Hack:
Principals of management in management-less organizations.

The interest in alternative forms of organization is helped by a greater understanding of their principles.

In this Hack, I hope to be clear about the prinliples leaderless organizations bring to bear on the problem of organizational management.

“Organizations organize themselves”.

Traditional organizations organize themselves using a discrete management team, usually arranged in a hierarchical structure, following both a formal and informal rule-set. In practice some teams are more effective than others at the job of organization.

This system is based upon the command-and-control by managers over conforming-and-compliant followers. That’s how organization happens in organizations right?

Well, there are alternatives.

Some organizations are different, they use the so called “bottom up” approach which can be divided into two broad groups;

a) the democratic model, where organisational decisions are arrived at through group consensus, (referred to as heterarchy), and

b) the so called Responsible Autonomy approach, in which individuals have a primary responsibility to organize themselves and do so alongside other self-organizing individuals.

(ref: “The Three Ways of Getting Things Done. Hierarchy, Heterarchy & Responsible Autonomy in Organizations” by Gerard Fairtlough. ISBN: 0-9550081-0-7)

We are all pretty familiar with the traditional and democratic models (Hierarchy and Heterarchy), so I will focus on the mechanisms of Responsible Autonomy.

To many, this bottom-up approach sounds a little kooky as there is no obvious mechanism by which the organization of the individual is somehow linked to the organization as a whole; can it be right that those who promote these approaches believe that through some mutual trust or benevolence the magic of good organization just happens?

That sounds pretty utopian.

It is worth reflecting at this point that the systems of your country, and even your city are based on Responsible Autonomy with independent agents, self-organizing via millions of daily voluntary transactions. Indeed, much of the organization in nature follows this very same system.

Households are also organized along these principals, with the exception of families whose members are either too young or too old to be responsible for themselves.

In Responsible Autonomy, the mechanism is not immediately obvious whereby the organization of each individual is combined into a coherent group activity.

The secret lies in a feedback mechanism that occurs at the level of individual interaction.

Through this mechanism my decisions are based upon what you did, and in turn your decisions are based upon what I did.

It is a “self-referencing” feedback system; something that if set up in a spread-sheet creates a failure mode called a “circ” (a sum, whose answer is used within its own question).

Whilst in a spread-sheet they are a problem, when they occur in reality a “circ” is not so troublesome, indeed they are often very useful; this is how the centrifugal governor on a steam engine works and it is also the mechanism of Adam Smith’s concept of the “invisible hand” in free market capitalism.

How does it actually work?

As previously stated, you react to me and I react to you in a mutual feedback loop. But in the example of an organization we are not just connected to each other, we also have connections to other people and thus our actions are both transmitted and reacted to by others, who in their turn have feedback links to yet more people. Some of those “people” will be connected back to us via loops in the chains of inter-connection.

If you were to draw out all the feedback loops between the individuals in the network you would see the organization is cross linked by a very dense structure of feedback connections.

It is this network structure that signals the actions of an individual around the organization, making the other agents react in consequence, which in turn creates more reaction; thus any and every change reverberates throughout the whole network.

Even if only a few parts of the network are tied to the production of an outcome then the organization will naturally align its activities in this direction.

The “high level” organization that emerges from the aggregation of the heavily networked self-referencing individuals can be surprisingly efficient in both how an outcome is achieved and the resources consumed in achieving it. The solution is often fiendishly complex and a unique compromise in the moment.

In mathematics, this unpredictable high level result is called an emergent property; it just emerges as an artefact within systems of autonomous agents. This is how the individuals in your city organize their day-to-day activities, somehow they all just rub along in fluid concert with everyone else.

There are two important attributes of such feedback mechanisms: they only function well if the connections between people are cheap to maintain (otherwise the individuals don’t use them), and second the feedback must happen fast enough so that reaction is timely enough to achieve the outcome.

In those organizations practicing “responsible autonomy” the costs of this complicated feedback network is considerably reduced by piggy-backing them onto existing transactional systems used in day-to-day operations: in the same way that broadband “piggy backs” on the existing telephone system.

When slickly designed, the performance and the costs of such a network feedback system will compare very favourably to the traditional management system, especially when the costs of the managers themselves are included in the traditional system. The rationale is utilitarian not utopian.

The question for every organization is which approach has the best balance of cost and effectiveness for them?

Whichever approach is chosen, top down, democratic or distributed, any system must deliver six fundamental functions:

a) it must acquire demand,

b) it must divide the activity between the agents,

c) it must acquire and allocate resources to the agents,

d) it must aggregate the activities,

e) it must distribute the rewards of their activities back to the agents in proportion to their contribution, and finally

f) it must record the process (administrative records).

It must do all this within the constraints of its competitive environment (and be lawful).

If you live in Cuba or North Korea you would naturally imagine that a centrally controlled organization is the proper choice. If you live anywhere else you may figure a hybrid system of centralized control and distributed decision making, perhaps using a rule based system is more appropriate.

There are two very familiar examples of the hierarchical system; corporations, and families with members who are too young to be responsible.

What have these systems got in common? They are both based on a paternalistic/materialistic model; clearly relevant to mums and dads, but arguably not so relevant to groups of responsible adults.

What system is your organization modelled upon- do you have to "mother" your subordinates?

In pursuit of competitiveness, which model would you explore?