COHESIVE DECENTRALIZATION

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• Today’s organizations face a volatile business environment with large uncertainties.

• To survive and scale, organizations should not only be innovative but also focused, adaptable, agile and in touch with the external environment.

• This requires new ways of organizational design to accelerate and sustain growth.

• Organizational design based on decentralization or even self-management seems best suited to offers continuous and new growth pathways in this environment.

• However, there is a dilemma as decentralization/self-management challenges synergy and increases risks as “control” is lost. There is no fit for all solution to solve this dilemma.

• Even the organizational design itself needs to be continuously adapted to have a scalable organization.

SUSTAINING GROWTH IN TODAY’SBUSINESS ENVIRONMENT

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DECENTRALIZED COHESION

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1. Intrinsic motivation2. Decentralized decision-

making or self-management3. Discretionary resources4. Belief in capabilities5. Continuous learning for

mastery and confidence6. Stress testing through induced

failures

What drives us outwards?

What binds us together?

1. Shared vision and purpose2. Shared values 3. Information transparency4. Talent hiring, grooming, evaluating

and rewarding5. Structure (teams; contracts; circles)6. Mutual trust and co-dependence7. Rules of engagement (templates,

brand books, formats)

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INTRINSIC MOTIVATION

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INTRINSIC MOTIVATIONConsider the paradigm in which, given appropriate working conditions, most people perform well and are the most important asset of the company. If you believe that workers can derive satisfaction from their physical and mental work, they will do it for self-actualization and enjoyment. Treat each worker as a mature and responsible individual. This spurs action and self-motivation towards solving difficult problems, go the extra mile, to do the right thing rather than just the easy thing, and it will lift the performance and energy of the team.

How might you ensure that you select intrinsically motivated people in your organization?

Zappos offers a two-week boot camp to all new call-center employees. After finishing the program, all employees get a choice: either they get $2000 to stop, or they are hired. This way, they retain those that are really motivated to stay and do the work they’re being inspired by.

After the breakdown of the “Obamacare” website, Barack Obama enlisted the help of young, tech savvy professionals to get the website back and

running. This led to the creation of the US Digital Service, which specifically targets tech talent that

want to have positive societal impact.

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INTRINSIC MOTIVATIONDECENTRALIZED DECISION-MAKING AND SELF-DIRECTED TEAMS

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Decentralization empowers rapid decision-making by the people closest to the customer. Byputting the power where the action is, you ensure that the right people, equipped with the right information and context make the right desicions – rather than waiting for decisions from the ‘higher-ups’ who usually don’t have the complete picture, or act delayed. Self-directed teams are an extreme form in which the members are responsible for an entire business operation, generallywith no input from a manager.

What can you decentralize to empower front-line employees and what wouldmake self-directed teams an attractive option?

Buurtzorg, which offers homecare, relies on self-directed teams by its front-line nurses. Every team is responsible for its own clientele and is in close contact with family doctors and families. The teams are also responsible for their own financial results. There is no middle-level management.

Whole Foods decentralizes decision-making to region and store level by empowering the

local management and within the store to specific teams, e.g., the fresh-produce team.

DECENTRALIZED DECISION-MAKING AND SELF-DIRECTED TEAMS

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INTRINSIC MOTIVATIONDECENTRALIZED DECISION-MAKING AND SELF-DIRECTED TEAMS

BELIEF IN CAPABILITIES

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BELIEF IN CAPABILITIESFostering deep felt-faith on your employees’ abilities creates an enviroment of motivation. Focus on creating clear divison of accountabilities and on producing results, rather thanstipulating how things should be done. This will encourage people to give their best: achievingand exceeding personal goals. It is not just about getting things done, but also team-bondingand creating joint experiences for your employees.

How do you foster trust among your employees?

SEMCO employees have full access to all financials of the companies. They set their own salaries twice a year, based on the information provided.

At Virgin, employees can take vacation time when they feel is appropriate. Bosses and

employees are asked to work it out with oneanother, with senior level executives taken a mand, to make sure people follow-through.

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CONTINUOUS LEARNING FOR MASTERY AND CONFIDENCE

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Create an environment in which continued employee development and learning is encouraged. This is not just about encouraging your employees to participate in ongoing training, but also about ensuring continuous internal feedback loops to spur learning, mastery, and confidence. This dynamic also promotes a culture of mutual trust (among employees, management, and leadership) and encourages a culture of transparency and honesty.

How do you use continuous feedback loops in your organization to keep everyone on a learning path?

Mendeley’s Hack Days seek to spur learning, by bringing together people in new teams that group around a challenge/project of own choosing to keep people on a learning path.

Morning Star’s employees formulate their intrinsic motivation, learning goals, and targets on an online

environment, to which colleagues can give constructive feedback, creating continuous learning

loops to work towards their learning goals.

CONTINUOUS LEARNING FOR MASTERY AND CONFIDENCE

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DISCRETIONARY RESOURCES

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DISCRETIONARY RESOURCESInstead of allocating budget and resources top-down, and following a “predict-and-control” approach, more and more organizations are de-centralizing budgetary decision-making and access, trusting and further empowering teams to safeguard healthy financial performance.

How will you make sure that budgets and resources are available to the people that need them?

FAVI uses bottom-up planning based on trust towards its teams to come up with realistic budget requests. In case of conflicts, representatives of each team sort out problems on their own. “In the new way of thinking, we aim to make money without knowing how we do it, as opposed to the old way of losing money knowing exactly how we lose it.”

Sun Hydraulics – a publically listed company –opts for an entirely budget-free approach. “We

don’t run this business by the numbers. The numbers will be doing what the numbers will be

doing; we can just give you a good picture of what the next quarter will bring.” So, we got away from making annual projections and started just doing quarterly forecasts. We know our performance in the long run will be a result of just doing the right

things every day."

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CONTINUOUS STRESS TESTING THROUGH “INDUCED GENTLE ABUSE”

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Failures happen and they inevitably happen when least desired or expected. The best defense against major unexpected failures is to fail often. Periodic and deliberate stress testing will not only get companies more resilient against unanticipated failure, but will actually make companies thrive in such a situation.

How might you defend yourself against unexpected failure, and learn to thrive in such situations?

Netflix takes it one step further: the company developed “Chaos Monkey”, a tool that

randomly disables production instances to make sure they can survive this common type

of failure without any customer impact.

Google and Amazon host Game Days, where failure is manually introduced or simulated to mirror real-world failure, with the goal of both identifying the results and practicing the response.

CONTINUOUS STRESS TESTING THROUGH “INDUCED GENTLE ABUSE”

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1. Intrinsic motivation2. Decentralized decision-

making or self-management3. Discretionary resources4. Belief in capabilities5. Continuous learning for

mastery and confidence6. Stress testing through

induced failures

What drives us outwards?

What binds us together?

1. Shared vision and purpose2. Shared values 3. Information transparency4. Talent hiring, grooming,

evaluating and rewarding5. Structure (teams; contracts;

circles)6. Mutual trust and co-dependence7. Rules of engagement (templates,

brand books, formats)

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CONTINUOUS STRESS TESTINGSHARED VISION, COMMON PURPOSE

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SHARED VISION, COMMON PURPOSEWhen the common purpose is created with input from all of the employees, the organization stays on board aligned, and focused on the right outcome. It provides a moral compass, and gives guidance in situations in which the right course of action is not immediately clear, but in which there is no doubt about the desired outcome.

Can you/everyone in you organization clearly articulate the key components of the company vision and purpose? How do you make sure your vision stays “alive” throughout the organization?

“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs, everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.” The company’s famous credo provides a “north star” for all employees, and corresponding strategy, direction, values, and behavior.

The purpose of supporting the great outdoors drives all business activities,

beyond the products that it makes. Patagonia gives profit-shares to

environmental NGOs, and offers paid employee sabbaticals to drive positive

environmental change, engaging everyone to share in its purpose and vision.

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SHARED CULTURE, COMMON VALUES

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SHARED CULTURE, COMMON VALUESEmpowered organizations have a clear set of values and core beliefs governing behavior andperformance. Enacting these values starts at the leadership level. Decentralization makes a strong culture all the more important to correct for the loss of corporate control in decision-making. A culture is felt and understood through experiences and stories. Stories and mythsare a great way of ensuring common values stay “alive” in the organization.

What are the core values and beliefs that govern how people behave within their role? Are your core values and purpose kept "alive" in the organization? How do you exemplify these values as a leader?

Each and every employee at Zynga (developer of Farmville and Words With Friends) is expected to follow the same simple core value in every endeavor: “Be your own CEO: Own outcomes.”

The cornerstone of Nordstrom’s culture is its storytelling culture, which resolve around “service

stories”. Employees are taught that every customer interaction is a story opportunity. These stories,

repeated over and over, eventually becoming legends that serve to create cohesion, create joint experiences,

and keep values alive.

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INFORMATION TRANSPARENCY

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INFORMATION TRANSPARENCY“To move faster, pulse faster to more people”. Ensure information transparency throughopen communication about activities, progress, success and failure, and learnings. This is a sharp departure from the long valued “information sharing on a need-to-know basis”. It makes sure the people at the edge of the organization are fed in real time with all relevant information they need to make the best decisions. Transparency breeds trust andaccountability – the foundations of great teamwork.

How might you ensure information transparency, building trust and accountability to your customers and within your team?

In the mid-2000s, McCrystal drastically transformed his team coordination. Instead of having calls with his top commanders, that would then share information “down the line”, he organized calls with 7000 people to share information, allowing people to provide updates and intel in 3-minute chunks.

Social media marketing company Buffer puts radical transparency at the heart of the

organization. They are open about revenues, pricing decisions, user numbers, progress

reports on customer support and performance to the outside world. Internally, they share salary

information, create cc-lists to ensure open internal communication via e-mail, and use

IDoneThis to share daily improvements.

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INFORMATION TRANSPARENCYTALENT HIRING, GROOMING, EVALUATING AND REWARDING

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TALENT HIRING, GROOMING, EVALUATING AND REWARDINGHire people whose personal goals are aligned with organization goals and mission. To ensuresynergy, you should not only hire based on personal alignment with company purpose, but also on cultural fit – without losing out on diversity. Value-based grooming evaluates andrewards people on common values, and cultural fit.

How might you hire, groom, evaluate, and reward employees to enhance cohesion?

Whole Foods offers the right to vote to local teams. New hires serve for a period of one to

three months on a team, after which the team approves (or rejects) the candidate as a

permanent team member by two-thirds vote.

At Morning Star, employees are part of a social network that includes a real-time feed of performance data, colleague activities (and how it relates to the organization’s mission), and peer feedback. People don’t move “up” at Morning Star, they grow in respect and responsibility (and compensation) based on their contribution.

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STRUCTURE

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People need some form of structure to work together, yet (permanent) structures often lead tosilo-ed behavior. Co-dependent teams, or “small fighting units”, allow for product, market andcustomer focus. By transcending functional units, these teams operate with clear but fluidstructures that adapt and morph based on the needs of the organization and changes in the environment.

Nested circles. Ternary Software uses (nested) circles, with representatives forming linkages between them. There is a hierarchy of purpose, complexity, and scope, but not of people or power. Each circle has full authority to make decisions within the scope of its specific purpose. Decisions are not sent upwards, and cannot be overturned by members of overarching circles.

Parallel teams. At Zara, creative teams work in parallel to each other. Each team is given full responsibility and autonomy over certain items –from beginning to end. This allows for incredible speed of production (from ideation to sales), and market responsiveness. It also allows the company to locally manufacture its clothes in Spain.

What alternative team structures can you put in place that foster cohesion?

Rotating cross-disciplinary teams. Vox lets tech developers, editorial teams, marketers, publishers and photo/video departments organically form around new opportunities into rotating, cross-disciplinary teams, speeding up, and opting innovative news formats over administrative efficiency and “pipe-line” structures.

STRUCTURE

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MUTUAL TRUST AND CO-DEPENDENCE

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MUTUAL TRUST AND CO-DEPENDENCEAny person can make any decision after seeking advice from (1) everyone who will bemeaningfully affected, and (2) people with expertise in the matter. Advice received must betaken into consideration. The point is not to create a watered-down compromise thataccommodates everybody’s wishes. It is about accessing collective wisdom in pursuit of a sound decision: with all the advice and perspectives the decision maker has received.

How might you design your team/organization so that mutual trust and co-dependence are fostered and “silos” are avoided? How can you imbed advice processes in your team/organization?

AES combines hierarchy with adviceprocesses. Employees consult thoseimpacted by a decision and thoseconsidered experts. Decisions are made with the person who noticesthe issue, the person most affected byit, or otherwise someone that themanagers believe is the best person tomake the decision.

W.L. Gore uses circles made of representative colleagues who go through the advice process on behalf of the whole organization. Team leaders are voted democratically and represent the team in other decision-making circles.

Buurtzorg uses social media to support and speed up the advice

process. Within 24 hours of a post, a majority of nurses will have read it.

These posts evoke dozens, sometimes hundreds, of

comments.

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RULES OF ENGAGEMENT

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RULES OF ENGAGEMENTCulture and values come alive through behavior. Rules of engagement refer to “the way you feel and act” in any given circumstance, providing authorization and/or limits, among other things. It often also defines what the public sees. Apart from a set of “ground rules”, rules of engagement may include a brand books, working formats and templates.

Can you formulate a set of guiding principles that dictate behavior and action and keep your team united? How do you exemplify these values as a leader?

Leaders during the American civil rights era relied on a number of techniques to help encourage people to join the movement and remain united as one. It took extensive trainings to prepare civil rights workers for the violence they would encounter in the South. Training included role plays and signing a pledge to remain nonviolent.

Peace Corps offers a unique experience to its trainees and volunteers. While the intrinsic rewards of joining are great, the challenges and demands are

many. To maintain cohesion and reputation, the organization has a shared set of to govern behavior,

while respecting local traditions and regulations.