What if your organisation could run itself?

The Operating System for Evolutionary Organisations Part 4/10

The Operating System for Evolutionary Organisations

What if instead of getting more ineffective as your company grows, the organisation could run itself? What if your startup — your restaurant, your school or your church — were able to improve every day, without you having to move mountains for it? What if you could stop giving orders and instructions, constantly checking in to see how things are going and obsessing over your budget, plan and next quarter? What if you could stop playing politics and speak with candor? What if your people would move to different roles if they were not exceeding expectations without losing face? What if you were able to work productively instead of taking care of numerous alignments needed because of unclear responsibilities? Or because of centralised and inefficient communication processes?

What if I told you that not only it is possible, but it is already happening in organisations around the world?

It’s the 4th article of a series of 10 where I will dive into why traditional organisations are doomed to fail and how a new breed of evolutionary organisations offers a better way forward. These innovative companies prioritize people, continuous development, and embrace complexity. Thus fostering happiness and achieving lasting success. On top of that, I sprinkled in a little bit of science, distilled a framework of 3 universal principles and defined an operating system for organisations consisting of 8 essential components, with which any CEO or founder can transform their organization into a workplace that thrives.

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My first full-time job was great — I had a ton of fun, learned a bunch, and made some awesome friends. We were on a super fast growth ride, growing from 0 to 150 people in 1 year. But there were a lot of things that just didn't work, and it felt like a lot of the important decisions depended on the founders. Back then, I didn't really get the whole idea of creating a great company culture, and I thought the way things were happening was pretty normal. It bothered me, but I didn't know any better.

After we sold the company, a good proportion of the management, including me, decided to leave. It hit me then that most of us had joined the company because it was growing like crazy and looked great from the outside, not because the work culture was awesome. As soon as that changed post-sale, the company started to tank.

Once I left, I started my own business and I began to think: How can I build a place where work gets done effectively, and people genuinely enjoy what they're doing? I began studying what successful leaders and scientists had to say and started putting these ideas to work in my new company. This helped me to create a lasting culture even in moments when we tripled the size of our company — from 20 to 65 people.

Today, many of my team members still mention how unique our work culture was, and that they haven't seen anything like it since. Even though we sadly had to shut down after a few years, we managed to create a super tight-knit group of people. From that, we got lifelong friendships, successful careers and even new businesses.

This got me thinking: How can I recreate that amazing culture in my next venture and help others do the same? That's when I decided to package all these lessons into a playbook, the Operating System for this new breed of evolutionary organisations. It's like a toolkit to help you design an organisation of the future. 

Organisational expert Frederic Laloux identified a new paradigm for organisational design and management in his book "Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness", proposing a more holistic and evolutionary approach to how businesses and institutions operate. Laloux traces the development of organisations through various stages in history. He identifies five main stages: Red (impulsive and exploitative), Amber (conformist and hierarchical), Orange (achievement-oriented and innovative), Green (pluralistic and socially conscious), and Teal (self-managing and purpose-driven). (see illustration below) (more details)

He identified that new levels of human consciousness unlocked new organisational models. At every stage, we made a leap in our abilities — cognitively, morally and psychologically — to deal with the world. (see our chapter about the guiding principle “Act developmental” and the stages of human development of Robert Kegan or Ken Wilbers Spiral Dynamics Model)  Every new organisational model also unlocked new levels of efficiency. The latest stage, teal organisations, is the focus of his research. These organisations are characterised by self-management, wholeness and an evolutionary purpose. Laloux identifies that these companies, across a variety of industries, all outperform their competitors — and not just for a few years, but decades. The organisations that were part of his research had at least 100 employees and existed for more than 5 years.

Here is a glimpse into some of these evolutionary “teal” organisations: 

• Bridgewater: Bridgewater is one of the world's largest and most successful hedge funds. Their founder Ray Dalio instilled a culture centred around radical transparency and a generalised commitment to the continuous development of their employees.

• Buurtzorg: Buurtzorg is a Dutch home healthcare organisation that operates with a teal model. It empowers its nurses to self-manage their teams and make decisions without the need for a traditional management hierarchy. Buurtzorg has seen impressive growth, as well as high employee satisfaction and cost-effectiveness compared to traditional healthcare organisations.

• Morning Star: Morning Star is a tomato processing company in California that operates without managers or a traditional hierarchy. Employees self-organise and negotiate roles and responsibilities. The company has grown significantly and is now known for its commitment to quality and innovation in the tomato industry.

• Patagonia: Although not a strict teal organisation, Patagonia, an outdoor clothing company, exemplifies many teal principles. It is deeply committed to its mission, encourages employees to bring their whole selves to work and promotes self-management. Patagonia has seen consistent growth and profitability while maintaining a strong focus on environmental and social responsibility.

• Semco: Semco, a Brazilian conglomerate, was one of the early adopters of self-management and teal principles. It allows employees to set their own salaries and hours and even choose their managers. Semco has grown significantly and is known for its innovative practices in various industries.

• Favi: Favi is a French manufacturer of metal parts that operates with a self-management system. The company has reported increased productivity, reduced absenteeism, and strong employee engagement as a result of its teal-inspired practices.

• Handelsbanken: Handelsbanken, a Swedish bank that has been outperforming its competition for decades without a traditional budget.

When it comes to how these companies build teams, manage projects, make decisions, share information, set targets, review performance and set compensation, they use purpose, transparency and reputation to create cultures based on the values of freedom and responsibility. They are intentional but full of serendipity, decentralised but coherent.

These are the organisations where people are all rallied behind a cause, working in permanent flux but with a common shared vision, sharing the same principles, attitude and motivation. They have found the key to operate effectively, even at a large scale, with a system based on peer relationships, without the need for either hierarchy or consensus.

These are companies where autonomy plays a big role, they are sustainable and conscious of the complexity of the world. These companies are built on trust and fairness, as well as create tremendous impact and previously unseen outcomes. These organisations are all about realising their full potential and creating a global impact. 

To describe these organisations and better understand how they work it helps to use the metaphor of a living organism. In the words of Laloux: “​​The founders of Teal Organizations use a [...] metaphor for the workplaces they aspire to create. With surprising frequency, they talk about their organization as a living organism or living system. Life, in all its evolutionary wisdom, manages ecosystems of unfathomable beauty, ever evolving toward more wholeness, complexity, and consciousness. Change in nature happens everywhere, all the time, in a self-organizing urge that comes from every cell and every organism, with no need for central command and control to give orders or pull the levers. The metaphor opens up new horizons. Imagine what organizations would be like if we stopped designing them like soulless, clunky machines. What could organizations achieve, and what would work feel like, if we treated them like living beings, if we let them be fueled by the evolutionary power of life itself?”

So how do you build these living organisms? That strive in complexity when a company expands? Where people work smoothly hand in hand, happy with their job as they find meaning in their work, where they flourish and improve their skills and where productive work takes place?

Therefore, I applied the science of motivation, personal development, happiness and fulfilment, from ancient tribal wisdom to recent scientific developments. I added the learnings from organisational researchers like Frederic Laloux or Aaron Dignan and combined them with the insights of many successful leaders like Ray Dalio from Bridgewater, Reed Hastings from Netflix, Tony Hsieh from Zappos and sparkled in my own learnings from building several companies and consulting many more. 

Out of this, I created a playbook, the Operating System for this new breed of evolutionary organisations. It will help you build these evolutionary organisations. So, instead of just letting a company develop accidentally, take the responsibility in your hands and engineer the company of the future that you want.

Of course, every organisation has and needs a different culture. For instance, a SaaS B2B company will be completely different to an army or a civil rights movement. But if we talk about a modern organisation that caters to the needs of the level of consciousness of our current generations, these principles and practices are essential to creating evolutionary organisations.

The 8 Essential Components of Evolutionary Organisations

The operating system is made up of 8 essential components:

1. Purpose and Direction

2. Virtues

3. Density of high-quality talent

4. Radical candor and transparency

5. Autonomy

6. Flexible roles

7. Developmental practices

8. Careers and compensation

1. Set a purpose and direction

If the purpose of a business today is solely about making money, it won’t inspire and survive. Instead, a company should focus on maximising value and creating meaning through its work. Purpose unites the whole team. A great purpose allows you and your team to set a long-term vision (10 to 30 years), as well as to define short- to mid-term goals (3 to 12 months) that give clarity and provide actionable guidance for everyday work. 

2. Act according to your virtues

Who hasn’t seen values hanging on some companies' walls or displayed in some presentations? But then, actually, no one actually cares about them, and even if someone does, most employees don’t live by them or use them as a guiding compass for their actions. Virtues are more than values. Only what you do is who you are, so virtues are all about actions that align with one’s beliefs about the world. Only by acting upon our values can we turn them into virtues and truly live by them. 

3. Create a high talent density

To create outstanding results you need outstanding people. Many managers confuse a company with a family, which is an entirely wrong approach. Being bound by blood without choice and forever — who wants that for their organisation? 

A company is more like a sports team where the coach needs to make sure there is always the best player in every role. Everyone at the company should give their best in their respective roles. It should also be normal that, after some time, a person moves to another role or changes teams to continue their professional growth, or because their priorities have shifted, or because there is someone better for their role. 

4. Create a culture of radical candor and transparency 

Another key concept in building a successful organisation is radical candor and transparency. There are three main reasons why this is important. First and foremost, candor creates trust. Second, this unlocks the potential of everyone and allows your people to flourish and be fulfilled. Lastly, people in your organisation get a clear understanding of what's happening, the good, the bad and the ugly. It pushes your company to perform at its highest level, and your employees to make the best decisions and be successful. 

But telling the truth doesn’t come easy. In fact, it’s the opposite of your natural behaviour which defaults to making everyone feel good. However, speaking up when it hurts is where you see if you are truly capable of being transparent. To open up, you need an environment of trust and care. It’s not simple and requires everyone to grow. To be open, people need to throw away misconceptions about feedback and learn to give good feedback. 

5. With freedom comes responsibility

Distribute authority as much as possible and then trust your people to make the right decisions. Give your people maximum freedom, remove all policies and lead by example and with context, not control. But with the acquired freedom also comes responsibility. Your people have to make sure to deliver on their accountabilities, or live with the consequences if they don’t. For this to work, you need a high talent density, transparency, clear responsibilities and a system that is loosely coupled and highly aligned. In such a setting, feedback becomes even more important and your people will train their decision-making muscle to understand when to bring in outside opinion. 

6. Implement flexible roles with clear responsibilities 

First, you need to make sure that roles at your organisation are clearly defined so that each employee knows their responsibilities exactly. Second, you want a structure that is decentralised. This gives the people at the local level, who are actually doing the work, the power to make decisions. Third, create a more integrated structure, replacing big overhead leadership functions that control everything and everyone with more independent teams. You should then also set up processes to constantly and flexibly adjust the roles to the changing requirements. 

7. Allow your people to flourish

Evolutionary organisations ensure consistent development of their employees as a founding principle, as that leads to growth and fulfilment, as well as better performance of teams and employees. This also means everyone can stop doing a second job of hiding their weaknesses and instead work on them openly and actively.

Your organisation needs to work on three dimensions to allow this to happen. First, you need to develop the “edge”, which means to foster the right mindset to inspire development. Second, you need to provide a “home”, thus creating the right community that makes opening up easy and safe. Finally, you need to implement certain practices to facilitate growth, the “groove”.

8. Redefine careers and compensation

Most people quit their jobs to get more money because a lot of the leaders don’t make the effort to match the salary with the performance and development of an employee. To avoid quick employee turnover, leaders should ensure transparency when it comes to pay and adopt more effective compensation strategies to retain the best talent.

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If you implement these 8 essential components of the operating system of evolutionary organisations, you are setting your organisation on a path to success. You are setting the stage right. You are building the right culture, structures and guiding principles. But remember, if you do all that and turn your organisation into an evolutionary organisation, this does not guarantee success. If you have a bad product, the wrong business model, launched the business at the wrong time or the market changed completely, you probably won’t succeed. It’s similar to being an athlete: you can make sure to get enough sleep, follow the right diet and proper training, but it doesn't automatically mean you will win the race. Yet even if you are unsuccessful this time, the culture you create is the future foundation for everyone's growth and career. And imagine if you are lucky and your business is thriving, if you don’t take care of your operating system, someone will pass by you in the long term.

In the next article, I will dive into the first 2 essential components of the operating system of evolutionary organisations. If you are interested, please subscribe. I will then notify you when I release the 5th article (in around 2 weeks) and send you the full white paper about the operating system for evolutionary organizations when it’s done.