Horizontal Leadership and the Willingness to Work 
through Consensus

In this post we deep dive into self-management governing models, practices and systems unveiled at the MIXMashup. Learn how “collaboration is eating bureaucracy” and value-based organizations are outperforming their markets trough abolishing traditional budgeting, no more fixed goal planning and no creative resources wasted to command and control employees. The time has come to shift from 100 years-old BA inventions and to start adopting 21st century management models driven by social technologies.

In transparent enterprises like Atlassian, Zappos, Statoil, Vagas and Klick Health, that are open about wins, fails, decisions, and questions, the governing guidelines are defined by values and consensus. John Bunch outlined how it all started at Zappos: A CEO “declaring” Holacracy might seem ironic, but is analogous to king introducing democracy by putting a “governing constitution“ in place. At Vagas the underlying philosophy is best summarized as:

 “We are a community of people engaged in a common project: to accomplish the mission of the company in an environment that provides both professional achievement and enjoyment”.

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Strategic planning without predefined goals

At Vagas not even the sales team – that has performed exceptionally well – has ever had predefined monetary goals, The teams, with an entrepreneurial approach, measure and analyze the evolutions of key indicators, that reflect the achievement of their clearly defined purposes to create and implement strategies to constantly improve them. The focus is on the process and results are harvested as a consequence.

“Each team meets fortnightly to analyze the evolution of key indicators of the achievement of its purposes and conceive forms to improve them”
 – A short definition of the VAGAS’ management model

Most strategic decisions are made in these meetings. The strategic drivers implementations are revisited every two weeks, and the complete plan every two months.

An organizational structure to eliminate politics

Vargas is structured in self-managed teams responsible for functional areas, e.g., Sales, HR, R&D and multidisciplinary committees, e.g., Information Security, Culture. There are also temporary commissions created to manage specific objectives. The decision process throughout the company, independently of taking place in formal meetings or elsewhere, is based on consensus building. It is not a democracy in the sense that decisions are never made by a majority of votes: consensus, i.e., the agreement of all participants must always be achieved.
Or as Alanna Krause outlined: Majority isn’t good enough, if 40% of your people disagree with decision in means of true collaborative decision-making. To reach a consensus in defining corporate strategies employees are asked to contribute to decisions with a discussion starting at the root causes of a problem. The goal is to gain inputs from a wider range of people, helping the organization make smarter decisions.
Frederic Laloux outlines that instead of competing to be right – you collaborate to succeed in a no power hierarchy. Power isn’t a zero-sum game, when everyone is powerful great things can happen. With lots of natural hierarchy, everyone is a leader and a follower at the same time. Leaders become coaches, mentors, followers and learners.

A collaborative decision making process

In the day to day operations tactical decisions need to be taken. Laloux outlines the decision making process:

“One Decision Owner + Expert Advice + Impacted Stakeholder = Decision”
– Frederic Laloux

No decision is made on guessing or by the highest paid person in the room, but trough an advice process, where people with knowledge and that are affected by the decision are integrated in the process. As the decision making becomes a process of advice gathering and debating. With ongoing consensus debates there are no goals, but continuous improvements steps and an evolution of the team’s purpose. Collaborative decision can be made by online-voting’s or the use of collaborative decision making tools, such as Loomio.

Planning and budgeting

Bjarte Bognes outlined, that the traditional budget is a 100 year old management technology. We need more effective intelligent ways of managing costs as budgets force companies to make decisions too early and too high up in the organization. At Statoil the main financial targets are set against a peer group of fifteen other oil and gas companies. They aim to be in the first quartile on Return on Capital Employed, above average on Shareholder Return, and in first quartile on Unit Production Cost. These are the kind of financial targets their Board approves. They do not approve a budget. The two first metrics are key in their common bonus scheme. Everybody is in the same boat; Statoil against the competition. What they want to deliver on is their targets, and forecasts are there to help them. 
At statoil they try to make decisions as far out in the organization as possible. In many other businesses decision authorities can be delegated even further out. The question they want everybody to ask when making cost decisions is not “Do I have a budget for this?” but:

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More on how Statoil moved beyond budgeting can be found here and here. A tool for collaborative funding can be found here:

Job design and assignments

In High-Performing Organization there are no more strict job descriptions. A definition of high-performing organization: Organizations that do, what other organizations consider impossible. At Vagas the believe is, that:

“Individuals are empowered to do whatever they want BUT everybody has everything to do with that”

Allowing employees to choose which projects they work fosters a wider culture of collaboration and is driving better results. More choice and flexibility results in improved job satisfaction and a more productive team.

Performance review

Bjarte Bognes breaks up with a tradition: it’s not about managing performance, but creating the conditions for performance to take place. Leerom Segal presented the survey data: 98 % of people who do performance reviews think they suck. Often, by the time employees receive their feedback it is outdated. With Klick Health for example a 360 degree evaluation is talking place. You evaluate yourself, one of your team and anyone else in the organization. Giving employees the tool for self-evaluation is an efficient way to regularly solicit and gain continuous feedback.

Compensation

Based on contributions, ratings and collaboration a compensation committee with the help of a logarithm figures out the salary. At Vargas salaries are not disclosed, it was the consensus. At Haufe salary transparency was needed. Heiko Fischer said that his clients are moving toward self-organizing to run completely democratic and ‘liquid’ with virtually no shared service functions like HR. For example it should be possible for everyone in the organization to raise his own salary:

“You want more money: just raise it and find out what happens”.

A MIT study revealed, that financial incentives does not make people innovate: What matters more is recognition based on achievements or contributions to improve the company performance. Look what happens if two monkey get “paid” unequally:

Within the Umantis human resource software a simple recognition model is built in: Everyone gets 10 stars per week they can give to anyone else. That’s how you create an influence map of your organization.

Talent Acquistion

In a value-based enterprise the talent acquisition is key. With Vargas the shortlisted candidates are selected by the decision in a hiring forum trough consensus. With Atlassian the culture in hiring matters most, if an employee has the experience but not the right cultural mindset it will be overruled by one with the right mindset even with missing experience.

In organizations, where the energy is unleashed you don’t need employee engagement programs. Where power shifts horizontally no more middle management for alignment and time for leadership development is needed.

How the “Self-service” or “Consumerization” of Management combined with data mining possibilities of workforce interactions will Eat traditional Organizational Development’, will be outlined in the next post: “Collaboration and Innovation in the Decoded Company”.

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