Are Entrepreneurial Organizations at Scale Possible?

The 8th Global Peter Drucker Forum 2016  occurred on Thursday 17 and Friday 18 November 2016.

The theme for this year’s Drucker Forum was: “THE ENTREPRENEURIAL SOCIETY”. Visit their website to view the program, list of speakers and more…

In one of the early sessions Steve Denning, Keynote Speaker on Leadership Innovation, facilitated a discussion on whether entrepreneurial organizations are possible at scale. The panelists included:

Scrum Alliance® formed the Learning Consortium with 11 organizations to learn about the implications of innovative management practices under the emerging Creative Economy, such as the goals, practices, and values of Scrum.

Based on a set of site visits to learn what agile organizations look like. The Learning Consortium visited several companies over several years.

The Learning Consortium discovered that post-bureaucratic companies are possible. These organizations are not rule-driven. But they are hierarchical. They express a hierarchy of competence, not a hierarchy of status, producing a different feel. The thrust of management becomes one of enablement. The customer and the mission of the organization become the boss.

Some of these companies like Spotify still have managers. All of the companies, however, are moving towards autonomous teams.

Themes in non-bureaucratic organizations

Steve Denning summarized the 4 major themes of non-bureaucratic organizations.

  1. Obsession with customer delight. Providing increased value to customers and what clients are demanding. Two methods:
    • Extreme customer focus. Talking to customers, early and often. Seeking feedback and deliver new features along the way.
    • Obsession over developing customer intimacy. Creating greater intimacy users via a customer ecosystem. Develop efficient ways to gather feedback from users and stakeholders.
  2. Work performed in small batch sizes in multidisciplinary teams. Presumption that work is done by small cross-functional teams in small pieces which are completed in one to two week cycles driven to deliver what the customer wants. Critically that work is descaled into small batches, produced by small teams. The bureaucracy-busting magic derives from developing cross-functional teams which are aligned to what the customer wants.
  3. A commitment to organizational agility. Making the whole organization agile. The bottom-up agility of small teams must connect organically with the passion of the C-suite.
  4. A continuous nurturing of the culture. This requires a continuous nurturing of the culture, a continuous upgrading of the culture. Everyone entering the culture knows what the culture is like, and what it has to be. How the work is performed should be flexible, but organizational principles and values should be upheld rigorously.

All of these are required to create sustainable, non-bureaucratic organizations.

These themes feed into an embodiment of the critical entrepreneurial mindset. These are not tools or processes, but an agile, entrepreneurial mindset. When you focus on tools, frameworks, and practices, whether those be Scrum, standups, retrospectives, and forgo mindset, no benefits come and you will cease to evolve. Knowledge sharing is encouraged with other groups. Share the benefits with others, and help them to break down projects into small incremental pieces. To further drive the entrepreneurial mindset, use peers to determine compensation.

Creating a safe workplace derives from frequent experiments and the celebration of failure. In such organizations career suicide does not exist, where failing fast and prototyping rapidly, is part of the culture.

Themes from Riot Games

Joakim Sundén of Spotify spoke of Riot Games, which was voted as the 13th best place to work in Fortunes best 100. These were some of the principles which Riot Games employs.

  1. Self-management. No one can tell anyone what to do. No one gives orders. The members are laser focused on fulfilling the mission of the organization.
  2. The use of forecasts. Instead of using budgets, forecasts are made based on real historical data.
  3. The acceptance of hiring recommendations from anyone. Anyone can hire people without permission, if they can make a business case.
  4. Remarkable customer focus. They have even designed parts of the organization, such as the cafeteria and cafe, to reflect the culture and preferences of their client base, in this case it has a Korean style because most of the professional gamers in the world come from South Korea.
  5. Distribution of decision making authority. Through a system of Request for Comments, or RFCs, anyone can propose anything and have it posted in a central repository. Ideas are even posted on the bathroom stalls to further the exposure. In this way they leverage the wisdom of the crowd to affect change. Each idea must survive the crucible of socialization.

Themes from C. H. Robinson, an established logistics company

Vanessa Gamboa Adams at C.H. Robinson, a logistics company, recounted the principles and lessons she learned after they joined the consortium in 2015.

  1. Transparency and honesty. The ability to adapt, learn, and grow develops from the courage to be transparent both within and without the organization about what is working and not working.
  2. Knowledge exchange, site visits and the development of real relationships. While attending seminars and reading books can open the minds of some, nothing beats site visits and the development of real, authentic relationships with people in other organizations already pursuing the path which you wish to take. Visits to companies, for example, Ericsson and Microsoft, may be instrumental in getting your CIO on board with an organizational transformation. Form relationships with other companies and discuss challenges openly with others. Challenges are at least as important as the triumphs. Every firm is on a journey and facing challenges. It is a reassurance. No one is perfect. It is an agile journey of inspection and adaptation. A traditional way of working that we have had for 150 years or more is being uprooted. It takes time to develop new habits and ways of thinking.
  3. Cross-functional teams aligned to what the customer wants. This was the magic that allowed the organization to overcome much of the bureaucracy that evolved with a traditional growth mindset.
  4. Extreme customer focus. Talk to customers, early and often. Seek feedback and deliver new features along the way.
  5. Mindset and learning exchanges with other groups. After the C-level was brought in, the HR Department also went agile. They are now breaking down projects into small incremental pieces.
  6. The critical mindset. It is not about tools or frameworks, whether those be Scrum, standups, retrospectives. If you focus on processes, you will cease to evolve.
  7. Flipping the script. The question should not be how to scale agile but how to descale initiatives.

Lessons from a renegade

The management iconoclast, Gary Hamel, added some other themes:

  1. Start with the vision, the mindset, and the principles. To create post-bureaucratic company do not start with a practice or a process. Start with the vision, the mindset, and the principles that jazz people up to go to work, and then work backwards.
  2. Reduction in the ratio of bureaucrats to individual contributors. Doubling the ratio of people to bureaucrats from  4.7:1 to 10:1 on average alone will raise economic output by $9 Trillion, more than double the OECD growth rate. In addition people are spending at least one day per week on bureaucratic tasks.
  3. Distribution of financial transparency and literacy. Investment in people when they start. At Morning Star they educate all members of the organization in internal rate of return and net present value, return on investment, and other financial concepts.
  4. Disaggregation – division of the enterprise into micro-enterprises. There is no internal goal setting. You set internal targets. Everyone is given the incentive and the upside if growth doubles.
  5. Obsession over customer intimacy. Haier’s profitable growth occurred by creating greater intimacy with its users via a customer ecosystem. In one case, Haier produced a Air Filter that was controlled by a smartphone. Via the smartphone app they were able to gather 800,000 responses from users and recruiting partners online.
  6. Experiments. Fail fast and prototype rapidly.
  7. Use of 360 compensation techniques. Use peers to determine compensation. W. L. Gore has no formal hierarchy. Every year each member of the organization is graded by 25 of their peers based on their value add and the results are put on a bell-shaped curve. This drives an entrepreneurship mindset.

Questions:

In a bossless organization like Morning Star who formulates strategy?

Strategy coalesces around a point of view. When everyone shares the same scoreboard people start to solve the problem before other companies would even recognize it.

At W.L. Gore, which is a flat, bossless organization, there is always a hierarchy present based on a particular issue. On every issue a natural leader emerges who has more knowledge or more vision. It is a bottom-up, not a top-down approach. You are not a leader unless you have followers.

How do you deal with customers from hell?

Give customer support agents the liberty to share Random Acts of Kindness with customers at their own discretion.

Get clear on who is your ultimate customer. Ask yourself whether they are an intermediary or your actual customer. Or determine whether you need to revisit your company mission and target customer.

Use these troublesome customers as an opportunity for learning. Sometimes you can learn the most from your worst customers. Follow the example of Microsoft with regard to Vista and listen to them.

How do you measure contribution in a flat organization?

Not all of these organizations are flat. Even when they do not have a formal hierarchy there is always an informal hierarchy of competence present which delivers the value to the customer.

No tolerance for mediocracy. The external arbiter is necessary, for example a financial scorecard, to ensure the incompetence is not tolerated. At Morning Star each group chooses a leader. However, there are personal consequences if that leader fails. After 3 failures, the group can organize an ad-hoc meeting and select a new leader. When someone underperforms consistently 3 peers mediate the problem. Someone is fired when 6 of your peers decide that you need to go.

How to shift the mindset and values of the people to develop an agile organization?

Becoming agile is a personal journey for all leaders. Managers who have subordinated others become servant-leaders who support others. Managing work disappears. Leadership capital is measured differently. How managers view their impact shifts. Leadership is about education and mentorship not task management.

Stories facilitate the intellectual conversion, not data. Command and control managers become servant-leaders when they are ready. New habits are learned. Otherwie the transition may never occur.

 

About Dan & Agile and Beyond:

Dan Feldman is the creator and host of the Agile and Beyond podcast. With Agile practitioners, design thinkers, team builders, organization designers, entrepreneurs, and visionaries, he explores the future of work, education, and society. With the digital age demanding greater collaboration, enhanced creativity, and heightened agility, he examines avant-garde, responsive, collaborative team and organization designs as well as the shifts in our individual and collective perception of experience and purpose. Tune in!

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