Organizational systems and their evolution

Speaking of ‘organizational systems’ as a concept is complex, due to all the elements included within them. There are different types of organizations, with different types of objectives: for-profit organizations in different sectors, non-profit organizations, supranational, national and regional governments, each with a strategy and more or less formal objectives.

WITORG will try to show different types of organizations in terms of their organizational system’s focus. All this from several perspectives, with the aim of reflecting on the organizational models.

Frederic Laloux. Reinventing Organizations

The first classification on types of organizations is based on the classification of organizational systems carried out by Frederic Laloux in his book Reinventing Organizations. It is a very interesting book, which will help you to classify your organization or others that you already know. By recognizing your reality, it is possible that you can find in it ideas or ways that help you to evolve your organization. You could also realize that other realities different from yours are possible and start a new path. It depends on you.

Next, we present five of the seven types of organization described in the book with which we live today: RED, AMBAR, ORANGE, GREEN and TEAL. Each system emerges as a solution to a specific reality and has been an advance to adapt to more complex and unprecedented realities in the course of history.

The most advanced state in organizational systems is the so-called TEAL. Frederic Laloux considers it an emerging model that some organizations, with and without profit, have self-developed. They have done it without contact between them, however, they share common ways of doing and the same philosophy to understand an organization. And something more important, the meaning of an organization.

As we can see in the drawing, the classification of organizational systems in this book has been raised regarding the evolution of the organizational systems that have arisen throughout history. All systems have brought an important advance in the world’s development to this day.

The classification of the organizational systems is carried out considering the relationship between the people within the organization and the objectives pursued by each organization.

Classification of organizations according to Frederic Laloux

In reality, no organization will be 100% within one of the categories, however, one of them will be clearly predominant.

RED Organizations

Examples: mafia, street gangs, tribal militias.

They are organizations where functions and hierarchy are clearly defined. The exercise of power is constant to keep the troops in order. Fear is the element that agglutinates the organization.

They are highly reactive organizations, where the short-term is the horizon of their vision. They develop in chaotic environments.

AMBAR Organizations

Examples: military organizations, Catholic Church, most systems (ministries, etc.) of government of a country, public school in general.

They are characterized by clearly defined roles within a hierarchical and pyramidal structure. The chain of command and control through the pyramidal structures is clearly defined, thus achieving the stability of the system.

They are scalable structures, where the future is seen as a repetition of the past.

ORANGE Organizations

Examples: multinational companies, charter schools.

The objective is to grow and beat the competition, maximizing economic or other results. Innovation is key to maintaining leadership. It is managed by objectives and their achievement is rewarded. Nowadays, it is the type of organization that predominates in the world.

The head of the organization orders what to get and the system of control or accountability is established. There is a certain freedom in how to achieve these objectives.

The keys or main features of the orange system are:

• Innovation (with the aim of creating new material needs for people).
• Accountability.
• Meritocracy.
• The shareholder or owner’s growth and benefit is pursued above other interest groups within the organization.

Today, most of the for-profit organizations fall into this category. They have focused on the achievement of economic objectives above all. The position of power of some organizations of this type has been used to influence governments, saving taxes and obtaining favourable regulations for them. This position of power has also been used to impose its conditions on customers, suppliers and the company’s own employees. Even so, we must not forget the technological development that this type of organizations has brought, even if it has brought negative consequences as well.

GREEN Organizations

Maintaining the classic pyramidal structures focus on culture and empowerment, with the aim of achieving an extraordinary motivation of the people who work in it.

Examples: Southwest Airlines, Ben & Jerry’s.

The keys or main characteristics of the green organizations are:

• Empowerment.
• Culture focused on values.
• Model focused on all interest groups of the organization, not just shareholders.

The green model emerges from the consequences of the orange model, absolute materialism, the importance of the ego or individualism and the loss of a sense of community. The green model focuses on the equality of all people, justice, the community, cooperation and consensus.

This division of organizational systems in red, amber, orange and green might seem simple, but it is a very valid way of understanding the organizations that exist in our reality. Surely none of these organizational systems is presented in a pure way. We will have mixtures of several of them within the same organization, although one will be the predominant one, and who knows, it could even be mutating nowadays.

TEAL Organizations

Frederic Laloux considers this type of organizational systems as emerging. Through his research, he has located a series of organizations that, without working in contact with each other, share similar philosophies and ways of doing things. He also understands that the focus of these organizational systems can help to solve many of the problems that the present world has. Therefore, consider this option as the most advanced.

Frederic Laloux describes the passage from green to teal as a state of consciousness, relating it to the fifth level of Maslow’s pyramid already seen: self-realization, meaning of life.

The characteristics of these organizations are:

• Self -management, relating as equals (P2P) without the need for hierarchies or consensus.
• Integrity (wholeness). When a person belongs to an organization, there is a part of him that stays out of it. We have a mask that shows what the organization demands and what each individual is willing to teach. Within the teal, people develop in the organization as they are, not using only their professional characteristics, but feeling accepted in all their integrity.
• Evolutionary purpose. Instead of predicting, planning and controlling the future by the management teams, in teal organizations people become involved in what the organization wants to become and for what purpose it wants to serve.

The book provides a list of organizations that practice teal principles. It also shows how some companies apply the aforementioned concepts.

The author uses metaphors to classify the three main (orange, green, teal) organizational systems:

• ORANGE as a soulless machine to achieve objectives.
• GREEN as a family with its own problems.
• TEAL as a living organism adapting to the environment.

Book highlights

It offers a very broad perspective of existing organizational systems. It can help to be aware of the organizational reality in which a person operates. In this way, you can consider what type of organization you would like to work with.

WITORG thinks that it is important to understand the book from the point of view of the organizational systems’ evolution. The classification of the five types of organizations is conceptual. Any organization can contain up to the five classifications, however, some of them will be predominant. Any organization should consider what their situation is and if any evolution would be advisable. It is not a matter of seeing who is more orange, green or teal.

Regarding the most advanced organizational concept, teal, the book shows examples and practices within the organizational systems that can answer the following questions:

• Is this possible in any type of industry or sector?
• Can it be applied in an organization with a large number of people, for example five hundred?
• How do you organize a team where people self-manage?
• How is the chain of command?
• How are conflicts between people resolved?
• What role do the ‘most responsible’ of the organization have? Are there any?
• Are there layoffs?
• What role do directors and managers play?
• How are the benefits distributed?
• What role does the CEO play?
• What role do the shareholders play?
• How are the relationships of a teal organization with its environment, suppliers, customers, collaborators, society, etc.?
• What conditions are necessary to start a teal path?
• Can you think of some more? Sure!

The book hardly comments on the world of new technologies. It is important to say that they have contributed to become aware of the concept of self-management and peer relations (P2P). The availability of new technologies is the same for organizations orange, green and teal. However, organizations that did not exist in 1990, or were in the process of being built during that year, have managed to develop and become major players in their sectors, thanks to proposing business models supported by new concepts and the use of new technologies.

Organizations such as Google, Apple, Amazon, Facebook, Tesla, Inditex, etc. How could they be classified? Orange? Green? Teal? One of the objectives of these organizations is to survive over time, in addition to continuing to obtain benefits. Which of the concepts orange, green or teal would help more to continue surviving as leaders in their sectors? Can a large corporation like the ones named be teal?

Taylorism versus holacracy

Taylorism has been the most common organizing system in the last hundred years in the West and in the corporate world and a valid form of government for many decades. However, the passage of time and mainly the complexity incorporated into organizations in the last four decades have caused several inefficiencies in the Taylorist organizational systems.

The classifications orange, green and teal are, after all, evolved forms of Taylorism. Each of them tries in its own way to avoid or solve the flaws after the passing of time and the changes that have occurred in Taylorism since the beginning of the last century.

To deal with all these inefficiencies that have arisen within the Taylorist organizational systems, several proposals have emerged in recent years. Some concepts aimed in principle to improve or evolve organizational systems are: self-managed equipment, process management, deployment of objectives, mini- factories, lean manufacturing, lean thinking, blockchain, TQM, QMS, EFQM, ISO 9000 family and derivatives, holacracy, etc.

Perhaps the holacracy concept is the most complete to face the Taylorist system. Frederic Laloux already includes this concept within the teal classification. Holacracy. in its conceptual representations, is clearly opposed to the Taylorist hierarchy, as an alternative to that classical way. Nowadays, you can easily find schemes like the following, where the Taylorist system and holacracy are confronted as concepts:

But what is holacracy really? Being a relatively new concept with great commercial depth, you can find many articles that speak of it:

• According to Wikipedia, holacracy is an organization system in which authority and decision making are distributed horizontally instead of being established by a management hierarchy.
• Holacracy.org is an organization dedicated to the implementation of holacratic systems.

Holacracy contains elements that define it:

• Roles. They are the elementary blocks of holacracy. A role includes a name, a purpose, a domain and an accountability. A role is not a description of a position. A person can hold several roles at once. A role can be covered by several people.
• Sub-circles, circles and main circle. They are management functions or processes that include several roles with defined autonomy for the self-management of the circle itself, although one circle will be included in a larger one, as a concept of global coordination. Finally, all will be included in the main circle.
• Governance process. Each sub-circle, circle and main circle will have a process of self-governance. Here the roles will be rethought as the organization needs to evolve, with the aim of adapting to the environment. Perhaps this is one of holacracy’s key points.
• If the figure of the CEO and shareholders or owners exists, they should take a declaration of holacracy where a series of principles are collected and respected.
• If there are no CEOs, shareholders or owners, the organization should find how to make the declaration of holacracy with its principles. Can this be done without some kind of leadership?

Reading the elements mentioned above, it is clear the need to deepen in how they work. Surely the reader will wonder if holacracy is plausible in any circumstance. In internal element of the WITORG Guide ‘300. Process management” the following conclusion was reached: many organizations confuse process management with the classic organizational functions by specialties; There are generalized management process maps where functions such as management processes appear.

Some organizations, seeking to evolve from their Taylorist flaws, will join holacracy. However, they will only get to disguise a Taylorist organization in roles, circles and sub-circles. It is possible that in the attempt, they evolve in a positive way, although being far from the referents of holacracy as they are defined in Holacracy.org.

Man, from his primitive origin, has organized in groups with the aim of ensuring survival. In these groups the individuals’ hierarchy was necessary to seek an order and form of government. Hierarchy brings with it a distribution of power in its own structure. Often, when the power is established in a specific way and distributed among certain people, although there is a real need for a change in the hierarchy with the aim of continuing to survive as a group, it is normal, and even natural, the resistance to change.

In holacracy there is also a hierarchy of roles within sub-circles or circles. And there are also hierarchical sub-circles or circles in other circles that contain them. However, in each circle or sub-circle there is a self-management autonomy. This must be used to evolve roles and be able to efficiently face changing environments. The circles have a governance committee, where they talk, quite often, about the evolution of roles to cope with the changes in the normal evolution of any organization. Circles and sub-circles must also be accountable to the circles that encompass them.

As a summary, the system consists of main circles that encompass other circles. All circles have a governance committee with a certain defined autonomy. All circles are accountable for. For it to work, it is necessary:

• A hierarchy between main circles with respect to other circles.
• A permanent bilateral communication as decisions are made in the governance committees.

There are hierarchical organizations where efforts have been made to obtain bidirectional information flows in a pyramid. They also try to apply self-management concepts. The need to improve organizational systems is a reality caused by the world’s and environmental evolution. Are these organizations being more holacratic?

When talking about holacracy, many elements are introduced into the conversation. They can bring conceptual discussions, really empty of real meaning when not talking about concrete realities. If holacracy is analysed for a given reality, it may be easier to define which parts or degree of holacracy could be applied.

In order to analyse a concrete reality, a series of questions are proposed for the reader to analyse the case he considers appropriate:

• Is holacracy a teal concept?
• What is sought to achieve by applying holacracy in an organization and in its organizational system?
• If there are CEOs and shareholders, to what extent does it depend on them to implement holacracy? What happens if, once the road has been started, bad times come?
• If there are no CEOs or shareholders or owners, how is the declaration of holacracy and its principles constructed?
• Is holacracy going to a certain extent against human nature itself, as to how man has generally been organized up to the last century?
• Is the classic power sharing contradictory to how it is done in holacracy?
• Could a Taylorist hierarchical system be disguised as holacratic?
• If a circle is encompassed by a higher level, are not hierarchies marked to a certain degree?
• Are there bidirectional information and some autonomy for self-management in a hierarchical organization steps in the holacratic direction?
• Would having circles representing classic functions be the same as having management processes as circles? In principle, both cases would be holacracy, however, what are the differences between one model and another?
• Can holacracy be applied in any organization?
• Can an organization apply holacracy to part of its stakeholders or part of its management processes and not others? What would it depend on?
• What values would it be necessary to collect within the declaration of holacracy in order to start the journey?
• What level of academic education and professional experience would it take to apply holacracy?
• What other constraints posed in ‘100. Essence of an organizational system’, can help or harm in the beginning towards a holacratic system?
• Other questions to be proposed by the reader.

WITORG believes that holacracy invites the evolution of Taylorist hierarchical systems towards more efficient models. In these models, concepts are introduced to overcome inefficiencies of classic Taylorist systems, where the unilateral direction of information and the superiors’ design of jobs are the way to act.

The complexity of the current world requires knowledge, self-management and bidirectional information in many organizations. Many of the positions, jobs or roles need these components. A hierarchical superior may have less knowledge of specific issues of positions or roles under him. Teamwork has become a necessity in the face of increasing complexity.

Holacracy is undoubtedly a response to the inefficiencies of traditional organizational systems. How to start or continue the path depends on each case…

The blockchain concept

The term ‘blockchain’ is born from the concept of ‘distributed registration technologies’. The term encompasses different types of ICT technologies (P2P, cryptography, time stamping…). By combining ICT technologies through a network of computers and other devices, we can manage information in a synchronized and decentralized way, in a distributed registry (network nodes). In addition, the information is transmitted and stored in a secure manner, respecting the participants’ identity and privacy.

Blockchain, also called ‘BC’, is a chain of blocks. These block chains form a distributed database. Block chains are published chronologically and linked to the previous block. To be published, an approval process must be applied, which occurs in the network nodes, with the consensus of the vast majority. Following the approval process, through the P2P, the information will be distributed and stored in the different systems of the distributed network. From that moment, the information cannot be altered.

Blockchain proposes an alternative to centralized databases.

The blockchain main concepts are:

• The chain of blocks.
• Linking a chain of blocks to the previous one chronologically.
• Processes of verification and approval of information. Validation process for new entries, transparent and agreed among the network participants called ‘mining’.
• The information already approved and published cannot be altered.
• P2P distribution of information.
• Distributed databases in a network of computers and other systems (nodes).

Once explained the blockchain concept, what it could contribute to the organizational systems:

• Distributed and non-alterable information.
• The need for informative transparency.
• The need for transparent and shared approval processes.
• P2P, not hierarchical or centralized relationships.
• Intermediaries are avoided as entities that provide confidence.
• Identity and privacy are respected if necessary.

To date, the best-known example as a real application is the bitcoin cryptocurrency, conceived in 2009.

When talking about organizational systems, what does the blockchain concept have to do with them?

So far, we have talked mainly about the hierarchical or Taylorist systems and holacracy. In both cases there is a hierarchy within the same organization. This is pyramidal in Taylorism and among circles in holacracy. Informative transparency, both in Taylorism and holacracy, will depend on the decisions of the first levels of the pyramid or of the most important circles, although in principle holacracy should have greater transparency.

With the blockchain concept, the term hierarchy disappears, the information is stored in different nodes after a process of approval, distribution and consensus among several independent entities. What could the bitcoin concept (distributed registration technologies) provide within an organization?

Could several independent organizations work with each other using the blockchain concept? Could the blockchain concept be used within the same organization? On what occasions? It may be convenient to review certain questions before answering them:

• What kind of information can be shared in a distributed blockchain record between different organizations or within the same organization?
• If information is power, should it be shared with other organizations?
• Are governments willing to make use of the blockchain concept? In what fields is it convenient to apply it?
• What are the benefits of sharing information validated by several organizations at the same time, registered next and without the possibility of altering it in the future?
• What are the benefits of sharing information validated by several entities of the same organization at the same time?
• Could the blockchain concept be applied to suppliers, competitors, users, collaborators, administration and other entities?
• Could the use of the concept put the survival of existing regulatory entities at risk?
• Any other the reader wants to add.

The answers to these questions could be proposed in a conceptual way as well. However, the need and opportunities for improvement will bring the answers once the latter are implemented.

Bitcoin cryptocurrency is based on distributed registration technologies. Below are several fields where the use of the blockchain concept is being considered, both in a conceptual way as well as in a real way:

• Cryptocurrencies.
• Direct payments between users without the intervention of intermediaries.
• Logistics.
• Traceability in the manufacture of all types of products.
• Distributed storage in the cloud. With Google Drive or Dropbox, the information depends on a single provider. There are projects to have these services distributed so as not to depend on a single provider.
• Property records and patents.
• Transparent governments regarding all economic transfers.
• Electronic voting.

The blockchain concept can offer ways of proposing solutions different from the current ones. This concept is also applicable in organizational systems. Alternatives to existing ways of doing can be proposed in order to be more efficient and effective in an increasingly complex environment.

Organizational concepts and 100. Essence of an organizational system

The concepts of the Taylorist hierarchy, holacracy and blockchain were novel at the time, they are now and, surely, new ones will appear. Understanding them, the conviction about the advantages they bring and the decision about their implementation is dealt with in the internal element ‘100. Essence of an Organizational System’.

Once it has been decided to bring a concept to reality, the rest of the elements of the WITORG Guide will be considered. Any new organizational concept can bring with it a halo of interest and prestige. Quickly, external organizations, generally for profit, will publicize the benefits of the new concept.

The awareness of the current status of an organization’s organizational system, sometimes makes it necessary to propose the introduction of new concepts in it. Unsuccessful implementations are known in many types of organizations. From 5S, ERP, deployment of objectives, self-managed teams, continuous improvement, etc. All these failures are usually related to the following situations:

• Lack of understanding the concept.
• Lack of understanding the necessary bases to launch the concept.
• Signing up for the concept because of fashion.

Once the introduction of a new organizational concept in the internal element of the guide 100 has been decided, there is an arduous task to understand the external elements to that concept of the guide, A, B, C, D. And also, an arduous work of development of the internal elements 200, 300, 400, 500 and 600. In addition, as each organization is ‘unique’, up to a certain point, it will have to adapt that concept, up to a point also, in order to be implanted in the reality of the organizational system.