8/10. Laloux has done a great service bringing together multiple case studies, and drawing out commonalities in practices, attitudes and behaviours.

Potential improvements:

Those unfamiliar with Wilber and culture/values stage theory (as I was when I read the book) may find the initial sections on “amber/red/green/teal” a bit hard-going. I’d suggest this be moved toward the end of the book rather than be at the start (instead, you could go straight into case studies).
An appendix listing all the organisations covered and common (or different) practices (e.g. tabular form) might be useful.

Questions I have:

Do practices vary by industry?
Why do people struggle to scale this? 2-3 big companies he mentions have all reverted to “traditional” practices.

Summary

Buurtzorg practices

On self-management, pg 69-70:

There is no job description for the regional coach. Every coach is encouraged to find and grow into her specific way of filling the role, based on her specific character and talents. Nevertheless, a few unwritten principles have emerged as part of Buurtzorg’s culture:

It’s okay for teams to struggle. From struggle comes learning. And teams that have gone through difficult moments build resilience and a deep sense of community. The coach’s role therefore is not to prevent foreseeable problems, but to support teams in solving them (and later help them reflect on how they’ve grown in the process).

The coach’s role is to let teams make their own choices, even if she believes she knows a better solution.

The coach supports the team mostly by asking insightful questions and mirroring what she sees. She helps teams frame issues and solutions in light of Buurtzorg’s purpose and its holistic approach to care.

The starting point is always to look for enthusiasm, strengths, and existing capabilities within the team. The coach projects trust that the team has all it takes to solve the problems it faces.

The span of support (what in traditional organizations would be called “span of control”) of Buurtzorg’s regional coaches is broad; on average, a coach supports 40 to 50 teams. Jos de Blok, Buurtzorg’s founder and CEO, explains the intention: Coaches shouldn’t have too much time on their hands, or they risk getting too involved with teams, and that would hurt teams’ autonomy. Now they take care of only the most important questions. We gave some of the first teams from Buurtzorg quite intensive support and attention, and today we still see that they are more dependent and less autonomous than other teams. 7

Buurtzorg teams have incredible latitude to come up with their own solutions. Very little is mandated from the top. There are only a few ground rules that experience has shown are important so as to make self-management work in practice. The list of ground rules includes:

A team should not grow larger than 12 persons. Beyond that number, it should split.

Teams should delegate tasks widely among themselves. They should be careful not to concentrate too many tasks with one person, or a form of traditional hierarchy might creep in through the back door.

Along with team meetings, teams plan regular coaching meetings where they discuss specific issues encountered with patients and learn from each other (using a specific group coaching technique).

Team members must appraise each other every year, based on competency models they can devise themselves.

Teams make yearly plans for initiatives they want to take in the areas of client care and quality, training, organization, and other issues.

The target for billable hours in mature teams is 60 to 65 percent. 8

Teams make important decisions based on the specific decision-making technique outlined earlier.

Organizational Structures make Implicit Assumptions about People

By contrast here are a different set of assumptions p.108-109:

AES people:

Are creative, thoughtful, trustworthy adults, capable of making important decisions;

Are accountable and responsible for their decisions and actions;

Are fallible. We make mistakes, sometimes on purpose;

Are unique; and

Want to use our talents and skills to make a positive contribution to the organization and the world. 4

With this set of assumptions, self-management and the advice process make perfect sense; while control mechanisms and hierarchy are needless and demoralizing distractions. Jean-François Zobrist often initiated similar discussions with workers and new recruits at FAVI to explain the rationale for self-management. One day, for training purposes, he wrote down the following set of assumptions:

The analysis of our organization chart in the 1980s [when FAVI was still run like any other factory] reveals without a doubt that men and women were considered to be:

Thieves because everything was locked up in storage rooms.

Lazy, as their working time was controlled and every late showing punished by somebody … who didn’t even care to inquire about the reasons for being late.

Not dependable because all their production was controlled by somebody else who must not have been very dependable either because random controls … had been put in place.

Not intelligent, as a “manufacturing engineering” department did the thinking for them.

Zobrist and his colleagues defined three new assumptions that over time have become mantras inside the factory.

People are systematically considered to be good. (Reliable, self-motivated, trustworthy, intelligent)

There is no performance without happiness. (To be happy, we need to be motivated. To be motivated, we need to be responsible. To be responsible we must understand why and for whom we work, and be free to decide how)

Value is created on the shop floor. (Shop floor operators craft the products; the CEO and staff at best serve to support them, at worst are costly distractions)5

p.261

You will probably make your life much easier if you articulate the assumptions you hold about people and about work. Here some examples to provide food for thought:

RHD, you might remember, has defined for itself the following three basic assumptions: people are of equal human worth; people are essentially good, unless proven otherwise; there is no single way to manage corporate issues well.

Morning Star’s way of operating is founded on two core principles: individuals shall work together with no use of force or coercion; individuals shall keep commitments.

FAVI has articulated three basic assumptions: people are systematically considered to be good (reliable, self-motivated, trustworthy, intelligent); there is no performance without happiness; value is created on the shop floor.

Conflict resolution

Morning Star model (p.112-113)

The conflict resolution process (called “Direct Communication and Gaining Agreement”), applies to any type of disagreement. It can be a difference of opinion about a technical decision in a given situation. It can be interpersonal conflict. It can be a breach of values. Or it can be related to performance issues, when one colleague finds that another is doing a lousy job or not pulling his weight. Whatever the topic, the process starts with one person asking another to gain agreement:

In a first phase, they sit together and try to sort it out privately. The initiator has to make a clear request (not a judgment, not a demand), and the other person has to respond clearly to the request (with a “yes,” a “no,” or a counterproposal).

If they can’t find a solution agreeable to both of them, they nominate a colleague they both trust to act as a mediator. The colleague supports the parties in finding agreement but cannot impose a resolution.

If mediation fails, a panel of topic-relevant colleagues is convened. The panel’s role, again, is to listen and help shape agreement. It cannot force a decision, but usually carries enough moral weight for matters to come to a conclusion.

In an ultimate step, Chris Rufer, the founder and president, might be called into the panel, to add to the panel’s moral weight.

Since the disagreement is private, all parties are expected to respect confidentiality during and after the processes. This confidentiality applies of course to the two persons at the heart of the conflict as well. They must resolve their disagreement between themselves and are discouraged from spreading the conflict by enlisting support and building rival factions.

Role setting

Create roles not jobs. People can have multiple roles
Some organizations are team-based; some are more like a production line (e.g. Morning Star). Production line types have agreements amongst interdependent people. Team can do team stuff.
Holacracy has a special once a month governance meeting for creating and removing roles and allocating them

p.119-120

One of the core elements of Holacracy, which can be found in all Teal Organizations in this research, is to separate role from soul, to break the fusion of identity between people and their job titles. In holacratic language, people don’t have a job, but fill a number of granular roles. Where Holacracy goes further than other organizations is in the elegant process through which roles are defined.

When someone senses that a new role must be created, or an existing role amended or discarded, he brings it up within his team in a governance meeting.14 Governance meetings are specific meetings where only questions related to roles and collaboration are to be discussed, separate from the rumble and tumble of getting work done. (Everything that has to do with getting business done is discussed in what are called “tactical meetings” with specific meeting practices.) Governance meetings are held regularly―generally every month―and any member of a team can request an extra meeting at any point in time. They follow a strict process to ensure that everybody’s voice is heard and that no one can dominate decision-making. A facilitator guides the proceeding. Anybody who feels a role needs to be created, amended, or discarded (called the proposer) can add it to the agenda. Each such governance item is discussed in turn and brought to resolution with the following process:

Present proposal: The proposer states his proposal and the issue this proposal is attempting to resolve.

Clarifying questions: Anybody can ask clarifying questions to seek information or understanding. This point is not yet the moment for reactions, and the facilitator will interrupt any question that is cloaking a reaction to the proposal.

Reaction round: Each person is given space to react to the proposal. Discussions and responses are not allowed at this stage.

Amend and clarify: The proposer can clarify the intent of his proposal further or amend it based on the prior discussion.

Objection round: The facilitator asks, ”Do you see any reasons why adopting this proposal would cause harm or move us backwards?” Objections are stated and captured without discussion; the proposal is adopted if none surface.

Integration: If an objection is raised, the facilitator leads an open discussion to craft an amended proposal that would avoid the objection while still addressing the proposer’s concern. If several objections are raised, they get addressed in this way one at a time, until all are removed.

With this process, every month a team will typically adapt, clarify, create, or discard one or several roles. The organization constantly adapts and corrects, based on problems and opportunities people sense.

Performance management

Once a year meeting with colleagues

Salary setting

Various models but all involve people making their own proposal, getting feedback and an arbitration process (conflict resolution) if that does not work

Creating and Developing a Culture

Organizations explicitly create culture and make it explicit, i.e. they write it down and transmit it to people when they arrive

p.152

Teal Organizations spend significant time and energy training everybody in a number of ground rules that support healthy and productive collaboration. Several of the organi- zations in this book end up writing down these ground rules in a document. RHD, for instance, has developed over the years a beautiful and precisely worded Bill of Rights and Responsibilities for Employees and Consumers. The first two articles spell out RHD’s objective of creating a safe environment and constructively managing conflict and anger. (Later articles deal with topics related to self-management.) The premise is maintained that conflict is inevitable, but that hostile behaviors are not:

This corporation has chosen to operate with several basic assumptions. One of those assumptions is that there are multiple “right” ways or paths we can follow in making decisions, thus there is no one “true” or “absolute” reality. Each person in a situation holds his/her own view of reality, and his/her own perspective about the most effective way to do things. This assumption allows us to recognize that conflict is inevitable and that people will disagree in the workplace. While conflict and difference (or disagreement) are to be expected, explosive or otherwise hostile expressions of anger are not acceptable in RHD.

As a member of the RHD community, it is important to be able to do two things:

a) Separate from our own need to be “right” in order to hear and respect others’ realities and perspectives: and, b) Differentiate between thoughts (what’s going on inside your head) and behaviors (what you do or say).8 [fn 8 is to: Robert Fishman and Barbara Fishman, The Common Good Corporation: The Experiment Has Worked! (Philadelphia: The Journey to Oz Press, 2006), p.165]

The document goes on to spell out in detail five unacceptable expressions of hostility. The first―demeaning speech and behavior―is described in the following terms:

Demeaning speech and behavior involves any verbal or nonverbal behavior that someone experiences as undermining of that person’s self-esteem and implies that he/she is less than worthy as a human being. Such behaviors include, but are not limited to, name-calling, ridicule, sarcasm, or other actions which “put down” people. Demeaning a person with such physical behaviors as rolling one’s eyes when the person speaks or otherwise negating her importance as a member of the community is also unacceptable. Anyone encountering such hostile behavior has the right and responsibility to surface it as an issue.9

Other expressions of hostility―“negative triangulated messages,” “threat of abandonment,” “disconfirming the other person’s reality,” and “intimidation/explosion”―are defined in an equally precise manner.

In summary:

Ground rules take shared values to the next level. They spell out the mindsets and behaviors that foster or undermine a safe and healthy work environment.

“Practices to cultivate discussions about values and ground rules”

Of course, it takes more than a document to bring values to life. Many organizations in this research have chosen to start right at the beginning: all new recruits are invited, as part of the onboarding, to a training session about the company values and ground rules, which helps to create common references and a common language across the organization.

Companies have found that beyond the initial training, there is a need for dedicated times to discuss the values and the ground rules to keep them alive. It can be done in a hundred ways; here are a few examples:

Values Day: Many organizations hold a yearly company-wide values day where everybody is invited, through playful and/or introspective activities, to revisit the organization’s purpose, values, and ground rules and inquire how they, individually and within their teams, live up to them. At RHD, for example, Values Day is a major event, with lots of fun, singing, and dancing. People celebrate and reaffirm their commitment to the company’s extraordinary culture.

Values meeting: Every two months, all RHD colleagues are invited to join the values implementation meeting, where people can bring up issues they have encountered with values in the workplace or suggest changes to the Bill of Rights and Responsibilities. The meeting is well attended. Bob Fishman, RHD’s founder, makes a point to be present every time.

Annual survey: Many organizations cultivate discussion about values and ground rules through an annual survey. At AES, for instance, a task force of volunteers devised a new set of questions every year and sent them out to the entire organization. Each unit had the obligation―it was one of the ground rules―to discuss the outcome of the survey, in whatever format it thought would be useful.

Coaching

Most orgs have coaching in some form or other. Pg 157:

Team supervision

Working in teams, which is what most people do in self-managing organizations, invariably brings up tensions. We run into colleagues with different styles, preferences, and belief systems. We can choose, as most organizations do, to sweep the tensions under the rug. Or we can have the courage to confront them so as to grow individually and collectively. Heiligenfeld has developed a simple practice of team supervision. The company works with four external coaches who each have their domain of expertise (relationships, organizational development, system thinking, leadership). There are a number of time slots with the coaches every month that teams can sign up for. The recommendation is for every team to hold at least one session a year; on average teams hold two to four. In the discussion, with the help of the outside supervisor, colleagues can explore what a tension reveals about themselves and how they can grow to resolve it.

Peer coaching

Team supervision helps to deal with an issue that affects the whole team. Peer coaching uses the power of the team to help one specific team member work through an individual issue. At Buurtzorg, all nurses are trained in “Intervisie,” a peer-coaching technique that originated in the Netherlands. A nurse that wrestles with a certain question can ask colleagues on her team to help her sort it out in a group coaching session. How should she deal with a client that refuses to take life-saving medication? How can she help an elderly patient accept help from his children? How to say no to clients to protect herself from burnout? Often, when a nurse struggles with one of these matters, it is because the question brings up a broader personal issue she hasn’t worked through. In these cases, a peer coaching session can help. Some Buurtzorg teams allow an hour for peer coaching every month; other teams convene when a team member requests it.

“Intervisie,” the process used at Buurtzorg, follows a strict format and ground rules to prevent the group from administering the all-too-common medicine of advice, admonitions, or reassurance. During most of the process, team members can ask only open-ended questions; they become fellow travelers into the mystery of the issue the person is dealing with. A safe space is created that invites deep listening, authenticity, and vulnerability―the necessary ingredients for inner truth to emerge. The goal is for the nurse to see the problem in a new light and discover her own solutions. It is at once a simple and beautiful process. Being respectfully and compassionately “held” by a group is for many people a new and unforgettable experience.12

Individual coaching

Offering individual coaching at certain stages of people’s careers has become standard practice in many organizations today. Most often, it is reserved for senior leaders, stars on their way up, or underperformers on their way out. Not surprisingly, Teal Organizations expand coaching to all colleagues, whatever their role in the organization. RHD’s coaching program goes one step further: it offers 10 free counseling sessions for employees and/or their families every year. No one else in the organization needs to be informed about the theme of the coaching and the theme must not be a professional topic. The program is built on the trust that if an employee is seeking support from an external coach, the topic must be important enough to be worth the money the company pays for it.

Silence

At Heiligenfeld all new employees―therapists and cleaning staff alike―are taught to meditate as part of their onboarding. All mental-health patients are invited to learn to meditate too. There are several fixed group meditation sessions every week: some for employees only, others where patients are invited to join in too. Four times a year, Heiligenfeld organizes a “mindfulness day”―a day that patients and staff spend in silence. Patients are invited to remain entirely silent (they wear a tag with the word “silence” to remind each other), while the staff speaks only when needed, in whispers (staff wear a tag with the word “mindfulness”). There are no talking therapy sessions that day. Instead, other forms of therapy take place―walks in the woods, painting, or creative activities, for instance. Information sessions help patients prepare for the day, and there are “emergency talking places” for patients who feel overwhelmed by the silence. “The majority of patients love the experience and many ask us to organize this more often,” says Dorothea Galuska. “Roughly a third of the patients are confronted with some of their shadows and find the experience difficult. ‘If silence was hard for you, you got lucky,’ I tell them. ‘People who’ve enjoyed it had a good day. But you’ve now got great material for therapy.’” It’s also a day that employees look forward to. Collaborating in silence brings a special quality to relationships between colleagues. It requires a new level of mindfulness, listening not to what colleagues say, but to their presence, emotions, and intentions.

Silence in community is feared for the exact reason that makes this practice so powerful: without words to fill the space, we create an opening for deeper voices to emerge.

Meetings

Heiligenfeld uses a combination of the previous practices, and adds a twist. Every meeting starts in one of three ways: a minute of silence; a minute of silence and a reading; or a minute of silence and a joke. The meeting moves forward with a ritual question: “Who is going to ring the bell today?” The volunteer takes possession of a pair of tingsha bells, two small hand cymbals that can make a beautiful, crystal-like sound. Whenever the person feels that ground rules are not being respected, or that the meeting is serving egos more than purpose, she can make the cymbals sing. The rule is that no one can speak until the last sound of the cymbal has died out―which takes a surprisingly long time. During the silence, participants are to reflect on the question: “Am I in service to the topic we are discussing and to the organization?” Colleagues are now so used to this practice that simply reaching out to the cymbals is all it takes to get a meeting back on track. (Reflecting on this practice, I realized that in many executive meetings in traditional corporations I’ve been invited to join over the years, people were speaking only from their ego. Had they used this practice, the only sound in the meeting would have come from the tingsha bells!)

Managing Conflict

This research has revealed three types of practices Teal Organizations can put in place to help us bring up and deal with necessary conflicts in the workplace. The first type of practice around conflict management helps people bring tensions to the surface. It can be hard for someone to stand up to a colleague and say, “We need to talk.” Some organizations create a space that helps lingering conflict among colleagues to surface. Here are some examples:

At ESBZ, the school in Berlin, every class gets together at a fixed time each week to discuss and deal with tensions in the group. The meeting is facilitated by a student who enforces a number of ground rules that keep the discussion safe.

At Heiligenfeld, once a year colleagues in every team rate the quality of their interaction with other teams. The result is a company-wide “heat map” that reveals which teams should have a conversation to improve their collaboration.

RHD holds a bi-monthly “isms in the workplace meeting.” Anyone feeling that the organization should pay attention to a specific form or occurrence of racism, sexism, or any other “-ism” can join the meeting. Of course, an act inspired by blatant racism should be confronted directly on the spot. The meeting is meant for more subtle forms of -ism. What if you notice that the organization as a whole tends to hire disproportionately more white than black people, or that women generally don’t step into certain roles? There is no obvious party to confront; everyone is called to find a solution. The “-isms meeting” gives time and space for introspection: where might we fall prey to our collective and unconscious prejudices? What should we do about it?

We have discussed the second type of practice in the previous chapter: spelling out a well-defined and thorough conflict resolution process (see page 112). Such a process is needed in self-managing organizations for peers to settle issues when there is no boss to act as referee. Having a clear process that everyone knows about also helps people raise issues. It’s easier to ask someone to discuss a disagreement when we know there is a well-paved avenue that will get us unharmed to the other side.

But even that might not be enough. Morning Star says that conflict avoidance remains their major organizational issue. Making that first move to confront someone is hard. Some organizations, therefore, go one step further and train all their colleagues in interpersonal skills to enable them to deal gracefully with conflict. At ESBZ, all teachers are trained in Nonviolent Communication, and so are the students. At Sounds True, all colleagues have the opportunity to learn a simple three-step process for difficult conversation:

Step 1: Here is how I feel.

Step 2: Here is what I need.

Step 3: What do you need?

The process has become so key to managing interpersonal dynamics at Sounds True that people have to engage with it, as Tami Simon explains:

When we first introduced this at the company, we had a COO that told me, “I don’t want to talk with other people about how I’m feeling. That’s not why you hired me. You hired me to run your operations, Tami. My wife has been trying to get me talking about my feelings for years unsuccessfully. Now I come into work and you are trying to get me to talk about my feelings?” I told him, “We are not going to be able to move forward emotionally, together as a group, if you can’t talk about your feelings. You have to commit to this process.” He ended up leaving the company. People have to be okay with having a conversation about how they are feeling, what they need, and listening to what the other person needs.17

Chapter 2.5 - Striving for wholeness

Recruiting

Tami Simon, the founder of Sounds True, tells the following story about its particular culture and how people may or may not fit in:

One of the things I’ve found at Sounds True is in the first three months of employment a lot of the people don’t stay. … At Sounds True, people want to get to know who you are, they want you to be real, they don’t want you to wear forty masks to work. It’s like―will the real person please stand up? There is this sense of authenticity; who we are when we are not at work is who we are when we are at work. That’s the kind of environment that’s here and of course we try to screen for this and let people know before they take the job, and a lot of people go, “Oh I’m totally ready for that. I’m interested in that, that’s what I want.” But then they come in and may or may not be comfortable actually working in that kind of environment where people when they stop in the hallway and ask “How are you doing?” actually mean it! How are you doing?1

Of course, skills and experience matter, but generally they take second place. Roles are so fluid that it makes little sense to hire somebody for one particular box. Organizations in this research have also found that when people are self-motivated, they can pick up new skills and experience in surprisingly little time. The real deal-breaker is someone who doesn’t fit in, particularly, someone who is not suited for self-management, as an employee of AES explained:

[A bad hire is] someone who is a chronic complainer, who is not happy, who blames others, who doesn’t take responsibility, who’s not honest, who doesn’t trust other people. A bad hire would be someone who needs specific direction and waits to be told what to do. A poor hire would be someone who wasn’t flexible and who says, “It’s not my job.”2

Most organizations spend a lot of time during the recruitment process informing candidates about the values of the organization and what it’s like to work there, so that people can decide whether they want to be part of it or not. Every potential hire at Morning Star gets thoroughly introduced to self-management during the interview process. At AES, candidates were invited to discussions about the organization’s values and practices during the recruitment process. And in many of these organizations, a significant number of teammates interview the candidates―10 to 12 interviews is no rarity―providing ample time for both parties to feel each other out. It is, in essence, a two-way discovery process to answer one fundamental question: Are we meant to journey together?

Job descriptions, job titles, and career planning

Don’t have them. Let people have roles, let them evolve what they do.

Teal Organizations also do away with job descriptions, and that comes with a side benefit too: we can’t turn to the job description to tell us how we ought to work. We have to find within ourselves our own unique way to fill a role with life and meaning. Bob Fishman, the founder of RHD, illustrates this with a telling example:

RHD consciously does not use [job descriptions]. Instead, the assumption that people are essentially good leads us to believe that, once an employee has a general sense of the job, he or she will want to shape the way it is done. …

Thelma, for instance, had already been working as a receptionist at our new outpatient clinic for many years when she asked me for a job description. … I felt, and so told her, that it was absurd for me to define the details of her work since she was already doing a quality job. One of her outstanding behaviors was the kindness with which she greeted our clients, brought them coffee, and made sure that the therapist took them into the therapy room in a timely manner. Delineating her kindness was impossible: words would never have done justice to her heartfelt warmth. Thelma already knew how to perform her job and a detailed job description, I believed, would have done her more harm than good. …

There is no single way to define a job, and no supervisor has the answer to how another person’s job should be performed. If … I imposed my view on her job, the corporation would, in effect, lose her special contribution―her way of managing the relationship between people. That would have been a great loss.6

Philosopher Viktor Frankl perhaps captured it best: “Success, like happiness, cannot be pursued; it must ensue, and it only does so as the unintended side-effect of one’s personal dedication to a cause greater than oneself.”

Finding purpose

p.201

Now you might argue that it’s easy for Buurtzorg to listen in to its purpose. There is an obvious purpose in caring for sick and old people (even though other neighborhood nursing companies in the Netherlands have lost track of it). But what about organizations that manufacture car parts, make tomato paste, or sell shoes? Is there really a higher purpose that these organizations can tap into?

I believe the answer is yes. From the perspective of organizations as living entities, any organization has its own soul, its own life force. The real question is: do we listen hard enough to hear the purpose? Take FAVI, the French brass foundry that sells components that go into electric motors, faucets, and gearboxes. Obviously, it’s not hard to define a meaningful purpose for its business: faucets put the gift of running water at our fingertips. Gearboxes go into cars that bring us the gift of freedom to go where we please. Yet somehow, justifying the organization’s purpose on its downstream activity feels a bit constructed. These might be the purposes of a faucet maker or a car manufacturer. But what about FAVI?

Early on in his tenure as CEO, Jean-François Zobrist invited all the factory employees to a meeting to figure out the organization’s raison d’être. The soul searching was prompted by a proposed order that came out of the blue from a French car manufacturer. Could they, within a year, supply not only a gear fork, but a full gearbox? This single order would be larger than all of FAVI’s existing business. Many people thought it was too risky. Zobrist felt the decision could not be made without inquiring into the purpose of the organization. In keeping with his style, he involved the whole company, in meetings with subgroups of 15 people at a time on Friday afternoons. He showed up at the meeting with no agenda and no process; he trusted that his colleagues would somehow self-organize in these meetings, reconvening every Friday if needed, until they had answered this most fundamental question: what is our purpose?

After much discussion, when the obvious but superficial ideas had been discarded, the answer emerged with clarity. FAVI has two reasons for existence, two fundamental purposes: the first is to provide meaningful work in the area of Hallencourt, a rural area in northern France where good work is rare; the second is to give and receive love from clients. Yes, love, a word rarely heard in the world of business, a word few would expect in a blue-collar manufacturing environment. At FAVI, it has taken on real meaning. Operators don’t just send products to their clients, they send products into which they have put their heart. A few years ago, around Christmas time, an operator at FAVI moulded excess brass into a few small figurines of Santa and of reindeers. He added the figurines into the boxes of finished products, rather like kids put a message in a bottle they throw out to sea, imagining that someone, somewhere, would find it. Other operators have since picked up on the idea and at random times of the year add brass figurines into their shipments, as little tokens of love to their counterparts working on assembly lines at Volkswagen or Volvo, who will find the figurines when they unpack the boxes.

Common cultural elements

p.230 ff.

Self-management

Trust

We relate to one another with an assumption of positive intent.

Until we are proven wrong, trusting co-workers is our default means of engagement.

Freedom and accountability are two sides of the same coin.

Information and decision-making

All business information is open to all.

Every one of us is able to handle difficult and sensitive news.

We believe in the power of collective intelligence. Nobody is as smart as everybody. Therefore all decisions will be made with the advice process.

Responsibility and accountability

We each have full responsibility for the organization. If we sense that something needs to happen, we have a duty to address it. It’s not acceptable to limit our concern to the remit of our roles.

Everyone must be comfortable with holding others accountable to their commitments through feedback and respectful confrontation.

Wholeness

Equal worth

We are all of fundamental equal worth.

At the same time, our community will be richest if we let all members contribute in their distinctive way, appreciating the differences in roles, education, backgrounds, interests, skills, characters, points of view, and so on.

Safe and caring workplace

Any situation can be approached from fear and separation, or from love and connection. We choose love and connection.

We strive to create emotionally and spiritually safe environments, where each of us can behave authentically.

We honor the moods of … [love, care, recognition, gratitude, curiosity, fun, playfulness …].

We are comfortable with vocabulary like care, love, service, purpose, soul … in the workplace.

Overcoming separation

We aim to have a workplace where we can honor all parts of us: the cognitive, physical, emotional, and spiritual; the rational and the intuitive; the feminine and the masculine.

We recognize that we are all deeply interconnected, part of a bigger whole that includes nature and all forms of life.

Learning

Every problem is an invitation to learn and grow. We will always be learners. We have never arrived.

Failure is always a possibility if we strive boldly for our purpose. We discuss our failures openly and learn from them. Hiding or neglecting to learn from failure is unacceptable.

Feedback and respectful confrontation are gifts we share to help one another grow.

We focus on strengths more than weaknesses, on opportunities more than problems.

Relationships and conflict

It’s impossible to change other people. We can only change ourselves.

We take ownership for our thoughts, beliefs, words, and actions.

We don’t spread rumors. We don’t talk behind someone’s back.

We resolve disagreements one-on-one and don’t drag other people into the problem.

We don’t blame problems on others. When we feel like blaming, we take it as an invitation to reflect on how we might be part of the problem (and the solution).

Purpose

Collective purpose

We view the organization as having a soul and purpose of its own.

We try to listen in to where the organization wants to go and beware of forcing a direction onto it.

Individual purpose

We have a duty to ourselves and to the organization to inquire into our personal sense of calling to see if and how it resonates with the organization’s purpose.

We try to imbue our roles with our souls, not our egos.

Planning the future

Trying to predict and control the future is futile. We make forecasts only when a specific decision requires us to do so.

Everything will unfold with more grace if we stop trying to control and instead choose to simply sense and respond.

Profit

In the long run, there are no trade-offs between purpose and profits. If we focus on purpose, profits will follow.

Part 3: The Emergence of Teal Organizations

Good points …

Teal has never made it without support of the CEO. It must come from and be supported at the top
- But structure matters too [ed: and it is the culture that persists …]
The Board has to support the CEO
The two biggest examples of Teal both reverted. Note that both took external investor money – whether from shareholders or in a buyout.
- I think there is a point here: Teal is risk-accepting in the short-term (perhaps for less risk in long-term). Non-teal is mainly about fear and is very big on risk aversion esp short-term and its practices help with that (or at least “covering your ass”).

How it Goes Wrong (the Board don’t support the CEO)

BSO/Origin

There are two organizations researched for this book that pioneered new ways of operating, but then reverted to traditional management practices. In both cases, this happened because the board didn’t see the world in the same way as the founder and pulled the plug.

Eckart Wintzen founded BSO/Origin, a software-consulting firm, in the Netherlands in 1973. In the following 20 years, he grew the company to 10,000 people, setting up shop in 18 countries in Europe, South America, and Asia. The company’s structure consisted entirely of self-managing units, with virtually no headquarters and no staff functions. In 1994, the company established a joint venture with a Business Unit from Philips that took majority ownership of BSO/Origin two years later. As Wintzen recounts a decade later in a book, two worlds clashed:

I [became] a board member and gave powerful speeches to leave the system in place. But unfortunately―but not surprisingly given the perspective they came from―my colleagues from Philips on the board pronounced the word “unacceptable” regularly and forcefully. In the eyes of Philips it was a “deadly sin” to give people the authority to hire personnel or even just give away tickets for a musical. I believe that once we literally shouted over the issue until our faces turned red. Two worlds collided, one of strict financial procedures combined with “check, check, double check” with one of “have trust, have trust” 7

In a matter of mere months, as traditional management practices were brought back in, Wintzen saw the company he founded 20 years earlier lose its mojo.

AES

AES, the energy generation and distribution powerhouse co-founded in 1982 by Roger Sant and Dennis Bakke, provides a similar story. Under Sant’s leadership as CEO until 1994, and then with Bakke at the helm, it grew from a two-person firm into a global energy producer employing 40,000 people in plants located in more than 30 countries around the world. AES became a Wall Street darling after it was publicly listed in 1991. For years, while the company was going from success to success, the board members were supportive of AES’s radically decentralized and trust-based decision-making. And yet as Bakke suspected, “Most board members loved the AES approach primarily because they believed it pushed the stock price up, not because it was the ‘right’ way to operate an organization.” 8

In 1992, an unexpected problem confirmed Bakke’s suspicion that most board members were still firmly rooted in a command-and-control perspective. That year, not long after AES became public, a colleague informed Bakke that nine technicians at the AES plant in Shady Point, Oklahoma, had falsified results of water testing and sent inaccurate data to the U.S. Environmental Protection Agency (EPA). No harm was actually done to the river into which the water was discharged, and the fine the EPA ultimately imposed was small. But when an internal letter where Bakke shared the news with all of his colleagues was picked up by the press, investors overreacted and AES’s shares plummeted by 40 percent. In an instant, Bakke remembers, board members as well as some of his senior colleagues were ready to throw self-managing principles overboard:

After the stock price dropped, the nature of our response changed dramatically. We became panicky, and our emphasis shifted from disclosure to damage control. Much of our attention turned to reassuring our shareholders. A host of lawyers descended on the plant to “protect the assets.” … Several of our most senior people and board members raised the possibility that our approach to operations was a major part of the problems. It was as if the entire company were on the verge of ruin. They jumped to the conclusions that our radical decentralizations, lack of organizational layers, and unorthodox operating style had caused “economic” collapse. There was, of course, no real economic collapse. Only the stock price had declined. In addition, one of our senior vice presidents did a presentation to the board suggesting that “Protecting our Assets” rather than “Serving Electrical Needs” should be the top goal of the company. What he meant was that we should follow a defensive strategy, led by a phalanx of lawyers, in order to avoid legal, environmental, and regulatory wrangles. There was also discussion of adding a new layer of operating vice presidents between me and the five plant managers we had at the time. … Under pressure from lawyers and because of an understandable loss of confidence, the [Oklahoma] plant had decided to return to a “proven” approach to running industrial facilities. Back came shift supervisors, an assistant plant manager, and a new environmental staff department reporting to the plant manager (to make sure water treatment employees did the right thing). These steps increased our staffing level at the plant by more than 30 percent.

During this time I felt under-appreciated and uncertain about how much support I had among board members, who seemed to like our values only because they generated good press and were popular among employees. I felt I was alone in fighting for our values because they were intrinsically right. 9

This event triggered an exhausting six-month period where Bakke held what seemed like endless conversations with board members. At the end of it, he just managed to keep the board’s confidence and stay in his role. While the board thought that he had pushed things too far, he came to the opposite conclusion: the new principles weren’t yet anchored firmly enough in the company. He was determined, in his own words, “to challenge every organizational design and every system either in place or proposed” for consistency with AES’s basic assumptions. Over the next 10 years, Bakke focused his energy on embedding self-management deeply within the organization. By his own account, he succeeded at one level but failed at another: employees became champions of “Joy at Work,” as Bakke called AES’s management practices. But at the board level, Bakke was less successful:

I had several clues that my campaign to win over my board colleagues had been ineffective. … Even while some board members were telling shareholders that they loved “giving up power,” I could see that they found it difficult to give advice rather than make decisions. In addition, board members often suggested I tone down the “rhetoric” concerning our shared values and purpose, especially when writing the company annual letter and in meetings with shareholders. 10

When the dotcom bubble burst in 2001, AES’s share price, which had peaked at $70, began to slide. After the 9/11 terrorist attacks it fell lower, to $26. In October, when Enron declared bankruptcy, the stock of all energy providers fell through the floor in a mood of panic―AES’s stock hit a low of $5. AES’s leadership had made some decisions in the previous years that proved risky and mistaken when the economy crashed. Much of the company’s growth was financed with debt on the belief that “debt is cheaper than equity,” which was true until the debt financing collapsed. AES had also begun operating some “merchant plants” in the late 1990s, facilities that sold electricity to the spot market without long-term contracts, leaving it more vulnerable to swings in the price of electricity.

AES’s self-management practices could hardly be blamed for the stock price decline: the decisions that proved risky in hindsight had not been made by some out-of-control renegades, but had been discussed and agreed upon at board level. But it didn’t matter; fear took over among board members, who called for a major reorganization of the company and for centralizing all important decision-making. Scores of lawyers, consultants, and advisors were hired to give the board further control over the company. Employees, meanwhile, were still devoted to AES’s decentralized way of operating, and to Bakke, who embodied it. Finding themselves in a bind, the board decided not to replace Bakke but to bring in a co-CEO whose instructions Bakke was asked to carry out. With opposite perspectives on almost every matter, their collaboration proved extremely difficult. Nine frustrating months later, Bakke resigned. Without him, the new leadership was free to impose tried-and- proven management recipes in place of the self-managing practices that AES had started pioneering 20 years earlier.

Getting started

Overarching assumptions and values

Pg 261:

You will probably make your life much easier if you articulate the assumptions you hold about people and about work. Here some examples to provide food for thought:

RHD, you might remember, has defined for itself the following three basic assumptions: people are of equal human worth; people are essentially good, unless proven otherwise; there is no single way to manage corporate issues well.

Morning Star’s way of operating is founded on two core principles: individuals shall work together with no use of force or coercion; individuals shall keep commitments.

FAVI has articulated three basic assumptions: people are systematically considered to be good (reliable, self-motivated, trustworthy, intelligent); there is no performance without happiness; value is created on the shop floor.

A practical tip: explore the assumptions with your team, not on your own. And as a first step, start by uncovering the unspoken assumptions behind the traditional hierarchical organizational (Amber/Orange) model: workers are lazy and untrustworthy; senior people have all the answers; employees can’t handle difficult news; and so forth.

The advice process (see page 99): From the start, make sure that all members of the organization can make any decision, as long as they consult with the people affected and the people who have expertise on the matter. If a new hire comes to you to approve a decision, refuse to give him the assent he is looking for. Make it clear that nobody, not even the founder, “approves” a decision in a self-managing organization. That said, if you are meaningfully affected by the decision or if you have expertise on the matter, you can of course share your advice.

A conflict resolution mechanism (see page 112): When there is disagreement between two colleagues, they are likely to send it up to you if you are the founder or CEO. Resist the temptation to settle the matter for them. Instead, it’s time to formulate a conflict resolution mechanism that will help them work their way through the conflict. (You might be involved later on if they can’t sort the issue out one-on-one and if they choose you as a mediator or panel member.)

Peer-based evaluation and salary processes (see pages 123 and 129): Who will decide on the compensation of a new hire, and based on what process? Unless you consciously think about it, you might do it the traditional way: as a founder, you negotiate and settle with the new recruit on a certain package (and then probably keep it confidential). Why not innovate from the start? Give the potential hire information about other people’s salaries and let them peg their own number, to which the group of colleagues can then react with advice to increase or lower the number. Similarly, it makes sense right from the beginning to choose a peer-based mechanism for the appraisal process if you choose to formalize such a process. Otherwise, people will naturally look to you, the founder, to tell them how they are doing, creating a de facto sense of hierarchy within the team.

As a founder, your presence, the way you show up, will determine to a large extent how comfortable other people feel to show up with all of who they are. The more you self-disclose, the more authentic, the more vulnerable, the more honest you are about your strengths and weaknesses, the safer others will feel to do the same. This might all come naturally to you. In any case, when starting an organization, certain practices might help you and others ground yourselves in more wholeness. Four particular practices lend themselves to being introduced very early on:

Ground rules for safe space (see page 151): To show up fully in the presence of others, we must feel it is safe to do so. Many organizations find it helpful to define a set of values and to translate them into concrete behaviors that are either encouraged or declared unacceptable in the community of colleagues. This is often best captured in a document, such as RHD’s Bill of Rights and Responsibilities, or Morning Star’s Colleague Principles. Some startups will find it important to draft a full version of such a document early on, based on experiences both good and bad from previous organizations they worked in. Others will write such a document chapter by chapter, whenever an incident triggers a new topic to be added. Whatever way you choose, make sure it is not written by a single person (not even you, if you are the founder), but stems from a collective effort (and it might be helpful to ask one or several volunteers to take on the role to keep it alive).

The office or factory building (see page 167): Office buildings are often drab, soulless places. They unconsciously tell us: This is a work setting where you are expected to think and behave in certain conditioned ways. Why not, from the start, make the work setting colorful, inviting, warm, and quirky, in whatever ways fit the organization’s culture and purpose? Spend a day or a weekend as a team planning and re-decorating the space. Go wild―forget any preconceived notions of what a workplace should look like. It will help colleagues remember that this place is special, and that they, like the building, are welcome to show up in their own unique way.

Onboarding process (see page 176): The onboarding process is critical in making new members feel welcome and in conveying how this place works. What is the ideal experience for new hires in their first hours, days, and weeks at work? What foundational training should everybody that works in the organization experience? Self-management, deep listening, dealing constructively with conflict, creating a safe environment, some frontline skills … ?

Meeting practices (see on page 162): In the early days of an organization, people tend to meet often to align with and update one another. To prevent the typical meeting syndromes―egos showing up, some people’s voices drowned out by others―you can integrate a meeting practice that invites people into wholeness. It can be as simple as starting with a minute of silence or a round of thanking, but you can also choose a structured decision-making process, such as those practiced by Holacracy and Buurtzorg.

The healthy relationship is one where as a founder you see, from the start, the organization as having a life and purpose of its own, distinct from your own wishes and desires. For a short time, you might be the main person to articulate it, but as soon as other people join you, they should be able to sense the broader purpose just as well and find their unique way to relate to it and express it. Two practices can help:

Recruitment (see page 219): The recruitment process offers a beautiful opportunity to help potential new hires explore in depth in what unique ways the organization’s purpose resonates (or doesn’t) with their own calling and longings. These can be wonderfully deep, sometimes moving conversations. And perhaps the candidate might, even before joining the organization, offer a perspective of where he feels the organization might be called to go.

Empty chair meeting practice (see page 204): The “empty chair” is a simple practice you can introduce from day one. At the end of every meeting (or at any moment during the meeting), someone from the team can sit in the empty chair that represents the organization’s purpose and listen in, for instance, to the question: Has this meeting served the organization well?

NTS

Some real alignment with us re AET

The final chapter on a “Teal Society” has a lot in common with us e.g. p.300

An increasing number of people believe that technology alone will not save us and that a change in consciousness is needed. Will humanity, in sufficient numbers, make the leap in time? We can draw some hope from the fact that consciousness seems to grow at an exponential rate too, moving to later stages ever more quickly: the half-life of each new paradigm seems to get shorter and shorter (see graph on page 35). Hope can come also from the millennial generation: it used to be that people shifted to a Teal perspective mostly in their 40s or 50s; more and more millennials make the shift in their 20s and 30s. We seem increasingly ready and hungry for change. On a small scale, Buurtzorg gives a hopeful example of an entire industry―neighborhood nursing in the Netherlands―that in less than 10 years transitioned smoothly from Orange to Teal, breathing truth into the affirmation of Harvard economist Kenneth Rogoff: “Systems often hold longer than we think, but they end up by collapsing much faster than we imagine.”

p.303-4

Such a worldview is bound to produce new ways of working. Many of us sense that the current way we run organizations is deeply limiting. We will come up with better ways- because there is simply is too much life, and too much human potential, waiting to express itself. Almost 20 years ago, Margaret J. Wheatley and Myron Kellner-Rogers began A Simpler Way, a prophetic book about what organizations could be, with these words:

There is a simpler way to organize human endeavor. It requires a new way of being in the world. It requires being in the world without fear. Being in the world with play and creativity. Seeking after what’s possible. Being willing to learn and be surprised.

The simpler way to organize human endeavor requires a belief that the world is inherently orderly. The world seeks organization. It does not need us humans to organize it.

This simpler way summons forth what is best about us. It asks us to understand human nature differently, more optimistically. It identifies us as creative. It acknowledges that we seek after meaning. It asks us to be less serious, yet more purposeful, about our work and our lives. It does not separate play from the nature of being. …

The world we had been taught to see was alien to our humanness. We were taught to see the world as a great machine. But then we could find nothing human in it. Our thinking grew even stranger―we turned this world-image back on ourselves and believed that we too were machines.

Because we could not find ourselves in the machine world we had created in thought, we experienced the world as foreign and fearsome. … Fear led to control. We wanted to harness and control everything. We tried, but it did not stop the fear. Mistakes threatened us; failed plans ruined us; relentless mechanistic forces demanded absolute submission. There was little room for human concerns.

But the world is not a machine. It is alive, filled with life and the history of life. … Life cannot be eradicated from the world, even though our metaphors have tried. … If we can be in the world in the fullness of our humanity, what are we capable of? If we are free to play, to experiment and discover, if we are free to fail, what might we create? What could we accomplish if we stopped trying to structure the world into existence? What could we accomplish if we worked with life’s natural tendency to organize? Who could we be if we found a simpler way?4

Connections with wisdom traditions

p.44

The shift to Evolutionary-Teal happens when we learn to disidentify from our own ego. By looking at our ego from a distance, we can suddenly see how its fears, ambitions, and desires often run our life. We can learn to minimize our need to control, to look good, to fit in. We are no longer fused with our ego, and we don’t let its fears reflexively control our lives. In the process, we make room to listen to the wisdom of other, deeper parts of ourselves.

What replaces fear? A capacity to trust the abundance of life. All wisdom traditions posit the profound truth that there are two fundamental ways to live life: from fear and scarcity or from trust and abundance. In Evolutionary-Teal, we cross the chasm and learn to decrease our need to control people and events. We come to believe that even if something unexpected happens or if we make mistakes, things will turn out all right, and when they don’t, life will have given us an opportunity to learn and grow.

p.47-48

Beyond facts and figures, cognition at this stage taps a broader range of sources to support decision-making. The Orange modern-scientific perspective is wary of emotions that could cloud our ability to reason rationally, whereas Green sometimes goes to the other extreme, rejecting analytical “left brain” approaches for “right brain” feeling as a basis for decision-making. Teal is happy to tap into all the domains of knowing. There are insights to be gained from analytical approaches. There is also wisdom to be found in emotions if we learn to inquire into their significance: Why am I angry, fearful, ambitious, or excited? What does this reveal about me or about the situation that is unfolding?

Wisdom can be found in intuition, too. Intuition honors the complex, ambiguous, paradoxical, non-linear nature of reality; we unconsciously connect patterns in a way that our rational mind cannot. Intuition is a muscle that can be trained, just like logical thinking: when we learn to pay attention to our intuitions, to honor them, to question them for the truth and guidance they might contain, more intuitive answers will surface.

Many people believe that there are answers to be found in yet deeper sources. Wisdom traditions and transpersonal psychology trust that if we don’t simply ask a question, but live a question, the universe in its abundance may give us clues to the answer in unexpected events and synchronicity or in words and images that arise in dreams and meditations. Non-ordinary states of consciousness―meditative states, contemplative states, visionary experiences, flow, peak experiences―are available at any stage of consciousness, but from Teal onward, people often take on regular practices to deepen their experience in these states and access the full spectrum of human experience.4

Another cognitive breakthrough is the ability to reason in paradox, transcending the simple either-or with more complex both-and thinking. The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honors the servant and has forgotten the gift.

Breathing in and breathing out provides an easy illustration of the difference. In either-or thinking, we see them as opposites. In both-and thinking, we view them as two elements that need each other: the more we can breathe in, the more we can breathe out. The paradox is easy to grasp for breathing in and out; it is less obvious for some of the great paradoxes of life that we only start to truly understand when we reach Teal: freedom and responsibility, solitude and community, tending to the self and tending to others.

Put this all together―a fearless rationality and the wisdom that can be found in emotions, intuition, events, and paradoxes―and Evolutionary-Teal turns the page from the rational-reductionist world-view of Orange and the post-modern worldview of Green to a holistic approach to knowing.

Striving for wholeness

Disidentifying from the ego is one more step of liberation on the human journey. But with disidentification comes separation, and people operating at this stage often develop a keen sense of how far we have let separation fragment our lives and how much it has cost us. We have let our busy egos trump the quiet voice of our soul; in our culture we often celebrate the mind and neglect the body; we often value the masculine above the feminine; we have lost community and our innate connection with nature.

With this stage comes a deep yearning for wholeness―bringing together the ego and the deeper parts of the self; integrating mind, body, and soul; cultivating both the feminine and masculine parts within; being whole in relation to others; and repairing our broken relationship with life and nature. Often the shift to Teal comes with an opening to a transcendent spiritual realm and a profound sense that at some level, we are all connected and part of one big whole. After many successive steps of disidentification, as we learn to be fully independent and true to ourselves, it dawns on us that, paradoxically, we are profoundly part of everything.

This longing for wholeness is at odds with the separation that most existing workplaces foster, albeit unconsciously―overemphasizing the ego and the rational while negating the spiritual and emotional; separating people based on the departments they work in, their rank, background, or level of performance; separating the professional from the personal; separating the organization from its competitors and the ecosystem it is embedded in. Vocabulary we use is often revealing: in organizations, we often speak about “work-life balance”―a notion that shows how little life is left in work when we have separated ourselves from so much that truly matters. For people transitioning to Teal, these separations in the workplace often become so painful that they choose to leave organizational life for some form of self-employment, a more accommodating context to find wholeness with themselves and with others.

p.144 [ed: i like this]

Wisdom traditions from around the world speak to this from a deeper level: at heart, we are all profoundly interconnected and part of a whole, but it’s a truth we have forgotten. We are born into separation and raised to feel divided from our deeper nature, as well as from the people and life around us. Our deepest calling in life, these traditions tell us, is to reclaim wholeness, within ourselves and in our connection with the outside world.

Misc

p.143 - did Einstein really say this?

A human … experiences himself, his thoughts and feelings, as something separated from the rest. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest us. Our task must be to free ourselves from this prison by widening our circles of compassion to embrace all living creatures and the whole of nature in its beauty. -Albert Einstein

Is this an org we could connect with (maybe if Laurie and Tamara would like to):

An organization that can show us, perhaps better than any other, how reflective practices can be integrated deeply into everyday life is a German company called Heiligenfeld. It is a fast-growing company with 630 employees running four mental health and rehabilitation hospitals in the center of Germany. It is the brainchild of Dr. Joachim Galuska, a medical doctor and psychotherapist. In the 1980s, he felt that more holistic approaches to therapy were needed to treat patients in mental hospitals; he wanted to add spiritual and transpersonal approaches to classical psychotherapy. He found that none of the existing hospitals he talked to seemed open to his vision. In 1990, he stumbled upon Fritz Lang, an entrepreneur and owner of a historic, if somewhat faded, hotel in Bad Kissingen. Together they decided to transform the hotel into a small 43-bed mental health hospital that would offer a holistic approach to therapy. The success has been overwhelming, with clients traveling in from all over Germany and other parts of Europe. Twenty years later, Heiligenfeld has become a network of hospitals with 600 beds, which most likely will keep expanding.

Dubiousness about Patagonia as poster child (note this is also in Thich Nhat Hanh Power book):

Looking back, Chouinard found that more often than not in Patagonia’s history, risky bets have turned out to be profitable in the end. Most strikingly, Patagonia resolved in the summer of 1994 to replace all conventionally grown cotton with organic cotton by spring of 1996―a decision with an insanely fast timeline and wide-reaching implications. The raw material cost three times more, and the cotton product line was reduced from 91 styles to 66. It was a crazy risk. And yet Patagonia felt there was no alternative when it realized the full extent of the damage the cotton industry was doing to the world: cotton fields that covered only three percent of the world’s farmland were responsible for 10 percent of the worldwide use of pesticide and 25 percent of the use of insecticides. Against all expectations, Patagonia’s organic cotton program turned out to be financially beneficial. More importantly, it has convinced others in the industry to follow suit.

My comment is what about the crazy growth phase in the 80s when they had 20%+ growth a year and became really successful. Once you have “made it”, especially in a niche, conscious consumer industry it may be easier to be “good”.

TODO:checkout Clare Graves e.g. The Never Ending Quest (Santa Barbara: ECLET Publishing, 2005)

From the Notes

The first major study dates from 1992, when Harvard Business School professors John Kotter and James Heskett investigated this link in their book Corporate Culture and Performance. They established that companies with strong business cultures and empowered managers/employees outperformed other companies on revenue growth (by a factor of four), stock price increase (by a factor of eight) and increase in net income (by a factor of more than 700) during the 11 years considered in the research. A more recent study by Raj Sisodia, Jagh Sheth, and David B. Wolfe, in what is arguably a defining book for the Green organizational model―Firms of Endearment: How World-Class Companies Profit from Passion and Purpose―came to similar conclusions in 2007. The “firms of endearment” studied by the authors obtained a cumulative return to shareholders of 1,025 percent over the 10 years leading up to the research, as compared to 122 percent for the S&P 500. From a methodological point of view, these results should be taken with a grain of salt. There is an obvious selection bias, as only exceptional companies that one would expect to outperform their peers were handpicked into the sample. The benchmark of the S&P 500 wasn’t adjusted for industry, size, or other criteria. Furthermore, criteria other than the organization model, such as patents, innovative business models, and asset utilizations that could explain the superior result, were not filtered out. Raj Sisodia’s latest book, written with John Mackey, has a whole chapter with references of similar studies to which interested readers can refer. Any research trying to make such general claims as to the superior outcome of one organizational model over another is bound to hit methodological discussions (and on a principled level, one could question shareholder return or growth as the primary metric to gauge success, as most of these studies do). Perhaps direct experience ultimately matters more than academic claims. Anyone who spends time in organizations such as Southwest Airlines or The Container Store will return convinced that empowered workers in values- driven companies will on average outperform their peers in more traditional settings.

15 The 2006 Stanford Business Case on DaVita is highly readable and a good resource for readers wanting to immerse themselves in a more detailed description of Green organizational principles and practices.

Reinventing Organizations by Frederic Laloux