Reinventing Management, Part II: What Happens When No One Is In Charge?

In Part I of this two-part series , we explored Frederic Laloux’s color-coded typology of organizational evolution, and I left you with this question: What color is your organization? Chances are that most of you responded either Orange or Green. If you are one of the approximately seventy percent that workplace surveys report are not engaged in the workplace, yours is probably an Orange organization where the primary focus is on making the numbers and management practices are clearly top-down. If you are lucky enough to be in a workplace where you feel engaged and your voice matters, yours is likely a Green organization that views strong human cultures and a focus on delighting customers as the pathway to profitability. But regardless of the color of your organization, it is almost certain that the vast majority of you report to a boss. The difference between being in an Orange or a Green organization is those of you in Green organizations probably like working for your bosses a lot more than your Orange counterparts.

However, if you work for Buurtzorg, the Dutch neighborhood nursing organization, or W. L. Gore, the makers of Gore-Tex, you don’t have a boss, which is why the color of your organization is Teal. Buurtzorg and Gore are two of the innovative enterprises that Laloux highlights in his book Reinventing Organizations: A Guide for Creating Organizations Inspired by the Next Stage of Human Consciousness.  These Teal organizations are models of an evolutionary leap in organizational design that may very well represent the future of management.

Putting Patient Care First

Buurtzorg was founded in 2006 by Jos de Blok, a nurse who had a radical idea for a better way to organize neighborhood nurses—an idea he knew would never be accepted in the traditional organization where he worked. In the Dutch health care system, neighborhood nurses have an essential role, working hand-in-hand with hospitals and family doctors. At the time, every one of the approximately 85 nursing organizations followed the Orange model where the primary focus was on efficiency and economies of scale. Accordingly, the various tasks of these organizations were distributed into specific functional roles, such as intake specialists, schedule planners, call center employees, and, of course, managers and supervisors.

What concerned de Blok was that, although this typical arrangement was highly efficient, it unwittingly enabled a system that lost track of patients as human beings. For example, because schedule planning was done by people who didn’t know the patients and whose primary interest was minimizing the travel time of nurses between visits, the patients had no continuity of care and would see different nurses from visit to visit. While the system appeared to be managing costs well, the same could not be said for managing patient care.

To correct this problem, de Blok put in place an organizational arrangement where nurses work in self-organized teams of 10 to 12, with each team responsible for the care of 50 patients in well-defined neighborhoods. From day one, no one on the teams has ever been in charge and there is no prescribed division of labor. Instead, the teams are responsible for collectively distributing tasks among themselves, monitoring their own performance and productivity, and making important decisions that affect the team.

Jos de Blok’s innovative organizational paradigm has been extraordinarily successful. In its first seven years, Buurtzorg rapidly grew from 10 to 7,000 nurses, and today employs two-thirds of all neighborhood nurses in the Netherlands. Buurtzorg requires almost 40 percent fewer hours of care per patient than traditional nursing organizations because, by putting patient care first, Buurtzorg’s clients heal faster, are less likely to be hospitalized, and stay in care half as long. It turns out the key to efficiency has less to do with focusing on costs and managing travel time between visits, and more to do with providing a human care experience for the patients.

A Lattice Organization

In 1958, Bill Gore walked away from a seventeen-year stint with DuPont to start his own company. He wanted his new company to be very different, especially in how people communicated with each other. Gore often said that, in hierarchical organizations, “communication really happens in the car pool,” meaning that the ride to and from work was the only place where people felt free to talk to each other without worrying about the chain of command. In his new company, Gore did not want any impediments to conversations because he understood the free interchange of ideas was the soil of innovation. Gore was clearly ahead of his time in recognizing that conversation would become the catalyst that would drive the corporation. And so, Gore built what he called a lattice organization where there would be no traditional organization charts, no chain of command, and no predetermined channels of communication. Unlike the top-down hierarchy, a lattice-based architecture connects every person in the organization to everyone else to form a dense network of peer-to-peer connections where information flows in all directions, unfiltered by any intermediaries.

Bill Gore’s organizational approach was extraordinarily innovative for the 1950’s. In his lattice organization, all work is self-managed by teams, and projects are accepted rather than assigned. Workers are partners and volunteers who are accountable to their teams, rather than to a boss. Everyone is free to talk to anyone else in the organization, and people are expected to be open and candid when Gore associates gather for meetings. Compensation is determined using a peer review process, similar to that used in law firms. On average, every associate evaluates twenty people and is evaluated by twenty peers. Thus, the associates are rewarded based on their contributions to team success, and they have an incentive to commit to more rather than less work.

There is no central planning at Gore and Associates. No single person or elite group determines strategy, sets the direction or drives execution. Strategy is determined by the collective intelligence of the associates and, because there are no bosses, no one individual can kill a good idea or keep a worthless project alive. All voices count at Gore and whether or not a project goes forward is determined by how many associates are willing to work on the proposition. Once a project goes forward, the self-managed team determines its own direction and its own requirements based on its own shared understanding.

Gore’s consistent success for well over six decades is clear proof that the decentralized collective wisdom of workers is an alternative to the centralized planning of a managerial elite. However, as the digital revolution continues to radically transform the world, we are likely to find that companies such as Gore are better capable of managing at the new pace of change and responding to the market’s increasing demands for knowledge and speed. While on the surface it may appear that Gore’s approach to strategy and execution is haphazard and inefficient, their outstanding performance in developing innovative products across a variety of industries is testament to the reality that nobody is smarter or faster than everybody.

It is perhaps ironic that an engineer who was trained in the ways of mechanical thinking builds the first large corporation designed as a self-managed peer-to-peer network. While he knew from his previous experiences at DuPont that bosses could drive results, Gore was convinced that the workers would achieve better results if his organization had the processes to hear and to aggregate all their perspectives. Without any bosses, there would be no one who could silence a voice or abuse the power of position to coerce a mandated point of view. By tying compensation to performance and then having a collective peer review process to determine each individual’s pay, Gore assured that the associates would be working for and listening to each other as well as having an incentive to collaborate to produce the best results for the company. Gore understood that peer pressure is a far more effective motivator than pleasing the boss as long as you have the right social infrastructure.

Perhaps Bill Gore’s greatest accomplishment is that his vision of a lattice organization without bosses lives on long after his death in 1986.  Gore and Associates demonstrates that companies built around shared understanding and self-organization are not subject to the usual disruptions when successful leaders move on. Self-managed organizations are not dependent upon star performers or heroic leaders because they have the capacity to quickly access and leverage their collective intelligence. Succession planning and consistent execution are not issues when companies are guided by the collective wisdom and the shared understanding of the workers and when organizations truly appreciate that workers are partners, not subordinates.

The Network Effect

Buurtzorg and Gore are impressive examples of how Teal organizations can be far more effective and efficient than their traditional counterparts. One of the most significant insights derived from Laloux’s study of the evolution of organizations is how the emergence of the Teal organization is so radically different from any other organizational transformation. The moves from Red to Amber to Orange to Green were all done in the context of a constant dominant paradigm. Every one of these organizational types is some form of a prescribed hierarchy where people are led by someone who’s in charge. What changed over these early evolutionary phases was the scale, the motivational incentives, and the expected behaviors of those who held power over others. But what has remained constant across ten millennia of organizational evolution is an unquestioned belief that organizations can’t work unless someone is in charge.

However, maintaining this belief may be difficult in a rapidly changing world where all people are available to each other on the Internet and where, very soon, all devices will be connected through the Internet of Things. In a hyper-connected world, power is not derived from being in charge, it belongs to the connected, which is why the network is rapidly replacing the hierarchy as the dominant paradigm of our time. What can best be described as the “network effect” will completely displace the silo effect that has shaped our organizational structures. That’s why the Teal organization is very likely the future of management.