Last week I ran a catchup up call with Jon Reed on a succession of things I've observed over the last few weeks as I settle into my US role. I wanted to sense test some topics I'm noodling in part because I see a pattern emerging that is both disturbing and exciting and in part because there are tectonic shifts going on around our business.
The spark came in my realization that Oracle's emphasis on people and sales as two sides of the same coin matters. A lot. As it happens - and I genuinely did not know this - Larry Ellison, chairman Oracle said in 2014:
In the 21st century, the two most important applications inside of a modern enterprise are HCM and customer service because it's all about taking care of people, taking care of your employees who in turn take care of your customers. You can't do one without the other.
How does this work? We don't know enough right now to be certain and as Mark Hurd, co-CEO said, the company is taking huge risks because the data suggests they will fail. Even so, that realization sparked a chain of thought that goes something like this.
Where we're at
- Our existing structures are fundamentally broken. In the large companies I follow it is clear that even where there are logical processes in place, those same companies are suffering from a form of entropy that is rapidly ossifying the business. It is worst in those companies where the perceived need for control is greatest.
- It is extraordinarily hard for even the most eager and willing of management to instantiate change that is both purposeful and sustaining. Much of the time, the cultural antibodies are just too overwhelming.
- The sense of frustration among the most forward thinking and/or entrepreneurial leaders and sometime former founders is profound. Some will walk away. A few will find an alternative way forward.
- The overwhelming sense of worthlessness and need for self protection among many employees is palpable, giving rise to a rigidity that I see expressed in jobsworth fashion.
- None of what we have today works and size won't help save these companies. While companies may well be able to continue reporting marginally improved sales, beaten down costs and some sort of return to stakeholders, very little that is happening in response to the changing economic dynamics is sustainable because it is rooted in a past that is no longer relevant.
In talking to Jon, I quickly learned that while well understood in the UK, the notion of 'jobsworth' is almost unknown in the US. From Wikipedia which I think sums it up very well in quoting from a 1960's song by Jeremy Taylor:
Jobsworth, Jobsworth, It's more than me job's worth,
I don't care, rain or snow,
whatever you want the answer's no,
I can keep you waiting for hours in the queue,
and if you don't like it you know what you can do.
Recognize that person? I come across them all the time. While 'jobsworth' is often seen as a term of derision, I see it as emblematic of people abuse.
The problem as I see it is a direct result of many things, almost none of which have anything to do with the employee but everything to do with corrosive management and an obsession with bowing to stockholder activists. As Mark Hurd, co-CEO Oracle said last week:
They don't care about me, they only care about my performance. And if I don't deliver it then they'll just get the next person in line.
It seems to me that in the relentless pursuit of operational productivity, management has progressively stripped away people's worth. Apply a liberal dose of rule following culture and it doesn't take much imagination to see that we end up turning people into automatons. That's OK when dealing with machines but counter productive when dealing with sentient beings. And when you strip away enough of a person's worth then they respond by clinging on to what is left - or leave.
What you're left with is something that while having the sheen of efficiency is, in reality, counter productive. You can cover it up with cost cutting. You can cover it up with price increases. You can sweep away some inefficiencies with process automation. But you can't build a sustainable 21st century business in this fashion. Iteration of the old models simply isn't going to work.
What do we need?
This came to a head for me when an analyst colleague asked me: 'Who's running your business?' That was a great question because the honest answer is - I don't know. I know who does various things but running the business? What does that mean?
I guess there is an expectation that Some One actually runs a business. That Some One has their hands on the invisible levers that direct and control our destiny. That there is some sort of hierarchy. That's not true. Some One might be the voice through which direction, vision and strategy get articulated out into the wider world but Some One doesn't run the business. We all do in the roles and activities we play out.
And then I got to thinking about how this works.
Over the last eight or so years I've been involved in multiple projects where the teams have never been fixed. A few of the same faces may turn up at frequent intervals but there's always someone or some people who are new. The team does its job, disbands and then reforms when the next project comes along but in different form. It is liquid. Leaders emerge but are not fixed either. Different situations demand different skills, different talents, different emphases. Most of these projects have been very successful based upon the outcomes achieved.
The combination of participants is often drawn from a pool of people with which I am familiar and in that sense, the pool represents an organization albeit with no fixed abode other than living in the digital world. That in turn got me exploring the world of alternative organizations and Holacracy in particular. If this is new to you then join the club.
The last re-org you'll ever do?
I was especially drawn to The Last Re-Org You'll Ever Do by Aaron Dignan. It contains much that feels familiar, holds the ring of truth and yet is vaguely uncomfortable and all at the same time. This:
We know that we can’t hold the perfect corporate structure in our minds. And we know that for it to thrive under pressure, uncertainty, and volatility we need variation and redundancy. Most of all, it’s clear that our organizations need the ability to adapt rapidly to the pace of technological change. But, what does that mean for the future of organization design? What kind of structure delivers on all that?
To get a hint, we look to today’s most disruptive and purposeful companies. I recently wrote about how the next generation of great organizations are using a fundamentally different approach to running their business. One of the most interesting differences is the way they’re experimenting with structure, specifically: roles, teams, and authority.
At its heart, holacracy is about empowering people to both have a voice, take their own decisions and act but within a common framework of clearly defined rules and with the freedom to offer unfettered opinion. Philippe Pinault, talkSpirit CEO says in “The hardest thing I can see about switching to Holacracy…”
We are inventing a new organization based on new rules and new governance. The past is in the past, I want you to write the future by giving yourself all the room you want to take up. And to bring out all your tensions, whatever they may be about, so we can deal with them.
Sounds great doesn't it? But does it work?
Does Holacracy work?
While Holacracy is one of the more popular approaches to solving organizational problems for the 21st century workplace it is far from a done deal. In the Quartz story about how this is going at Zappos, the author focuses on a range of problems with which the company is wrestling.
Harvard management professor Ethan Bernstein, who has studied Zappos and other companies that are pursuing new modes of organization, tells Quartz that Holacracy isn’t the answer to becoming self-managing. Ultimately, it’s not about whether Holacracy is the answer but instead what problem you’re trying to solve. Holacracy’s biggest value, in Bernstein’s view, is that it provides a framework for effective conflict resolution: “Holacracy replaces that [traditional] structure with a structuring process, at least for particularly frequent kinds of conflicts, to resolve conflicts in a potentially less-hierarchical, more self-organized, and more adaptive fashion.”
The overarching impression is that while Zappos may be the poster child for Holacracy, the only reason it is surviving as a guiding set of principles is because CEO Tony Hsieh has persuaded Jeff Bezos, CEO of Amazon, Zappos holding company, that it is worthwhile.
In what is a telling statement about how these new approaches are tough to sell to outsiders:
In his book, Delivering Happiness, Hsieh says that he never wanted to sell Zappos but that the company’s board—and, in particular, investor Sequoia Capital, the venture capital firm which kept it afloat with $48 million in the mid-2000s—was getting tired of his “social experiments” and wanted the company to improve profitability. Instead of risk getting forced out, Hsieh decided to sell the company to Amazon, which also values reinvestment over immediate bottom-line growth.
What about inside the organization?
“Things are going to get slower before they get faster,” John Bunch, a software engineer who is leading the transition along with Gonzales-Black, tells Quartz. “There are pockets of strong practice.” Both speak about the power of leveraging Holacracy once the company gets fully up and running. They also acknowledge that the system won’t work for everyone. And like Hsieh, they channel the vision that Holacracy is ultimately about increased adaptability.
“Every Zapponian has to decide,” says Bunch. “Is this a company and an organization that I want to follow along that journey?”
And not every Zappos employee is willing to make the transition. Recent departures since the rollout include David Hannigan, who was brought in as the chief information security officer after the company’s data breach in 2012; Larry Hernandez, a recruiting lead who was in the pilot group for Holacracy; and former CTO Arun Rajan who was part of the tech exodus. Rajan returned this fall as interim COO and says that he now understands the inner workings of the company better since everyone’s roles are more clearly identified. “It’s the best tool we have to move into self organization.”
Anecdotally, I've heard that Hsieh is having a turbulent time making Holacracy stick, going so far as to mandate its introduction or move out. I'm not surprised.
As I look at organizations of all sizes, management's default position is always one of command and control. It's what we've all been conditioned to believe works for the last century or so. If, as I am hearing, Zappos is experiencing difficulty then it may have no choice but to revert to some elements of command and control in order to usher in the new.
Holacracy, along with similar methods are too new to know for certain whether they provide the basis for sustainable management and organization in the 21st century. Case studies are hard to come by and even some of its most prominent enthusiasts say it's painful.
The requirement to stick within a very tightly defined rule set that governs how the organization evolves is something I see as uniquely American in concept and style. It fits within the framework of 'land of the free, (provided you follow the rules)' and as such may only work in US style setups.
The main difficulty I find in the case material and in the narrative around these concepts lies in problem resolution and the expectation that people will air their grievances in open forums. Medium says:
In our meetings, everyone has a chance to bring up “tensions,” which in Holacracy means something that you as an individual feel is hampering the true potential of your work. No one can tell you that a tension is invalid even if they themselves do not feel that tension. As an individual, you have a unique perspective into the company, so if you feel a tension, it is valid and needs to be processed to help the company achieve its potential.
It's an interesting idea but one I sense is unrealistic without significant coaching. It requires an unlearning of the language and behavior around blame and a relearning of responsibility in the context of fast failing. That's no easy task.
Hierarchies are notoriously difficult to unpick. The informal organization that most people recognize as the most efficient way to self organize doesn't go away as readily as many might imagine. That works after a fashion whereas we don't know whether the new will lead to sustainable outcomes.
Reading the literature and listening to a variety of sources, I'm not getting a sense of how you take a very large organization and shift it into the new. The authors at Holacracy.org claim it can work anywhere. They would since Holacracy IS their agenda, but the proof points don't exist - yet.
Image credits - per captions, featured image via @gpaingvoid