Our most recent columns explored the risk management approach of Paul O’Neill and Stanley McChrystal and their creation of institutional learning systems. Let’s now validate this approach through the lens of history and determine why building organizational capacity for institutional learning is essential to the future of risk management.
"What determines which stage an organization operates from? Consciously or unconsciously, leaders put into place organizational structures, practices and cultures that make sense to them or what they know – all of which will correspond to their current way of dealing with the world that is increasingly unpredictable and uncertain. Put differently, the general rule is that the level of consciousness of an organization cannot exceed the level of consciousness of its leader."
– Frederick Laloux, Reinventing Organizations (2014)
– Frederick Laloux, Reinventing Organizations (2014)
In Part II of this series, we introduced the concept of corporate longevity – a concept borrowed from biology to measure the life expectancy of a company which, at bottom, is a community of human beings who are linked through trust, purpose and a shared consciousness. The organizational model for this human community is best thought of as a living being that is learning to thrive in a world that increasingly uncertain and unpredictable.
What is unique about the organizational models employed at Alcoa under Paul O’Neill or the Joint Special Operations Task Force under Stanley McChrystal? The answer is they reflect a new organizational model of emergent intelligence and awareness that enables greater adaptability to changing circumstances. Put differently, this new organizational model has higher rates of adaptability and effectiveness, including management of risk, because things move faster and more effectively than what is possible under more traditional hierarchical models built on slower knowledge and information flows. Thomas Friedman describes this new organizational model as akin to operating within the eye of a hurricane that moves with the storm, draws energy from it and creates a platform of dynamic stability within it – “a healthy community where people can feel connected, protected, and respected.”
Research conducted by a great number of scholars and thinkers – historians, anthropologists, philosophers, psychologists and neuroscientists – teach us that organizational models derive from a state of human consciousness. That is, organizations as we know them are simply the expression of our current worldview, our current state of development. We also know that humanity (and hence organizations we create) evolves in stages. We are not like trees that grow continuously. Instead, we evolve by sudden transformations, like a caterpillar becomes a butterfly, or a tadpole a frog. Every transition to a new stage of human consciousness ushers in a new era in human history. At each new era, everything changes: society (going from family bands to tribes to empires to nation states) and the economy (going from foraging to horticulture, agriculture and industrialization) represent two examples of stage-like change. With every new stage in human consciousness, there is also a breakthrough in our ability to collaborate and bring about a new organizational model – much like what O’Neill and McChrystal did.
The best material on the various historical stages through which human organizational development has progressed is Frederic Lalaoux’s book Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness (2014). The first three stages are small family groups (100,000 to 50,000 BC); tribes of approximately 200 people led by elders (15,000 BC); and bigger groups and armies that today we would recognize as street gangs, tribal militias or the Mafia (10,000 BC) (think wolfpack). Around 4,000 BC, a new stage resembling pyramid structures (think Army) appeared leading to stable and scalable hierarchies and long-term processes focused on the future being a repetition of the past. The Catholic Church, military, governmental agencies and public-school systems exemplify this fourth hierarchical stage.
Beginning in the 19th century with the advent of the Industrial Age, a fifth stage (think Machine) emerged in which achievement became the measuring stick leading to innovation, accountability and a meritocracy. Examples include multinational corporations in which participants talk in mechanistic terms such as “units and layers, inputs and outputs, efficiency and effectiveness, pulling the lever and moving the needle.” Stage six organizations focus on culture building within the classic pyramid structure (think Southwest Airlines, Ben & Jerry’s etc.) while the newest and most recent stage is what is embodied by leadership approach of O’Neill and McChrystal. Stage seven organizations resemble a living organism or ecosystem.
Laloux’s book focuses on 12 companies that he considers models of stage seven organizations – seven based in the United States and five in Europe, nine for-profit and three not-for-profit. The smallest had 100 employees, the largest 40,000 and they include a wide range of businesses (tomato processing, electricity production and distribution, technology consulting, manufacturing, and nursing). What is most striking is how effective decision-making is in these stage seven organizations. Much like the organizations led by O’Neill and McChrystal, the right people make decisions at the right level with input from relevant and knowledgeable colleagues. Instead of bottlenecks at the top to make decisions, more decisions are made everywhere, and they are timelier. As the saying goes, when a fisherman senses a fish in a particular spot, by the time his boss gives approval to cast the fly, the fish has long moved on. Our next column will take a more in depth look at stage seven organizations and why they are optimal for the future of risk management.
What is unique about the organizational models employed at Alcoa under Paul O’Neill or the Joint Special Operations Task Force under Stanley McChrystal? The answer is they reflect a new organizational model of emergent intelligence and awareness that enables greater adaptability to changing circumstances. Put differently, this new organizational model has higher rates of adaptability and effectiveness, including management of risk, because things move faster and more effectively than what is possible under more traditional hierarchical models built on slower knowledge and information flows. Thomas Friedman describes this new organizational model as akin to operating within the eye of a hurricane that moves with the storm, draws energy from it and creates a platform of dynamic stability within it – “a healthy community where people can feel connected, protected, and respected.”
Research conducted by a great number of scholars and thinkers – historians, anthropologists, philosophers, psychologists and neuroscientists – teach us that organizational models derive from a state of human consciousness. That is, organizations as we know them are simply the expression of our current worldview, our current state of development. We also know that humanity (and hence organizations we create) evolves in stages. We are not like trees that grow continuously. Instead, we evolve by sudden transformations, like a caterpillar becomes a butterfly, or a tadpole a frog. Every transition to a new stage of human consciousness ushers in a new era in human history. At each new era, everything changes: society (going from family bands to tribes to empires to nation states) and the economy (going from foraging to horticulture, agriculture and industrialization) represent two examples of stage-like change. With every new stage in human consciousness, there is also a breakthrough in our ability to collaborate and bring about a new organizational model – much like what O’Neill and McChrystal did.
The best material on the various historical stages through which human organizational development has progressed is Frederic Lalaoux’s book Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness (2014). The first three stages are small family groups (100,000 to 50,000 BC); tribes of approximately 200 people led by elders (15,000 BC); and bigger groups and armies that today we would recognize as street gangs, tribal militias or the Mafia (10,000 BC) (think wolfpack). Around 4,000 BC, a new stage resembling pyramid structures (think Army) appeared leading to stable and scalable hierarchies and long-term processes focused on the future being a repetition of the past. The Catholic Church, military, governmental agencies and public-school systems exemplify this fourth hierarchical stage.
Beginning in the 19th century with the advent of the Industrial Age, a fifth stage (think Machine) emerged in which achievement became the measuring stick leading to innovation, accountability and a meritocracy. Examples include multinational corporations in which participants talk in mechanistic terms such as “units and layers, inputs and outputs, efficiency and effectiveness, pulling the lever and moving the needle.” Stage six organizations focus on culture building within the classic pyramid structure (think Southwest Airlines, Ben & Jerry’s etc.) while the newest and most recent stage is what is embodied by leadership approach of O’Neill and McChrystal. Stage seven organizations resemble a living organism or ecosystem.
Laloux’s book focuses on 12 companies that he considers models of stage seven organizations – seven based in the United States and five in Europe, nine for-profit and three not-for-profit. The smallest had 100 employees, the largest 40,000 and they include a wide range of businesses (tomato processing, electricity production and distribution, technology consulting, manufacturing, and nursing). What is most striking is how effective decision-making is in these stage seven organizations. Much like the organizations led by O’Neill and McChrystal, the right people make decisions at the right level with input from relevant and knowledgeable colleagues. Instead of bottlenecks at the top to make decisions, more decisions are made everywhere, and they are timelier. As the saying goes, when a fisherman senses a fish in a particular spot, by the time his boss gives approval to cast the fly, the fish has long moved on. Our next column will take a more in depth look at stage seven organizations and why they are optimal for the future of risk management.
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