This article is by Mike Arauz, co-founder of August, an organizational design firm that helps teams develop their capacity to learn and adapt quickly, together. Mike is also a co-author of the Responsive Org Manifesto.
I remember that Monday morning well. It was too early to be at the office, and the team sipped coffee anxiously, waiting for the meeting to start. For the past two months, every day seemed to bring bittersweet news about the future of our business. One day we were going to pull through. The next day we were doomed. Understandably, the team hoped that this special meeting would finally bring some clarity one way or the other. Unfortunately it too was painfully short on clarity or action.
One month later, Undercurrent — our recently thriving company — abruptly shut its doors forever.
When I think back on that Monday morning, and the tumultuous weeks on either side of it, the lesson I learned was that our greatest failure was our inability (or unwillingness) to completely embrace a new, responsive mode of self-management that had transformed our business over the past year. We were finally reaching a point where senior leaders weren’t swooping in to overrule or derail others’ work; where we weren’t letting a desire for perfection get in the way of user-driven iteration; and where we were maximizing transparency about our company’s performance and operations.
But when it came to the biggest decisions our company would face — first whether or not to sell the business, and later how it might be saved — we hung on tight to the traditional command-and-control ways of operating. We did this at exactly the time we would have benefitted most from trusting the team to collectively determine its own future.
In the wake of Undercurrent’s collapse, myself and five other former team members have picked up the pieces and started to build something new. August is different from Undercurrent. But, we are intentionally building on everything we tried while we were there, and everything we learned about what worked and what didn’t.
Undercurrent adopted Holacracy in the Summer of 2013, and it made a huge positive impact on our business. Yet, as August looks ahead at the company that we want to build, we have decided to opt-out of Holacracy’s rigid system, and operate with our own lighter weight approach to self-management. While many of Holacracy’s underlying principles are incredibly valuable, it is possible to reap the benefits without formally adopting Holacracy.
Whether you’re interested in Holacracy or not, these are the fundamental practices that any company can design into its DNA to give it the capacity to thrive — together — in the face of the inevitable challenges we will face.
This is how to design a company, from the ground up, that is capable of managing itself as it grows and evolves.
1. Nail a memorable common purpose.
Our purpose at August is to build capable teams for every meaningful mission. Committing to a distinct and explicit purpose — your collective raison d'être — brought a transformative focus to Undercurrent’s business, and when we started August, defining our own purpose was priority No. 1.
These are not empty words. It’s not a marketing slogan. We’ve even embedded this purpose into the legal foundation of our firm by incorporating as a New York Benefit Corporation. We believe that our world is full of missions with the potential to change our future for the better; and each of these missions deserves a team that is capable of learning and adapting fast enough to accomplish it.
This purpose doesn’t attempt to say everything, but it describes simply and clearly what we aim to accomplish. Importantly, it does not describe how to do it. Figuring out how to do it is the work.
This purpose now acts as a lens through which we can view decisions from now on. “What makes a team capable?” “What’s the best way to improve a team’s capability?” “Does this client share our definition of ‘capable’?” “Does this client want to have a meaningful impact on our world?”
Once you have a clear and explicit purpose, you'll find that entrenched debates become unstuck, and difficult decisions find resolution. This progress isn’t without its costs. Over time, beloved and long-tenured employees may decide that their personal career purpose is leading them in a different direction, and chose to leave the company. You may reevaluate your project work and client relationships and realize that some client relationships either need to evolve substantially, or you need to gracefully end the relationship altogether.
What is significant isn’t that you’re able to talk about the need for focus, or what to focus on — debating what to prioritize is easy — but, rather, that everyone has the exact same externalized reference point to use as a guidepost in these debates. The debate is no longer about one person’s opinion vs. another’s, but rather what course of action will help move you toward your shared goal.
This is the real magic of a great organization-wide mission: a true and compelling purpose becomes the ultimate trump-card that everyone can use to break through bureaucracy and inaction and move the company forward.
At August, our process for defining and committing to our purpose was fairly organic. As a very small group of founders with a clear idea of the business we wanted to pursue, we were lucky to all start on the same page about the essential idea of our purpose. A lot of startups benefit from the same momentum. But using precise words matters, and this is where we focused more explicit effort. We began by trying to express the clearest and most explicit version of the idea we had in our heads.
These early versions were wordy, clumsy, and not very user-friendly. But they helped us discuss and analyze what was most essential. Then, once we had landed on a true, but cumbersome version, we edited and re-edited over the next few weeks, exchanging slight iterations via Google Docs and Slack messages. Finally, when we arrived at a version that we all seemed to like, we brought it to an in-person all-team meeting and used the consent-based decision-making process described below to ratify and commit.
Once you have this single unifying goal, you can apply it to all of your other work. Define and commit to specific and explicit missions for every team within your organization. Start by asking yourself, “What are the most critical outcomes that we need to achieve to help make progress toward our overarching purpose?”
Identify a small handful of related, but independent, missions that you expect to be relevant and critical for the next 4-12 months. (Trying to predict what will be important more than 12 months into the future is a fool’s errand.) After you have this starting structure of purpose-aligned missions, you can assign them to members of your team. Each leader can then break the work down further into monthly, weekly, and daily sub-missions that can each be owned by its own sub-team.
At first, these broad areas of focus might have a lot in common with traditional “functions” (i.e. Product Development, Customer Relationships, Operations, Sales, Marketing, and HR), but the reframing of them as purpose-driven actually makes a significant difference in how they manifest themselves in your organization.
At Undercurrent, this reframing gave us permission to ask specific individuals to lead the teams and work for each of these areas without restricting the roles that an individual might play to just ‘Head of HR’ or ‘VP of Sales.’ These purpose-aligned missions existed independently of the individuals who filled them. The people who owned these missions were able to bring their whole selves to the challenge without having to limit or restrict their sense of self or their professional ambitions. Perhaps most significantly, it allowed us to look at the work of the organization through a more objective lens.
We could ask ourselves honestly, “Is this really the most critical work to be done right now in service of our purpose?” without the question getting tangled up in the question of whether or not, for example, Susan should or should not be VP of Operations.
Every mission should be:
- User/Customer-centric: Express the impact you aim to make for those you serve (internal or external)
- Brief: ~140 characters or less
- Clear: Jargon-free and easily understood
- Time-bound: Achievable within intervals of 1 week, 4 weeks, 3 months, 6 months, or 1 year, depending on the scale of the mission
- Ambitious: Inspires the team to do their best
2. Digitize your org to tap your network and blow up the hierarchy.
All of the essential elements of our organization are captured and expressed in a single digital repository, open and accessible to all members at all times, and able to be changed and revised on a continual basis. In this organizational system of record, we document: our collective org-wide purpose, specific sub-missions, teams, individual roles, expectations for and key activities of team members, org-wide and team-wide policies, and boundaries of ownership between teams. Currently, this information lives in Google Drive, so all changes made to these elements over time are recorded. You can view August’s record here, as an example. We are still a tiny startup, so the record is short, but it will grow and evolve steadily over time.
While it may seem daunting or tedious to capture all of this information for your organization at first, once you’ve done it, the result is transformative. The reason why digitizing your organization is so powerful is because the single biggest challenge holding most organizations back is that, as Yammer Co-founder and former CTO Adam Pisoni likes to say, “People don’t know how to organize to get things done” in a digital world. As technology has forced us into a networked work environment, with multiple overlapping and multiplying channels of communication, it has become seemingly impossible for us to keep track of our work.
Organizing to get things done depends on knowing 3 critical things:
- Knowing what you need to do.
- Agreeing on what we need from each other.
- Knowing who is (and isn't) responsible for what.
In most organizations today, the answers to these questions, and all the related interdependent questions, exist at best in static PowerPoint documents sitting on a senior manager’s hard drive, and at worst are trapped in implicit assumptions inside the heads of all the people who need to work together to move the company’s purpose forward. The power of making all of this previously inaccessible and implicit information about your organization easily accessible and explicit can not be understated.
It is critical that this practice enables the team rather than burdening them. This is relatively easy as long as you make a habit of it. Honestly, the only hard part is transitioning an existing org into this digital format. But, once you’ve created a v1.0, each team can meet regularly and easily make updates and changes. At August, we have a special meeting once every 4 weeks, where anyone can propose changes and the group can collaboratively commit to updates.
This way of documenting your organization is actually one of the lesser known facts about Holacracy. There’s an accompanying piece of software called GlassFrog that facilitates and keeps track of the organization’s self-management. I would argue that GlassFrog might actually be more powerful and significant than Holacracy itself. While Undercurrent had many internal debates about the merits of sticking with Holacracy, we stuck with it primarily because we were hooked on GlassFrog.
Once you’ve digitized this information, anyone, at any time, is empowered by the software to find out:
- Who is responsible for x? (Is anyone responsible for x?)
- What’s on my plate? What’s on my teammate’s plate?
- What are the teammates I depend on expected to provide for me?
And being able to get easy answers to these questions, and others like them, gives everyone the ability to make informed decisions about how they do their work, and how they work with their colleagues.
Having our organization expressed in this transparent way builds trust and empowers team members because our commitments to each other are explicit and open. We know exactly what we’ve promised each other, and have the same point of reference if we feel that those commitments need to change.
GlassFrog provides its own unique architecture for capturing your organization in digital form:
- Purpose (org-level, and team-level)
- Teams & Roles
- Team & Role purpose
- Team & Role domains
- Team & Role accountabilities
- Team & Role strategies
- Key Metrics
Holacracy and GlassFrog is one option. Other companies, like the tomato processing company Morning Star and their “Colleague Letter of Understanding,” have created other variations that address similar organizational outcomes. We’ve also seen that shared, cloud-based documents in Google Docs or Box can be used in a similar way, given the right templates and structured information.
The key is to make these critical elements of your organization explicit, and to put them in an open and accessible digital format. This digital record quickly becomes an essential reference point. When you’re thinking about recruiting and hiring, you always have up-to-date job descriptions for every possible role. When new team members want to find out what their new colleagues do, or who to connect with to do their work, they simply refer to the record. And, perhaps most importantly, when the company wants to make larger-scale changes to its structure, it has a single shared reference point for what to change. Before you try it, it’s hard to imagine what difference it makes. But once you’ve tried it, you’ll never go back.
3. Distribute authority and embrace total self-management.
Making your organization’s purpose clear and explicit, and digitizing how you organize to do the work builds a foundation of trust. The relationship between the organization, its leaders, and everyone who works within it is now grounded in a mutual understanding about where you’re going, and what is expected of each person to help get you there. Congratulations, you are now ready to unlock the power of self-management.
In a truly self-managed organization, each member and each team has both the authority and expectation to act as they see fit. Each person is trusted by the organization to use their best judgement to determine the best path forward in service of the organization’s collective purpose. For example, at August if someone thinks it would be valuable to hire a freelance designer to help create an important set of training documents for a client, they can go ahead and engage that designer without getting “approval from finance.” It also applies to larger, thornier issues. All team members have an active role to play in determining how we set salaries, distribute profits, and even assign equity. And anyone, regardless of seniority, role, or tenure, can propose changes to any aspect of how we operate.
This approach is popular at leading tech companies like Google, Amazon, and Facebook, where engineers push updates to the live platform with minimal oversight from very early on in their tenure. But it can and should extend much more broadly beyond software engineering.
At Zappos, customer service employees are empowered to do whatever is necessary to “wow” their customers. Seeds of this kind of employee trust can be found in much older organizations, as well. The manufacturing company W.L. Gore, famous for Gore-Tex and other patented inventions, has used a similar model for over 50 years. And even before that, Xerox Parc and Bell Labs harnessed this kind of employee empowerment to drive wildly prolific cultures of innovation.
At Undercurrent, we always had an implicit expectation that individuals and teams should be trusted to use their best judgement in nearly all situations. But, even with this cultural value in place, many decisions kept running into a “management” bottleneck. Whether it was as simple as reviewing a scope of work, deciding how to staff a project, or even what our parental leave policy should be, a select few “senior” leaders were making the final decisions, when actually many other team members could not only be trusted to make a good decision themselves, but moreover other team members might actually provide a better and more informed perspective on the decision than these senior leaders. We knew that those closest to the problems were best positioned to solve them; we just needed to let them.
At August, we are going all in on self-management. We are even using it to make decisions about equity and compensation. We commit to encouraging each other to claim as much decision making authority as possible, in all situations. When in doubt, the default is “DO even over ask.” Because most of the time whatever the team member would do is the right thing; and the few times that it turns out to be the wrong thing, we can adapt.
In this new era, no one is anyone else’s ‘manager.’ No one tells you how to do your work. Each team is fully responsible for doing what is expected of them, and deciding for themselves how to get the work done.
What makes this completely autonomous approach work are three interconnected behaviors and new practices:
Distributed Authority and Clear Domains – Each team, and the individuals within it, has explicit permission to do whatever they think is needed to accomplish their own team mission. The only restrictions are specific domains that are explicitly owned by another individual role or team. If you need to make a change to something that is explicitly within another team’s domain, you need to go through them and get their consent.
Proposals and Advice – When you recognize a problem or opportunity that impacts the work of other teams or roles, it is incumbent on the person who identifies the issue to propose a specific change or course of action, and to seek the advice of all those affected. When collecting advice, it’s important that all voices are equally represented, and that their perspectives are heard and respected.
Consent Over Consensus – Collecting feedback on every important decision could easily devolve into a downward spiral of discussion and unending debate. This is why it’s critical to pair the advice process with an explicit bias for consent over consensus. The default assumption is that the proposal will move forward. We only amend the proposal if another individual or team has evidence of why the proposal will cause immediate harm to the business in the near term. When these rare objections occur, it is then incumbent on the objector to propose an amendment that would make the proposal safe to try.
One specific process that is adapted from Sociocracy, and used in Holacracy, is something called the Integrative Decision Making process. It is a highly structured and facilitated method for collecting feedback on a proposal and gaining consent on group action.*
- Proposal: Describe the issue you’ve identified and propose your change or course of action.
- Clarifying Questions: Each participant can ask questions to clarify their understanding of the proposal. Only the proposer is allowed to answer.
- Reactions: Each participant can share their thoughts about the proposal, including support, concern, and suggested edits. The proposer does not respond or participate.
- Amend & Clarify: After listening carefully to the group’s reactions, the proposer can clarify their original proposal and amend their proposal to incorporate the group’s feedback.
- Objections: Each participant is asked if they have any evidence why the proposal, as stated, would cause immediate harm to the business, or if it is safe to try.
- Integration: If there is a valid objection, the objector and the proposer work together to find a mutually acceptable middle ground.
If there are no valid objections, or once valid objections have been addressed, the proposal is accepted.
* When using this process, make sure that you have a shared document — flip chart or Google Doc on a large screen — where you write down the specific proposal so that everyone can react to the exact same content, and you are 100% explicit about what you’re committing to.
4. Never stop iterating.
Everyone is familiar with agile methodology and its merits. It’s been a clear winner among successful startups and has become the assumed best-practice for enterprise as well. But, the need to continually test and learn in today’s business world is not limited to the discipline of software engineering. As Undercurrent shifted to this new model, we realized that we could bring this same agile approach to all aspects of our work and our organization itself.
At August, all of our projects, both internal and external, operate on a weekly sprint rhythm. Just like an agile software team, our consulting project teams hold weekly stand-ups on Monday to review priorities and assign tasks, and we ship work out to our clients every Friday regardless of where the work is at. As Lorne Michaels likes to say to the cast of SNL, “The show doesn’t go on because it’s ready; it goes on because it’s 11:30.” That’s the mindset we bring to our consulting work.
Having applied this approach across many diverse functions at our company and within our clients’ organizations, we have become convinced that the make → ship → learn → iterate process can and should be applied everywhere in your organization.
One of the important side-effects of bringing this constant iteration and fast-pace of change to all of your work, is that it begins to dramatically open up the organization’s collective aperture for what’s “safe to try.” As I mentioned in the decision-making process, we intentionally try to set an extremely high bar for what constitutes a valid objection to someone’s proposal. We seek to create an environment where individuals and teams are empowered to move forward with as little organizational resistance as possible.
By embedding a weekly rhythm of shipping and pivoting into our organizational DNA, we create a bias for progress over perfection. Nothing is ever finished, there’s simply a new version to test and learn from.
Importantly, this test-and-learn mindset even applies to our organizational structure itself. Using all the tools we’ve discussed, every team at every layer of our company meets on a monthly basis to re-organize. Instead of the infamous annual company-wide re-org exercise, where corporate territory is redrawn and fiefdoms are redistributed, we constantly evolve through a continuous and incremental re-organization exercise. Even significant restructuring decisions are much less painful than normal, because they are guided by a common purpose, and they are proposed and owned by the same people they impact.
The fuel for this practice of rapid iteration is feedback. This means that every project or team needs to have clear and explicit metrics that are tracked and reported on a regular basis. Each of our teams reports key metrics on a weekly and monthly basis. These key metrics are captured in a single shared Google Spreadsheet that is accessible to all members of the company. Each team begins their weekly tactical with a review of their metrics, and the leadership team begins its own weekly tactical meeting with a review of all team metrics.
Over time, an organization who works in this way builds an ongoing record of action and results. You begin to see patterns in the data, and can begin to base new decisions on historical trends. Most importantly, you can begin to make all decisions evidence-based. Whenever anyone proposes something to try, there are only two valid answers:
- We have clear evidence why your idea will cause immediate harm; here’s a proposed amendment…
- We don’t have any evidence, yet, that your idea will cause immediate harm; let’s give it a try and see what happens. (We’ll talk again next week.)
When this outlook becomes a habit, you’ll start catching yourself critiquing each other’s ideas or on the verge of devolving into a theoretical back and forth about what to do. Then, you’ll stop, and say, “But, who knows, right? Let’s try it and see what happens.” At Undercurrent, we actually adopted a fairly radical policy that was intended to help employees who wanted to leave find a mutually beneficial new job.
The original policy stated that employees who wanted to leave could opt into a ‘Search’ role, and could focus full-time on searching for a new job, while continuing to receive their Undercurrent salary, indefinitely. While we all empathized with the intention to create a more amicable departure, we also all agreed that this seemed like a crazy idea. But no one had any evidence why it would cause immediate harm. So, we went ahead and adopted it, and waited to see what would happen. Only after we had feedback from the first person to use the policy did we eventually edit it to be slightly more proscriptive.
5. Work in public.
Now that you’ve handed over the keys to everyone in your organization, the one critical ingredient you’ll need to make the system click is open information. If you’ve built a stellar team of people who are committed to your collective purpose, and provided all of these other supporting practices, then the only potential land mine is a lack of information.
At August, “working in public” is the default practice, and we aim to make it a hallmark of our organization. We have even created a public Google Drive where we intend to share as much information about how we operate as possible. Some of the items we will share here include: our operating agreement, salaries, cap table, all our governance and policies, teams, roles, accountabilities, and IP about how we do our work. And we’ll be adding much more to this over the months and years ahead.
We apply Google’s mantra of “open by default” across everything we do. This means that it is assumed that any document you’re creating or information you’re sharing should at a minimum be accessible to all members of the organization and ideally be directly shared with the entire organization. We use five key tools to help enable this way of working.
Slack: The vast majority of our internal communications now take place in Slack. We’ve embraced Slack’s open channel functionality to create more transparent forums for discussing the work. All teams have their own channel that is open and accessible to all other members of the organization. We’ve tried to double down on the move toward transparency by holding each other accountable on a 1-on-1 basis. If I fall back to an old-school mindset and send a direct message to a colleague about something that doesn’t need to be private, my colleague may respond to my question back in the shared public channel, as a reminder to work in public and to ensure that the information is easily discoverable by other teammates at a later time.
[email protected]: Since most of our internal communication is now in Slack, we rarely send any internal emails. We do, however, use email to archive important client communications. We do this by bcc’ing a company-wide email called “team”. Over time this listserv will become a library of useful templates for business development follow-up notes, key client deliverables, and a social reinforcement mechanism for sticking to our weekly rhythm. Each team bcc’s “team” when they send out their end-of-week shipments.
Trello: This low-fi and easy-to-customize task management tool has become a critical part of our open workflow. Project teams use Trello to capture and keep track of their weekly tasks. Project and resource allocations are planned and communicated in Trello. And proven processes for certain types of projects are captured, replicated, and iterated on in Trello.
Metrics Dashboard: As I alluded to earlier, every team tracks key metrics, and these metrics are collected in a single shared Google Spreadsheet. This dashboard gives everyone the same point of reference for what’s working and what’s not.
Cloud-based documents: In Undercurrent’s early years, we devoted countless hours and attached a good deal of our pride to creating exquisite Keynote presentations. They were perfect, beautiful, and incredibly slow and static. When we pivoted to this self-organizing model, we decided to completely embrace web-based multi-tenant document tools (primarily Google Docs) and cloud-based file sharing. Google Docs makes it nearly impossible to make things look too pretty. And simultaneously, it’s incredibly easy to collaborate with your teammates, to replicate work that you like, and to discover each other’s work. After 2 years of this, we can not imagine how any teams still get work done any other way.
One of downsides of this way of working, of course, is that the deluge of shared or broadcasted information can be overwhelming and hard to keep up with. The experience of opening up Slack after a day away from the office, can be a lot like the Google/Facebook dystopian satire described in Dave Eggers’ The Circle:
The chute opened, and in the first 12 minutes, she answered four requests, her score at 96. She was sweating heavily, but the rush was electric.
But, the upside is that everyone has the ability to make quick decisions for themselves, without having to wait to get useful information from anyone else. Also, when everyone has access to all the information, novel ideas and solutions spring up from all corners of the organization. Everyone has the ability to help steer the organization toward its goal.
So, what will the future look like?
The most valuable work for humans — not computers — to do in the years ahead will be the most complex and unpredictable work there is. It is the least routine tasks and the most unknown environments where we’ve got the computers beat (at least for now). Even if you’re the one building software that may make someone’s job obsolete, or you’re making something that allows us to harness computers for the betterment of humanity, it will take a team of human beings to accomplish your mission.
This future has two critical implications.
One: Complex and creative work depends on high-performing teams who know how to work and learn together.
Two: The traditional command-and-control operating model used in most organizations actively gets in the way of its employees ability to work and learn together.
The tension between these two realities has reached its breaking point. Leaders of startups and fast-growing businesses feel this pain acutely. How do you build a structure that helps you scale while also protecting the speed and agility that made you successful in the first place? When you look around, it seems like the only options are to either adopt the old model that defined business in the 20th century or to cross your fingers and embrace chaos.
There is, however, a new way. A new operating model is emerging that enables a company to self-organize to achieve its purpose without bureaucracy or top-down management, while continuously adapting to changes in its environment.
A revolution is afoot. All around the world, insurgent organizations are rising up and insisting on doing things a new way. This new way of working enables the organizations that embrace it to succeed. And the organizations who refuse to change will die.
Changing the way we work is hard. But, giving people the tools, know-how, and confidence they need to give it a try is literally why I come to work. As you give it a try at your own organization, I encourage you to also work in public, and to share your lessons as you go. August will be at your side, pursuing our purpose.