Frederic Laloux on what lies ahead for business

Think:Act Magazine "Robustness"
Frederic Laloux on what lies ahead for business

Portrait of Think:Act Magazine

Think:Act Magazine

Munich Office, Central Europe
July 21, 2020

The case for giving up a mechanistic worldview and focusing on an ecosystem of networks in flux.


by Frederick Schulenburg

Read more about the topic "Robustness"

Frederic Laloux's Reinventing Organizations rips up the rulebook and reimagines how a company should be run. In a wide-ranging conversation, he shares ideas about what lies ahead for business – a vision that is already emerging.

He doesn't often give interviews, and when he does, he likes to do them virtually – so as not to "put more carbon in the air." Speaking on a Zoom chat from his eco-community in New York State in February, just weeks before the coronavirus outbreak went global, Frederic Laloux's ideas about how companies need to change seem strikingly prescient.

Is the "reinvented organization" the way to create robust and resilient entities at a time when everything seems to be changing?

Traditional management, with its fixed job titles and reporting lines, its silos and bureaucracy is predicated on stability. It's inherently fragile when there is disruption, it's ill-equipped even for gradual change. By contrast, this emerging organizational model I've researched and shared – organic and networked – is all at once extraordinarily resilient, productive and soulful. Sadly, while it's in so many ways superior, it is still out of reach for most organizations because most leaders today still inhabit a mechanistic worldview […]

The mechanistic perspective sees the world as a complicated clockwork that a few clever minds can fully grasp and comprehend. In every organization, a handful of brilliant people must peer into the future and then map out a plan – two, five, ten years ahead – with all the initiatives and milestones needed to get there. Once the strategy is determined, you need to make sure the vast machinery of the organization – the thousands of people in their respective boxes of the org chart – execute this plan faithfully. If you see the world as a machine to be optimized, that's what you do.

But what if the world is not a complicated mechanic? What if we see it as it really is – a hugely complex, interconnected, nonlinear living system in constant flux? That makes a mockery of any plans that constrain it to a preset course?

Let's face it, by the time you make a brilliant plan, the world might have changed already. In this world, you need everyone – not just a few people at the top – to sense into what is changing and make the necessary decisions. In such a world, the whole system is constantly adapting and morphing towards its purpose.

Which makes organizations more resilient …

Indeed! Here is another way to understand this: Imagine an ecosystem like a forest. Forests are hugely complex systems. For some reason, this year, winter comes much earlier than expected. Imagine the five biggest trees saying, "Okay, everybody, freeze! We have an emergency. Don't do anything until we have thought [it] through. Once we have a brilliant plan, we'll let you know what to do." Yet, by the time they come up with their plan, spring has already arrived and it is too late. In reality, in a forest, the whole system – trees, moss, fungi, insects – immediately adapts as one and responds to deal with the situation.

So, we need to learn more from nature – not something we often do in corporate life. You say this mechanistic worldview feeds a process of maximization. Can you expand on that?

This mechanistic way to see the world has just one aim: You want the maximum output with the minimum input. Right?

There is really nothing else to a machine. This simplistic worldview has unfortunately permeated everything, including our personal lives. If you are offered a job that makes more money, you would be stupid not to take it, even though you might actually know, deep down, that this job will make you miserable. If you can have a bigger house, a bigger car, a nicer sounding job, you should take it. Yet, slowly but increasingly, some people are tired of this imperative to maximize their lives. I noticed this when my book became this sudden bestseller all around the world. A lot of readers asked me questions not about the book, but about my life choices.

At first, that surprised me. They naturally assumed that with a bestseller in my hand, I would give a talk every evening to rake in speaking fees, build a consulting firm around the book. That's the assumption of maximization we all carry to some degree in our heads. But they heard that I continued to live a simple life, saying no to almost all requests to keep spending lots of time with my children rather than in hotel rooms. That's what they wanted to talk about – because they too were tired of the game of maximization, and that topic was almost as interesting to them as what I wrote about in my book.

What does stepping back from maximization really mean? Accepting a lower profit margin or lower return rather than running the "machine" like crazy to the point where everyone's unhappy?

I don't remember who said this, but there's another analogy from nature: If you cut a tree and you see the tree rings, you see that there's very healthy years where the rings grew large. And then there's other years where the rings are tiny because the conditions were such. It would make no sense in nature to say: "Every year, let's try to strive for 12%." This year the conditions might allow for a 12% year. Next year might be a 2% year. The big shift here is to start taking your purpose as the guiding star and do everything we can to serve that purpose. One year it's going to result in something like 12% and in another 2%.

So, organizations need to put purpose, not targets, at the heart of everything, and accept that there will be years where you have fantastic results, and years where results are perhaps less stellar.

I don't underestimate how big a leap that is for our current financial systems. It's like a square peg for a round hole.

But those companies that offer a greater control through self-management, that allow the whole person to show up, that pursue a purpose rather than targets, will be the most resilient, the ones that will fare best?

Everything I've seen seems to confirm that. Their extraordinary results during downturns. The dedication of people who work there. The hundreds of applications they receive from people who simply want to work there because they just hear such amazing things about them.

What makes them more robust?

You can answer that question in 20 different ways. One way to put it is that these organizations are structured in ways that simply respond to the needs of reality rather than some neat but overly simplistic template like a pyramid.

Take Morning Star, a Californian tomato ketchup maker and one of those self-organizing companies. They have no fixed hierarchy, no fixed organization chart. One day, they made a diagram where every colleague is a dot and they drew lines connecting those people who work together most closely. The result was their real org chart. That's what the natural org chart of any organization looks like – it's simply people who cluster to get work done. But on top of that we unfortunately – forcefully – add another layer: the traditional organizational pyramid. It's a complete abstraction and doesn't represent how people actually do work. It just organizes them into neat groups and silos that gives our mind a sense of control. We've created a redundant structure that gets in the way of work and makes the whole system much slower and more fragile.

What makes these 'new' organizations fare better in hard times?

One of the reasons is that they never "grow fat." In a traditional organization, if I am a manager, the size of my staff determines how important I am. So I fight for more budgets. In good years, my budget will grow and I will hire more people. The surest sign that an organization has become "fat" is that we can waste time in meetings and infighting. But then suddenly we hit on hard times and the organization needs to go through this painful cycle where it sheds 10, 20, 30% of its workers.

It always makes me wonder: If you fire 30% of people, it either means you never really needed them in the first place. Or if they were needed, then you are now asking way too much from the people that remain. Yet we go through these ridiculous cycles because a lot of the work we do is unproductive Much of what we call "management" is shuffling information up and down the hierarchy and sitting in meeting after meeting. In a pyramid, all this is needed. But is it really work? Or is it just serving an outdated management system?

So, stay lean?

I don't like the word "lean." It still stems from mechanistic thinking – to maximize results, let's be lean and minimize costs. These new forms of organizations that are springing up everywhere simply try to structure themselves to do the work – not more, not less. It's not lean, it's not fat.

In difficult years they stay afloat and don't need to shed anybody because everyone is needed to do the work. Another reason these organizations are so resilient is that they never stray too far from reality. Traditional organizations cling to their plans for too long, forcing them to make a sudden, drastic change when reality catches on to them. If you sense and adapt all the time, you are naturally resilient.

We go through these ridiculous cycles because a lot of the work we do is unproductive.

Yet people still find it hard to make the leap to thinking that way.

Yes. It's a real leap for us to come to terms with the inherent complexity and interconnectedness of the world – that our organization is a living entity, not a machine that can be programmed. Even if we know our old recipes no longer work, we still cling to them because they give us a sense of control. I have a strategic plan! A neat org chart! Things are under control!

There are not that many leaders yet who have internalized this new paradigm and can adopt the coherent set of management practices it calls for. But even when you have such a leader, there often remains a risk one level up: the board of directors. It's happened with more than one of these new organizations that the board at some point pulled the plug: "This is all working really well, but this is all a mystery to us. Let's put in a CEO that will do that top-down thing we understand and trust." It doesn't take long, under such a new CEO, for the company to lose its mojo.

So, what does the future look like?

I wish I had a crystal ball! I have a sense it might take 10 or 20 years for us to reach a tipping point: As more and more examples of this new kind of management pop up, more people will get it. And perhaps, quite suddenly, the current system will feel hopelessly outdated.

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Munich Office, Central Europe