Frederic Laloux’s book Reinventing organizations has been the main source of inspiration for this blog and the ideas here are reflecting the 5 evolutionary organizational stages described in the book.
Frederic Laloux’s book “Reinventing organizations” has been the main source of inspiration for this blog and the ideas here are reflecting the 5 evolutionary organizational stages described in the book. However, in this blog we have formed our own view of the management paradigms and tried to bring them into our business context with practical examples and interpretations.
Laloux is saying that different paradigms are linked to different levels of consciousness and have evolved as stages in the history of mankind and organizations. All paradigms are still present in organizations and every paradigm has its pros and cons. Since the complexity of the world has been increasing through the history, the later paradigms have been developed for managing the higher complexity. Laloux states that because the core elements of the stages are fundamentally different it has always been a quantum leap to move to a new stage.
In this blog we will introduce and explain our view of 4 different paradigms inspired by the book. It’s not the Laloux’s color model, but our read on translating his thinking into our context: 1) Command & Control 2) Predict & Control 3) Business autonomy with high empowerment 4) Purpose driven with wholeness mindset
Our frame of 4 management paradigms
Core belief: Clear separation of thinking and doing. Labor has limited capacity and needs to be tightly controlled for getting results and efficiency. Organizations shall be run as machines with detailed blueprints, strong processes, clear work orders and continuous management control of the operations. Competition is fierce with mindset of destroying enemies.
Leadership: Strong heroic leadership style. High focus on IQ skills and logic. Scientific management. Coercive style: “Do what I say”. Fear is an important tool for a leader.
Operational model: Strong hierarchy. Ranks and titles have high importance. Info flow top-down. Strategy created and decisions done by management in the hierarchy.
Typical situations and benefits: Used often in chaotic situations and crisis. Paradigm often used in military operations. Brings short-term results in challenging situations. High efficiency in executing known repeatable processes at scale. Used in 20th century industrial revolution.
Core belief: Individuals are driven by extrinsic motivation. Targets and incentives are central elements. Business control via top-down cascading targets and expectation setting. All operations and functions shall have incentives and clear targets. Business shall be simulated. Competition is the key measure for short-term success.
Leadership: High IQ essential for being able to design and implement target settings and structures effectively. “Excel management”. Transactional approach. Fear exists in the leadership toolbox.
Operational model: Operating plans cascading down in the organization. Lower level waiting for the expectations coming from above. Higher level of freedom (compared to Command & Control) to operate within own territory for achieving targets received. Governance based on continuous KPI follow-up. “Results or Out” mindset. People replaced with new people in case results not achieved.
Typical situations and benefits: Longer term perspective compared to Command & Control. Works in stable business situations and environment enabling growth and scalability. Used often for managing a mix of different independent business without synergies. “Portfolio management”.
Core belief: Results come with high autonomy and team/individual empowerment. High level transparency and shared “Business mindset” used for enabling organizational empowerment. Power is not a zero-sum game and finite resource that is either given or taken. It is infinite and there are no limits for teams’ and individuals’ power. Power is not tightly associated with titles or ranks. Autonomy is achieved with less hierarchic and flat organization. Organization is perceived as a system and not as a rigid structure. Competition is perceived as positive challenge and opportunity to benchmark long-term success.
Leadership: Need to be able to lead without titles or ranks. High EQ essential for being able to inspire individuals and leading the mental state and co-operation in the system. Leaders need to understand how the system works and work as “enabler” for value creation within the system. Various leadership styles required on situational basis. Strong leadership required from time to time, but servant leadership style playing an essential role. Engagement is the key. It is more about relationships and value creation rather than transactions. Creating environment of trust and psychological safety is of essence.
Operational model: Creating high transparency and shared consciousness into whole organization. In line with the overall directions and cultural foundation enabling teams and individuals to drive for their business visions and objectives with high autonomy. Fostering co-operation between the autonomous teams within the system. Continuous learning in laboratory environment. Teams making decisions close to the problem without slow hierarchical processes. Teams following their own progress via leading indicators they have set for themselves.
Typical situations and benefits: Highly adaptive network of autonomous teams works better in VUCA (Volatile, Uncertain, Complex, Ambiguous) environment. Enables individuals and teams to master their operations and get a higher feeling of inspiration, inclusion and fulfillment. High autonomy and agility make the organization more resilient to changing business environment.
Core belief: Everything starts from higher purpose of organizations existence. Concept of competition and business is irrelevant. Aiming for wholeness where body, soul and mind are integrated. Goal in life is to become the truest expressions of ourselves and live into authentic selfhood.
Leadership: Leaders must be willing to surrender their power to the group. Dare to trust the collective sensing without control. Requires humility, courage and highest level of trust.
Operational model: Self-organizing teams with high equality. Strategy emerges organically from the teams. No management meetings. Projects done with self-staffing without formal project managers. Fully decentralized decision making with shift from external to internal mindset: “does the decision seem right”. No promotions. Often transparent or even self-set salaries. Equal profit sharing.
Typical situations and benefits: Some examples globally in various industries, for example Buurtzorg in Netherlands healthcare sector. Paradoxically has resulted in great business results without specific focus on business metrics.
All the described 4 paradigms have their pros and cons generating benefits in different situations. All of them are also always somehow present in every organization’s operations. Since the transformation is linked to building a new level of consciousness, we have seen it important to understand different paradigms for being able to observe different situations in business. This understanding forms a common terminology and enables the organization to self-reflect and more consciously transform their operations into desired direction.
In our transformation, the #3 “Business autonomy with high empowerment” has been the primary paradigm setting the foundation for the journey. However, there are some flavors of #4 and other ones involved.
This blog was based more theories and formed a terminology and frame for the future. In our next blog we will do something very different. We will have a “guest star” with long experience of Laloux ideas and mindset. Our “surprise star” will share an authentic real-life story. Stay tuned!
With passion and humility,
Co-authors Jaakko Hartikainen & Mikko Virtanen
Our blog series:
No 1: Call for Paradigm Shift in Management
No 2: Magnitude of Change when Shifting Management Paradigm
No 3: Why do so many companies manage people like machines and why is it one of the biggest problems of our times?
No 4: How to drive paradigm level change? Our learnings and one crucial breakthrough innovation
No 5: Incredible India and breaking the hierarchy
No 6: Management paradigms in a nutshell, inspired by Frederic Laloux's book Reinventing Organizations
Jaakko Hartikainen is a senior business leader with broad experience in building next generation digital services, agile way of working and new business models. His passion is to place humanity at the heart of everything and build sustainable success for increasingly complex world by empowered people and teams.