This article is the translation of an Harvard Business Review France chronicle by Luc Bretones : https://www.hbrfrance.fr/chroniques-experts/2019/08/27317-pourquoi-le-travail-passera-dans-le-futur-par-de-nouvelles-formes-de-gouvernance/

The world of work is changing. Some models, such as holacracy and sociocracy, have already set important milestones.

What do Auguste Comte, the yellow vests and Michelin have in common? A keen interest on new forms of governance that is more shared, more flexible and more inclusive. In fact, these new forms of governance are much more than a fad or an expert debate. It seems that they are comparable to a tidal wave from which it will be very difficult to escape. Flat structure, direct democracy, sociocracy or holacracy are the many faces of the same revolution. Today, there seems to be no doubt that these transformations are well founded. As companies have grown in size and complexity, some of them becoming colossal, with tens of thousands of employees present in all continents and who are performing countless activities, it has become clear that the orthodox model, with its pyramidal and vertical governance, separation of support and executive functions, is no longer sufficiently responsive, flexible and realistic.

Is it possible to provide these companies, but more broadly to any group of people regardless of their size, from family to country, the promises of a renewed adaptation to their environment and the abundant and unpredictable world around them? How can we ensure that employees, or any stakeholders, are involved and align themselves with the project led by the group (even though according to a Gallup poll 85% of employees worldwide are not engaged or actively disengaged at work). Reflections on the subject are not new and some go back as far as the beginning of the 20th century. The philosopher Auguste Comte was the first person to use the term “sociocracy” in 1851 in his works. With the exception of a few pioneers, it was then necessary to wait until Taylorism and the traditional and hierarchical organisation of management to reach the end of its useful life in order to create a need to imagine and apply new forms of organisation which would be imposed on everyone.

To fully grasp the origins of these new forms of governance, we must go back to the middle of the 20th century and the emergence of “systemic” thinking. The mode of thinking was well embraced by biologists, psychiatrists and sociologists alike, it is perhaps the original revolution. What was the idea behind it? To get rid of the Cartesian vision that was hegemonic, which consists in understanding an organisation by studying separately all the elements that make up the organisation. It is insufficient for many intellectuals who see the group as a distinct entity, subject to its own rules and logic. An entity that can in no way be reduced to a mere addition of elements.

Trust in freedom

It was really in the 1970s that this thought first found its expression in modern management, particularly with the work of Gerard Endenburg, a Dutch engineer. After taking over the family electrical engineering business, he quickly worked on the developing a new form of governance that would put an end to the main shortcomings he observed in his teams: competition and ego warfare. Drawing inspiration from the work of Kees Boeke, a reformist educator, from cybernetics and from Ilya Prigogine (Nobel Prize winner in Chemistry in 1977) on the self-organization mechanisms of living beings, he became the founding father of modern sociocracy. His stroke of genius? Trust in freedom, autonomy and co-responsibility of the actors. Betting on collective intelligence, that according to him characterizes the living. In concrete terms, his methodology is based on 4 golden rules:

– Consent decision-making is certainly the driving force of this new way of thinking about governance. No decision can be taken as long as objections or reluctance exist. Through discussions and exchanges, the group should work together to build consensus. This principle is fundamental but not absolute. Consent can also allow the group to opt for another mode of governance on an ad hoc basis, if there is no objection to it.

– The circle is thought of as the decision-making structure. The company’s activities are divided into work units, each of which corresponds to a role. Each employee is assigned several of these roles, depending on their skills, expertise and workload. Finally, roles with similar tasks are grouped into circles — which sometimes correspond to traditional teams: marketing, accounting, etc. Each circle functions as an autonomous entity, both as a whole and as part of a whole (this is the etymological meaning of holos, while kratos means power). The coordination of these entities therefore requires existence of operating rules that are sufficiently effective to prevent friction. This is the whole principle of holacracy: to establish a precise framework within which all employees’ creativity can be freely expressed.
This aggregation is subject to one essential condition: the certainty that all these teams work together to achieve a common goal. In holacracy, defining, adopting and integrating a company’s long-term strategic vision is a responsibility for all members of the company. It is no longer the privilege of a few managers.

– It is the double link method that ensures equitable interconnection between the circles and the different levels of the decision-making structure. Each circle remains connected to the upper circle by two people, one elected by the lower circle to represent it, the other designated by the upper circle. These two people are an integral part of both circles and as such participate in each other’s decision-making process.

– Last but not least, election without a candidate. When it comes to choosing someone for a position, rather than voting for a candidate, why not discuss it openly, in the absence of any candidate, and appoint collectively and by consensus the person who seems best placed?

More than a magic formula, it is clear that sociocracy is above all a method, and as such, it can be deployed in all types of structures. It has also shaken up modern management by aiming to reconcile decision and execution functions, in order to shorten the decision-making chain as much as possible and to put the employee back at the heart of its activity.

Deconstruction of leadership

Holacracy, which appeared in the 2000s, is, in a way, the little sister of sociocracy and is based on similar principles (decision-making by consent, circle, double link and election without a candidate). We owe the notion to Brian Robertson, an entrepreneur who thought about the best way to organise his company (Ternary Software) when he launched it in 2001. Perhaps the main contribution lies in the idea of dividing the company’s activities into different circles — themselves made up of roles — that are accountable to each other and contribute with maximum autonomy to the purpose of the organisation. From then on, the employee can perform various functions, depending on his/her skills, his/her desires or simply his/her free time. Here we find the influence of flexwork and agile that considerably permeate holocratic thinking. Here again, the result is a deconstruction of leadership in order to distribute it to all stakeholders, in short, to place everyone on an equal footing. Brian Robertson went so far as to publish a constitution of holacracy in 2011, earning him some criticism from the pure sociocrats.

But then, are holacracy and sociocracy really the expected revolution? In any case, companies of all sizes and sectors are beginning to let themselves be seduced and they are experimenting and implementing these modes of governance in certain divisions. Examples of such companies are Engie, Renault, BOL.com (the Dutch Amazon) or the Russian bank Tochka. But the most emblematic example is certainly Zappos, the juggernaut of online shoe sales. Tony Hsieh an American internet entrepreneur and venture capitalist decided to bet on holacracy: the hierarchy was shelved in 2015, leaving room for hundreds of decision-making circles, but also the departure of 30% of employees, including many executives, who did not really align themselves with these new methods. And for good? Unfortunately, no. The company finally adapted the method last year while presumptly keeping the founding principles.

Since the terms have become fashionable and groups and companies have tried their luck, the dream of revolution has also given rise to many critics. Some criticize holacracy for only replacing a bureaucracy with a system so rigid that it becomes a new form of bureaucracy after a while. The insecurity into which these new methods can plunge employees is also criticised.

Reconciling growth and the common good

Time seems to be ripe for the pragmatic adaptation of the methodologies to the context and maturity of organisations; an increase in the importance of the strong principles of distribution of authority and responsibility, in line with the purpose, without the quasi-religious orthodoxy of the methodology and its constitution. Be that as it may, sociocracy like holacracy, whatever their near future, have certainly laid important milestones towards what will define the forward looking company. The forms of governance and organization, in profound changes, are only just beginning to change.

The future of work will therefore probably seek to reconcile growth and the common good, the commitment of employees and the expression of a powerful collective intelligence. This is done in flatter hierarchies, with widely distributed authority and reinvented decision-making processes; hierarchies of circles (e.g. marketing, product development) that are composed of roles (e.g. product manager, mobile developer), driven by potentially diverse talents. Organizations with unprecedented efficiency are thus led to positively disrupt economic models that today often lack social, societal or environmental meaning. According to a study by ISEOR (Institut de socio-économie des entreprises et des organisations founded by Henri Savall, Emeritus Professor at Lyon III Jean Moulin University), employee disengagement costs between 20,000 and 70,000 euros per year per employee, depending on the type and size of organisation.

Yan Laurent, the general manager of the Novotel Paris Cœur d’Orly, has chosen disruptive management to manage the hotel’s 163 rooms, after 20 years of frustration and conflict in various establishments. The holarchy (hierarchy of circles) set up made it possible to redefine roles and move from 7 to 12 hierarchical layers in a classic 3-star hotel at Novotel Cœur d’Orly. The collective description of roles has made it possible to redefine the functionality of the positions: suppression, for example, of the positions of head chef or head receptionist and the appearance of expert roles in hotel organization and optimization, taste buds’ agitator (in the kitchen), sleep preparer (formerly room attendant) or divergent… The divergent being a person who does not belong to any specific hotel profession. And the performances are at the rendezvous: “In 2018, we made almost a million euros more than the planned budget, on a hotel with 163 rooms, which is exceptional,” says Yan Laurent, the director of the ‘hotel.

« I used to apply instructions, now I’m looking for solutions »

Even if his organization is not based precisely on a theory such as holacracy or sociocracy, Pascal Demurger, CEO of Maif, clearly expresses in his latest book, “L’entreprise du XXIème siècle sera politique ou ne sera plus”, that “management by trust does not only create a dynamic in the company, it also increases collective intelligence. To trust is to agree to let go, to delegate, to apply a principle of subsidiarity so that decisions are taken at the most decentralized level possible. To consider that hierarchy has a monopoly on relevant decisions, is a major source of inefficiency.” A manager at Maif confirms this fact and is pleased to escape the traditional scripts found among insurance competitors: “Before I applied instructions, now I am looking for solutions”. As a result, Maif has an attrition rate nearly seven times lower than their competitors.

The collective power of the next generation companies is intended to express itself well beyond its employees, by involving in its projects a whole ecosystem of specific contributors, freelancers, partners, and brand ambassadors. It is anticipated that the question of talent gap will arise, in a world of work that promises to be highly adapted to the autonomous and entrepreneurial profiles, something that is perhaps less obvious to others.

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