Today’s business organization is an oligarchy, and that needs to change

Foreword

I recently founded Chautauqua, an open community investigating the future of work, cooperating to find and advance new ways of working together. This post is a companion to something I published there today: A Manifesto For A Third Way of Work. This piece, here, is a condensed version of a chapter of the book I am working on, The Third Way of Work.

Hyperdemocracy, Not Oligarchy

Politically, the Western world has adopted the premise that governance should be democratic: that the legitimacy of any government — or political organization — relies on the adoption of democratic principles, and foremost among them voting equality (‘one person, one vote’) and the consent of the governed.

But the way that businesses operate is largely non-democratic. Businesses are private interests, owned by the shareholders or proprietors, and are only subject to the laws governing their behavior and their obligations to the city, region, or nation in which they operate. In this way, businesses actually resemble the monarchies that preceded the rise of the industrial era, or perhaps the earliest sorts of constitutional monarchies where the monarch played a powerful executive role, with powers limited by a constitution or conventions. Not an absolute monarchy in which the monarch is subject to no external power, but far short of the modern notions of democracy.

Over the centuries since the industrial revolution, increasingly democratic nations have created regulatory and legislative burdens on companies in the public interest, such as child labor laws, workplace safety requirements, the minimum wage, and union rights, to name only a few. These, and provisions related to the sale of stock for public companies, represent the checks on the conduct of business and the relationship of the executives of a business to the employees. In essence, we are living in modern democracies, but when passing through the door of our workplaces we step back into a constitutional monarchy much like those of the 1700s.

A monarchy is a form of oligarchy: a power structure where power rests in the hands of a few people. This is true of almost all companies. Long-established or very large firms are run by an executive elite who are beholden to the shareholders or owners of the business. Start-ups and younger companies — even those created in just the past few years — are run by their founders and owners, in a similar, but perhaps more measured way.

The social psychologist Karl Weick suggested that the way we think about organizations are an abstraction of reality, largely given life by management’s narrative. This is his theory of enactment: that an organization is a social construct, enabled by the ways in which all of the members relate to each other. And, relative to my argument, relative to the way that the structure of power is manifested through those relationships.

The narrative of business management often leads back to the mythos surrounding visionaries like Henry Ford, Steve Jobs, and Jeff Bezos, who created world-beating and hugely disruptive companies, and whose direct involvement in almost every aspect of their business is legend. However, the narrative often leaves out what happens when the visionary passes away, and lesser mortals find they can’t fill those shoes.

Nonetheless, the deeper narrative about business management today in general is not about visionaries, but about efficiencies. The established model makes as its starting point the claim that it is more efficient to run a business with an an elite making most of the decisions and the rest of the firm following their lead, and — through consensus — adopting the principles, biases, and operational directions of the elite. This is the source of legitimacy in the narrative: it’s not democratic, but at least the trains run on time.

The problem is this: in the economic era we have slipped into in the past decade, this form of organization is too slow and tight to stay ahead of market disruption and accelerated competition. Today’s oligarchic business lacks speed, agility, and resilience

I have written a great deal about the 3C model, a psychodynamic model of organizations (see The future of work in a social world: part 1 and part 2, for example). Here’s the model:

Screenshot 2013-12-16 16.37.09

The short version:

  • The oldest form of organizational psychology is Competitive. That’s the most feudal internally. Power is used coercively by the ‘king’ executive and his elite, and others do what they are told or else. The structure is top-down command-and-control: a strict hierarchy.
  • Today’s corporate model is the collaborative: the executive elite drive strategy and operations, but engage in an on-going and extensive process of consensus building as a central part of the narrative of enactment. The structure is a flattened, matrixed hierarchy with a great deal of lateral interaction of the members, and increased level of involvement and power-sharing between formal and informal leaders. And some or all of the employees have the option to own shares in the company, although in most cases that ownership is more of a benefit rather than as having a ‘one person, one vote’ involvement in the company.
  • The emerging corporate model is cooperative: the company is a non-hierarchical network, where a constitution defines the rights and responsibilities in a relational model, and influence is social. All members are owners, in some degree, based on time in service, cash investment, and levels of responsibility. The power structure is decentralized, and a laissez-faire model prevails, since people work in voluntary associations, largely autonomously.

A useful characterization of the cooperative business is fast-and-loose:  a cooperative business is more agile because the strongest ties of earlier organizational models — those between the supervised and the supervisor — are broken, and supervision is replaced by circumvision: supervision is totally diffused, rewored as feedback from coworkers,  mentors, and ‘people operations’.

From another viewpoint, we might characterize this shift to the cooperative business as a stepwise transition from an early parliamentary democracy with the executive monarch acting at head of state, and where citizens were first-and-foremost subjects to the crown, and only secondarily members of the electorate.

The cooperative business is a direct democracy of a sort. Direct democracy is where those that are subject to political decisions directly vote on them, and ‘one person, one vote’ prevails.

It might be better to jump the the hyperdemocracy that is intimated by hyperlean organizational models (see The New Visionaries: Kris Gale), in which the people that do the work plan it, execute it, and then rate their performance.

Most importantly, hyperdemocracy is predicated on modern social tools as the foundation of effective application of direct democratic principles. Maximizing the influence of those closest to the issue on how the issue should be handled, subject to generally agreed upon principles (as embodied in doctrine, constitution, and other narrative objects that capture agreed upon values and express a new deep culture for business).

We need to start the narrative about hyperdemocracy and the cooperative model of organization. It could not have happened before: we didn’t have the tools or the new narrative that is unfolding in the development organizations of the most technically advanced software teams, like Yammer, Asana, Medium, Valve, Amazon, and the like.

The narrative will pivot on a different ethos. There is still room for visionaries, as much as before. There will still be founders, and leaders, and owners. But in order to be fast-and-loose the notion of direct supervision — and the strong ties involved — must be diffused. Increasingly high performing staff will demand greater autonomy, and not for selfish reasons, but to get things done quickly. Companies will create, find, and retain top performers, and create the context for high performance. As before, the narrative will be legitimacy of the organizational structure by efficiency, but a much greater degree of democracy will be involved since all work participants will voluntarily select the work to be done, and who to work with, rather than being told.

This is the third way of work. The final transition away from our distant feudal past, and the explicit rejection of the executive monarchy that underlies today’s collaborative company credo. And it is driven by the same desire for greater productivity that has driven the various stages of the industrial era, up to the present, post-industrial, postnormal times.

Since this change is happening so fast — within a decade or so — there is too much at stake for businesses that are moving in this direction to expect people to understand the new rules of engagement tacitly. Soaking this up osmotically is possible, but I think the example of Valve’s new hire handbook is a good one.

Today, all companies need a constitution. No company should operate on implicit cultural rules that are based in a shadowy way on oligarchic myths. Even if the elite continue to make all major decisions based on building ‘consensus’ — which at its worst is engineered groupthink, and at its best is inefficient and demotivating — the rights and responsibilities of all involved should be spelled out, and the few should garner the consent of the many to establish legitimacy, at the very least.

But the best course might be to make a break with the past, and move to a new charter, based on the narrative of greater efficiency and productivity from all work participants, built on fast-and-loose operations in a cooperative organization. It won’t be easy, and it may involve a stepwise transition, but don’t take too long: there is a reason that the halflife of business has dropped 50% in the past 20 years.

Cooperative tools need to become ‘engines of meaning’

Had a discussion yesterday with Kakul Srivastava of Tomfoolery.com, formerly of Yahoo, Flickr, and Tiny Speck. Got a peak at Tomfoolery’s coming products, but there are some UX changes coming in the near term, and I still have only played with it for a few minutes, so an actual review will have to wait.

What I want to share is an idea that I’ve been stewing on for some time — years, actually. Somehow these ideas crystalized in the discussion with Kakul.

The subject is following. I believe that any cooperative tool — one that is really designed to support a fast-and-loose style of work, and not just another collaboration tool — will have to rely on following as the central mechanism of messaging. Following is a pull mechanism: the potential recipient of information opts to receive messages from people (and other information producing agents). The default mechanism in collaborative tools is membership in groups, teams, spaces, or other defined contexts: belonging. That is a push model, since the creator/owner of the context has to invite the user, and in order to receive any messages from the context at all, the user in essence has to sign up for a long list of things, including symmetric visibility with the other members.

So, I believe that one of the differentiators of the coming generation of cooperative tools is this: while they will support contexts and belonging, other and better mechanisms of supporting messaging through following will be supported.

I reviewed Azendoo recently, and suggested that some of that product’s features put it in at least past the border between collaborative and cooperative tools (see Azendoo is one of the first cooperative work tools). I wrote about Azendoo’s ‘topics’, which at first glance seemed like just another term for a context, but then I realized they’d done something unique:

Users define topics in the workspace as a means of organizing content, and as a way of managing visibility. In most solutions we see some sort of context — a space, project, or group — to which people are invited in order to symmetrically share access to some store of information and conversational streams. However, if you are not invited you can’t see anything going on inside those closed contexts.

Topics are different. They act as a context and as tag to be followed, at the same time. For example, I can create a topic that people can follow like a tag in Twitter, and all public postings made by members of that topic can be seen by anyone following. This support an open follower style of interaction within a business setting.

[…]

Azendoo topics are like light: they are both waves and particles. Both a closed, private context and an open, public stream. I believe Azendoo is one of the first to implement this model, and I have been waiting for this breakthrough. Azendoo is one of the first of what will prove to be the next generation of social business software: cooperative work tools.

Talking about the possibility of overload with Kakul, I had an insight regarding the possible filtering of followed streams using tags. So, imagine that I am following a colleague, Bette, on an imaginary cooperative tool, Koan. Koan (let’s imagine) implements a user tag-based filtering. So I could tag Bette with ‘Jones project’, ‘social business’, and ‘NYC’ and then messages that match those tags would surface in my stream.

This requires the Koan system to be very knowledgeable about tags, and to be able to cluster them, like Flickr does, in order to infer things that I would like to see. So when Bette tags something as ‘Manhattan’ or ‘Times Sq’, Koan should pass it along to me. And, following in the footsteps of Azendoo, anything public, or private that I am privy to, regarding the Jones project, I should see. And if she has some breaking news about Yammer or Tomfoolery to share, the social business tag should suffice to pull that information into my stream.

Note that these ‘search tags’ must be interpreted liberally, and not limited to looking just at the explicit tags offered up by Bette. In particular, tags and terms of other users, commenting on Bette’s messages, would be important, even if I am not following them.

Years ago, in 2006 and 2007, I advanced the idea of ‘groupings’ as a replacement or extension of groups. I made the case that all the people using a tag or searching for it represent a ‘grouping’ which has similarities to a group or a context, but which is very different. No one has to invite me to use the tag ‘social business’ or to search for it. I opt to do so without the tag being ‘owned’, and participation in the grouping is very unlike membership in a group. There may be reasons to allow people to define tags that are ‘private’, meaning they define contexts, but I bet in the future the proportion of closed tags will decrease as part of the explosion of connection as we move to a cooperative world of work.

[Incidentally, it was in a Twitter discussion of these ideas, back in August 2007 where Chris Messina proposed the idea of Twitter channels, similar to IRC chat tags, for which I offered up the term ‘hash tag’.]

The Azendoo topic acts like a context and a tag at the same time, but doesn’t include the fuzzy logic that I envision will be necessary for actual serendipity to happen. With that fuzziness, I could decide to follow ‘social business’ and discover people who I don’t know arguing about a new release of Dachis software. And that acceleration of serendipity, that increase in coincidensity, is the magic needed for cooperative work tools to take us past collaboration’s slow-and-tight models. When we can rely on platform-mediated weak ties to surface the information we have made clear we want to see, then that machinery will become ‘an engine of meaning’, sifting through the social exhaust of thousands to find the eleven things I really need to see right now.