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Posts tagged ‘Organizational Structure’

Hierarchies aren’t evil… but people can be!

Hierarchies aren't evil... People are!

Hierarchies aren't evil... People are!

Do you ever say to yourself “I wish there was no hierarchy in our company“?

Wouldn’t it be a perfect world if there were no hierarchy in organizations? Everyone working in harmony, collaborating to achieve their goals with no annoying boss telling anyone what to do. In this hierarchy-free world there would be no supreme ruler over the teams, only happy people delivering their work with birds chirping in the background…

OK, I realize I’m pushing it a little but people who systematically oppose to specific organizational structures often have an idealistic perspective of the world. Fortunately, the world isn’t black or white, there are many nuances.

I have had discussions about hierarchy-free organizations with many people over the last few months. Repeatedly, people bring up the same reasons why they don’t like hierarchies. From their perspective, hierarchies are bad because:

  • they don’t let employees perform their work as they wish;
  • they allow authority over people;
  • they break communication channels;
  • they create a distinction between the boss and the employees;
  • they don’t treat people equitably;
  • they offer more benefits to people at the top;
  • etc.

What if hierarchies weren’t the problem? What if the cause of these issues was somewhere else? What if the organizational structure wasn’t the real problem? Not that I am a huge fan of hierarchies, but I do not believe the organizational structure is the real problem – people are!

Let me explain my perspective.

I feel that blaming hierarchies as the reason people hate their job and feel under-appreciated is short-sighted. Organizational structures have much less to do with how people feel than the management style and attitude of the leaders.

Let me repeat that statement. I believe that the attitude and behavior of the leader has greater impact on the team members’ performance and happiness in the workplace than the organizational structure under which they operate.

You are not convinced? You might want to try this exercise.

Can you think back of a time when you felt empowered to do your job and were happy to be at work? Can you recall a time when you would invest long hours working on a project and your energy level was going though the roof? If you answered yes to these questions, ask yourself this other question “was it because of the hierarchy-free structure or the leader’s attitude”?

If you have had the opportunity to work for a great leader – someone who gives you freedom to do your work, holds you accountable for the results, is always supportive and available for mentoring, and gives you credit for your work – you will immediately realize that the leader’s behavior and attitude were the underlying causes of your satisfaction. A bad leader in a hierarchy-free organization will make everyone’s life miserable while a good manager – even in a position of authority – will get amazing commitment from his people.

It might be that the people against hierarchies are ones that never had the opportunity to work for a great leader and so, assume that the organizational structure is the issue. I wish them to find a great leader to work with because in the end, the leader’s attitude has much more to do with a happy and productive work environment than the actual structure of the organization.

FAQ: Communities in the context of business

Since my first post on this topic, a few people asked me why I thought communities were a new way to organize and what complexity there was in applying communities to a business setting (i.e. for-profit organizations). I have defined what is a community in a business context and some of the rules they follow. Below are some of the recurring questions and their associated answer.

In a business context, what is a community?

In a business context, communities are similar to functional departments with some fundamental distinctions. In traditional setting, members of a functional department or of a project team work together to achieve a goal. With some exceptions, team members share nothing but their common goal and a common boss. By comparison, in addition to sharing a common goal members within a community also share common values and culture and they operate within agreed upon self-defined norms. I provided a few examples here.

Why are communities in the context of business different from other communities?

Communities that come together to carry out a goal are common but communities that aim to generate revenue to autonomously support themselves are no frequent. In traditional for-profit organizations, shareholders through board members select the management team for the organization. The management team (President, CEO, COO, etc.) become accountable to the board for their performance and as such almost always use a top-down (command-and-control) approach.

By contrast, communities rely on a bottom-up approach to decide their goals and those are seldom oriented toward profit.

Aren’t communities completely disorganized and as such, couldn’t work in a business context?

Communities could be disorganized but they wouldn’t be effective. Communities typically set up rules that will allow them to work efficiently. What may seem like disorganized entities within traditional organizations may actually bring better results.

In certain situation, a larger community may ask sub-communities to run within certain guideline and as such, would cut disorganization.

Why use communities as organizational structure?

Because communities are living cells, they are components of a living organism and are able to adapt to their environment.

A community can be born, live and die. A community arises when 2 people come together around a common goal, and decide to form a community.

A community dies when less than 2 people deploy energy to sustain it.

What rules govern a community?

I already provided an answer in this post but typically, communities work by the rules defined by their members. Some rules are implicit while others are explicit and clearly adapted to the needs of the community. The community may decide to create a space for expression and revision of its rules.

In his blog (English translation by google) Tremeur talked about the notion of rules and how they are relevant to the functioning of communities.

How can someone join a community?

Individuals can join a community by expressing their interest in the community, ensuring they are motivated by the goals the community has set, and by adhering to the rules of that community. Further information on this topic can be found in this post.

Can a community expel a member?

According to the rules under which it operates, the community may choose to expel one of its members. It is important to establish that the decision to evacuate a member is serious and can not be done without the approval of the majority (or unanimity) of group members.

An individual is part of a community if he is active in this community. Being active in the community means to actively and positively contribute to achieving the goals set by the community by working with other members of this community. If an individual is not active in a community, it is not part of that community (even if his name appears in the list of members).

How many communities can an individual belong to?

People can belong to as many communities as they wish. Individuals alone are responsible for setting their limit.

What is the largest number of members in a community?

There is no set limit.

If the number of members is jeopardizing the operational effectiveness of the community (9 members in a team would be a reasonable number), then it is likely that the community will divide itself into 2 communities, each pursuing different sub-objectives.

What is the role of leader of the community?

A leader is appointed only if the community decides to appoint one, and its role is defined by the community. Typically,

  • the leader ensures the respect of the common rules that the community has given itself;
  • the leader ensures that the community is visible and transparent;
  • the leader is the one who will link with other communities.

Who chooses the leader of a community?

Unlike traditional businesses where leaders (managers) are selected or appointed by their supervisor, the leader of a community is chosen democratically by the members of the community. Similar to the concept of holacracy, the leader emerges from the group because of its expertise and its commitment to advancing the community towards achieving the goals it has set.

Are all communities are connected?

Maybe, maybe not.

The link between 2 communities may be at least 2 kinds:

  • members belonging to more than 1 community;
  • a need expressed by a community for the services provided by another.

A community that needs support or resources from another community therefore becomes automatically linked to another community.

Can a community exist independently?

If it apart from other communities, the answer is “yes”: For example, communities of practice are primarily in service to their members, and this is enough.

Is that all communities have financial goals?

No. Basically, communities set their own goals.

As a commercial enterprise, some communities have financial goals to make sure growth and sustainability of the organization.

By contrast, other communities will be directly or indirectly serving communities with financial goals but will not themselves financial targets.

Other communities are communities of interest and have no link with strict financial targets.

Do you wonder why your boss doesn’t show up at your meeting?

This is not an un-usual situation. You call a meeting that you deem important. You invite the right people to have a constructive conversation in the hopes of coming to a decision that will be accepted by most. You planned everything ahead of time in order to maximize your participants’ “Return On Time Invested” (ROTI).

Before the meeting and without further information, your boss tells you that he won’t be attending your meeting. You try to get over the inital disappointment and frustration in order to answer the nagging question that pops in your mind “Why doesn’t my boss show up at my meeting?“.

Assuming for a minute that this is not due to an un-expected situation and that you were told before the start of the meeting – being told during the meeting would add insult to injury by showing a lack of respect.

I can only think of 2 reasons to explain that behavior:

  • The decision for which you are meeting has already been taken or will be taken behind closed-door.
  • The decision is not important for your boss.

Either way, this demonstrates that your boss doesn’t care about the decision stemming from the meeting. Although that is frustrating and wastes people time and energy, it is not dramatic in itself. This becomes a problem because of the lack of communication around your boss’ decision not to attend the meeting.

You may not be pleased if your boss tells you that the decision has already been taken but at least, you wouldn’t feel like an idiot when you realize this fact after you put your time and energy in the meeting.

Now, let’s give this situation a different spin and imagine receiving the following information from your boss before your meeting:

  • My absence to your meeting does not indicate that I do not believe in the value of your meeting;
  • I trust the group and their collective intelligence to make an informed decision;
  • I am confident that the participants will challenge each other and will have good discussions;
  • I want to prevent the debate from revolving around my opinion, which could bias the conversation;
  • I prefer to support individuals with my expertise rather than take decisions for them.

Would you still wonder what your boss’ intentions were? Wouldn’t you feel good? Trusted? Motivated??

If you manage people, don’t let them wonder about your intention. Tell them the reason behind your actions.

How can someone Join a Community? Can people leave a Community?

Joining a Community is Simple

Everyone can ask to join a community if it is open to integrate new members. Once again, the community decides how many members it will allow and which skill set, profile and experience is required to qualify. Assuming the community is accepting new members, anybody who believes they meet the requirements may ask to join the community.

Leaving a Community is Simple

Based on the norms established by the community, people may leave with (or without) advanced notice. Communities are usually fluid and allow for members to join and leave in order to support the emergence of new ideas and new energy to reach the set objectives.

In order not to disrupt significantly the activities of the community, members are usually required to provide advanced notice to the other community members.

The Community May Ask People to Leave

Norms vary for each communities but in our situation there is a fundamental rule that states the “no single individual can have authority over another individual”. As such, community members cannot be expelled or fired based on the decision of a single individual, including the community leader. Community members who fail to comply to the norms and values of their group may be asked to leave if the majority of community members support the decision.

As in the case of a voluntary departure, the community is required to provide advanced notice to the member they wish to expel.

For more content on the topic of communities, you may follow the community tag.

What Rules Do Communities Follow?

The answer to that question is simple: NONE.

It is not that communities are disorganized and chaotic but Our Communities do not follow rules as they are currently understood and documented. The Merriam-Webster dictionnary defines rules as “a prescribed guide for conduct or action” or “the laws or regulations prescribed by the founder of a religious order for observance by its members“. By that definition, rules are very strict and typically defined by the leading members of the group.

Our communities use norms to organize themselves and ensure common understanding. As per wikipedia, norms “are the rules that a group uses for appropriate and inappropriate values, beliefs, attitudes and behaviors“.

Each community defines its set of norms under which they wish to operation. To ensure the community is linked to other communities, the group must ensure their norms are inline with the norms of the greater community to which they belong.

Some norms may be identical for all the communities (i.e. freedom of expression) while some communities may have specifics expectations (i.e. specific time commitment).

Typically, more norms are required at the early stages of a community to create a common culture and set of values and to prevent abuse. As the community matures, less norms are required and the community self-regulates. It is critical for the norms to be clearly communicated at the entry point in order to avoid misunderstanding and confusion later in time.

In the end, the level of freedom and the type of structure used by each community is never as important as the results they achieve.

Non Traditional Organizations – The Community Structure

A few weeks ago, I presented the organizational structure used for our Monthly Strategic Meetings. Since then, I had the opportunity to read: The Answer to How Is Yes: Acting on What MattersThe Starfish and the Spider: The Unstoppable Power of Leaderless Organizations, and The Right Use of Power and attended an interesting session at Agile 2009.

As I was walking the kids to school one morning, everything fell into place. Communities could be the new way of structuring organizations.

Most organizations are still structured around hierarchies – top-down command and control structures. Some have move towards a matrix type organization and very few organizations adopted other types of structure. As part of an ongoing experiment, we (at Pyxis) are trying to move away from traditional organizational structures while still remaining a profitable organization. Evacuating the financial aspect might allow for even more creative organizational type but generating profit is one of the constraint we are dealing with.

In an attempt to provide information about the Community Structure, I will add content in various blog posts over the next few weeks with the objective of documenting what it means to operate an organization as if it was a community of communities.

I invite you to share your thoughts and experience on this topic.

Can you grow a business profitably while improving the lives of people?

In today’s post, I am publishing a translated version of the blog post I co-wrote with François Beauregard, President and Founder of Pyxis Technologies. The article is reproduced here with permission.


Quite by chance I came across an article (The Smart Growth Manifesto) that triggered some interesting thoughts in my mind. I immediately sent the article to François asking him about Pyxis’ position compared to what is described in the article as the 21st century capitalism.

Below is the content of our exchange and personal perspectives on this article.

Martin: In recent years, I frequently asked myself “Are we the last generation for whom the standard of living is better than the generation that preceded it? Will our children and our children’s children have an income level lower than ours? Will they be happier? “. The type of organizations described in this article is rare but I believe that Pyxis would qualify as one of these companies. What do you think?

François: In your opinion, how does Pyxis rank compared to other companies?

Martin: I think we are definitely in the “trail blazers” category. Very few organizations have a business model that fits the way of thinking and operating described in the article. I believe we could establish an exciting objective to continue our rapid growth while remaining true to our business model. In fact, the model described in the article is close to the concept of  “NPII” (Number of Positively Impacted Individuals) and the concept of welfare which we often referred to at Pyxis – maybe without the negative connotation of the long robes, the sandals and the flowers in our hair! I like the phrase People Outcome used in the article and the definition of smart growth – “smart growth is sustainable, equitable, and resilient“.

Does this speak to you?

François: Of course it speaks to me, it’s screaming in my head! Whether or not we agree with everything stated in this article, it certainly raises several interesting lines of thought and it seems very healthy to ponder about them and identify elements that could lead us to make improvements to our organization. Let’s start with the first pillar Outcomes, not income that translates for me as well-being more than remuneration. I have been repeating for a while now that the fundamental objective of Pyxis is not to generate profit for its shareholders but to achieve its mission, its purpose; to the point that many believe that money has no importance at Pyxis. Money is absolutely essential for a company to function, it is the air and without air the system can not breathe and it dies. In this analogy, participants in the enterprise would be seen as the muscles that allow the company to act, to make things happen.

Having a purpose that is shared by all ensures that the system is geared towards achieving a fundamental objective and avoids wasting energy to move in inconsistent directions. For Pyxis, the reason for being is: Pyxis helps software development organizations to become places where results, quality of life and pleasure coexist in a sustainable way by being first an example of what it proposes to its customers. Having defined a clear future makes it possible to set concrete targets.

To go back to well-being more than remuneration, it is my firm belief that if the employees are also the shareholders of the organisation that points to (but not absolutely) a more responsible (sustainable) and equitable model of redistribution of wealth. This also leads to a better balance between the desire to produce economic benefits in the short term for shareholders, and long-term value creation and welfare for the employees (in fact the shareholders). In our case, we set up a worker-shareholders cooperative (WSC) who now holds 30% of the companies’ share (Class A) and there are efforts underway to significantly increase the percentage of shares held by the WSC of Pyxis.

I’d like to hear you on Connections, not transactions.

Martin: It’s interesting that you translated Outcomes, not income as well-being more than remuneration. At the last Open Space held at Pyxis in April, I frequently used Wellness, rather than ownership. I think it extends the notion of personal happiness to a wider meaning than the simple financial perspective.

On the other hand, I agree with you that some people within our organization incorrectly interpret the message when you state that the main objective of the organization is not to generate profit. I heard some people mention that happiness and pleasure were the fundamental objectives and that money is not a priority. I know you try to correct perceptions whenever you have the opportunity.

On a completely different perspective, the notion of fairness is a concept that is also confusing for some and causes major discrepancies. In my opinion, fairness is a concept that applies to both the opportunities and the results. First, fairness in opportunities means that the largest number – ideally all – have access to participate in the economic process and to benefit from it. I am not talking about charity or social programs, but a true opportunity to be part of the economic process. I like, among other things, the concept of micro-lending such as the Grameen Bank or organizations like Kiva, which allows individuals to participate in the local economy.

On the other hand, fairness in earnings means that individuals are rewarded in proportion to their contributions. Some mistakenly believe that equity in the results means that everyone must have an equal portion of the benefits. Fairness and equality are not the same thing. I think fairness means that the benefits are available to all of those who participated in the achievement of the objectives and the distribution is in proportion to the contribution of the individuals. Recent examples of senior American executives who pocketed large bonuses when their company came close to bankruptcy is quite absurd.

In line with the concept of welfare, Connections, not transactions take us back to a more human perspective of trade and economics. Pre-industrialization commercial transactions were much more collaborative. The local farmer didn’t aim to maximize its revenues at the expense of its customers. Not only did the farmer not have that goal, but the maximization of income was not in his interest since he was himself a client of his customers. If the farmer inflated the price of his eggs to increase his personal wealth, the baker would do the same. The system would balanced itself as short-term profit of the farmer would be quickly eliminated by higher prices for goods purchased from the baker.

What do you think?

François: When I read the previous paragraphs, I can not help but think of Lean and references to the principle of optimizing the whole process and avoid local optimizations. It’s been quite some time that Toyota has understood that the objective is to optimize the supply chain as a whole to create maximum value for all stakeholders. This is quite contrasting with what I saw in North America since the beginning of my career where I feel that the mental model applied to maximize the value received is to keep pressure on the suppliers without considering the value created for them. In other words, in this mental model, if a supplier is successful, it is absolutely necessary to renegotiate their prices downwards to ensure the organization obtains the maximum value for its money. This is the model of the “pressure on the throat” that inevitably leads to sub-optimizations and ultimately to conflicts.

Connections, not transactions in my opinion represents a huge challenge because it forces us to significantly revise the way we do business. When I talk about my perspective of business to customers and suppliers and I sometime have the impression that they take me for an extra-terrestrial.

Let’s now go to People, not product.

Martin: For People, not product, I will tackle this one from a different angle than the one used by Umair Haque. For me, the perspective is less about product and more about humanization of work. For too long, organizational structures assumed that people at the bottom of the pyramid were less competent and less capable to determine for themselves how best to perform their tasks. The methods, processes and outcomes were defined at the top of the hierarchy, while execution was delegated to non-managerial staff.

As the economy turns toward services and knowledge, the role of the managers is losing its importance while advanced technical expertise increases in value. The challenge is therefore to put in place mechanisms – not structures – that maximize cooperation and knowledge sharing to achieve the organizational objectives. Decentralized and non-hierarchical structures set up within Pyxis are a good example, aren’t they?

François: You knew that is a core belief of mine! Let’s begin with People, not product. I was strongly influenced by the work of Peter Block, in particular his book Stewardship. At Pyxis, I tried to create a strong culture focused on individuals and their individual responsibility (not to be confused with individualism). I’m looking for a way to explain it all and I see no other way than to express my vision of the enterprise systems. Here I go.

A company is a human system whose complexity is growing exponentially, a system comprising 100 individuals is much more than 10 times more complex than a system with 10 individuals. For the purpose of this post, let’s imagine for a moment a company called Chaotic Inc. which includes 100 employees. In this organization, there is no structure, no rules, no identified purpose. It is interesting to observe Chaotic Inc. but it is obvious that the system is not optimal for achieving a fundamental objective.

We have discussed above, giving the company a purpose that is understood and shared by all stakeholders to give direction to the system thus avoiding to some extent that stakeholders spend energies tackling fundamentally incompatible goals. Clearly establishing the values for the participants to understand the appropriate behaviors and encouraged those behavior when operating inside the company (the system). In other words, some defining rules for what is in play and what is out of play. So one can imagine that Chaotic Inc. after a collaborative exercise to establish its purpose, its values and vision over several years is significantly more effective then it would have been even if its operations were still relatively chaotic – sort of speak.

To become a successful business and achieve its purpose and its vision, Chaotic Inc. should probably put in place structures. It then becomes quite difficult to adapt from a systemic point of view, since putting structures in place sediments the system because if the structure is inadequate with an evolving system, removing the inappropriate structure in order to replace them for better suites structures requires a substantial quantity of energy. It is therefore essential to establish mechanisms that encourage flexibility and dynamism of the system (more details about this topic in an upcoming blog post). The basic structure most common in our organizations is the hierarchical structure and it is inappropriate to me in a system as complex as a modern business. So then what is the alternative? At Pyxis we adopted a principle of mapping the areas of responsibility without violating the fundamental principle that no individual can be responsible for someone else. This helps to loosen the system by clarifying who is responsible for what, and specifying processes (more specific rules about what is in play and what is out of play) without giving formal authority.

Within Pyxis, we also put structures in place to develop the maturity and competence of all employees. It may be interesting to write a few posts to elaborate on these structures. Much work remains to be done but I think we have in place the foundations of a highly-performing human system. As such, Pyxis’ 2013 vision is: By implementing what we believe, repeatedly obtain extraordinary results in the projects we are involved with.

Whew! You want to initiative Creativity, not productivity.

Martin: There are considerable efforts being invested in achieving maximum productivity, i.e. producing as much as possible at the lowest cost. In my opinion, the perspective of productivity without other consideration is absolutely incorrect. Creativity, not productivity is for me a fair and sustainable productivity, which is different than simple creativity aimed only at improving productivity. In several sectors, the unit production costs are so low that organization come to a complete waste of resources at the end of the cycle – they sell 60% of their production at full price and they discard the remaining 40% since its production cost is not high.

In the context of software development, this is equivalent to writing more lines of code at a lower unit cost. Organizations find ways to ensure that resources produce more (extensions of work hours, outsourcing, time constraints) without wondering if there are better way to achieve results. Using creativity and innovation in production methods, achieves better results and hence gives more value to the organization. I believe that evolutionary processes are not desirable. It takes innovation and revolutions rather than evolution methods.

It is time that organizations begin to think in terms of results rather than accounting costs or productivity as per the Taylorist approach – this is what Pyxis is aiming to do.

At the end of his article, the author raises an interesting question Can you build a business powered by smart growth? I know you would answer yes to this question. The question that applies to Pyxis is rather, how does it happen?

François: It is a difficult question. What comes to mind is how Peter Block discusses this issue in his work where he talks about the role of the social architect, creating space for individuals to act on what is important for them. I take this personal commitment to Pyxis and strongly wishes that others would do the same.

Martin: Finally, our exchange on the theme of 21st century capitalism has raised the following question for me: “For the shareholder-employees, what concrete evidence would show that the business model set forth by Pyxis really works?” Although preliminary, my response would be as follows:

Using varied and innovative approaches Pyxis substantially increases the level of performance of the companies it serves. As such, Pyxis generates a high profitability that it re-distributes to its shareholder-employees and to the community.

To its shareholder-employees:

  • By introducing the 80% rule where shareholder-employees receive 100% of their salary while working 80% of the time on an annual basis. Individuals use the remaining 20% to spend more time with their family and their friends, their colleagues and their community;
  • By paying annual bonus and dividends in relation to company performance;
  • By increasing the capital value of the company.

To the community:

  • By allocating financial and human resources to advance social causes.

I’ll leave you the last word.

François: I really enjoyed this collaborative mode of writing and I encourage everyone to try it out. Martin, thank you for having kept our energy level high and helped me write about a topic that is really close to my heart. Fortunately, we both discovered there are plenty of opportunities continue this conversation.

Stay tuned …

Can an organization grow without bosses and formal authority?

Most people are familiar with the traditional hierarchical organizational structure – one person at the top has a handful of direct reports, who in turn have a handful of direct reports, who in turn… You get a pyramidal structure with as many levels as required by the organization to operate as it wishes.

At the other extreme of the organizational structure spectrum, you have small dis-organized entrepreneurial environments – the company founder with every employee reporting to him / her.

As the organization grows, we are trying to implement a new organizational structure that is innovative and that moves away from the old paradigms. The challenge we are facing is that we want to implement a structure that is scalable – will work immediately and throughout the organization’s growth – and respects the fundamental values of the organization.

Sounds easy? Try to come up with an organizational structure that can work with the following constraints:

  • every employee owns shares of the company
  • nobody has authority over another individual
  • everybody can pursue their goals as long as it fits within the company’s mission
  • people choose their assignments
  • leaders are accountable to achieve results
  • the company has to be profitable
  • leaders can only build teams through negotiation and influence
  • collectively people decide where to deploy resources (people and money) and which projects to pursue
  • no single area can have more power than any others
  • there is no Human Resources department
  • the organization is approaching 100 employees in 4 cities (2 countries)

I’d like to hear your suggestions. I’ll let you know in a couple of weeks what the new structure looks like.

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