This article is an excerpt from the Shortform book guide to "Reinventing Organizations" by Frédéric Laloux. Shortform has the world's best summaries and analyses of books you should be reading.
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What if your organization focused on team performance rather than individual performance? How would that impact feedback, conflicts, and compensation?
When everyone is free to act as a self-regulated agent in an organization, it might be hard to imagine how individual performance is measured. For the most part, it isn’t. Business consultant Frédéric Laloux explains this in his book Reinventing Organizations.
Keep reading to learn how organizational performance measures work in visionary companies.
Performance in Organizations
In visionary companies (what Laloux calls “Teal organizations”), organizational performance measures operate at the level of teams, whose results are available for all to see. Individual feedback is given by peers, and that pressure is often sufficient for individuals to judge their own performance. Laloux describes specific processes that visionary organizations use to give feedback, resolve conflicts, and determine worker compensation.
The Feedback Process
Laloux is quick to point out that visionary companies strive not to use fear or coercion as a motivator. Instead, they approach interpersonal feedback sessions from a perspective of teaching and learning. These sessions are structured around active listening and effective communication—skills in which all employees are trained. If a colleague has trouble fitting into a role, feedback can help guide them to a different one in which they might actually blossom.
| Feedback From Every Direction In Thanks for the Feedback, Douglas Stone and Sheila Heen make the point that how you receive and incorporate feedback is just as important as how you give it. This is true at the organizational level as well, where they explain that it’s necessary to create a culture of learning and for there to be multiple routes feedback can take, either officially or otherwise. For example, in No Rules Rules, Reed Hastings elucidates Netflix’s formalized framework for feedback, with written appraisals that can be given for anyone by anyone in the company, as well as live, in-person group appraisals that reveal the interpersonal dynamics of each team. |
Conflict Resolution
Conflict between colleagues is inevitable, and the companies Laloux studied have structured procedures to address it. The first step is for colleagues to attempt to resolve their issues on their own. Failing that, two people in conflict can nominate a mediator whom both of them trust. The mediator can guide the process but cannot enforce a solution. If the mediator’s help isn’t enough, a panel can be convened, conferring with the CEO if needed.
(Shortform note: In Difficult Conversations, Douglas Stone, Bruce Patton, and Sheila Heen lay out the ground rules for holding the type of sessions mentioned above. They recommend you adopt a position of curiosity by discarding the certainty that you’re right. You should differentiate between intent and results, practice active listening, and acknowledge the other party’s feelings.)
Setting Compensation
Another process unique to visionary organizations is how they determine compensation. Without formal hierarchies or HR departments, pay is either set by peer review or by the employees themselves, writes Laloux. In practice, many of these companies have found that people are good at accurately judging how much they should earn.
(Shortform note: Allowing self-managed employees to determine their own pay may not be as fair in practice as Laloux claims. A 2019 study reveals that in self-managed teams, women earn 25% less than male colleagues. The study’s authors attribute this discrepancy to men’s and women’s different negotiating styles and prosocial behavior in the workplace.)
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Here's what you'll find in our full Reinventing Organizations summary:
- The practices and values that are inherent in the next level of human organization
- A look at the paradigm shifts in organizational structure over the past 10,000 years
- How to implement visionary practices at your company
