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The Leaderless Organization

2012 December 2
2010_11_22_Photo1_FacelessBusinessman_v2

Abraham Lincoln.  Winston Churchill.  Nelson Mandela. We honor our leaders and always have.  In both public and business life they are treated with almost godlike reverence.

I guess that’s why we compensate our corporate chiefs hundreds of times more than we do the average worker and then give them tens of millions more in bonuses, even when they are fired for cause.  Mediocrity in leadership seems to pay as well as excellence.

All of this begs the question:  Do we really need leaders?  Is the small chance of getting an excellent one worth the high cost of the mediocre breed?  Top management thinkers have begun to ask that question and, surprisingly, there are some prime examples of high performing organizations who are able to succeed without any leaders at all.

What Happens Without Managers?

In the field of management, there’s no one more prominent than Gary Hamel, who The Wall Street Journal named “the world’s most influential business thinker” and who is the most reprinted author in the history of the Harvard Business Review.  He’s pioneered popular concepts such as core competency, strategic intent and reinvention.

So it rose eyebrows when he recently published an article entitled First, Let’s Fire All the Managers and declared that, “Management is the least efficient activity in your organization.”  He then went on to suggest that it gets even worse as organizations get larger, that there are actually diseconomies to scale when it comes to management.

As a counter example, he examines the company Morning Star, which is a $700 million enterprise that is in the capital intensive business of processing tomato products.  Nobody has a boss, anybody can spend company money and employees negotiate salaries and responsibilities with each other.

Perhaps most importantly, Morning Star isn’t a collective, but a privately owned, rapidly growing, highly profitable business.  Hamel says it succeeds because the “mission is the boss.”

The Conductorless Orchestra

Okay, so it’s possible to run a business without managers, but what about an orchestra, where you need not only tightly coordinated teamwork, but a clear artistic direction? Surely, that’s a different matter altogether.

Not so fast.  It just so happens that one of the world’s most successful orchestras, the Orpheus in New York City, has been operating without a conductor since 1972.  They not only regularly play at top venues like Carnegie Hall and Lincoln Center, but have won multiple Grammy awards.  Much like at Morning Star, the lunatics truly run the asylum.

Everything, from the individual pieces played to the way they are interpreted, is decided through building consensus.  First, among a core group that leads a particular ensemble, then among the full orchestra.  For the next performance, a new core group emerges while the previous one fades into the background.

Not surprisingly, the Orpheus has become a highly studied model, most notably by Harvey Seifter in this highly cited article.

The Ad Hoc Organization

Possibly the most interesting case of a leaderless organization is Anonymous, which isn’t really an organization at all, but a mish mash of online chat rooms, forums and software protocols.

As Forbes’ london bureau chief Parmy Olson explains in her book, We Are Anonymous, the hacktivist group grew out of the imageboard 4chan and other online subculture sites. The online chatter turned to pranks, mostly consisting of uncovering the identity of online rivals and ordering pizzas and the like to their homes.

The pranks turned to more purpose driven acts, such as uncovering pedophiles and eventually online activism.  The group has successfully targeted the Church of Scientology, Sarah Palin, the governments of Tunisia and Egypt as well as major corporations like Paypal, Mastercard and Visa, among others.

Anonymous doesn’t have a leadership structure or even a real membership.  Someone gets an idea for an “Op” and recruits through chat rooms.  Planning is done by ad hoc groups in special private chats that are invite only.  Despite being loosely knit and geographically diverse, they have successfully attacked organizations with sophisticated infrastructures.

The Nature of the Organization

The emergence of leaderless organizations creates important questions not just about leaders, but organizations and particularly corporations.

The question of why firms exist was first taken on by Ronald Coase in his landmark 1937 paper The Nature of the Firm, in which he argued that their main function was to minimize transaction costs, specifically search and informational costs.

That’s been the prevailing view for nearly a century, but in the new semantic economy, those costs have much less relevance.  I think it’s clear that merely optimizing costs is no longer enough for an organization to survive, much less thrive.

While returns to scale diminish along with transactional frictions, organizational costs do not keep pace.  Sluggish organizations, no matter how efficient, can fall fast while small upstarts can go global overnight.  Hierarchies, in many if not most cases, fail to keep up with peer networks.

In the old Coasean organization, leaders mainly functioned as gatekeepers.  They kept employees in line, organized work, watched costs and kept things moving smoothly.  Now that it’s become clear that leaderless organizations can do that just as well, what is the function of a leader?

What Do Leaders Really Do?

By now I think it’s clear that organizations no longer serve to direct work, but to direct passion.  Good leaders therefore, direct passion effectively, bad leaders do not.

Of course, that’s easier said than done, but as I described in an earlier post, Daniel Pink offers a very useful framework of autonomy, mastery and purpose.  Organizations in the digital age that provide those three things, no matter what their size, history or technology, can succeed.  Ones that do not will fail.

And that’s what leaderless organizations teach us about how to manage more conventional enterprises.  While the examples above show that organizations can be self organizing, leaders with industrial age tendencies often obstruct progress.  They pursue efficiency to the exclusion of passion, become overbearing and diminish performance.

Those who devote their efforts to the success of organizations like Morning Star, the Orpheus Orchestra and Anonymous are committed to a purpose, much like those at Apple, Facebook Google and other successful enterprises   In the end, a leader’s primary function is to imbue work with meaning.

Good leadership, after all, is defined by its absence.

– Greg

16 Responses leave one →
  1. December 2, 2012

    The story of Semco is probably the best documented case of a organisation being transformed into a manager-less, democractic workplace with the resultant dramatic growth in productivity and profitability http://en.wikipedia.org/wiki/Ricardo_Semler
    Over the years Semco has proved an inspiration to a growing number of people and today see companies like WorldBlu set up for the sole purpose of promoting new leadership models and the idea of freedom at work: http://worldblulive.com

    [Reply]

    Greg Reply:

    That’s one I missed. Thanks for pointing it out.

    – Greg

    [Reply]

  2. December 2, 2012

    Extending the Music analogy – Orchestras are for the music of a bygone age – prescribed and scripted – music has changed – lets improvise.

    Leadership Lessons From The Geniuses Of Jazz
    http://www.forbes.com/sites/susanadams/2012/08/10/leadership-lessons-from-the-geniuses-of-jazz/?awid=8553011968307110015-3271

    The role of a creative leader is not ‘command and control’, it’s more like ‘climate control’. You create a culture.” – Ken Robinson

    [Reply]

    Greg Reply:

    Cool. Thanks, I’ll check it out.

    – Greg

    [Reply]

  3. December 2, 2012

    Your post is commendable for several quotable soundbites.

    “The mission is the boss” might be attributable to Gary Hamel.

    But these are pretty good, too.

    “Good leadership, after all, is defined by its absence.”

    “(Good leaders) no longer serve to direct work, but to direct passion. ”

    I’ve always believed in making the “brand” the boss in any organization.

    [Reply]

    Greg Reply:

    Thanks Sumit. I’m glad you liked it.

    Hope to see you again.

    – Greg

    [Reply]

  4. Wanne van Dorst permalink
    December 3, 2012

    In the Netherlands, Buurtzorg, a home and health care company, started in 2006. Now they have 5500 employees, 2 leaders and no managers. they have just been chosen as Employer of the Year in the Netherlands. for the second time n a row

    [Reply]

    Greg Reply:

    Great add Wanne! Never heard of them. Do you have any more info?

    – Greg

    [Reply]

    Wanne Reply:

    Nothing in English I’m afraid. Maybe Google Translate http://www.buurtzorgnederland.com/
    They have small teams (cells) where the nurses themselves do the intakes, planning. They have coaches for HR and Quality issues. Overhead staff only 30 or so, financial and personnel administration. No workers council, the founder has a blog on which the employees can comment ;-)
    From zero to € 150 mio turnover in just 6 years!

    [Reply]

    Greg Reply:

    Impressive! As I said to Jorge, I don’t think this is a model that will be particularly widespread, but for the organizations that are able to pull it off it’s an amazing thing to see and a real lesson for the rest of us.

    Thanks again for pointing Buurtzorg out!

    – Greg

  5. December 3, 2012

    Hi Greg,

    I agree with you that leaderless organizations are led by principles (purpose) everyone abides by. Just last week I was with a typical-management-led (they think management is same as leadership) client, and ended up getting pissed off at their insistence of following a strict process (bureaucracy).

    I ended up writing a post about it and started with Semler’s quote: http://ow.ly/fLn9r

    The point is I think that leaderless/bossless orgs are here to stay. Collaboration towards the mission reigns supreme in an open and transparent world. The interwebs are making this obvious.

    Adding to your examples, another model that comes to my mind is the MMORPG World of Warcraft: http://ow.ly/fLnoG

    Cheers,

    Jorge
    Jorge Barba´s last blog post ..Must read innovation posts of the week: Spreading ideas is highly social

    [Reply]

    Greg Reply:

    Thanks Jorge. Just for the record, I don’t think we’re going to see a massive trend toward leaderless organizations, but peer networks are here to stay and they will become an increasingly important part of any organization. I’m trying to create a framework around my “tent city” concept: http://bit.ly/Ofku47 I’ve made some progress, but still some work to do.

    The real lesson, in my opinion, is instructing managers on what they’re most valuable role is: Not to get people to do what they want, but to inspire them to want what they want.

    As for WoW, being a recovering addict myself, I’ve come to believe that they only way to win is not to play:-)

    – Greg

    [Reply]

  6. Ken Bour permalink
    December 5, 2012

    I spent a dozen years as CEO of a small software company. As the organization’s leader, the most frequently requested and useful role I played was “Prioritizer.” In the pursuit of our mission, it was a frequent occurrence that team members faced limitations involving resources, time, bandwidth, skill, knowledge, and/or expertise. There was no loss of mission focus, only a temporary incapacity to satisfy ALL pressing demands in the same time-space. Tough decisions had to be made – somehow – and usually with imperfect information. I am reminded of the adage, “Brilliance isn’t just knowing what to do, it’s knowing what to do NEXT.” Prioritization fell on my shoulders largely because I was ultimately accountable to and had the broadest perspective of needs including shareholders, customers, suppliers, and employees. Is the author sincerely advocating that organizations would be better served by asking all of the stakeholders to discuss/argue the merits of which urgent priority should be handled first?! In my experience such an approach would be, at best, inefficient and, at worst, distrastrous for any busy and vibrant company. Building consensus can work under many circumstances, but anyone who has actually tried it when a situation involves many diverse competing needs, urgency, immediacy, uncertainty, and stress knows not only how challenging it can be, but also the deleterious side-effects it can cause including bruised egos, perceived winners/losers, blaming/faulting, and more… In my experience as an organizational leader, prioritization was the most intensely challenging function I performed, but it also felt like it was the most important one as well – for the mission and the team!

    [Reply]

    Greg Reply:

    No. As “the author” I am certainly not suggesting that ” that organizations would be better served by asking all of the stakeholders to discuss/argue the merits of which urgent priority should be handled first?”

    What I am pointing out is the simple fact that some organizations have been surprisingly successful with a leaderless structure and that give us some pause regarding traditional thinking regarding management.

    Thanks for giving me the opportunity to clear that up.

    – Greg

    [Reply]

  7. November 9, 2014

    Sometime you just stumble accidentally upon a piece which is nothing to do with anything you would normally read. This is one of those times. An excellent piece, I particularly enjoyed the notion of a conductorless orchestra.

    My question is, can this notion be translated to the governance of cities, nations, even the world? Whilst it’s a purely hypothetical question, as this could clearly never happen. Does anyone have any thoughts?

    @maxjfreeman

    [Reply]

    Greg Reply:

    Thanks Max. That’s a very interesting question, although I’m afraid that the answer is probably no. Leaderless organizations tend to thrive in enterprises where the purpose is very clear. When that’s true, enormously complex tasks can be self organized. However, in most cases, it is up to leaders to create that clarity of purpose.

    Unfortunately, very few leaders understand that to be their primary function and even less do it very well.

    – Greg

    [Reply]

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