What does it mean to ‘design’ complex organizations?

Ralph Stacey Posted by Ralph Stacey.

Ralph Stacey is a professor of management at the Business School of the University Hertfordshire and also a visiting lecturer at universities in Sweden, the Netherlands, and Malta. He is an active consultant to top management teams in major companies and the author of a several books on management and organization.

In this post I am curious about a set of approaches which seem to have family resemblances with, and claim to be at least partly based on, insights from the complexity science....

In this post I am curious about a set of approaches which seem to have family resemblances with, and claim to be at least partly based on, insights from the complexity sciences similar to ones taken up and developed on this blog. As with the last post I try to understand the methods in their own terms before offering a critique.

I take together the holacracy method, the sociocracy movement, which appear to be mutually informing to a degree, and Frederic Laloux’s Reinventing Organizations[1]. All three offer a partial critique of contemporary management practice and promise a more effective way to structure and run organisations based on principles of ‘self-organisation’. Holacracy in particular claims to offer ‘a complete packaged system for self-management in organizations’, while Reinventing Organizations claims to offer a new worldview. I do not intend to explore the similarities and differences in great detail for fear of losing both myself and the reader, but try to cover some of the main assumptions in each. As with Clear Leadership, there are quite detailed prescriptions as to how to fully realize the perspective. (readers can listen to a recorded telecall here where one of the proponents of sociocracy, James Priest, describes what he sees as the similarities and differences between the different approaches, and includes reflections on Agile and pattern language, which I do not address).

Sociocracy, Holacracy and Reinventing Organizations – the basics.

All three perspectives point to the inadequacy of current methods of organizing and critique in particular hierarchical organizational structures, top down command and control, and contemporary theories of leadership which privilege the visionary leader. The proponents of sociocracy et al. think that orthodox structures and contemporary managerialism (although they do not use this term) lead to authoritarian relationships which work against drawing on the wisdom of the group, and curtail individual autonomy. Clear Leadership, the subject of the last post, does not offer a critique of leadership, but does share in common with the three perspectives under discussion an interest in relationships of collaboration, trust and cooperation and drawing on the wisdom of the group, which are thought to be necessary to increase innovation and organizational effectiveness.

Sociocracy claims as part of its heritage the sociology of Comte, one of the first proponents of the discipline of sociology which aimed to think more scientifically about the social, with principles of engineering and cybernetics applied to ‘human systems’. Dutch electrical engineer Gerard Endenburg put his workers in teams, or ‘circles’, organized hierarchically, where all decisions within the circle are reached by common consent. Organizing staff into circles, or inter-linked teams, are common to all three perspectives. While sociocracy suggests a gradualist approach to organizational change, holacracy, on the other hand offers a more comprehensive programme, a ‘complete package’ for transitioning wholesale to a holacratic organization based on a ‘constitution’ which covers the way to design your organizational structure (circles and sub-circles), efficient ways to run your meetings, and problem-solve ‘without bureaucracy’. Holacracy draws on the parts/whole thinking said to originate with both Arthur Koestler and Ken Wilbur, where the part is both autonomous and contributory to the whole at the same time. (Readers of this blog will recognize that this parts/whole thinking originates with Kant and his regulative ideas about Nature).

Frederic Laloux, meanwhile, describes an organization as a complex adaptive system (CAS), a ‘living breathing system’, which has an evolutionary purpose, and a purpose beyond that of the individuals who make up the organization.  It is made up of people, but exists somehow independently of them at the same time, although Laloux does not make clear what this means in material terms. He makes a bold claim that there is evolution in organizational structure which reflects a particular stage of the development of human consciousness. We develop from being driven by our impulses to being preoccupied by control, and latterly to a ‘Teal’ age when we can disidentify from our ego needs and listen to our authentic selves. We can listen to the deeper, wiser parts of ourselves and to the organizational purpose. In Laloux’s understanding of organization as CAS, the parts serve the purpose of the whole, they interact in a non-linear way, and their interactions are governed by simple rules. There is constant adaptation between the parts (employees?) and the whole, and between the whole and the environment to ensure survival.

All three perspectives claim to be egalitarian in their intent. Sociocracy and holacracy in particular claim that applying their methods means that decisions are not made autocratically or on the basis of prejudice or politics, but rather on reasoned argument. When a team member senses a gap or tension between what is and what could be, and makes a recommendation to the team as to why a change should be made, an elected facilitator holds the ring while the team member’s ideas are tested by questioning from other team members. The holacracy constitution has a very detailed account of how this might be done which currently stretches to more than 20 pages.

So each of the three perspectives privileges the idea that human beings are somehow prevented from reaching their full collaborative potential because of restricted ways of working and organizational structures which get in the way. Each of these perspectives argue that they enhance value alignment, trust, co-operation and harmonious working, create greater organizational resilience and distribute power throughout the organization (although power is hardly mentioned as a factor in Reinventing Organizations). Organizational politics are largely considered an impediment to effective organizational working, as are managers and leaders; they are part of an ‘old mentality’. Staff in organizations are said to be self-organizing, or self-managing, because they operate according to clear rules of engagement which enhance transparency.

Some assumptions in the models

One of the first things to notice about all three perspectives is that they appeal both to science, and to emancipatory thinking. And in doing so, one might argue, they also invoke the religious imagination. In Laloux’s case the appeal to the mystical is both overt and deliberate. I think this is an important phenomenon in contemporary organizations where managerial thinking and language can make organization life seem flattened and meaningless. Who, for example, is content to be thought of as a human resource and looks forward to their next appraisal if it is based on a dry assessment of whether last year’s objectives have been met or not? One way of understanding this linking, or relinking of mystery to work, prevalent also in Peter Senge’s books, is a sacralisation of the workplace as the principle site of spiritual fulfillment, however we interpret the term. We might understand this as an attempt to make today’s organizations more meaningful, or see it as yet another colonization project, a corporate claim on your soul as well as your body, depending on your ideological perspective.

The rational/emancipatory nexus is that we can apply the same kind of rational thinking to social life that we do to the natural world, and evolve as higher and higher social beings. This was de Condercet’s[2] dream in the 18th C, for example, one of the first exponents of what we have come to understand as sociology. Laloux follows in de Condercet’s footsteps by imagining that that human beings gain ever higher levels of consciousness. In de Condercet’s case there were ten stages of human development until, in the last stage, we are able to banish inequality and increase human happiness based on the ‘general laws directing the phenomena of the universe’. Laloux is not assuming that each stage of development is ‘higher’ as de Condercet does, however, but that each stage, and the form or organizing which accompanies it, is adapted to the age and stage of society in which if finds expression.

So there is a clear thread of rationalist/positivist thought in each of these perspectives which dates back to Kant, continuing through de Condercet and Comte to Habermas. Habermas’ theory of communicative action[3] imagines the abstract conditions under which human beings can communicate and be understood, untrammelled by unequal social relations and power. Equally, but from a critical and emancipatory perspective, in these OD methods it is thought that there are more rational, procedural ways of conducting ourselves, so that we can set aside our differences and the messy ambiguity of staying in relation with each other. Through the application of reason can we overcome our fear of tradition, of religion and of authority and release ourselves from our need to dominate each other. So far, so critical.

A critique from an alternative understanding of the complexity sciences

In all three cases of sociocracy, holacracy and Teal organisations, proponents of the perspectives conflate self-organization, a property of agents in CAS, with self-management. As an alternative, and based on the understanding of complex responsive processes, on this blog I have taken self-organization to mean simply and only the local interaction of agents with other agents in their vicinity. In other words, if we take up the insights from CAS by analogy, social life is always self-organizing in the sense that we are always acting locally trying to co-operate and compete with others. It implies no necessary critique of hierarchy, nor of management, managers or leaders.

Of course, astute readers will have noticed that this blog maintains a critique of both managerialism, a particular form of management thinking, and the overblown discourse on leadership. But this is not the same as saying that there should be no managers and no leaders. Indeed it seems to me that sociocracy in general and holacracy in particular simply replace one form of hierarchy and management with another. (This is an overt acknowledgement here that power produces as well as constrains, a strong theme in the work of both Elias and Foucault). Within each circle there are members called facilitators who are more powerful than others, and there is a governing circle made up of representatives of all the other circles. So some kind of hierarchy is always necessary, no matter what you call it. In a critique of Laloux’s thinking Zaid Hassan points out an important hierarchical contradiction in the former’s book when he stipulates that a prior condition for creating a Teal organisation is that the founder or CEO has a Teal mindset. In other words, it is still the CEO who ‘creates the conditions’ for others to be liberated.

It seems to me that in being naïve about power, all three perspectives both overstate and understate the operation of power in social life. In assuming that leaders and managers are powerful and workers are powerless, they overstate the effects of management power. Anyone who works in an organization understands the daily acts of subversion, the hidden transcripts, the rebellions, the work-arounds which take place in organizations which are authoritarian, or even conventionally managed. Power is a function of all human relating. Additionally, it completely misses the point that everyone, no matter how powerful, is also caught up in relations of power. No one can do precisely what they want, because they too are subject to the pressures of scrutiny and surveillance, as well as pressure from peers and the influence of internalized authority. Organizational life is a game of games, not an environment where those at the top do to those at the bottom.

And in terms of understating power, the proceduralised ways of interaction on offer, which claim to eliminate politics and power, will never actually do so. These procedures are, as the political philosopher Lois McNay has observed, drawing on Bourdieu, ‘socially weightless’[4]. What she means by this is that the prescriptions for dealing with politics and power are very abstract and far removed from the urgencies of everyday practice. The abstract account of conflict, that on the basis that people detecting a ‘tension’ can make a rational and convincing argument for going ahead with what they propose, completely misses the quite ordinary impediments to doing so. The ability to make one’s case is directly related to one’s social situation, and the specific qualities of the relationships between the people present, which no formal ‘constitution’ can ever fully take account of. In other words people are more or less confident, according to age, sex, race and life experience, and will have their own take on what they can and can’t say, and can get away with. The procedures in sociocracy and holacracy are over-reliant on rational argument and counter-argument. In the case of holacacracy in particular one can only expect the ‘constitution’ to grow and grow to take account of more and more messy human behaviour that previous versions have not legislated for.  In Laloux’s case, employees are invited to bring in their ‘whole’ selves, their emotions as well as their ‘spiritual’ side, but are also invited to submit to the good of the whole, the mystical presence of the organization which is thought to have a purpose of its own. In all three cases the perspectives have missed the point of the importance of constraint, conflict, ambiguity and misunderstanding in producing novelty.

It is something to think about that holacracy in particular seems to be popular in the tech sector. In the last two decades we have experienced the growth of enormously influential global digital corporations who may promise to ‘do no evil’ on the one hand, but find ways of commodifiying our data and selling it back to us, and subjecting us to increasing surveillance on the other. It is possible to see how the appeal to rationality as a way of covering over power and politics would be tempting for digital companies pretending to be on our side.

Summing up for now

All three perspectives have merit in the fact that they do not take for granted the dominant discourse on management and leadership, but are open to experimenting with different ways of working. In this sense they are both experimental in the pragmatic sense of the word and critical, more or less. They are predicated on finding greater autonomy for workers and promote a kind of localism which assumes that expertise is best located close to the site of where the work takes place. According to Priest’s account, sociocracy seems more gradualist and methodologically experimental in attempting to work with what already exists in an organisation; holacracy, on the other hand attempts wholesale change from hierarchy to holons, meanwhile Laloux appeals to mystical New Age fantasies of wholeness and different states of consciousness, which may appeal to industry leaders who may already feel that they have some unique and privileged insight into the human condition because of their material success. Each, to a degree, is imbued with emancipatory intent.

All three draw on the complexity sciences in either a mechanistic, algorithmic or mystical way and assume that self-organisation means no managers and no hierarchy. Sociocracy and holacracy try to replace politics and power with procedures, and in doing assume that unequal power relations can be done away with by rational argument and abstract processes defined in advance of the encounter. In so doing they produce a handbook, a manual of how to stay in relation with each other. The question arises, then as to what happens, to our full humanity, our grievances and imperfections, what we obsess about, whether justified or not. Meanwhile Laloux assumes that conflict will evaporate if we can find it within our ‘deeper’ selves to be good and can realize a higher state of consciousness. In each of these cases the point is missed that evolution occurs in complex systems because of constraint, and the escalation of small differences. Complex social life manifests in the paradox of trust and mistrust, transparency and hidden transcripts, agreement and disagreement. Alignment, agreement and conformity to rules are no path to novelty.

Like a number of OD disciplines, all three perspectives are methods-driven, rather than question-driven. In other words, they already have a solution handy, a handbook, in holacracy’s case an elaborate one, for whatever presents itself in terms of organizational context and difficulty. In this sense, although they each nod to the complexity sciences, they do not fully grapple with what it means to work in an emergent way with the grain of the particular habitus of the organizations they encounter. And I do not mean this in any mystical way, as though there is some kind of inchoate ‘whole’ which informs all activities, but rather the everyday conversational life of the organization which reflects figurations of power, ideology and conflicting values.



[1] Laloux, F. (2014) Reinventing Organizations: a Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness, Brussels: Nelson Parker.

[2] Condorcet, Marie, J. A. M. de (1795/1955) (trans. Barraclough, J.) Sketch for a Historical Picture of the Progress of the Human Mind, London: Weidenfeld and Nicolson.

[3] Habermas, Jürgen (1984) [1981]. Theory of Communicative Action, Volume One: Reason and the Rationalization of Society (Book). Translated by Thomas A. McCarthy. Boston, Mass.: Beacon Press.

Habermas, Jürgen (1987) [1981]. Theory of Communicative Action, Volume Two: Lifeworld and System: A Critique of Functionalist Reason (Book). Translated by Thomas A. McCarthy. Boston, Mass.: Beacon Press.

[4] McNay, L (2014) The Misguided Search for the Political, Oxford: Oxford University Press: 41-46.