The Death of the Company Doug Poretz

1. THE DEATH OF THE COMPANY;
THE BIRTH OF THE COLLABORATIVE
-- Some thoughts about a new model –
It is time to adopt a new organizational structure to replace the way companies are
currently designed. In this paper, I try to jump-start a discussion about a new
organizational structure that I call a “collaborative.” This is not an evolution of the
“company.” It is not a variation on the existing theme. This is a new structural model.
THESIS:
For all practical purposes, enterprises have been (and are) organized and operated
based on a master:slave relationship. By that I mean enterprises are organized in a
structure that is based on the premise that things get done when people tell other
people what to do, how to do it and at what standard and schedule, and then evaluate
those people on how well they complied with those requests. That is what basically
comprises and defines the concept of “organization” as we currently understand and
live with that concept. That model is becoming increasingly outdated and needs to be
replaced by a much better model, one that is based on the idea that endeavors can be
undertaken and completed in a much more successful way both for the enterprise as a
whole and for the individuals who comprise it when a collaborator:collaborator model is
used.
WHY THE TRADITIONAL ENTERPRISE STRUCTURE IS WRONG:
The traditional enterprise structure is not simply out of date, but it is based on a
misunderstanding of (and conflict with) the fundamental nature of the human being.
Research led by Michael Tomasello of the Department of Developmental and
Comparative Psychology of the Max Planck Institute for Evolutionary Anthropology,
asserts a compelling case that humans communicate for a very different reason and in a
very different way than all other creatures: to collaborate. In one of his books, Origins
of Human Communications (MIT Press, 2008), when explaining how early hominids
communicated primarily by pointing and pantomiming even before they had a larger
brain and possibly even before they could make sounds, Tomasello wrote:
Thus, for reasons we do not know, at some point in human evolution individuals
who could engage with one another collaboratively with joint intentions, joint
attention, and cooperative motives were at an adaptive advantage. Cooperative
communication then arose as a way of coordinating these collaborative activities
more efficiently, first inheriting and then helping to build further a common
psychological infrastructure of shared intentionality. This all began almost
certainly in mutualistic activities in which an individual who helped her partner
was simultaneously helping herself. But then there was a generalization to more

2. altruistic situations in which individuals simply informed or shared things with
others freely, possibly as a way to cultivate reciprocity and a reputation for
cooperation within the cultural group.
Recent research by anthropologists at the University of Missouri and Arizona State
University published in the March 2011 issue of Science, confirms Tomasello’s research,
as summarized by The New York Times:
Early human groups, according to the new view, would have been more
cooperative and willing to learn from one another than the chimpanzees from
which human ancestors split about five million years ago. The advantages of
cooperation and social learning then propelled the incipient human groups along
a different evolutionary path.
I acknowledge that research conducted by Tomasello and others could be debated. For
example, an argument may be made that great apes evidence some forms of
cooperation. Tomasello’s own research shows that dogs, after thousands of years of
domestication by humans, now show some signs of shared intentionality between
themselves and humans. Nevertheless, the basic point is that it is inherent in the
human spirit that we are cooperative and collaborative creatures. However, modern
organizations are not structured to encourage or even allow cooperation and
collaboration among employees.
Of course, there are plenty of examples of cooperation occurring within enterprises, but
they occur despite, not because of, the current organizational structure. The natural
human drive of sharing and being collegial about their intentions occur in the modern
enterprise only when a special effort is made to encourage the collaboration. Conduct a
Google search for “encouraging collaboration in companies” and you will find more than
300,000 citations. If collaboration was built-into the enterprise, there would be no need
to “encourage” it. The reason collaboration needs to be aided and abetted is because
organizations are structured without regard to the natural human instincts to
collaborate. That needs to change.
TRADITIONAL ORGANIZATIONAL STRUCTURE IS ESPECIALLY OUTDATED FOR THE
KNOWLEDGE ECONOMY:
In the manufacturing process, products being built are moved down the assembly line
from one stage of its development to the other. The person (or, robot) receiving the
product for the purpose of undertaking the next step in the process does not need to
know anything about what happened to the product before it got to the current
situation. The next step simply needs to be undertaken, and the product needs to move
further down the line until completion. Thus, cooperation wasn’t really necessary for
the Manufacturing Economy. But that is not the case in the Knowledge Economy.

3. In functions and processes where knowledge is either the (or one of the) most
important components, the individual(s) engaged in the process will perform best if they
understand what has been done to create the product or service up to the current
situation. Intellectual context becomes a valuable asset for everyone involved in the
process. For example, consider the lawyer preparing to argue a case for their client:
they could not perform effectively without the input from the investigator who gleaned
the facts, or the associate who researched legal precedent, or the ideas of legal
colleagues as to what could make a compelling argument. Similarly, the software
designer needs to understand fully the hows and whys of the programming that has
already been done, the capabilities of the computer that will operate the programming,
the collateral processes and interaction with other programs that might impact the way
the new software works. In such cases, the players must have a shared intentionality to
be successful. Thus, whereas, the master:slave organizationally-structured relationship
between people worked (and may, in fact, have been preferential) for a manufacturing
business, it is a non-starter in the knowledge business.
THE COLLABORATIVE IN BRIEF:
Collaboratives start from an entirely different premise. Humans maximize their
knowledge, experience, contacts and ideas when they are shared among and between
each other. Although that can be achieved in the current organizational structure, it is
accomplished only as the result of a special effort. Collaboratives must be organized
from their inception so that collegiality is not the result of extraordinary effort but arises
from the environment itself. In a collaborative, rather than people telling other people
what to do at what time and at what standard, everyone understands the shared goals
and joins forces to achieve those goals.
That is not to say that collaboratives exist without leadership. Leadership must exist to
avoid chaos. But leadership in a collaborative arises from the trust and confidence
others in the organization have for the person who steps up to the leadership role, not
simply because of title or salary or the size and location of their office. Furthermore,
leadership is not necessarily permanent in all instances. In some cases, one person may
have the unique experiences or capabilities to lead one aspect of an effort, only to step
back and allow others to assume the leadership role when appropriate.
But isn’t all that impossible because of the competitive nature of the human being?
Wouldn’t there have to be a change in “the nature of Man” to realize such an
environment? That might be a viable argument if the premise is accepted that humans
are competitive animals, but Tomasello’s research shows that humans are cooperative
animals. Thus, although our current culture may encourage competitive positions, our
very nature encourages collaboration. If we allow “nature” (collaboration) to supersede
the enterprise environment that has been nurtured for the sake of an efficient
manufacturing process (the relationship between the boss and those “under” the boss),
we will eventually come to learn that we actually benefit as individuals in a collaborative

4. rather than competitive environment. Such a cultural view of the workplace is
absolutely necessary for the collaborative to succeed. Therefore, structures,
methodologies, rules and processes that have been created to encourage the
competitive work environment must disintegrate and be replaced by those policies and
ways of doing things that encourage collaboration.
THE CURRENT BALANCE SHEET IS NOT ONLY OUT-DATED, BUT IT IS COUNTER-
PRODUCTIVE:
One of the first things that must be bombed out of existence if we are to encourage the
collaborative organizational structure is the current balance sheet. The balance sheet is
not terribly complicated: it is simply a list of assets and liabilities so that the latter can
be subtracted from the former to determine net worth. That’s the key measurement
used to determine an individual’s or an enterprise’s “worth” in financial terms. Of
course, when looking at a spouse or a friend or a political leader nobody thinks in such
terms. But banks do think that way when they decide whether to provide a loan or not,
and investors do think that way as part of their process of determining whether they
want to buy some ownership of the company. Thus, the balance sheet is critically
important to the growth of businesses, which, in turn, drives growth of jobs,
innovations, and progress in general. So, the balance sheet is critically important.
When banks take a look at the balance sheet, they often focus on “hard assets,” which
are generally listed as “property, plant and equipment.” The reason why these assets
are important is because when a bank considers making a loan and evaluates their risk
and weighs the worst case scenario they assume that if the company has to go out of
business the hard assets can be sold, even if at a discount to their market value.
But in addition to hard assets, there are “soft assets,” which are most usually classified
on a balance sheet as “goodwill.” These assets come on the balance sheet primarily
when a company buys another company for more than the value of the hard assets, as
is virtually always the case in an acquisition. That gives rise to the question: how should
the acquiring company account for the premium paid over the hard assets listed on the
acquired company’s balance sheet? To answer that challenge, accountants have
developed the contrivance they call “goodwill.”
Bankers and investors do not like goodwill, and they punish the enterprise that has
brought goodwill onto their balance sheet by requiring that such assets be depreciated
at a faster schedule than hard assets. Because that depreciation is taken as a cost item,
it negatively impacts the P&L, and thereby it costs the company some of their
profitability. In other words, in accounting terms, a company is penalized more when it
acquires intellectual property than when it acquires property, plant and equipment.
Soft assets are often dismissed as an asset because they aren’t tangible. In truth, the
current balance sheet is 180° wrong. Hard assets deteriorate and become outdated
over time. They need to be renovated or replaced. But knowledge grows over time and

5. becomes increasingly valuable.
How does the current balance sheet treat intellectual property: the combined
knowledge of the people who work at the company and the knowledge gained from the
people who preceded them? How does it treat assets such as trade secrets, proprietary
formulas, and so on? It leaves them off the books entirely – they are not accounted for.
The current balance sheets ignore knowledge, and that means that when the current
balance sheet is used as a measure of a company’s net worth, knowledge is not part of
the calculation. That leaves a knowledge business with a low value as measured by the
current balance sheet. And that is mighty strange when governments want to build a
“Knowledge Economy” and create “Knowledge Jobs.”
When attempting to build or value a collaborative organizational structure, the current
balance sheet should be ignored – dismissed – immediately by bankers and investors.
Some new device needs to be established to measure worth in a way that is appropriate
for a knowledge-based business. Bankers and accountants would reply: “But you can’t
put a value on a person’s knowledge the same way you can get an appraiser to put a
value on a factory.” That’s correct. So, we cannot look to bankers to create the new
device for measuring intellectual assets; maybe accountants can do it, but that isn’t
likely either. A new expertise and new algorithms need to be created so that knowledge
economy assets can be fairly valued. That’s a mechanical issue. The major point is that
the current balance sheet needs to be blown up if we are to move to the new
collaborative organizational structure.
THE OTHER DIFFERENCE BETWEEN HARD AND SOFT ASSETS IS LEGS:
The primary objective of a business is to nurture and grow its most important assets so
as to increase the value of the enterprise. Profit, of course, helps to achieve that goal,
but making a profit is less of a priority than growing enterprise value.
All property, plant and equipment share a common feature: they can be locked-up or
locked-down. Whatever way that might be accomplished, whether an assembly line is
behind a fence or tools are put into a safe at night, the net effect is that owners of hard
assets can keep those assets from moving. That is not the case with human assets
because they have legs. They also have emotions and needs and desires that, when
unmet to too great a degree for too long a time, will lead to an individual’s desire to
leave their job, or perhaps where their job is located. Because a collaborative relies on
the collegiality and energy and commitment of the people who comprise it, keeping
those people highly satisfied with their working environment becomes a very high
priority.
But people do not exist solely in the context of their job; they live in a community – and
thus the community itself is a vital ingredient to their continued involvement with the
collaborative. Assuming that they need to live near where they work (which is less of a

6. good assumption as communications technology progresses), these people must be able
to find housing that meets their needs at a price they can afford. They must be happy
with their commute to work and their ability to access the culture and restaurants and
other components of society that add to their enjoyment of life. They must feel
confident that their children are prospering in their community. If those factors (among
many others as explained by scholars including Richard Florida in “Rise of the Creative
Class”) do not exist in the individual’s community or if they begin to decline, the
collaborative will soon begin to lose its most precious assets: the people who, in the
final analysis, are synonymous with the collaborative itself. Thus, the leadership of a
collaborative must play an active role in supporting the communities where they exist –
not as a nicety, nor because they want to be “a good corporate citizen” and win PR
points, but because the viability of the community where the collaborative exists (even
if that is in cyberspace) is integral to the viability of the collaborative itself.
NO TITLES:
Titles give people authority over other people. “Associates” know that Vice Presidents
can tell them what to do and they know that they can lose their job if they do not do it
in the way and on the schedule the Vice President wants. That isn’t the way
collaborative teams work. Look to the sports team as an example. In baseball, the
players have various niches of expertise; they know how to play first base or pitch or be
a designated hitter, and so on. All that each player needs to know and all that the fans
need to know is the individual player’s special niche. The really talented first baseman
isn’t called a team “vice president,” and the good but not great shortstop isn’t called a
team “associate.” Such titles are irrelevant. Similarly, members of a collaborative don’t
need titles; they simply need to understand the talents and capabilities they bring to the
team, and other members of the team need to understand those talents, know why
they are important, and respect them.
HOW COLLABORATIVES ARE LED:
In addition to the negative consequences of titles, they do provide the benefit of
establishing a leader for the team. Leaders are necessary for the success of the
collaborative and the teams that may exist within the collaborative. But the
collaborative leader has a different role than the “boss” and they get their roles in a
different way than by promotions.
The boss in the current organizational structure tells people what to do, sets the
agenda, manages the effort, and assumes responsibility for the success of the effort,
which will be rewarded with a promotion or special bonus. Although good bosses
incorporate input from the members of the team, they determine the final terms of how
and when things get done.
In many ways, “bosses” live in a quantitative world, where they are measured by profit

7. or some other quantitative goal that ends up enhancing the team members’ quality of
life. In counterpoint to that, collaborative “leaders” live in a qualitative world, where
their success is measured by the quality of life for the team members that ends up
producing an improved profit or some other quantifiable measurement. In short: in the
current organizational structure, quantitative results are the goal and qualitative results
are consequences of achieving that goal whereas in a collaborative, qualitative results
are the goal and quantitative results are the consequences.
The roll of the collaborative leader is to coordinate and inspire the entire team, not rule
them. Individual tasks naturally fall to the individuals with the expertise or other asset
appropriate to the task. Just as the first baseman is the player who best knows how to
stretch for the toss from the shortstop, the traffic manager on a project is the person
who best can keep things on schedule, get calendars coordinated to schedule meetings,
and get deliverables into the hands of the client at the right time in the right way. This
can be achieved only when a person is known by their expertise and the assets they can
bring to a team rather than when they are known by their title and their position of
power.
When this approach imbues an organization, the quality of the work improves because
collegiality maximizes the assets of each individual. In fact, the power of the team
amplifies each individual’s strengths so each individual has even more to give and the
quality of work truly excels. As that happens, the team’s reputation grows. The team
attracts more business from clients willing to pay higher fees. As business grows, the
team expands with additional highly talented and motivated people who seek out
opportunities to be part of the collaborative because they want to be part of an
environment where they can contribute to great work and be remunerated well for so
doing. As more talent accumulates within the collaborative, the exactly right expertise,
contacts and experiences are more likely to exist for any specific problem. As that
happens, the speed-to-solution accelerates and quality of response improves, both of
which merit higher fees. Higher fees received from work that takes less time equates to
higher margins. In the collaborative, therefore, the margin is elastic and encounters
only modest constraints. Thus, a collaborative is not simply a “good” organizational
structure, but it is also an organizational structure that makes sense in the strictly
business and even selfish terms of making more money and creating wealth.
HOW DOES LEADERSHIP HAPPEN?
The leader is critical for success. How do leaders become leaders and how do they lead?
Someone addressing those questions speaking from the perspective of the current
enterprise structure would be saying something like: “We look for the person who has
established the best track record in terms that are important to us – the person who can
squeeze the best margin out of the effort while also keeping customers coming back for
more and the people on the team happy. When we identify that person, we promote
them to a position of greater responsibility, give them a raise in salary and a new title,

8. and very often we give them a better and bigger office with more windows.” That
language will not work for a collaborative leader.
When a person is made a leader in the current enterprise structure, they are stuck in the
role of being a leader. An individual may have the right skills and subject matter
expertise to be the absolutely right leader for a unique project that lasts for six months.
But what happens when the task is over? In the current structure, the individual stays
boss for the next project whether it is right for that person or not. That’s not good for
the individual nor the organization, but titles stick. Promotions, titles, raises and bigger
offices aren’t taken back unless the person is fired, quits, or is promoted to their next
level of incompetence as noted years ago (1969) by Laurence J. Peter and Raymond Hull
in “The Peter Principle.” So, the individual and the organization are both stuck with the
legacy of what was once a perfect solution but is far from that going forward.
On the other hand, in a collaborative it is assumed that someone may be the perfect
leader for a specific team or team function but would be inappropriate as a leader in
other occasions. So, leadership isn’t forever; it’s for as long as appropriate. And
something is “appropriate” when it facilitates the improvement in the way something is
done and the quality of the final product or service. In other words, the focus stays on
the quality of the experience and the service to the client.
In a collaborative, leaders emerge. I know that isn’t a rational statement given the
current enterprise structure. It is extremely easy to pooh-pooh and dismiss as a cop-out
answer. But it is the only way to explain it with current vernacular. In some instances
they emerge for totally logical reasons. A person who came up with the idea and
started pulling together the resources to turn the idea into a reality is a leader at least
when it comes to understanding the idea. The person who seeks out prospective clients
establishes relationships that position them for a leadership role. Those who have the
expertise to undertake a function that becomes critical to the success of the team also
become a leader. People rise to the occasion in appropriate ways at appropriate times.
Because each individual benefits when the whole team benefits, it is in everyone’s
vested interests for the best person for the job to assume the job.
But what happens when there is a disagreement? How is the dispute settled? In the
current organizational structure that is very easy: the boss has responsibility for solving
conflicts so everyone goes to the boss. But what happens when the inevitable conflicts
arise in a collaborative? The first important step is that everyone needs to recognize
that someone needs to assume the role of settling legitimate conflicts. That person
would most likely already be a leader of the team and be the individual most adept at
addressing differences: good judgment as to how to identify the best person for the job,
how to explain the situation to the people involved, the ability to understand the
dynamics of the team, and so on. This person may gain such recognition that they
always take on that difficult role and their role takes on many of the attributes of being
institutionalized. But the institutionalization has the imprimatur of the team itself and is

9. never a “forever” thing.
HOW COLLABORATIVES ARE LIKE LAVA LAMPS:
New models need new images. When thinking of the modern corporation, one thinks
perhaps of imposing buildings that “say business,” or perhaps of people sitting around a
conference business, or as a bunch of cool young people sitting around in an informal
setting as in the example of the tech company.
When it comes to imagining collaboratives, the right image is the lava lamp. The blobs
inside are in constant change, depending on conditions of their external environment –
the environment in which they live. They grow, shrink, change shape, sometimes die
off, merge with other blobs, hive off from a big blob or bounce around to different
positions. But the change is organic, not forced or controlled in any way.
HOW COLLABORATIVES CAN GROW LIKE APPS:
Apps are created when one or more people come up with an idea of something that
may be needed by others who use a certain platform, such as a smart phone. So, they
morph the idea into something real and offer it for sale at the app store. If there is a
need for it, the market may respond right away, or it may take some better timing and
more promotion to get the app to the point where it gains the necessary visibility and
credibility, largely through the reviews and recommendations of others. Similarly,
collaboratives are formed when its founders determine they can fill a need. Their
solution may be used exactly as envisioned or, like the blob inside the lava lamp, they
may morph to meet other needs as they come to understand those needs better.
[Thanks for the app analogy goes to Bhaskar Chakravorti, recently named by Tuft
University’s Fletcher School of International Affairs as Senior Associate Dean for
International Business and Finance, Executive Director of the International Business
Center and Center for Emerging Markets Enterprises, and Professor of Practice in
International Business.]
MOVING THE COLLABORATIVE FORWARD:
People and organizations under attack establish defense tactics; people in pursuit of a
shared goal establish tactics and strategies to succeed. There will be resistance to
change. Most people reacting to the concept that the existing “company” must be
replaced by the new “collaborative” will argue that the new structure cannot exist and
cannot succeed and makes no sense. And to make their arguments they will cite
historical case histories even while failing to appreciate that, by definition, such case
histories occurred in the past, with past standards and outdated tools.
The collaborative form of organization, or some iteration of it, will emerge a little at a
time. We will hear of more collaboratives achieving success. At a certain point, the new

10. model will be understood well enough and will have built enough successful precedents
that the adoption of this new form or organization will accelerate and expand. In the
meantime, pioneers will attempt to use this structure. Some will succeed. Some will
fail. It will be worth the effort to watch the evolution; it will be especially valuable if you
can be one of the successful pioneers.