There’s Something Broken About the Way We Run Organizations

Frederic Laloux and "Reinventing Organizations" explained.

by Naomi Ryland, January 13, 2016

There’s something broken about the way we run organizations today. It feels exhausted.” 

It seems like in the last few months, Frederic Laloux’s name has popped up all over the place. For those who haven’t heard it being whispered around the water cooler; he’s the man behind the popular book, “Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage in Human Consciousness”. At first I was skeptical, but having gotten over my typical knee-jerk reaction to things like this as “weird” - I finally decided to give him a try myself. 

In this 100 minute lecture, Laloux presents some of his key arguments as to why today’s modern organizations, are in fact, broken.

Here is what he says. 

Reinventing Organizations

According to Laloux, studies suggest that between 2/3 and 3/4 of all employees are disengaged with their work. They “come to work with their bodies but not with their hearts” (cute). Whilst this notion is hardly new - Marx had plenty to say about the “functionality” of the working classes - as Laloux points out, we are not only talking about the disenfranchised poor but literally EVERYBODY, right up to top management. People even at the very highest echelons of business are TIRED. Tired of the ego games, politics, bureaucracy, meaningless meetings, budgeting cycles, arbitrary targets.

And what’s more this isn’t JUST a pandemic of the corporate sector.

" Nurses and doctors are leaving their profession in record numbers because somehow hospitals turned into soulless machines."

And it’s the same for teachers and schools. 

For Laloux this can only mean one thing. The old system is dying, which means that something new will replace it. And he thinks he has found it. How? He spent three years researching organizations who are organizing themselves differently and being extraordinarily successful at it (we are talking about multi-million dollar companies in all sectors and various countries sometimes with tens of thousands of employees). 

He then identified three main commonalities which he thinks are the defining features of the new management paradigm. For they are resounding common factors in all 12 of his case studies, although none of these organisations knew of each other before and all considered themselves to be mavericks AKA oddballs. 

So what are these magic three factors which Laloux is convinced will define organizations of the future?

Self-Management

None of the organisations Laloux studied had a hierarchical structure. Or to put it more frankly there are no bosses at any of these companies. Even the ones with tens of thousands of employees. No bosses. NO. BOSSES. 

Hierarchies, especially beyond a certain level of complexity, are (and he makes a pretty good case for this) simply not efficient. Hierarchies suggest a pyramid structure, which means that all complexity gets pushed to the top and a small number of people (or even just one) end up having to deal with all of these complexities. Insanity when you think about it. And as Laloux points out, it’s just not how effective complex systems work in any other context. From the global economy through to human cells and forests, complex systems have structure and process but no “boss”. This seems to be his mantra for organizations too:

" Structure, yes. Process, yes. Boss, no."

So that doesn’t mean that you can just scrap hierarchy and leave everybody to get on with it. It also doesn’t mean you make decisions on a consensus basis either (shiver). Although common knowledge would have us believe that these are the only two ways of making decisions, there is apparently a third: “the advice process”. Any person in the organizations studied can make ANY decision, INCLUDING spending company money under two conditions: they must have sought advice e.g. from two people with expertise and from two people who will be impacted by the decision. 

Machine operators can decide to buy a new machine that costs 300.000 EUR or even a million EUR. Before doing so, they would probably talk to someone from finance, an engineer, and their colleagues who have to operate the machine. They don’t HAVE to integrate the advice into their decision but they need to be able to justify their decision and be transparent about it. The advantages are - gaining collective intelligence and accountability. And, apparently, it works. 

This applies to everything, including salaries. Most of the companies in question allow their employees to define their own salaries, with a process of course. 

Wholeness

If you are going to have your employees make all of the decisions, you are going to want them to be 100% on the game. Fair enough. But when Laloux says 100% he is not thinking about 100% strong, efficient, fighting for the team, pushing for results - as we may be used to understanding the term. 100% in this sense is the whole “being” - as in our masculine side, our feminine side, our emotional, rational, and spiritual sides and all sorts of other facets which make us humans and not machines. 

Laloux suggests that organizations push us to wear a mask; to behave and think according to what is “acceptable” in that particular organization. We are not able to be “ourselves” at work. In fact, to be precise, we are only 1/16th of ourselves at work. Apparently. (He did used to work for McKinsey so we must forgive him some things.)

It is currently only acceptable to bring your ego into work, masculine qualities are valued above others - showing doubts or vulnerabilities is often not acceptable and being emotional or spiritual is even strongly discouraged. We end up only showing a narrow, ego, rational side of ourselves i.e. the 1/16th. Which means, according to this theory and why the hell not, we also only bring 1/16th of our energy, passion and creativity into work. 

Allowing space for people to bring all of these other elements into work means that they are also ultimately more energised, passionate and creative in their work. Everyone’s a winner. 

How is this achieved? Different organizations have different practices but they all have them, and many of them are to do with how they conduct meetings. And in particular removing the ego from meetings. Which, if you think about it is a challenge, since most meetings are only about ego. But that is the point - by focussing on the bigger picture and what you are trying to achieve rather than trying to win personal battles - and combining this with training in active listening and non-violent communication for all staff - energy, passion and creativity can be released. 

Evolutionary Purpose

Focussing on the “bigger picture” is what the third point is actually all about. Even though pretty much every organization has a mission statement that is definitely not “make ourselves as much money as possible” - because that would just be awkward - that IS actually the ultimate purpose of most companies. (He said it, not me!)

So how does this differ for “reinvented organizations”. Well, the purpose of this new type of organization goes way above the individual leader, even beyond the success of the company. These organizations have in common a very strong and clear sense of wanting to achieve something on a societal scale. Example: a hugely successful nursing startup which took 80% market share of Holland’s public nursing contracts within a few years (yes, without bosses). Clearly their organizational structure and culture was their secret sauce. So of course they kept it under lock and key so that their competitors wouldn’t be able to copy. Right? Wrong. The founder only went and wrote a book about how he did it and sent it to all of his competitors. Not only that - he now consults one of his major competitors FOR FREE. Why? Because his purpose is not growing his organization per se but rather ensuring patients care. And if he can help others to achieve that better too, then he is fulfilling his purpose. 

And so (and this was my favourite part of the whole thing) neither he, nor his employees, have a strategy. In fact NONE OF THE ORGANIZATIONS Laloux studied have a strategy. Many of them don’t plan their budget allocations or have targets to meet. What they do have is a very clear idea of what they want to achieve, but they do not dictate how they are going to get there. 

" When we try to predict the future we stop actually listening to reality."

You should listen to your organization and let it lead you rather than trying to do it the other way around. As long as you know where you want to end up, trying to plan the way is simply trying to play God.

If your company is already a thousand steps ahead and putting all of this into practice, I would love to hear from you! You will find me at naomi@thechanger.org