Five Principles of Organizational Evolution
This article is an English translation of 「組織進化的五大原則」, originally published in Chinese on Future Organization Lab 未來組織實驗室 on July 1, 2020.
Before you read, consider
As the organizational environment changes, what exactly is changing?
What are the key elements of organizational evolution?
Evolution never stops
The world has always been a game about the present and the future. Evolution never stops; there’s always a next stage. As humans and as organizations, we’re all on an evolutionary journey with no end and no summit — evolution never stops. So there’s always the question of “where are you now?” You need to know your current environment and understand its existing limits in order to decide where to go next.
The evolution of power systems is gradual, step by step, continually developing and progressing — that’s the key to the evolutionary journey. We need to design power structures and distribute power well. Decision-making processes are what drive an organization, and they change and evolve with the times.
Opening the door to a new world of work
My colleague Elliott Jaques wrote a book called Requisite Organization. He argued that every organization contains three organizational structures.
The first: the organizational chart written down in black and white — the classic, traditional org chart.
The second: the “extant” org chart, reflecting who I actually know to go to in order to get work done, and who has the relevant experience.
The third: a structure based on different principles, determined by the nature of the work. That’s where we’re heading next.
So overall, there’s a clear trend: more and more self-organization is emerging.
Five principles of organizational evolution
What are the signs of the new world of work? What should we look for? Where are you now, and what’s your next step? How do you see these principles showing up in your organization, your work and your practice? I’ve summarized five principles:
1. Purpose
I believe purpose is crucial for a self-organizing organization. Purpose is the boss; purpose is the new driving force. When you face a choice, it’s purpose that tells you what to choose, not your boss. Your purpose, the organization’s purpose and the purpose of specific work — those are your boss. In a self-organizing, self-managing system, purpose comes above everything.
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In Forrest Gump, the hero says, “Life is like a box of chocolates. You never know what you’re gonna get,” and “Stupid is as stupid does.” Purpose works the same way: whether you have purpose shows in what you do. Purpose pushes you to act, and makes you keenly aware of what work needs doing and how. Everything revolves around purpose.
2. A holarchic structure
This is a whole new structure: one without concentrated personal power, organized around purpose. The classic org chart is history, and so are the power holders. There are many ways to define Holacracy. One is that it’s a complete replacement for hierarchy — a new stage of organizational evolution that supports self-organization and self-management. The management hierarchy disappears entirely, replaced by a new organizational system with a natural hierarchy of work, called a holarchy.
3. Dynamic and agile
This has many meanings. There’s the agile movement and the lean movement — great principles that I want to embed in the operating system of self-organization. We want to break the deep-rooted predict-and-control model in today’s organizational structures. Predict-and-control is the standard model today, but we’ve found we’re actually very bad at prediction. What we’re better at is sensing the present — sensing what we need to do right now and what action we need to take to move forward. Our strength lies in sensing current reality and moving forward around purpose, so we embed the dynamic principle into the system.
4. Autonomy
In a self-organizing model, there is mutual respect and people are at the core. You respect and follow each individual’s leadership, while recognizing your own leadership and directing your own work. This is a principle that brings change, and embedding it into a self-organizing system transforms everything. In an autonomous system, you need to know where the limits are. Another way to describe Holacracy is as a distributed autonomous system: individual autonomy is spread throughout the organization, and everyone can lead their own work while respecting others’ authority over theirs.
5. Transparency
Open-book management has been around for nearly a decade; you can think of this as a turbocharged version of it — the more transparent, the better. Transparency is essential to ensuring autonomy at work: you need to know where the limits and boundaries are, and what measures or metrics should guide our work. All of this requires a high degree of transparency. In a self-managing system, transparency has to go up — as high as you can make it.
I often ask people how they define an “organization.” They all give similar answers: a group of like-minded people doing interesting things together. That’s nice — but it’s not the organization we’re looking for.
In a self-organizing system, we organize around purpose. An organization is neither a concentration of individual power nor a group of people; it’s a structure for realizing purpose — a structure for pursuing purpose.
So our definition of organization changes, and so does our fundamental understanding of it. An organization is a structure for pursuing purpose. Our definitions of ownership and power structures change too. The idea of “my team” disappears; everyone’s attention shifts to purpose, and the whole language of “my employees,” “my company,” “my team” changes.
Self-organization cases:
1. Zappos
When a company grows to a certain size and age, unwelcome signs appear — bureaucracy, slow decision-making, an unhealthy culture and so on. So Zappos’s former CEO Tony Hsieh began looking for a breakthrough to reignite the company’s entrepreneurial spirit. A few years ago he decided to adopt Holacracy and completely overhaul the organization — distributing power under entirely new rules, pushing decision rights all the way down and cascading purpose through every level, so that everyone was actively engaged in running the company.
In an interview in the McKinsey Quarterly, Hsieh said, in essence: “Our organizational structure might change 50 times in a day, and our 1,500 employees can clearly see everyone’s purposes and accountabilities.” Imagine your org structure changing 50 times in a single day — isn’t that incredible? A traditional organization would never want such frequent change. It’s a vivid example of the dynamic principle.
2. A large organization using Holacracy successfully
A US financial holding company used Holacracy to expand its business and as a post-merger integration tool. When acquiring other companies, it used this new management system to integrate them into the parent company; Holacracy gave it a whole new tool for M&A and integration. If you know anything about mergers, you’ll know that many fail, mostly because of culture and management issues. This example shows Holacracy can be a very good tool for M&A.
The way forward: from power to purpose
The journey of self-organization continues. We have a system of rules that everyone can take part in, but two systems remain unresolved: our legal systems and our employment structures still follow 19th- and 20th-century corporate forms. If a self-organizing system has no hierarchy and no leaders, how do we manage employees? How do they find their place? That’s the next problem we need to solve.
Around the world, there’s a boom in independent contractors — people who come together as a federation around purpose, but aren’t employees. How should we respond? So we’ve built a new structure, a purpose economy that connects everything, with you at its core: you and your sense of purpose, how your purpose connects to a larger purpose, and what you contribute to the world. We’ve created a complete supporting space to help people ultimately achieve self-organization. That’s the next direction.
Looking ahead, I think that beyond self-organization, we should look at what other power structures affect the way we work. In this new world of work, I encourage you to explore — explore the five principles, explore what you look like now and what you want to become next, and how you’ll become a messenger of purpose in this world.
