7. Enterprise

SIX FACETS - Enterprise Highlighted

When we speak of enterprise, we typically think about organizations where bosses manage the enterprise by telling people what to do. However, there is growing evidence that when everyone in an organization has more voice, more choice and more responsibility, the enterprise achieves better outcomes than through top-down decision-making.

At the heart of enterprise in the new reality is decentralized power and participatory decision-making. To illustrate enterprise in a new reality, I highlight several companies and concepts:

  • Morning Star, the world’s largest tomato processing company, which handles forty percent of America’s tomato product, has taken the most radical approach to decentralizing authority—employees have no bosses.
  • Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness is a book by Frederic Laloux, a former management consultant. It explains key concepts related to Morning Star and similar organizations, which function with “no bosses.”
  • B Lab, a non-profit corporation, and the related concept of benefit corporations, are part of “a global movement of people using business as a force for good.™”
  • Ben and Jerry’s Ice Cream inspired the founders of B Lab to foster an approach to business that combines the profit-making of a traditional corporation with the social concerns of a non-profit corporation.
  • Fair Process is an evidence-based concept that challenges the traditional, top-down management approach to running organizations, but represents a less radical approach to decentralizing authority than in organizations without bosses.
  • Authority with Grace is an IIRP concept and an established training program, which encourages fair process in management and governance.

Morning Star Video

Woman: We have no bosses here at Morning Star.

Man: I have no boss—well, everybody is basically a boss.

Other man: We don’t have a structured hiring process.

Woman: Here at Morning Star as a group, as a family unit, we’re involved and we make those decisions together.

Other man: You get the right person on the job, you don’t need to micromanage them.

Morningstar video

These quotes are from a video about Morning Star, a company that was founded by Chris Rufer in 1970, while he was in college. As his company grew, he took a radical approach to management, in which employees take responsibility for decisions that used to be left to middle management bosses.

Apparently, his approach has worked for Morning Star. His company grew to be one of the biggest tomato product companies in the world, handling over 40% of America’s tomato production, and is one of the best examples of a self-managing company.

Reinventing Organizations

Reinventing Organizations book

Frederic Laloux is a former management consultant who tired of working with the “soul-less” corporate world. He is convinced that people want something else from a workplace besides a job.

They want to be part of an organization that matters and is doing something useful in the world. They want to be treated like full-fledged, competent adults, who do not need mommies and daddies supervising their work.

He studied Morning Star and other organizations that have moved toward staff self-management, and compared them to organizations that have not, or that use some elements of self-management.

This video about Frederic Laloux’s ideas provides a useful explanation of the evolution of his five management models as they move from the most authoritarian to the most self-managing, the latter being represented by the color “teal.”

What is particularly helpful about this explanation is the clarification that old and new management models can co-exist and serve organizations at different stages of development, with varied needs, and when challenges arise. Teal is the newest management culture to evolve and is potentially the most satisfying and productive approach for human society.

The traditional corporate management culture makes negative assumptions about their employees’ attitudes and behavior.

  • Employees are lazy and must be watched closely.
  • Employees do what it takes to make as much money as possible.
  • Employees put their own interest ahead of what is best for the organization, so they cannot be trusted.
  • Employees are not capable of understanding important matters that affect the economic performance of the company; therefore, we don’t involve employees in decision-making and don’t share company information with them.
  • Employees do not want to be responsible for their actions or for decisions that affect the performance of the organization; therefore, we install parent-like bosses to tell them what to do and make these decisions for them.

The basic assumptions of self-managing organizations stand in stark contrast to traditional assumptions.

  • Employees are creative, thoughtful, trustworthy adults.
  • Employees are accountable and responsible for their decisions and actions.
  • Employees are fallible and make mistakes.
  • Employees are unique.
  • Employees want to use their talent and skills to make a positive contribution to the organization and to the world.

Self-management is “based on peer relationships” in organizations that are “seen as living systems,” where people can “reclaim wholeness” and “bring all of who they are to work.” The self-managing organization relies on trust rather than control, offers roles not jobs, recognizes and tames egos, and as a collective body, develops a life and direction of its own.

A common misperception is that self-managing companies rely on reaching consensus for decisions and don’t have leaders. No, they don’t rely on reaching consensus, which can get mired in endless discussion and dilutes responsibility. Rather, they rely on a peer advice process.

Morningstar’s Colleague Principles give a good idea of what peer advice might look like, even in the most challenging situations. Ultimately, a decision might require that the CEO get involved, but usually the self-management process resolves issues without the company’s official leaders.

Ben and Jerry’s Ice Cream

BEN COHEN & JERRY GREENFIELD of Ben & Jerry's Ice Cream

Jerry Greenfield, left, and Bennett Cohen, the founders of Ben and Jerry Homemade Inc. (AP Photo/Toby Talbot)

Ben and Jerry’s Ice Cream is the world’s fourth-largest producer, selling more than a third of a billion dollars in ice cream each year. Ben and Jerry’s is also a pioneer in what Jerry calls “caring capitalism.”

Since 1985, Ben & Jerry’s has donated 7.5 percent of its profits to charities, and provides its employees with good salaries, profit-sharing, health club memberships, daycare service and college tuition aid. The company seeks organic suppliers, uses environmentally friendly packaging and creates opportunities for economically depressed areas and disadvantaged people.

Ben & Jerry's logo

However, in 2000, the “caring” corporation feared a challenge to its way of doing business when Unilever—the huge Anglo-Dutch conglomerate—decided to buy the company.

Although the founders were reluctant to sell, they felt duty-bound to maximize the financial benefit to their stockholders. In fact, under existing law, corporate leaders are vulnerable to stockholder lawsuits and hostile takeovers if they don’t make the stockholder their sole priority. That is, until “B Lab” was created to help corporations balance social responsibility and profit.

If you haven’t already, now would be a good time to watch or read “Ben and Jerry’s Ice Cream—To B or not to B”.

Ben & Jerry's video

B Lab and Benefit Corporations

Jay Coen Gilbert and Bart Houlahan, in 2003, sold their sports apparel business for a quarter-billion dollars and joined with Andrew Kassoy, a successful private equity investor, to co-found B Lab, a non-profit corporation they claim “serves a global movement of people using business as a force for good.”

Bart Houlahan, Andrew Kassoy, and Jay Coen Gilbert

L to R: Bart Houlahan, Andrew Kassoy, Jay Coen Gilbert

B Lab has developed self-assessment tools and a certification process for companies who want to meet high standards of ethical governance and positive social impact. In 2012, with Unilever’s support, Ben and Jerry’s Ice Cream went through B Lab’s certification process and in doing so, formally joined the caring capitalism movement that the ice cream company itself had inspired.

In the meantime, B Lab invented the benefit corporation—a hybrid corporation merging the social goals of the traditional non-profit with the financial goals of a profit-making corporation.

B-Lab Logo

Some critics see the benefit corporation as a threat to shareholder property rights—claiming that it’s socialism. But all the ownership and decision-making stays in private hands and—in the spirit of the free market—investors now have another choice.

Consumers also have a choice. Many would prefer to buy from what they consider ethical companies. Some people believe that capitalists are inherently greedy. But that attitude is contradicted by the growing interest in benefit corporations and in B Lab certification. This suggests that caring capitalism may be coming our way.

Although it was only in 2010 that Maryland authorized the first benefit corporation, 30 states now offer the option. B Lab Europe launched in 2015. Recently, Italy became the first country in Europe to authorize the benefit corporation. There are now almost 2,000 B corporations in 50 countries in 130 industries, and more than 40,000 companies worldwide are using B Lab’s free assessment tool.

Fair Process

When authorities do things with people, whether reactively—to deal with crisis—or proactively, the results are better than when they do things to people or for people, without their engagement.

This fundamental thesis is evident in a Harvard Business Review article about the concept of fair process producing effective outcomes in business organizations (Kim & Mauborgne, 2003).

Professors Kim and Maugborne

Professors Kim and Maugborne developed the concept of Fair Process.

The central idea of fair process is that “…individuals are most likely to trust and cooperate freely with systems—whether they themselves win or lose by those systems—when fair process is observed.”

The three principles of fair process are:

  • Engagement – involving individuals in decisions that affect them, by listening to their views and genuinely taking their opinions into account
  • Explanation – explaining the reasoning behind a decision to everyone who has been involved or who is affected by it
  • Expectation clarity – making sure that everyone clearly understands a decision and what is expected of them in the future

Fair process relates to how leaders handle their authority in all kinds of professions and roles, from parents and teachers to managers and administrators. The 1997 “Fair Process” article in Harvard Business Review was based on a study of strategic decision-making in 19 multinational companies.

The research concluded, “Managers who believed the company’s processes were fair displayed a high level of trust and commitment, which in turn engendered active cooperation. Conversely, when managers felt fair process was absent, they hoarded ideas and dragged their feet.”

In subsequent field research, the authors identified the three principles of fair process and affirmed their findings. Two contrasting case studies from their research illustrate the significance of restorative practices values in organizations:

Volkswagen – In the summer of 1992, at Volkswagen’s Puebla, Mexico, manufacturing facility, workers turned against both their union and the company, despite a generous 20 percent wage increase offer.

The “union’s leaders had not involved employees in discussions about the contract’s terms,” especially a number of unexplained work rule changes that the workers feared. A massive walkout cost the company about 10 million dollars per day, and disrupted its optimistic plans for the U.S. market.

Siemens – On the other hand, troubled Siemens Nixdorf Informationssysteme had cut 17,000 jobs by 1994, when Gerhard Schulmeyer, the new CEO, held a series of meetings, large and small. In these, he personally explained to 11,000 of the company’s remaining 32,000 employees the bleak outlook and the need to make deep cuts. He asked for volunteers to come up with ideas to save the company.

The initial group of 30 volunteers grew to 9,000 employees and managers who met mostly after business hours, often until midnight. They offered their ideas to executives, who could choose to finance them or not. Although 20 to 30 percent of their ideas were rejected, the executives explained the reasons for their decisions, so people felt the process was fair.

By the next year, the company was operating in the black again and employee satisfaction had doubled, despite the drastic changes underway—“a transformation notable in European corporate history.”

Harvard Business Review logo

Another research project in the Harvard Business Review, consistent with fair process and the trend away from top-down management, reported that, “Leadership is a conversation.”

Based on interviews over two years with 150 top leaders at 100 companies, the researchers concluded: “Smart leaders today, we have found, engage with employees in a way that resembles an ordinary person-to-person conversation more than it does a series of commands from on high. Furthermore, they initiate practices and foster cultural norms that instill a conversational sensibility throughout their organizations.”

For example, Athenahealth, a medical records technology provider, shares strategic and financial information—usually provided only to top leaders in most companies—so their employees are thoroughly involved in the business. Infosys includes a broad range of employees, from every rank and division, in the company’s annual strategy-development process.

Although these inclusive and participatory trends do not go as far as self-managing companies, they demonstrate that the business world is moving toward a new reality.

Authority with Grace

The IIRP Graduate School that I founded in Bethlehem, Pennsylvania, offers training to help organizational leaders implement fair process in their workplace. Restorative Leadership Development: Authority with Grace, is a two-day workshop. According to the IIRP Website:

“During this very personalized event, you will examine your own leadership style and characteristics through inventories and reflective processes. Participants share their own leadership challenges and receive support and feedback from others, to help build new organizational and implementation strategies.

“You will also learn about:

  • Building relationships with staff using practical supervision strategies
  • Responding to conflicts using an approach that repairs relationships
  • Effectively managing organizational change
  • Employing your strengths as a leader to overcome gaps and weaknesses”

Many people are employed in dysfunctional workplaces characterized by toxic relationships. However, by engaging staff in meaningful conversations, leaders can improve performance, resolve challenging issues and create healthy workplaces that satisfy people’s needs and reward them for their efforts.