Travelogue Part 2/4: Key Principles of Self-organization

Read part 1/4 here.

Self-organization sounded like chaos at first. Everyone is doing whatever comes to mind. But the chaos we had already. So we couldn’t lose anything and were keen to try something new.

Self-organizing companies are like ecosystems. There is no central place, in which all the decisions are made. Let’s take a forest, for example. There is no CEO tree making all the decisions. A forest may seem chaotic, but at a closer look, it’s a balanced ecosystem.

Now you’d think that a small agency with just ten employees can’t be all that complex. In reality, the opposite is true. The complexity starts within every one of us, with all our contradictions and fluctuations. In the daily business of an agency, every project and client is different. We don’t sell a mass product, and that’s why a one size fits all approach doesn’t work.

There are well refined and field-tested frameworks for self-organization, such as Holocracy®. We have decided to develop our own system step by step. This has the advantage that we can adjust things to our needs and don’t have to switch everything from day one. Going one step at a time allows us to gradually catch up with our minds, behavior, and culture.

With software development, it’s the same, by the way. I can take a ready-made system such as Ruby on Rails. However, if I have requirements that go beyond, the framework can be quite limiting.

The balance in the forest is based on principles. So we need strong principles for self-organization to work too.

Here are the three most important principles we’ve already implemented:

The Advice Process

A common misunderstanding of self-organization is that we have to take all decisions democratically and with consensus. That’s not the case, because consensus and democratic decisions are slow, inflexible, and hard to scale.

Instead, we make decisions where they need to be taken by the contributor who wants to bring about change. However, it’s essential to ask for advice and make use of collective intelligence to make the best possible decision.

That’s why the Advice Process is at the core of self-organization, and this is how it’s defined:

Any contributor can make any decision after seeking advice from 1) everyone who will be meaningfully affected, and 2) people with expertise in the matter. Source: Reinventing Organizations Wiki

Sounds simple, but in reality, it’s not easy to implement, because the old thinking that we learned in life “To ask for permission” is so deeply rooted. It takes patience to unlearn it.

Even today, two years after introducing the advice principle, I see it happening that we wait for permission, or there is disorientation because it’s not clear who makes the decision.

The contributor who sees the need for change needs to make the decision. As a contributor I propose change and ask for advice to refine my proposal to make the best possible decision.

Full Transparency

Next, we need full transparency for self-organization. To make the right decisions, the team needs access to all information. As a small business, we didn’t have much to hide. We rarely talked about finances, however. How much profit did we make? How much of that goes as dividends to the shareholders, and how much is reinvested?

It’s important to not only make information generally accessible, but make it visible, so the team looks at it regularly. The raw data often doesn’t help much. If the team needs to decide whether they can hire a new employee or not, they need to know the company’s financial situation. Just checking the account balance won’t do the job.

That is why we have a few KPIs which we check regularly. We are working on a dashboard to make this information easily accessible to everyone.

Circles & Roles

As a small business, we need to handle a broad and diverse range of tasks with just a few people. That means, as part of the team, I take a wide range of roles instead of just a particular one like in an orange organization, at the production line, for example. For that, we use the concept of roles and circles.

A role pursues a defined purpose and has clear accountabilities. As part of the team, I’m taking various roles, some of them long term, some temporary, e.g., in a meeting. As a project coordinator, for example, I coordinate the project’s budget and schedule, and as the Product Owner, I represent the customer internally and manage the product’s requirements. Both roles can be taken by the same person.

The Product Owner role, we already know from Scrum, a framework for agile software development. That’s why the concept of roles isn’t new to us. The difference is that we now apply this to the whole company and add a process to refine the roles as needed.

In addition to the roles, we also have circles. You can call it a team or a task force if you will. Just like a role, a circle has a defined purpose and accountabilities. Circles can also be long term, for Marketing, for example, or temporary, to push a project. Every two weeks, we meet in the meta circle to chat about each circle’s progress and assign new tasks and projects.

As a contributor, I can freely decide which roles to take on and in which circles to participate. That allows us to react very flexibly to new challenges.

Example: Self-setting salaries

How we are setting our salaries serves as an excellent example of all three principles.

Setting salaries works like any other decision. The salary is self-set and follows the Advice Process. We had considered using a formula like the startup Buffer is doing, for example. That didn’t work for us, though. Salaries are way too complex to break it down into a simple formula. This example demonstrates how powerful the Advice Process in combination with full transparency is in dealing with complexity.

Here is how it works: when I want to adjust my salary, I create a salary change request. The request is a sort of open letter to myself. I have a few guiding questions to help me reflect on it and find a good salary. The letter helps me and others to get a feel for how I’ve come to a decision. I can see change requests of other contributors, too, and set it in relation. I also have an insight into company financials and can get a feel for whether we can afford the raise or not (Full Transparency).

I’m sending my salary change request to the salary circle (Circles & Roles), which meets to consult about the request to give me advice (Advice Principle). Possible, that I have a bit exaggerated with my raise or perhaps I was too modest. Important to note is that this is just advice to help me as a contributor taking the right decision. In the end, I’m making the decision myself. Once I’ve made the decision, I inform the salary circle as well as the role responsible for payroll accounting to make the change.

So far, we have had three change requests, and things are working well.

In the next part 3/4, I’ll be reporting on our progress in the “Search for Wholeness”.

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