TLDR - Reinventing Organizations ("Teal")

The book Reinventing Organizations by Frederic Laloux is a book about DAOs that isn’t about DAOs.

It was published in 2014 - the same year as the Ethereum Whitepaper - and articulates the need for a new organizational model, one that is more soulful, emergent, and holocratic. I feel it’s a must-read for folks interested in organizational design and decentralized governance.

Laloux’s core thesis is that every time humanity has shifted to a new stage of consciousness, it has invented a whole new way to structure and run organizations. This, in turn, has enabled extraordinary breakthroughs in collaboration.

The book opens with lengthy and persuasive history of human organization. Each level of consciousness has a color associated with it. The Red stage emerged 10,000 years ago and brought organizational innovations like having an unimpeachable authority (ie, a chief) and a division of labor among citizens. Next came Amber, circa 1000 years ago, which introduced hierarchy, stable roles, and formal processes. These organizational innovations were essential to the spread of religion (eg, the church) and government (eg, monarchies). The Orange organization emerged around 100 years ago and is best exemplified by a traditional bank or multinational. Such organizations pioneered concepts like shareholder value, meritocracy, business forecasting, and management through KPIs. The last type of organization to be well represented among popular levels of consciousness is the Green organization. Most web2 companies operate at this level of consciousness. Such organizations tend to have flatter management structures and try to do more than just give lip service to social and environmental issues.

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While each type of organization had its heyday, each organization is still present in modern life. Most government organizations like public schools, police departments, and courts still operate with amber principles. The Fortune 500 list circa the Year 2000 is a good snapshot of orange organizations (General Motors, Wal-Mart, Exxon Mobil, Citigroup, AT&T) and the current World’s Most Admired companies list includes a good smattering of green organizations (Apple, Alphabet, Microsoft, Starbucks, Netflix). (If these links are paywalled for you, then you can thank orange consciousness for that.)

After the history section, the rest of the book focuses on a new type of organizational consciousness: Teal. Teal organizations replace hierarchy with self-management. The organization is much more like an organism that has emergent properties and an evolutionary purpose.

There is a lengthy practical section, which explains teal principles and how to implement them.
There are no bosses, no job descriptions, no formal strategy process, hardly any budgets. There are explicit ground rules, reflective spaces, open information flow, energy.

Here is a more elaborate derivation of teal principles and their evolution from early forms of organizational consciousness.

The book also gives several examples of modern organizations that have adopted one or more aspects of teal. The food processing company Morningstar is one such example. I found this vignette about how they handle compensation to be compelling:

If you work at Morning Star, then once a year, along with all your colleagues, you write a letter stating the raise in salary you believe to be fair for yourself and why. In an uneventful year, you are likely to stick with a cost-of-living adjustment. But if you feel you have taken on more challenging roles or made special contributions, you can choose a higher percentage.

You then share your letter with a handful of colleagues that were elected into a compensation committee. The committee’s job is to review all the letters it receives, calibrate them, and provide feedback.

Morning Star’s experience is that people prove to be remarkably skillful at assessing a fair compensation for themselves. In any given year, roughly a quarter of people choose salary increases above the cost-of-living adjustment. Only a handful of people throughout the company receive feedback that they might have aimed too high.

At the time it was published, it was difficult to find examples of organizations that had embraced all aspects of teal. Most of the examples used by Laloux felt to me like dipping a toe in teal waters, not jumping in wholeheartedly.

But, fast forward to 2022, and the book feels highly relevant to DAOs. Many DAOs exemplify most if not all of these principles.

There are some great resources available if you want to explore the book and its concepts further:

Finally, it appears that Frederic Laloux is starting to get involved in the DAO space. Here is one such appearance. I would expect him to be fully green pilled in the near future if @owocki hasn’t done so already!

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Hey @ccerv1,

Thanks for the summary. I added this book to my list when you mentioned it in the Impact Networks post.

One question, does Laloux talk about decision-making? I’m looking for working examples of decision-making processes that aren’t based on tokens.

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Hi @Layn

Yes, Laloux provides a lengthy discussion about decision-making. It’s another section that feels written for DAOs even though it doesn’t mention them by name!

Laloux focuses less on voting and more on how to create a foundation so that everything doesn’t need to come to a vote. The right foundation empowers members of the organization to spot problems, surface ideas, and make their own decisions. Basically, if you are having lots of votes – and lots of votes with unanimous results – then you are not really making decisions effectively as an organization. Better to study why people or groups feel the need to obtain consensus. Maybe they feel afraid to decide autonomously because they don’t know how it will be perceived or what the organization is trying to accomplish?

Instead of bringing everything to a vote, he strongly recommends something called the “advice process”. It’s a deliberate method of gathering advice from relevant people and accessing information necessary to make an informed decision.

In a hierarchical organization, information is siloed and access is restricted to certain levels. In a teal organization, information should flow much more freely. There are no unimportant people.

If you believe in the people, and the people feel a deep sense of responsibility to the organization and their peers, then “good” decisions should happen most of the time and the occasional “bad” decisions should be spotted quickly and self-corrected.

Laloux also gives some examples of this kind of process working at 100 to 1000+ person organizations. Here is a Medium article with some nice illustrations about it as well.

Thanks for the question – I enjoyed rereading that section again just now!

Thanks for the summary @ccerv1 !

I’ll definitely read it. Probably will come back with more comments later.

Thanks again.

btw, I was just reading the articles that you suggested and I already read The Decision Maker by Dennis Bakke some years ago. I tried to implement the “Advice Process” in the company but it didn’t work. Sometimes people are more comfortable being told what to do. So, I find a lack of initiative. Probably I didn’t push it enough or properly.

I will review my notes from the book because maybe it makes more sense in a DAO.

That’s interesting… I personally don’t have any experience seeing the “Advice Process” at work in traditional companies, but I can imagine it would be impossible to implement without the right culture and information flow.

It dawned on me that there is superficial similarity between the advice process and the “Kaizen” approach. However, my understanding is that Kaizen is more concerned with applying domain-specific knowledge to find solutions (ie, taking action within a silo). So it’s as far as you can go within an Orange stage of consciousness.

I hope you report back and share learnings about using the advice process with DAOs!

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Reinventing Organizations is a really great book. I try to re-read it every couple years, and Gitcoin is always in a new place when I do, it offers new insights.

We had the author of Impact Networks on Gitcoin Gathering Hour today. I wonder if we could ever get someone to give a TLDR of Reinventing Organizations.

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