The Creative Forces of Self-Organization

THE CREATIVE FORCES OF SELF-ORGANIZATION

JOHN A. BUCK

and

GERARD ENDENBURG Table of Contents

Introduction...... 3 Why Empower Workers...... 3 Introduction to the Defining Elements ...... 6 First Example: A Hairdressing Shop...... 7 Second Example: An Alternate Idea in a Crisis...... 12 New Corporate Structure ...... 14 Implementation...... 18 Benefits of Self-organization...... 20 Systems Theory and Dynamic Engineering...... 20 Conclusion...... 23 Selected Bibliography and Related Resources...... 24 About the Authors...... 26

List of Figures

Figure 1 The Defining Elements of Dynamic governance...... 6 Figure 2 Format of a Dynamic governance Circle Meeting...... 7 Figure 3 Template for Dynamic governance Elections...... 8 Figure 4 Dynamic governance Ballot...... 8 Figure 5 Template for Making Policy Decisions by Consent...... 9 Figure 6 Electrical Company’s Functional Structure...... 12 Figure 7 Electrical Company’s Dynamic “Circle” Structure...... 13 Figure 8 The Classic Corporate Model Uses Majority Vote and Autocratic Decision-making...... 15 Figure 9 The Classic Corporate Model with Union Feedback ...... 16 Figure 10 Classic Corporate Model with Employee Stockowner Feedback Loop...... 17 Figure 11 Dynamic governance Circle Functions: Leading-Doing-Measuring. 18 Figure 12 Summary of Advantages and Disadvantages of Dynamic governance ...... 21

Introduction This overview will first introduce a few Consider a group of workers. If they act key concepts that include consent decision- jointly under the direction of a leader to making and double-linked hierarchies. Then, produce a product or service, we consider after presenting two simulated examples their behavior organized. If they act as a team from dynamically governed organizations, without external orders, we would consider we will discuss dynamic governance methods them self-organized. in more detail and contrast them with more familiar forms of management. Finally, People self-organize all the time. Business we’ll summarize some of the mathematical associates create partnerships, children invent and systems theory concepts related to this games, students organize elaborate pranks, innovative management strategy. and employees take the initiative in handling an unusual problem during a supervisor’s Dynamic governance, or sociocracy, is a absence. In another organization, employees decision-making and governance method invent a subtle, collective way to resist an that allows an organization to manage itself unpopular supervisory policy. as an organic whole. To make this possible, dynamic governance enables every sub-part We have tried with only moderate success to of the organization to have an authoritative understand the self-organizing phenomena voice in the management of the organization. from the standpoint of behavioral psychology, In contrast, modern corporations are military science, management science, and considered to be legal persons with rights even operations research. Recent discoveries equivalent to those of a person, but the in systems theory, however, are giving exercise of those corporate rights is the sole new, clearer insights into self-organizing, authority and responsibility of a majority of insights that offer both managers and staff the board of directors, not the organization powerful new tools to increase productivity. as a whole or even the board of directors as Remarkably, they could implement these a whole. To demonstrate the uniqueness of with simple additions to currently existing dynamic governance and the development of organizational structures. the ideas that lead to its development, we will briefly discuss previous efforts to empower In this article, we will present a genuinely new workers in the workplace. method of organizing work and governing organizations and then discuss its principles Why Empower Workers? and some of its methods in more detail. This The word “sociocracy” was first used by new method’s technical name is sociocracy but August Comte, an early nineteenth century in the businesses and organizations that use French philosopher best known for a system it, is also known under other names including of thought and organization known as dynamic governance, nonviolent governance, Positivism that he hoped would provide the and green governance. In this paper we will basis for a stable society in the emerging use primarily dynamic governance because it industrial revolution. Comte established is more familiar than sociocracy and it also the science of sociology that provided the refers to a basic concept in systems theory, basis for his theory of sociocracy. Although feedback loops. Comte proposed a body of social scientists

to replace the monarchy, the meaning of the seem applicable to human self-organizing word sociocracy is literally “rule by the socios,” behavior as well. people who have a social relationship with each other. In contrast, a democracy is rule Beginning shortly after World War II, by the demos, the general mass of people who American educator and social psychologist, may have little in common. Comte, however, Rensis Likert, integrated empirical social was unable to suggest a practical structure for science research into a concept called System sociocracy. 4. His ideas, which both promote upward feedback and recognize the importance of In the 1800’s, John Stuart Mill advocated hierarchies, have been very influential in worker cooperatives in which the workers management theory. Highly respected in Japan, controlled all equity and selected their own a number of recent American plant start-ups, management, the beginning of the cooperative particularly joint ventures with Japanese firms, movement that has had some limited success. have been patterned on System 4 concepts. In the 1920’s, a pioneering management Before he died in 1981, Likert was beginning scientist Mary Parker Follett noted that in the to articulate ideas for System 5 that vested most productive companies workers strongly greater managerial authority in the workers. identified with the organization as their Professor Robert Ackoff of the Wharton company, allowing them to focus without School of Business suggested a similar idea conflicting feelings. She discerned, however, in the early 1980’s. He suggested a scheme for that no structure existed that allowed such the establishment of a corporation’s long range identification to be founded on anything other planning by using multi-staged majority vote than a difficult-to-maintain illusion. The of management and workers. basis of a new structure emerged with later in the 20th century with the notable thinking More recently, futurist John Naisbitt of Norbert Wiener, who founded cybernetics; popularized the concepts of participatory John Forbes Nash, the mathematician whose corporations, networking as an alternative life was portrayed in the movie A Beautiful to traditional hierarchical organizations, and Mind; and Ilya Prigogine, the Nobel laureate intrapreneurship,” acting like an entrepreneur who did pioneering work in self-organizing but within a corporation. Naisbitt and other systems. Their insights formed the basis writers seem to reflect a general societal mood for dynamic governance, which supports that reaffirms basic capitalist values while workers, managers and investors in focusing pushing for a broader base in the management together on a common aim. of our businesses and institutions. Legislation passed over the last few decades that promotes Dynamic governance theory continues to employee ownership reflects this mood. In grow by incorporating new scientific insights. Leading the Revolution, Gary Hamel makes For example, 21st Century mathematical a strong case for involving everyone in an modeling of decision-making behavior by organization when developing new business flocks of birds and schools of fish, and new strategies. In mid-2004 American Airlines observations of bee swarms is of particular announced a profitable quarter after teetering interest because some of the underlying on bankruptcy for two years. Why? Their concepts such as changes in zone of alignment new CEO, Gerard Arpey, found ways to

involve the workers and unions in developing in other European countries, Latin America, innovative and profitable business strategies. Australia, and the United States and Canada. The research and experiences of these theorists In research studies, organizations using and business leaders, however, were still dynamic governance are reporting increased lacking a system or structure that would ensure innovation, productivity increases of up both worker commitment and profitability. 30% and 40%, reduction in the number of Cultivating an environment that consistently meetings, decreases in sick leave, and higher maximized the potential of an investor- staff commitment to the organization. manager-worker partnership remained in the Both workers and managers like working hands of a few gifted managers. In the late in dynamically organized companies. Quite 20th century in his electrical engineering firm simply, businesses and organizations are in the Netherlands, Gerard Endenburg began easier to guide and seem to have an unusual developing such a structure. Endenburg had capacity for initiative, self-regeneration, studied with Dutch Quaker and progressive and repair. The method is operating well educator Kees Boeke, who had worked in organizations of up to 1800 people and internationally to promote peace through substantially larger organizations are applying education. In 1926, Boeke founded a school it on a limited basis. in which he developed the practical principles of sociocracy and applied them by having Although Endenburg developed the dynamic the students and teachers govern the school. governance methodology without direct Endenburg developed these principles and knowledge of Likert’s work, it has several applied them in his company to prove that striking similarities to his System 4 and 5 a business could not only function with ideas. These similarities are remarkable if workers assuming responsibility for the one considers that dynamic governance, policy decisions that affected their work, but based on applied systems theory, relies very that it was more profitable to do so. In 1981, little on the social psychology theories used Endenburg began to publish his theories by Likert. Dynamic governance is also quite and to apply his method in other businesses. unlike the management concepts underlying The methods and principles of dynamic quality circles, socio-technical analysis, governance solve the problem of organizing organizational development, cooperatives, sustainable and holistic worker empowerment and employee stock ownership plans. While while a the same time ensuring management it applies the best financial and business control and protecting the interests of management practices, it focuses on investors. It has now been used successfully modifying or rewiring the autocratic power for decades in many organizations in The structure that is the backbone of modern Netherlands as diverse as an electrical organizations, whether profit or nonprofit. contracting company, a municipal police department, a Buddhist monastery, a nursing home, a chain of hairdressing shops, a local public school system, and numerous others. It is also being used in a variety of organizations

Introduction to the Defining Elements The dynamic governance method relies on four critical components derived The Defining from the science of cybernetics, including Elements systems theory, fractal concepts, and the phenomenon of self-organization. The four Consent – The principle of consent governs defining elements are quite simple, and once decision-making. Consent means no argued and understood, are easy to follow. Any company paramount objection. In other words, a policy or organization can implement them without decision can only be made if nobody has a changing its existing organizational structure. reasoned and paramount objection to it. Day- Once in place they provide a flexible means to-day decisions don’t require consent, but there to develop that structure. Figure 1 lists the must be consent about the use of other forms defining elements and gives brief definitions. of decision-making. Election of Persons – Election of persons for Dynamic governance provides specific functions and/or tasks takes place in accordance structures and procedures for implementing with the principle of consent and after open and maintaining these defining elements, argumentation. much the same as Roberts Rules of Order guides the majority-vote decision processes. We will Circle – The organization maintains a structure illustrate these procedures with two detailed for decision-making, consisting of semi- examples based on actual companies. The autonomous circles (i.e., groups of individuals). first example focuses on the consent, election, Each circle has its own aim and organizes and circle components. The second example the three functions of leading, doing, and illustrates the double-linking component. measuring/feedback. A circle makes its own policy decisions by consent, maintains its own memory system, and develops itself through research, teaching, and learning that interacts with its aim. A circle makes consent decisions only in specially formatted circle meetings. Double Linking - A circle is connected to the next higher circle with a double link. This means that at least two persons, one being the functional leader of the circle and at least one representative from the circle, are full members of the next higher circle.

Figure 1: The Defining Elements of Dynamic Governance

First Example: A Hairdressing Shop Right after closing time, the staff of a hairdressing shop gathered for a circle The Order of meeting. The shop was part of a growing, a Dynamically dynamically organized franchise company. Governed Meeting Nine of the ten full-time workers and one – a time to attune – like an part-time person were present and ringed the A. Opening round orchestra just before the concert. room. B. Administrative concerns such as It had been six weeks since the last meeting. announcements, time available for the Donna, an experienced stylist and regular meeting, consent to minutes of last meeting, facilitator of the meeting, followed the date of next meeting, acceptance of the dynamic governance format for a circle agenda. meeting. (See Figure 2). Starting with an opening round, she asked each person in turn C. Content to say briefly how they were doing and, if Agenda item they wished, to make any comments on the Second agenda item agenda. As each person spoke, bringing him Etc. or herself into the meeting, there were nods, D. Closing round – a time to measure the some good-natured laughter, and a few clucks meeting process – e.g., use of time, did the of sympathy. The opening round complete, facilitator maintain equivalence, how could Donna dealt with administrative matters. She the decision-making could have been more asked if everyone had received a copy of efficient, did everyone arrive prepared. the decisions made in the previous meeting. Also, this is a time to mention agenda items Susan, an apprentice, said she’d forgotten that should be on the agenda for the next hers, and Charles, a stylist and secretary of meeting. the circle meetings, handed her an extra copy. Figure 2: Format of a Dynamic The circle was experienced in consent governance Circle Meeting decision-making and handled its proceedings with deceptive informality. Donna watched agenda item I have is Mildred’s request to talk them scan the list of decisions and after about coverage of our shop on Sundays.” seeing several nods said, “Since no one seems to have a problem with the minutes, let’s go Mildred, the manager, supervised the shop on to the agenda. As all of you know, I’m and presided over routine weekly staff getting a promotion and will be managing meetings, but, by the circle’s choice, she did the new shop opening over by the lake (some not chair the circle meetings. good natured cheers erupt); so, we need to Again, no one voiced any objections, and elect a new circle chair. Second, several of you Donna started into the content part of the mentioned that you’re concerned about our meeting. She introduced the first agenda competitor’s salon that’s opening in the other item by saying, “Now then, let’s proceed with wing of this shopping center. The only other

selecting a new circle facilitator to replace me.” Addressing the first step,Review Role, she said, She then proceeded to follow the template for “We’ll be electing the person for a one-year conducting dynamic governance elections. term. The duties are to prepare for and lead Figure 3 is of the process for elections. our circle meetings.” As everyone seemed satisfied with this short description of the job, she continued to the second step. “Charles, would you please hand out the Ballots?” Figure Dynamic Governance 4 shows a typical dynamic governance ballot. Elections Process 1. Review Role: Describe I, ______responsibilities, qualifications, and (Your Name) term.

2. Nomination forms: Fill out NOMINATE: nomination forms giving your name and the name of the person you nominate and give to election leader. (Name of Candidate) 3. Explanations round: Each person says why they made their nomination. Figure 4: Dynamic 4. Change round: Election leader asks governance Ballot each person if they want to change their nomination based on the arguments they heard in the previous round. Each member of the circle took a few 5. Consent round: Election leader moments to fill out his or her ballot and then proposes the candidate with the handed it to Donna. Proceeding with the strongest arguments and asks each third step, Donna picked up the first ballot person if he or she has a paramount from the stack and reading it said, “Linda, objection to the proposed candidate, you nominated John. Would you give your asking the proposed candidate last. reasons for choosing him?” Linda gave a If there is an objection, the election short explanation. Donna asked the next leader leads the group in resolving person and continued reading the ballots until the objection and initiates another everyone had presented his or her nominee consent round. and reasons for the nominations. Some gave arguments for John and others spoke Figure 3: Template for Dynamic in favor of Mildred, Joyce, or Charles. This governance Elections Explanations Round highlighted the positive qualities of each nominee.

After everyone had given an initial opinion Charles suggested that Donna chair the without discussion, Donna asked if anyone rest of the meeting, and she moved on to wanted to Change their vote based on what the next topic on the agenda. Following they’d heard, the fourth step. Two people the template for making policy decisions said that they liked the reasons given for by consent, Figure 5, Donna asked Michele Charles, including a person who had objected to give her report. (Step 1) In the previous to him in an earlier election based on his meeting, circle members had been very inexperience. (This self-organized movement concerned about a competitor’s new styling toward Charles occurs frequently in dynamic shop that would be opening in another part governance elections.) of the shopping center It had asked Michele, a stylist and the shop’s elected representative Based on the strength of the arguments for to their franchising company, to investigate Charles, Donna proposed him for the job and propose (Step 2) what they should do to and she initiated a Consent Round, asking each handle the new competition. Michele said person in turn, “Do you have any objection to she’d spoken with the franchising company’s Charles as the new chair?” She asked Charles main office and to a number of other people last. As no one objected, she announced that and it seemed that the competition was the circle had selected Charles. Donna paused coming in because their own shop had so for a moment, as everyone in the room seemed many customers. The new shop would try to to experience a moment of quiet satisfaction take their customers by offering manicures, at the completed election. and other extra services free, at least for the

Decision-Making Process

1. Consent to the issue(s) to be decided (What’s the picture?) 2. Generate a proposal (What’s our approach?) Often a person or persons may be asked to prepare a draft proposal and circulate it for comment and revision before the next meeting. 3. Consent to the proposal (What’s our decision?) a. Present proposal b. Clarifying round – clarifying questions only c. Quick reaction round – quick feedback about the proposal; as appropriate, tune proposal based on the quick reactions. d. Consent round – if objections, record on a flip chart without dialog until the round is completed; if necessary, amend proposal and repeat consent round. (If amendments are not obvious, a dialog may be initiated until potential amendments begin to emerge.)

Figure 5: Template for Making Policy Decisions by Consent.

time being. She proposed (Step 3a) that their was paramount. Donna summarized Charles’ shop offer special promotions for the first objection on a flip chart and continued the few months after the other store opened and round without further discussion. that they talk with their customers about what new services they might like to have. In the end, Charles had the only objection. After some clarifying questions (Step 3b), Donna initiated a dialog focused on Charles’ Donna asked for quick reactions (Step 3c) to objection by asking Charles if wanted to Michele’s proposal. Most felt it was a good elaborate further. “Well,” he said, “We don’t idea, and some asked how much the special have any way to research or learn from them. sales promotions would cost. Donna asked What are they doing better? What are they Michele if she wanted to amend her proposal not doing as well.” based on the quick reactions. Several other people made comments. After Michele thought for a moment and said, “I a bit, Donna saw that a strategy was starting imagine the advertising and specials will to take shape (self-organizing). She cut off be pretty expensive, and I’m not sure how the dialog and said, “So, we’re saying that expensive. But, it is really important that we in addition to Michele’s proposal, we want keep as many customers as we can during Mildred to organize an on-going effort to the other store’s big opening extravaganza. check out the other shop. Each of us will take So, I will add to my proposal that we turns going to the other shop as customers authorize Mildred to spend up to 20% of our to make our professional assessments of expected profits over the next three months what they are doing. Mildred will get other on advertising and special promotions. She people to go, too, who will talk to their other can tell us if she needs even more money customers to find out what they think and than that.” Michele glanced at Mildred, the why they are going there rather than here. shop manager, to try to gauge her reaction. We’ll get training or change our advertising The others were quiet a moment as they depending what we find.” Donna did another considered the effect on their own monthly consent round, and this time no one had any profit-sharing payments. objections. The decision was made. Donna broke the silence saying, “Alright let’s Donna then moved to the third topic, see if we have consent for Michele’s proposal.” coverage of the shop on Sunday afternoons She did a consent round (Step 3d), asking – an unpopular time to work. In its previous each person in turn whether they had any meeting the circle had created a new paramount objection to Michele’s proposal. assignment schedule after intense dialog. To Michele’s surprise, no one had an objection Mildred reported that she had received no to the money part of her proposal, but Charles complaints so far except her own: namely, objected because he felt it wouldn’t give them the new schedule was difficult for her to enough information about the services of the manage. To keep dissension at a minimum, other shop, what they were really offering the circle had closely limited her authority and their quality, and a way to react quickly to modify the schedule unilaterally. She said if there was some new gimmick. In a way it she now objected to those tight reins because left them blind, that was why his objection the schedule was unworkable without more

latitude. She described the changes she from other management strategies. It allows wanted. As no one seemed against the idea of organizations larger than a single circle to use giving more flexibility or inclined to discuss consent decision-making holistically, greatly it extensively, Donna skipped the steps of improving upward feedback and facilitating asking for questions and quick reactions and managerial delegation. simply asked for consent. There were no objections. What the example doesn’t illustrate is the dynamic engineering of the shop’s work. Donna concluded the meeting with a closing There are other templates that help a circle round (Figure 2, Step D) in which she asked articulate its own aim; organize itself using each person for a short evaluation of the the three functions of leading, doing, and meeting without discussion. The meeting measuring/feedback; maintain its own then broke up after running for an hour and memory system; and develop itself through fifteen minutes. integral research, teaching, and learning.” (Figure 1) Dynamic engineering is a bit like This hairdressing shop example illustrates industrial engineering except that, unlike the dynamic circle meeting format and traditional industrial engineering, control of the consent decision-making processes the work process is in everyone’s hands. The for electing people and for making policy result is that every person has the chance to decisions. It also alludes to the fourth be an entrepreneur in his or her own domain defining element, double linking, when it of responsibility. mentions Michele’s role as representative to the franchise’s regional general management The second example, based on a real-life circle. Double-linking (Figure 1) in event, illustrates the defining element of particular sets dynamic governance apart double linking.

Second Example: An Alternate the day–to–day operational structure, the Idea in a Crisis triangles in the bottom row of Figure 7 include Gloom reigned among the more than the department supervisor plus everyone one hundred members of a company that reporting directly to that supervisor. manufactures and installs heavy-duty Triangles are used in the diagram to represent electrical equipment. A local shipyard had the three functions, leading–doing– suddenly shut down, unable to keep up with measuring, that create the dynamic circular foreign competition. The shipyard accounted process. The groups of people and their for almost all of the Boat Department’s meetings are referred to as circles and circle business. meetings because they are implementing this Figure 6 shows the Boat Department’s place circular process. in the company’s day-to-day functional The General Circle in Figure 7 includes the structure, simplified for illustration. In this CEO plus the four supervisors reporting to figure, each department box represents a the CEO plus a representative elected by each single manager in the management structure department, nine people in all. The left hash with the exception of the Board, which mark at the top of each triangle represents contains several people. an elected representative and the right hash Fortunately, however, the company was a mark represents the functional supervisor. governed dynamically. Every four to six The hash marks at the top of the Board weeks all the departments meet in the policy Circle represent board members who are decision-making structure shown in Figure 7 outside experts. Because each circle connects to adjust the policies that govern their work. to the next higher circle through two people, Unlike the boxes in Figure 6, that represent the supervisor and an elected representative, the circles are double-linked. This feature is

Board

CEO

Admin Building Boat Assembly Department Department Department Department Manager Manager Manager Manager

Figure 6: Electrical Company’s Functional Structure

unique to the dynamic governance method if it means keeping their jobs. If they succeed, and creates a circular feedback process we’ll all get bigger long-term incentive checks between the two circles, the functional leader and no one will lose their jobs.” reporting down and the representative up. When it was his turn, Marvin, an apprentice Returning to the crisis, when word came of electrician, commented skeptically, “It’s a the shipyard closure, the Board Circle held nice idea, but I couldn’t see myself doing it, an emergency meeting and decided to begin and I can’t see those guys in Boats doing it a layoff of most of the Boat Department. either.” When the Board announced its decision, Max, one of the electricians in the Assembly George, the circle’s non-management Department, asked Henry, the Assembly representative to the General Circle, Circle secretary, to call a special meeting of continued, “I like Max’s idea. I think the Boat the Assembly Department Circle. The layoff guys would rather stand on a carpet than in did not immediately affect him, but he had an the unemployment line. What’s more, we idea about another solution. Henry arranged have been doing some work for Boats making a meeting and when everyone had gathered, special electrical cabinets. If they don’t bring Max explained his idea. in more work, we could be next for a layoff.” “It seems to me,” Max said, “that we’d do a The dialog continued for several more lot better if we shifted everyone who would minutes as the circle fell in behind Max’s idea. be laid off to a marketing effort. There has to Gene, the circle’s facilitator then summarized be more business out there. I’m sure the guys their thinking by making a proposal for a in Boats would rather not knock on doors decision. “Ok, it sounds like this is what we with a suit and tie on, but I’ll bet they’ll do it want to do: We designate Max as a temporary

Board Circle

General Circle

Admin Building Boat Assembly Department Department Department Department Circle Circle Circle Circle

Figure 7: Electrical Company’s Dynamic “Circle” Structure

second circle representative to the General In this second example, the fourth defining Management Circle. He will propose that element of dynamic governance, double- we delay the layoff for one month while the linking, facilitated upward communication Boats Department and anyone else who can of an idea all the way to top management. be spared concentrates on marketing. The The double-link process catapulted Max regular marketers will have to give some fast to a temporary position on the Board of marketing and sales training. Max and I will the company. The self-organizing process get Administration to help us calculate how identified the real leader of the moment and much of the company reserve we’d have to put him in the right position. spend to delay the layoff.” New Corporate Structure Gene glanced at Henry who was scribbling The next section explains how the four Gene’s words in the official circle notebook. defining elements are applied in the Henry nodded to indicate that he did not larger organizational context by analyzing need Gene to repeat the proposed decision. conventional corporate models of governance “Ok,” Gene continued, “let’s go around the and comparing them with the dynamic circle to see if anyone has objections.” No governance model shown in Figure 7. one did. As the meeting broke up, Alex, the supervisor of the Assembly Department, said Conventional businesses almost universally he’d report the decision to the company’s rely on a combination of majority vote and general manager at once and ask the General autocratic decision-making. Figure 8 expands Management Circle’s secretary to call an Figure 6 to illustrate that a majority of the emergency meeting for the next afternoon. Board members select the CEO who, acting for the Board, functions as an autocratic After initial reservations were resolved decision-maker. in the General Circle meeting, the circle decided to support the idea of temporarily By autocratic we don’t mean that the CEO reassigning the Boat workers to Marketing. is dictatorial; that’s only one autocratic style. Because the circle was limited in their In fact, CEO’s and their managers may authority to authorize expenditures from employ a wide range of autocratic styles the reserve. What they did do was elect Max including telling or giving direct orders, as a temporary second representative to the selling, participative, and joined styles. With company’s Board Circle (Board of Directors). the joined or participative style, mangers In a special meeting, after heated debate, the try to follow the consensus of their staff or Board gave its approval to a slightly modified peers, reserving final decisions to themselves plan, and the General Circle put the plan into only when necessary. These are all autocratic action. It worked. Within three weeks, there styles because, regardless of collaborative were enough new customer commitments that appearances, the auto, a single person, retains the layoff never occurred, and the company the power to ignore all other voices when is stronger today with a more diversified making decisions. Each of these autocratic customer base. styles has positive and negative qualities and depending on the circumstances none is inherently more desirable.

In contrast, it is important to understand By law employers who are displeased with that dynamic governance is not a method of employees statements can reprimand or participative or joined management. It is not a fire them. The law, however, protects management style. Rather it modifies the basic employees if they speak as a representative structure of power that supports whatever of the company’s union. Many brave and day-to-day style of management seems dedicated persons struggled for decades to most effective in a given context. Dynamic win for workers the power to negotiate with governance makes leading, regardless of a management from a position of collective manager’s personal style, easier. equality. From a systems viewpoint, unions can potentially perform a valuable feedback The evolution of business organizations service. Since union representatives have has tended toward greater equivalency of protection, feedback from them may be more everyone in a company. One stage in that accurate than from individual employees. evolution was the development of unions. Unfortunately, unions are also subject to the Figure 9 adds a union feedback loop to the politics created by majority vote that tends to corporate model depicted in Figure 6. distort that feedback.

Board of Directors Majority Minority

CEO

Subordinates

Figure 8: The Classic Corporate Model Uses Majority Vote and Autocratic Decision-making

These politics, plus the fact that the union A more recent development in the evolution stands outside the functional structure of of the corporate form of organization is the company, make the union feedback employee stock ownership plans. Figure loop effective only in reflecting matters of 10 slightly modifies Figure 9 to depict the broad and general concern. The feedback systems configuration created by such reflects the opinions of the majority, not the schemes. It replaces the Union with Employee minority, and is thus only partial feedback. Stockholders and redirects the feedback loop Furthermore, unions derive much of their to go directly to the stockholders rather strength from their right to strike or to than to the president. Since the employee require arbitration of disputes. Arbitration stockholders feedback loop is even further and strikes inhibit rather than promote than the union feedback loop from the day- communication with management, often to-day worker-supervisor communications making it strained, legalistic, and “us versus and decision-making, it is even more them.” Strikes especially can lead to bitterness ineffective. Its only values are to provide a and are rife with distorting and troublesome general positive incentive to the workers who mass emotions. as stockholders benefit overall performance and to protect against hostile takeovers.

Board of Directors Majority Minority

President

Subordinates

Majority Minority Union

Figure 9: The Classic Corporate Model with Union Feedback

Contrast Figures 8, 9 and 10 with Figure 7, Circles operate organically. For example, a which depicts the dynamic governance power person riding a bicycle from point A to point structure. Because of the double-linking B is a dynamic system. The leg muscles push principle, Figure 7 includes a feedback loop the pedals and the hands steer, the doing. The at each level in the hierarchy, including the senses, the measuring component, such as the Board, creating a wholly dynamic structure in eyes and inner ear give feedback to the brain, which feedback is direct and ensured. the leading component. The brain assesses the feedback and issues new guidance to the Figure 11 illustrates that the circles in Figure muscles. If we remove any one of the three 7 are drawn as triangles both for ease of components, we no longer have a system that illustration and to symbolize the circular can be steered dynamically. Without dynamic systems concept of dynamic steering: the steering, the odds that the cyclist will reach leading, doing, and measuring that follow point B efficiently, or at all, are very low. each other in a circular fashion. The triangle Dynamic governance places great emphasis apex represents the leading, the right on making both work processes and over- corner represents doing, and the left corner all corporate guidance dynamically steerable. represents measuring. Thus, a circle of people is one whose work processes and power structure respond

Stockholders Majority Minority

Board of Directors Majority Minority

President

Subordinates

Majority Minority Employee Stockholders

Figure 10: Classic Corporate Model with Employee Stockowner Feedback Loop

Leading

(Feedback) (Circle Policies and Orders)

Measuring Doing (Data and Output)

Figure 11: Dynamic governance Circle Functions: Leading-Doing-Measuring

dynamically to both the internal and external Finally, in a dynamically governed corporation, environment of the organization. the composition of the Board changes. The hash marks at the upper side of the Board The consent decision-making process Circle in Figure 7 reflect participation by provides the measurement component that is outsiders. One of these outsiders represents missing or weak in the classic models shown the stockholders. The other outsiders include in Figures 8, 9, and 10 because the boss can an expert in the company’s business area, an choose to ignore feedback. In a dynamic expert in the local government, and an expert governance circle meeting, consent decision- in management methods. Including a wide making removes the possibility of ignoring. range of expertise keeps the organization in Double linking then extends the reach of intimate touch with changes in the company’s the feedback, creating an integrated and environment. dynamically steerable organization at every level. Implementation The dynamic governance circle structure Top management should lead the overlays the classic structure. In other words, implementation of dynamic governance to Figure 7 embeds Figure 6: Specifically, the ensure that it proceeds holistically. Attempts lines that are the right-hand side of each by factions to implement it from the bottom triangle in Figure 7 are identical to the lines or middle of their organizations can lead in Figure 6. They represent the top down to considerable friction. Some people command structure of leader to doer. The mistakenly perceive dynamic governance as a remaining part of each triangle is the feedback revolutionary tool to use against management, loop. It represents power going from the to get rid of the boss. It’s not. The boss stays bottom upward in a circular relationship with put. The logic of dynamic governance sets the top-down power. These feedback loops aside the either/or logic of workers versus are much more immediate, accurate, and management. Dynamic governance logic is practical than the feedback loops shown in often expressed in both/and statements. For Figures 9 and 10. example, a dynamically governed business

places control of a company in the hands period, and to plan next steps based on that of both stockholders and management and evaluation. in both management and workers. It typically uses both autocratic and egalitarian decision- The second step is usually to form an making. It provides both a security assurance Implementation Circle consisting of the CEO, and a creative stimulus. It is concerned with other selected top managers, and persons both profit and human values. from other levels of the organization. The Implementation Circle receives training in By combining seemingly incompatible dynamic governance and deepens its learning concepts, both/and thinking stimulates by applying the training to its own operations. creative thinking and causes that seemingly The Implementation Circle’s job is to plan, chaotic thinking to self-organize into very guide, and evaluate a series of implementation practical solutions. steps, for example, implementing dynamic governance in one department and measuring Since the implementation process is both the results. If successful, the Implementation emancipating and motivating, conflicting Circle would probably expand the method feelings of caution, elation, frustration, to more departments. The second step ends relief, fear, and appreciation may arise once the whole organization has a double- during implementation. Careful planning linked circle structure and in-house trainers can minimize this discomfort and avoid are able to train current and new staff. disruption of the ongoing work process. The third step, that can partially overlap the Implementation begins in the imagination second step, is to install dynamic engineering of those in currently in charge, the owners methods. These methods organize all work or the board. They have to see dynamic processes on a dynamic basis and create a governance as a possible strategy for achieving structure to guide the organization’s own their values and vision for the business or evolution. Once these methods are in place, organization. Gaining this insight is the first the organization will likely be ready for step in implementation. They are likely to say ISO 9000 quality certification. The quality they are looking for better communications, methods will feel integral to the normal work more creativity in order to stay ahead of processes and not imposed from outside, competition, a more stable labor force, or as is so often the case when traditionally simply more profit. These are all valid reasons, structured and managed companies seek ISO but it is more effective if those in control can 9000 certification. articulate their dream for the company, their vision. Having a clear vision helps integrate The fourth step in implementation focuses dynamic governance into other strategies for on the Board Circle, or Top Circle, that realizing this vision. determines the budget for the organization. In a dynamically governed organization this The first step in implementation is for top includes setting formulas for the part of each management to make a clear decision to try staff member’s compensation that depends out dynamic governance for a specific period on the profits or losses of their department of time, to evaluate their experience after that and the company as a whole. This variable

compensation based on profits and losses Systems Theory and Dynamic ensures that each staff member, investor, Engineering circle, and the company as a whole has explicit Some readers will be interested in the financial feedback about their performance. theoretical background of the four defining The formulas include a regular payment for elements. Dynamic governance draws on investors and salaries for management, and knowledge from many disciplines, particularly staff, plus short- and long-term incentive systems theory. It has probably emerged only payments. recently because the crucial insights provided In addition to a new financial compensation by the science of cybernetics were simply structure, the Board Circle may wish to not available. Cybernetics is the science of revise its Incorporation and Bylaws structure communications and control. Systems theory, to make consent the legal basis of decision- closely related to cybernetics, explores the making. The corporation retains its ability similarities between seemingly unrelated to raise money through sale of stock, but phenomena. By establishing reliable analogies, because the basis of decision-making is the insights gained in one area of study can consent, not ownership, a hostile takeover accelerate understanding and discoveries in becomes impossible. The legal person, the other fields. The most powerful analogies corporation, thus owns itself; just as you, a are mathematical because they are the most natural person, own yourself. precise. For instance, as schoolchildren we learned to think of electrical circuits as being One attraction of dynamic governance is the “like” water pipes. That analogy is a very freedom it offers to use it in whole or in part. good one because the equations that describe The implementation process can be paused hydrodynamic volume and pressure have at any point or only applied to one division. the same algebraic form as the equations This offers a practical way to gain experience related to watts and voltage. Finding the with the model. social sciences lacking in clear management concepts, Endenburg developed the four Benefits of Self-organization defining elements of dynamic governance It is natural to ask, “Why bother to make by making analogies with processes clearly my company self-organizing? What are understood in the physical sciences, especially the benefits?” The summary answer is that electronics and biology. the self-organizing process spurs creative English mathematician and computer scientist thinking and catalyzes new structures and Alan Turing, Russian Belgian chemist and ideas. Although a circle meeting might be complexity theorist Ilya Prigogine, and others seen as a forum for endless argument and laid the foundation of systems theory during indecisiveness, in practice it is not. It is the 1950’s by generalizing the principles of more reminiscent of a stock market or a folk mechanics and thermodynamics to other market place where prices and exchanges fields of study. Their initial work led to new emerge spontaneously. Figure 12 summarizes disciplines such as operations research and the major advantages and disadvantages of found numerous practical applications in dynamic governance. manufacturing and management science. It

was the basis of the design of computers and of dissipative structures.” In lay terms, he generated such now familiar tools as PERT advanced our understanding of how order charts and flow diagrams. One of the tasks can arise from chaos. By mathematical of the systems approach to management is reasoning, he widened the scope of his work to understand why some organizations are from purely physical sciences to ecological better organized than others and to provide and sociological studies. Others have used a rigorous methodology for improving these ideas to examine such diverse topics organizational design and evaluation. as the origin of life on Earth, the dynamic equilibrium of ecosystems, and even the Prigogine became particularly interested in prevention of traffic jams. self-organizing systems. In 1977, Prigogine received the Nobel Prize in Chemistry for his “contributions to non-equilibrium thermodynamics, particularly the theory

Advantages Disadvantages • Promotes creativity and problem solving • Requires careful implementation throughout the organization planning • Supports the interests of investors, • Necessitates training in new concepts management, and staff • May arouse varying intense emotions • Speeds adaptation to change during implementation (skepticism, • Engages and utilizes the energy of every elation, anxiety, excitement) member of the organization • May, at first, be uncomfortable for • Generates high quality products and those not accustomed to sharing the services responsibility of difficult decisions • Increases staff commitment to and identification with the organization • Results in fewer, more satisfying meetings • Reduces sick leave • Improves safety record • Raises awareness of costs • Improves client orientation • Decreases the odds of burnout • Builds program self-discipline • Supports leadership among peers

Figure 12: Summary of Advantages and Disadvantages of Dynamic governance

In 1978, Herman Haken, a professor at other. For example, in the election process, the Institute for Theoretical Physics at the procedure in which each person makes the University of Stuttgart, extended the his or her nomination privately on a piece of mathematics associated with gases in paper intentionally creates a chaotic situation. Prigogine’s work and used the term synergetics The circle component provides the required to describe the new discipline he founded, that external energy source, viz, the common studies self-organizing phenomena. Haken’s aim which is assigned by the higher circle. work showed that self-organizing activities as The common aim creates tension: “We must far apart as lasers, the regular streaks of cirrus work together to produce a specific product clouds, certain rhythmic chemical reactions, or service, and we must do so in the face of patterns in slime mold, regular fluctuations in competition.” the number of hare and lynx pelts received by the Hudson’s Bay company over a 90 year In contrast, we can see that conventional period, and formation of public opinion are organizations do not create the conditions mathematically all one process. needed to release the phenomenon of self- organization. Neither autocratic nor majority- Prigogine and Haken showed that, to be vote decision-making allows the elements, self-organizing, a system must meet two the people, of the system, the company, to be conditions. First, the elements of any self- “not controlling each other.” For example, if organizing system must be equivalent, that is, each person on a board of directors has one not controlling each other. A system in which vote, the majority of votes on any one issue the elements do not limit or control each controls the minority. Thus, the majority vote other is without form; it is chaotic. Second, procedure destroys the initial equivalence. to be self-organizing, a system must have an Or, for example, managers in a conventional external source of energy. These conditions company may try to promote creative thinking are true for all self-organizing systems, by flattening their organization or by adopting whether the system elements are people freely a joined autocratic style. The reality, however, uniting around a common activity or atoms is that the manger alone retains the real power. harmonizing to one frequency in a laser. Thus, conventional businesses are organized, but they are not self-organizing. Only a The four defining elements of dynamic dynamic governance structure, that is, one governance create the conditions needed in which all the members are fundamentally for self-organizing to occur: consent, equal, fundamentally not trapped in a boss- elections, and double linking establish the servant relationship, supports the natural first condition, that of “not controlling” each phenomenon of self-organization.

Conclusion This article introduced dynamic governance, a new method of decision-making and organizational governance. It included two detailed examples of the decision-making method in day-to-day operation and outlined the governance system. It made brief mention of the discipline of dynamic engineering that develops existing work processes to make them more easily steered. Dynamically governed businesses, educational institutions and nonprofit organizations are significantly different from their conventional counterparts in many ways, ranging from job satisfaction to overall financial viability. The dynamic governance method is an empty tool, useful where and whenever people are organized. Still relatively new, dynamic governance is a methodology with tremendous untapped benefits. It lends itself well to partial use or full implementation. Dynamic governance has considerable unexplored potential for many areas of human endeavor. Those who are able to see the potential gains from dynamic governance will be invaluable to their organizations. These early adopters will be responsible for transforming their associated institutions in ways that enable everyone involved in the organization, as well as the organizations themselves, to achieve their full potential.

Selected Bibliography and Related Resources Much of the literature on dynamic governance York); and The Macroscope, Joel de Rosnay, is in Dutch; however, there are magazine translated from French by Robert Edwards articles in other languages, including (Harper & Row, New York). English, French, German, Spanish, Italian and Arabic. Readers may obtain copies of For more information on the scientific these articles through the Global Sociocratic approach to synergetics, we recommend Center in Rotterdam, Netherlands via Herman Haken’s Synergetics: Non-equilibrium www.sociocracy.biz or from the Center for Phase Transitions and Self-Organization in Physics, nd Sociocratic Governance in Washington, Chemistry, Biolog y, and Sociolog y, (2 Edition, DC, USA via www.sociocracy.info or www. Springer Verlag, New York 1978); and Erich sociocraticgovernance.org. Also available in Jantsch’s The Self-Organizing Universe (Pergamon English is: We the People: Consenting to a Deeper Press, New York 1979) which discusses Democracy by John Buck and Sharon Villines, Prigogine’s work with self-organizing available from www.amazon.com, and two dissipative structures. Jantsch’s book does not books by Gerard Endenburg: Sociocracy: The require facility with mathematics; however, Organization of Decision-making, and the more familiarity with calculus and linear algebra recent book Sociocracy as Social Design. are helpful for both of Haken’s books. These scientific approaches contrast to more C. A. Cannegieter’s book The Human Aspects philosophical treatments of synergetics such of Economics: A Treatise on Unemployment, as Buckminster Fuller’s Synergetics (MacMillan Inflation, and World Poverty (Exposition press, Publishing Co., New York 1975), which Smithtown, New York 1982, pages 150- seems less subject to empirical verification 184) gives a good overview of various and practical application. early sociocratic initiatives and contains an extensive bibliography. Dynamic governance carries the modern drift toward power equalization in employment to Books about dynamic governance are its logical conclusion. The power equalization also available in French. We particularly milieu can be seen from a number of recommend La Democratie se Meurt, Vive la perspectives, and the following list is a Sociocratie by Gilles Charest, 2007, available selection of various viewpoints: Introduction to from www.sociogest.ca. Management Science by Thomas M. Cook and Robert A. Russell (Prentice-Hall Inc., New While a number of books are available on Jersey 1977); Megatrends: Ten New Directions general systems theory, we particularly Transforming Our Lives by John Naisbitt (Warner suggest General Systems Theory: Essential Concepts books, inc., New York 1982); The Social Science and Applications, by Anatol Rapoport (Abacus of Organizations – Four Perspectives by Henry A. Press, Cambridge, Massachusetts); Cybernetics, Latane, David Mechanic, George Strauss, and Artificial Intelligence and Ecolog y: Proceedings of the th George B. Strother (Prentice-Hall Inc. New 4 Annual Symposium of the American Society for Jersey, 1963); In Search of Excellence by Thomas Cybernetics, edited by Herbert W. Robinson J. Peters and Robert H. Waterman, Jr. (Harper and Douglas E. Knight (Spartan Books, New and Row, New York 1982); Another Way of Life

by Patricia Baum (G.P. Putnam’s Sons, New applied to a business environment; Managing York 1973); Utopian Thought in the Western World on the Edge by Richard Pascale (Viking Books, by Frank E. Manuel and Fritzie P. Manuel New York, 1990) and Leading the Revolution by (The Belknap Press of the Harvard University Gary Hamel (Harvard Business School Press, Press, Cambridge 1979); What do Unions Do? Boston, 2002) for descriptions of the need By Richard B. Freeman and James L. Medoff for dynamic steering and development to (Basic Books, Inc., New York 1984); The North cope with constantly changing environments; Will Rise Again by Jeremy Riflin and Randy Complexity by Mitchell Waldrop (Simon & Barber (Beacon Press, Boston 1978); A Piece of Shuster, New York, 1992) and Competing for the Action by Stuart M. Speiser (Van Nostrand the Future by Gary Hamel and C.K. Prahalad Reinhold company, New Yo9rk, 1977); (Harvard Business School Press, Boston, Creating the Corporate Future by Russell Ackoff 1994) for a review of concepts of chaos, (John Wiley and Sons, New York 1981); complexity, and self-organization, and Beyond Majority Rule: Voteless Decisions in the strategic thinking as they apply to business; Religious Society of Friends by Michael J. Sheeran Reengineering the Corporation by James Champy (Philadelphia Yearly Meeting of the Religious and Michael Hammer (Harper Business, New Society of Friends, Philadelphia 1983); and York, 1993) for techniques that are related Dynamic Administration: the Collected Papers of in part to dynamic engineering; Emotional Mary Parker Follett edited by E. Fox and L. Intelligence by Daniel Goleman (Bantam, New Urwick (Pitman Publishing, New York 1973). York, 1997) and The Living Company: Habits Finally, there is the pioneering work of Rensis for Survival in a Turbulent Business Environment Likert. One can follow the development of by Arie de Geus (Harvard Business School his thought in three books: New Patterns of Press, Boston, 1997) for an in-depth analysis Management (McGraw-Hill, New York 1961); of the importance of human-to-human The Human Organization (McGraw-Hill, New skills – a strong rationale for using dynamic York 1976) and New Ways of Managing Conflict governance to govern. (McGraw-Hill, New York 1976). Likert and Associates, Inc., of Ann Arbor, Michigan, are A recent journal article of note is: Romme, continuing Likert’s work. A. Georges and Endenburg, Gerard, “Construction Principles and Design Rules More recent publications of interest include: in the Case of Circular Design, Organization Quest for Prosperity by Konosuke Matsushita Science: a Journal of the Institute of Management (PHP Institute, Kyoto, Japan, 1988), The Sciences. 17 (2):287. Interesting mathematical Rise and Fall of Strategic Planning by Henry exploration of self-organization is described Mintzberg (Free Press, New York, 1994) and in Klarreich, Erica. 2006. “The Mind of Built to Last by James Collins and Jerry Porras the Swarm.” Science News,170:347. Also, (Harper Business, New York, 1994) for a Millius, Susan, Swarm Savvy, “How bees, discussion of a broader vision for businesses; ants and other animals avoid dumb collective Planning for Quality by Joseph M. Juran (Free decisions,” May 9th, 2009; Vol. 175 #10 (p. Press, New York, 1988) for a discussion of 16). Finally, look for Tom Seeley’s book, quality concepts with a human face; The Fifth Honeybee Democracy, due out in 2010. Discipline by Peter Senge (Doubleday, New York, 1990) for insights into systems thinking

About the Authors Gerard Endenburg A citizen of The Netherlands, Gerard published his first book, Sociocratie, een redelijk Endenburg received his high school ideal (Sociocracy, a Reasonable Ideal). education at De Werkplaats, in Bilthoven, an innovative and influential school. The school, He helped found the Sociocratisch Centrum founded by educational and social theorist in 1977 to coordinate and to encourage the Kees Boeke, operated under a consensus growing number of Dutch organizations that decision-making system derived after the were adopting dynamic governance and to Quaker model for use in a secular setting. On support the interest expressed from countries completion of his college studies in electrical throughout the world. The Center now engineering and radar technology and his organizes lectures, seminars and training mandatory military service, Gerard worked courses on dynamic governance and has for a while for Philips Electronics where he overseen its implementation in numerous was instrumental in obtaining a patent for organizations. the flat speakers now used in many personal In 1981 Gerard published his second book, electronic devices including cell phones. He Sociocratie, de Organisatie van de Besluitvorming then joined Endenburg Elektrotechniek, (Sociocracy, the Organization of Decision-making). Inc., the electrical engineering company This book was launched at a press conference headed by his father. His parents established attended by Dr. W. Albeda, then Netherlands the company shortly after World War II as Minister of Social Affairs. The succeeding a practical laboratory to try out their ideas Minister of Social Affairs, Dr. J. de Koning, about management and industrial reform. launched Gerard’s Sociocratisch Manifest Gerard became general manager in 1968, a (Sociocratic Declaration) at a press conference in position he held for 30 years. He remained on 1984. In 1991 Gerard was awarded a PhD for his the board circle of the company until 2007. work with dynamic governance (sociocracy). Inspired by Boeke’s ideas, his engineering His thesis is published in Sociocracy as Social training in systems theory, and work in the Design. Today, Gerard remains involved in the field of synergetics, Gerard developed a system activities of the Sociocratisch Centrum and of decision-making based on the principle of the Global Sociocratic Center from his seat consent, which could be added to the existing on board circle and teaches in the business functional structure of any organization, school of the University of Maastricht. regardless of its size or objective: dynamic governance, known in the Netherlands as the sociocratic circle-organization method. In 1970, Gerard started to introduce this model into the factory. The first reports on the dynamic governance experiment appeared in the prestigious Dutch daily newspaper “NRC-Handelsblad” in 1974. A year later, he

John A. Buck John is a certified dynamic governance John established GovernanceAlive LLC consultant. After receiving a BA in English in 2006 from which he and others now from Brown University, John worked for train and consult full time on dynamic the Boeing Corporation as a technical writer governance. In 2009 Sharon Villines, Greg and then for the U.S. Federal Aviation Rouillard, and he established the Center for Administration (FAA) in Washington, D.C., Sociocratic Governance, a nonprofit located where he earned the Secretary of Department in Washington, DC, USA whose mission is of Transportation’s Award for Meritorious to increase public awareness and develop Achievement for his pioneering work the ability of individuals and organizations with information technology. He worked to apply the principles and methods of subsequently as a project manager for the sociocratic governance. It currently offers Harris Corporation, managing more than discussion lists and publications, sponsors 200 people in a global information systems conferences, and facilitates access to training installation and training project for the U.S. courses. For more information about the Department of State. In this position, John Center, see: www.sociocraticgovernance.org. used many dynamic governance systems concepts. The project received ISO 9000 John has three children and lives with his certification and consistently outstanding wife in Silver Spring, Maryland. ratings from it State Department clients. He For further information, contact John at: earned a Masters Degree from The George [email protected]. Washington University in 1999 in Quantitative Sociology. His thesis examined several dynamically governed organizations in the Netherlands. It demonstrated statistically that the staff of those companies had a significantly higher commitment to their organizations than typical Dutch workers. His publications include numerous professional articles about aspects of personnel management and automation, including techniques for establishing upward mobility programs, new concepts for human resource program evaluation, and strategies for designing and implementing new technology systems.

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