keep track of daily production for each product. When their self-determined quotas were in danger because parts had not been delivered the workers travelled to the suppliers to pick up supplies and worked through the night to finish before the end of the month.

Maverick is filled with such stories in which the workers are empowered and once empowered increased production by developing better processes and increased sales and profits by designing better products. All are inspiring and useful in making arguments for changing your workplace. This book was an all time best seller in Brazil when it was published there in 1988 as Turning the Tables. Semler was then 34. This is not a book about business; it is a book about work.

Maverick: The Success Story Behind the World’s Most Unusual Workplace by Ricardo Semler. NY: Tableturn, 1990. Buy the paperback from 1995 at Amazon

The later and similar book is The Seven-Day Weekend: Changing the Way We Work published in 2004 when he was a visiting scholar at Harvard. This book is less specific in giving examples and more motivational, encouraging people to think the way Semco management thinks in order to find the best solutions for their organization. In the end, I find this approach to be less useful. Feels good but what do I do on Monday morning? Available Used at Amazon

Terra Viva, São Paulo, Brazil

Terra Viva is an agribusiness centered in São Paulo, Brazil begin by the Schoenmaker family in 1959 to grow gladiolas. Though not mentioned on their website, Gerard Endenburg consulted with the owner in the 1970s to develop the company using sociocracy. They now have more than a thousand workers and focus on bulbs and plants for flowers and vegetables.

Their website includes a discussion of the company’s philosophy including an organizational chart, but does not mention sociocracy or Endenburg.

A good research topic.