BNET on business democracies

Geoffrey James at BNET has an interesting post on whether businesses should be democracies. An excerpt:

...if free market democracy is such a good idea, why are most businesses run like military dictatorships?

Think about it! Most companies:

• Are controlled by a junta of corporate “officers.”
• Strive for tight top-down financial controls.
• Spy upon employee emails and activities.
• Obsess endlessly about the chain of command.
• Dictate rules and regulations from the top.

By contrast, I’ve seen very few companies that encourage internal competition beyond initial R&D efforts, and I’ve NEVER seen a company where the employees get to vote for the new President. Heck, even the stockholders don’t get to do that.

It seems to me that if CEOs really believed the Republican “talk”, they’d “walk the talk” and voluntarily set up their companies with internal free market economies and hold regular elections to determine who should manage each function.

However, since no CEO is willing to put his money where his mouth is, it’s logical to assume that most CEOs secretly believe, consciously or unconsciously, that organizations are better off when they’re run like military dictatorships.

With all due respect, I disagree. In my view, most corporations are successful in spite of top-down management, rather than because of it. In fact, I think that most businesses would benefit if the employees were running more of the show.

While I agree with most of his points, I think the emphasis of the solution needs to be free markets more than democracy. Silicon Valley is successful because it allows hundreds of startups to bloom and the market sorts out the winners from the losers - not because they hold some sort of big vote every year to pick the "best" startups. Companies need to shift their thinking from "managers" controlling departments to "internal venture capitalists" putting resources behind the best ideas, and they should be judged on the results of those investments. Talent needs the freedom to move to the most promising and best funded projects. (more on Organization 2.0 here)

To quote Hamel:

“Market-based economies outperform those that are centrally planned. …markets are better than hierarchies at getting the right resources behind the right opportunities at the right time. The average company, though, operates more like a socialist state than an unfettered market. A hierarchy may be an effective mechanism for applying resources, but it is an imperfect device for allocating resources.”

–“The Quest for Resilience” by Gary Hamel and Liisa Välikangas, Harvard Business Review, Sept. 2003

We designed OpenTeams to act as that self-organizing ideas+talent+$ marketplace for projects.

I'd love to hear your thoughts in the comments.

Thoughts and takeaways from the WorldBlu conference

So I finally have some time to blog about the WorldBlu conference on democratic organizations last month in New York. Other blog posts do a great job of covering the conference details - here, here (where I was quoted), and here (including summaries of each speaker) - so I'm just going to post my own key takeaways and thoughts rather than all my notes. Here are some items I highlighted in my notes:

• When people don't have a self-governance model, they want a strong directive leader (with the negatives that entails).
• Democracy needs structure, or power becomes personal.
• The vast majority of people don't like their jobs (yet rather than recognize this as a symptom of a serious flaw in how we run our organizations, it's simply accepted as "the way things are").
• More than 80% of managers are poor leaders.
• 50+% of peoples' time is spent fighting institutional bureaucracies.
• "First, we shape our structures... and then our structures shape us." -Winston Churchill
• Results-only work environments (ROWE) are a great step in the right direction.
• "We long for community, but settle for institutions."
• Winning companies stand for powerful ideas.
• Leadership = creating an architecture of participation (not "genius on the mountain")
  

The reality is that most of the featured organizations were more benevolent autocracies than democracies. One exception is the co-op model, which got a presentation from Equal Exchange and was also recently featured in a Houston Chronicle op-ed. Co-ops are 100% owned by their workers (and, in some cases, their customers). While I see some benefits from the model, I don't think it's "the answer". For one thing, I think most of the world's enterprises need outside equity investment to be financially viable. There also has to be some mechanism for efficiently deploying capital where it's needed, as well as for investors to diversify their investments beyond their own firms to reduce risk.

But I have another issue with the co-op model. They talk about the need for empowerment, control, and trust, but then talk about how their model is like a city government. I don't think people feel all that much control, empowerment, and trust from their city government, so duplicating that model doesn't seem all that helpful. Democracy is better than autocracy, but liberty is even better than democracy (who would you prefer controlling you: dictator, elected leader, or nobody?). Liberty means free markets. How can we get that model inside organizations? (more here: Organization 2.0 briefing)

This leads to my bigger picture issue. Whole Foods CEO John Mackey talks about the damaged brand of capitalism worldwide and the deep unpopularity of big business (not to mention the other big command-and-control organizations: government bureaucracies). A few hundred years ago, scholars and nobles lamented all the bad kings (vs. the few good ones) and wrote about improving monarchies. "How can we get more good, enlightened kings?" But our Founding Fathers saw the futility of articulating principles for a better monarchy. They moved on to a whole new concept, representative democracy, and the rest, as they say, is history. As I attend conferences like WorldBlu and, later this week, Catalyzing Conscious Capitalism, I find myself asking:

Are we just trying to foster more "benevolent monarchies", or are we really moving on to create our equivalent of "democracy": a completely new form of organization that breaks from the old, dysfunctional, command-and-control, hierarchical model?

Another award for OpenTeams

Best of the Web online project management applications for CEOs and entrepreneurs, by CEOworld magazine.

I've been a little swamped since returning from NYC, but I hope to write a longer post on the WorldBlu conference soon, based on my notes. There was no wireless internet at the conference, so liveblogging didn't work out.

Headed to WorldBlu Live conference in NYC

Looks like a great event on democratic organizations. If you'll be there, find me and let's chat about next generation organizations (or, my new label, Organization 2.0 - short overview pdf with 4 content charts here). Here's quick head shot so you know who to look for.

I might do a little live blogging from the conference, or at least report back afterwards.

Benefits of social media in the workplace

I rediscovered this old Hinchcliffe blog post recently, which articulates a still-valid set of benefits for enterprise adoption of Web 2.0 tools like OpenTeams:

• More ad hoc collaboration between employees who can find each other’s work and team together.
• More globally persistent, discoverable business information is made available over time.
• Social media tends to capture more institutional knowledge that’s reusable.
• A deep hyperlink infrastructure begins to form, built by continuously by workers using social media. tools to forge links, making business information more discoverable.
• Tagging and other emergent organization methods allow business information to be organized and cross-referenced from every point of view.
• More efficient access to information as more business information becomes available internally and externally via syndication.
• Potentially higher levels of innovation and productivity as more previously unavailable enterprise thinking is available to be accessed, repurposed, and built on top of.
• Increased efficiency in conversations: social media scales up to mostly resource and time friendly conversations among thousands of asynchronous participants, yet excludes those uninterested in them, unlike e-mail distribution lists and conference calls.

Management's Grand Challenges

Coming out of Dr. Hamel's "Inventing the Future of Management" summit is this excellent document (introduced by this blog post) summing up the 25 challenges of reinventing management (i.e. Management 2.0). Here are the 25, although it's well worth diving into the details behind them in the document. Those details help flesh out the real issue behind each of these pretty abstract items.

1. Reconstruct the philosophical foundations of management
2. Fully operationalize the ideas of community and citizenship
3. Seek orientation in a higher and broader purpose
4. Distribute (share) the work of creating direction and strategy
5. Develop holistic performance measures
6. Stretch executive timeframes and perspectives
7. Increase trust, reduce fear
8. Create a democracy of information
9. Expand and exploit intellectual variety
10. Substantially reduce the gravitational pull of the past
11. Enlarge and empower the pro-change constituency
12. Expand the freedom for autonomous action
13. Create more space for emergent strategies
14. Create an internal market for ideas, talent and resources
15. De-structure and dis-aggregate the formal organization
16. Dramatically diminish the influence of (formal) hierarchy
17. Reinvent the work of executive leadership
18. De-politicize decision-making
19. Reinvent the means of “control”
20. Transcend the efficiency vs. innovation trade-off
21. (Further) Unleash human imagination
22. Enable communities of passion
23. Create (more) open organizations
24. Rethink management thinking
25. Humanize (the language of) business

Hamel's Management Innovation Summit

Dr. Hamel recently got 35 of the world's biggest thinkers together in a room for two days to discuss the future of management (his four core questions discussed here). If you want to know what they discussed, check out this article, this blog post, these in-depth series of blog posts (with graphics and pics), as well as a video interview with Dr. Eric Schmidt, CEO of Google. Alas, no post yet from Hamel himself.

Update: Here it is.

The moral purpose of capitalism

Some thoughts on the topic in a comment I posted on John Mackey's blog (Founder and CEO of Whole Foods Market).

Four questions (and answers) on reinventing management

Dr. Gary Hamel, famous author of "Competing for the Future" and "The Future of Management" - and recently ranked by the Wall Street Journal as their #1 business guru - has posted four questions on reinventing management on his blog. These questions will be posed to 35 top thinkers at a "Reinventing the Future of Management" conference next week in California. I dug through my notes on our Open Model Entrepreneurial Organization concept, and then posted a comment with my best shot at answers to the four questions. I will also repost those answers here:

1. What are the deep-seated impediments, or “design flaws,” that limit the capacity of organizations to adapt (to change without trauma); to innovate (to mobilize the imagination of everyone, every day); and to engage (to create environments that inspire extraordinary contributions)?

There are three core “design flaws,” each of which matches generally with one of the three challenges, although they also overlap and interrelate:

1) Weak adaptation: Flat salaries based on time passing (rather than achievements or being billable for clear tasks on a project), combined with people fiercely defending the “turf” of their territorial job descriptions, create an inertial bias towards stasis (“just mark time as comfortably as you can to make money, and be passive aggressive to make sure nobody rocks the boat in your job domain”). Only top management has an incentive to drive through disruptive change, but they’re pushing against an incredibly resistant organization with tremendous inertia.

2) Weak innovation: A hierarchical chain of bosses, any of which can say “No” to kill any new ideas, or to anything that threatens their power, interests, or the status quo.

3) Weak engagement: The straight-jacket of constraining job descriptions. Few employees are likely to be in the “Flow” state of optimal productivity (not bored or burned-out/overwhelmed) unless they can control their portfolio of roles to stay in that “zone.”

2. Given these systemic impediments, and the new demands that will confront organizations in the years ahead, what should be the agenda for 21st century management innovators? That is, what are the “moonshot challenges” that must be addressed if we are to create organizations that are truly fit for the future?

Organizations need to be more like the free market Silicon Valley ecosystem internally:

1) Compensation driven by value-added accomplishments (billable time for clear tasks on projects) rather than general time passing, creating an instant constituency for change, improvement, and adaptation.

2) Nobody’s “turf” is sacred – anybody can be challenged at any time.

3) A new idea can seek support/resources from multiple sources throughout the organization – no single gatekeeper, or, worse, a chain of hierarchical gatekeepers. Imagine if Silicon Valley had only one VC firm…

4) Replace single jobs with portfolios of ever-shifting roles so people can keep themselves in the highly engaged “Flow” state. Employees can trade roles with each other – for instance, passing down a role that has become stale and boring for one employee to another who sees it as a promotion to a new and challenging opportunity. This portfolio approach will also help reduce unproductive territorial defensiveness of job “turf,” since it’s only one part of their broader portfolio of roles.

The moonshot challenge is this: How can organizations become more like the Silicon Valley ecosystem internally, while avoiding anarchy, presenting a single face to the world, and acting in a cohesive strategic direction?

3. Can we imagine, even in outline form, some potential solutions to these challenges, and if so, what sorts of experiments might be useful in helping us to test these ideas in real world settings?

At OpenTeams, we call it the Open Model Entrepreneurial Organization (OMEO). The “entrepreneurial” part is obvious from the description above. What the “open model” is referring to is breaking up our single monolithic hierarchical organization maps into two parts: 1) an “open model” of all the assets, systems, processes, and day-to-day operational roles in the company, and 2) a collection self-organizing employees (with their own portfolios of project-based roles) as well as funding sponsors (“internal venture capitalists”) to support projects to change the open model (adapt, innovate, improve). Of course, individuals could straddle both parts of the organization with a combination of both operational and project roles – or even an internal venture capitalist role if they are given discretionary time to invest (as Google famously does with their engineers’ “20% time”).

4. More generally, what could be done to help accelerate the evolution of management in the years to come, that is, what is it that limits the pace of management innovation and how might these limits be overcome?

If you look at the case study of the transition from Manufacturing 1.0 (Ford) to 2.0 (Toyota), it took Edwards Deming influencing a prototype flagship company that became the paragon role model for industrial companies around the world. We need a similar prototype flagship for Management 2.0. It must be widely acknowledged as far more adaptive, innovative, and engaging than normal companies, and it must do it with a *system*, not just culture or leadership personalities. Once Management 2.0 has proven itself in a high-profile company, other companies will flock to emulate it, just as they did for Toyota.

Organizational Democracy and WorldBlu

I got to meet with Traci Fenton of WorldBlu in Austin on Monday. WorldBlu supports organizational democracy with activities like the annual WorldBlu List of the Most Democratic Workplaces and the WorldBlu Live conference in NYC this October, and Traci is as passionate about changing organizations as I am (she even has her own blog here). Her emphasis is on "democratic," while mine is on "entrepreneurial" - but our core principals are essentially the same. I highly encourage you to learn more and consider attending the conference this Fall. Hope to see you there!

Demo audio fixed

We recently discovered that the audio in our demo screencast could sound garbled when played in the newest version of Adobe's Flash player. We have implemented the fix, so if you've had trouble with our demo before, please try it again. It really is the best way to come up to speed quickly on the power of OpenTeams.

"Future of Management" in a nutshell

Came across this great set of bullet-points summarizing Dr. Gary Hamel's "Future of Management" organizations - what he calls "Management 2.0" and what we call "The Entrepreneurial Organization":

* Everyone has a voice.
* The tools of creativity are widely distributed.
* Its easy and cheap to experiment.
* Capability counts for more than credentials and titles.
* Commitment is voluntary.
* Power is granted from below.
* Authority is fluid and contingent on value-added.
* The only hierarchies are “natural” hierarchies.
* Communities are self-defining. Individuals are richly empowered with information.
* Just about everything is decentralized.
* Ideas compete on an equal footing.
* It’s easy for buyers and sellers to find each other.
* Resources are free to follow opportunities.
* Decisions are peer-based.

Interview on TrenchMice

Here. It's interesting he worries our price point might be a bit premium vs. some of the free tools out there. We've been getting a lot opposite feedback that our price point may be too low for many enterprises looking for a high level of support. Of course we like to think we've found the right middle-ground, with good value combined with excellent support.

I appreciate his optimistic view of our long-term prospects, but let's hope things progress faster than he predicts. This is the lightning-fast world of Web 2.0, right?

A new review

One of the more comprehensive reviews of OpenTeams, which concludes:

OpenTeams is an impressive service... OpenTeams’ high point is adding structure to a wiki. If you need to organize pages into folders, create outlines, track files, and work with a group of users, OpenTeams is definitely worth checking out.

It's also a pretty good overview of how to actually use OpenTeams. Check it out.

The workforce disengagement problem

Came across this post on the problem of widespread disengagement in the workforce, based on a Towers Perrin Global Workforce Study. The excerpt:

Just 21% of the employees surveyed around the world are engaged in their work, meaning they're willing to go the extra mile to help their companies succeed. Fully 38% are partly to fully disengaged. The result is a gap - which Towers Perrin has dubbed the "engagement gap" - between the discretionary effort companies need and people actually want to invest and companies' effectiveness in channeling this effort to enhance performance.

The study found that companies with the highest levels of employee engagement achieve better financial results and are more successful in retaining their most valued employees than companies with lower levels of engagement.

"It's impossible to overstate the importance of an engaged workforce on a company's bottom line," said Julie Gebauer, managing director and leader of Towers Perrin's Workforce Effectiveness consulting practice. "The Global Workforce Study establishes a definitive link between levels of engagement and financial performance and, for the first time, begins to quantify that link. It demonstrates that, at a time when companies are looking for every source of competitive advantage, the workforce itself represents the largest reservoir of untapped potential."

The most striking data about the linkage between employee engagement and financial performance come from a study of 40 global companies which involved a regression analysis of company financial results against engagement data. It found that firms with the highest percentage of engaged employees collectively increased operating income 19% and earnings per share 28% year to year. Those companies with the lowest percentage of engaged employees showed year-to-year declines of 33% in operating income and 11% in earnings per share.

OpenTeams increases employee engagement by helping them self-organize into entrepreneurial teams around innovative ideas. Entrepreneurs are the personification of "engagement," and having more of that spirit within an organization can do wonders for motivating employees to tap their full potential.