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COHESIVE
DECENTRALIZATION

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• Today’s organizations facea volatile businessenvironment with large
uncertainties.
• To survive and scale,organizations should not only be innovative but also
focused,adaptable, agile and in touch with the external environment.
• This requires new ways oforganizational design to accelerate and sustain
growth.
• Organizational design based on decentralization or even self-management
seems best suited to offerscontinuous and new growth pathways in this
environment.
• However, there is a dilemma as decentralization/self-management
challenges synergy and increases risksas “control” islost. There is no fitfor
all solution to solve this dilemma.
• Even the organizational design itself needs to be continuously adapted to
have a scalable organization.
SUSTAINING GROWTH IN TODAY’S
BUSINESS ENVIRONMENT

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DECENTRALIZED COHESION

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1. Intrinsic motivation
2. Decentralized decision-
making or self-management
3. Discretionary resources
4. Belief in capabilities
5. Continuous learning for
mastery and confidence
6. Stresstesting through induced
failures
What drives us
outwards?
What binds us
together?
1. Sharedvision andpurpose
2. Sharedvalues
3. Information transparency
4. Talenthiring, grooming, evaluating
andrewarding
5. Structure (teams; contracts; circles)
6. Mutualtrust andco-dependence
7. Rules of engagement(templates,
brandbooks, formats)

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INTRINSIC MOTIVATION

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INTRINSIC MOTIVATION
Consider the paradigmin which,givenappropriate working conditions, most people perform
wellandare the most important assetof the company. Ifyoubelieve thatworkers canderive
satisfaction fromtheir physicalandmentalwork, they will doit for self-actualizationand
enjoyment. Treateachworker asamature andresponsible individual. This spurs actionand
self-motivation towardssolving difficultproblems, gothe extra mile,to do the right thing
rather thanjust the easy thing, andit willlift the performanceand energy of the team.
How might you ensure thatyou selectintrinsicallymotivatedpeople inyour organization?
Zappos offers atwo-weekboot camptoallnew
call-centeremployees. Afterfinishing the
program, allemployees get a choice: eitherthey
get $2000 tostop, or they are hired. Thisway,
they retainthose that are reallymotivatedto
stayand dothe work they’re being inspiredby.
Afterthe breakdown of the “Obamacare”website,
BarackObamaenlistedthe helpof young, tech
savvy professionals toget the websitebackand
running. Thisledtothe creationof the US Digital
Service, whichspecificallytargetstechtalent that
wanttohave positive societalimpact.

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INTRINSIC MOTIVATIONDECENTRALIZED DECISION-MAKING
AND SELF-DIRECTED TEAMS

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Decentralizationempowersrapid decision-making by the people closestto the customer. By
putting the power where the action is,you ensure that the right people,equipped with the right
information andcontext make the right desicions –rather thanwaiting for decisions from the
‘higher-ups’ whousually don’t have the complete picture,or actdelayed.Self-directedteams are
anextreme form inwhich the members areresponsible for anentire business operation, generally
with no input froma manager.
What canyou decentralize toempowerfront-line employees andwhatwould
makeself-directedteamsanattractiveoption?
Buurtzorg, whichoffers homecare, relieson self-
directedteamsby itsfront-line nurses. Every teamis
responsible forits ownclienteleandis inclose contact
withfamilydoctors andfamilies.The teamsare also
responsible fortheir ownfinancialresults. There is no
middle-levelmanagement.
Whole Foods decentralizes decision-making
toregion and store levelby empowering the
localmanagement and withinthe store to
specificteams,e.g.,the fresh-produce team.
DECENTRALIZED DECISION-MAKING
AND SELF-DIRECTED TEAMS

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INTRINSIC MOTIVATIONDECENTRALIZED DECISION-MAKING
AND SELF-DIRECTED TEAMS
BELIEF IN CAPABILITIES

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BELIEF IN CAPABILITIES
Fostering deepfelt-faithon your employees’ abilities createsanenviroment of motivation.
Focuson creatingcleardivison of accountabilities andon producing results, rather than
stipulating how things should be done. This willencourage people togive their best: achieving
andexceeding personalgoals. Itis not just aboutgetting things done, but alsoteam-bonding
andcreatingjoint experiencesfor your employees.
How doyou fostertrust among your employees?
SEMCO employeeshavefullaccesstoall
financialsof the companies. They set their
own salariestwicea year,based onthe
information provided.
At Virgin, employeescantake vacationtime
when they feelis appropriate.Bosses and
employeesare askedto workit out with one
another, withsenior levelexecutivestaken a
mand, tomake sure people follow-through.

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CONTINUOUS LEARNING FOR
MASTERY AND CONFIDENCE

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Createanenvironment in whichcontinued employee development andlearning is
encouraged.This is not just aboutencouraging your employeesto participate inongoing
training, but alsoabout ensuring continuous internal feedbackloops to spur learning,mastery,
andconfidence.This dynamic also promotes a culture of mutualtrust (among employees,
management,and leadership) andencouragesaculture of transparency andhonesty.
How doyou use continuous feedbackloops inyour organization tokeep everyone on alearning path?
Mendeley’s HackDaysseek tospurlearning,
by bringing together people innew teamsthat
group around achallenge/project of own
choosing tokeep people on alearning path.
Morning Star’s employees formulate theirintrinsic
motivation, learninggoals, andtargets onanonline
environment, towhichcolleaguescangive
constructive feedback,creatingcontinuous learning
loops towork towards theirlearning goals.
CONTINUOUS LEARNING FOR
MASTERY AND CONFIDENCE

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DISCRETIONARY RESOURCES

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DISCRETIONARY RESOURCES
Insteadof allocating budgetand resourcestop-down, andfollowing a “predict-and-
control” approach,more andmore organizations arede-centralizing budgetary decision-
making andaccess,trusting and further empowering teamsto safeguardhealthy financial
performance.
How willyou makesure that budgets and resources are availabletothe people thatneed them?
FAVIuses bottom-upplanning basedon
trust towards itsteamstocome upwith
realisticbudget requests. In caseof conflicts,
representatives of eachteamsort out
problems ontheirown. “In the new wayof
thinking, we aimtomakemoney without
knowinghow wedo it,asopposed tothe old
wayof losing money knowing exactlyhow we
lose it.”
Sun Hydraulics– a publicallylistedcompany –
opts for anentirely budget-free approach. “We
don’t run this businessby the numbers. The
numbers willbe doing whatthe numbers willbe
doing; we canjustgive you agood picture of what
the next quarterwillbring.” So, we got awayfrom
makingannual projections and startedjust doing
quarterly forecasts.We know our performance in
the long run willbe aresult of just doing the right
things every day."

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CONTINUOUS STRESS TESTING
THROUGH “INDUCED GENTLE ABUSE”

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Failureshappenandthey inevitably happenwhen leastdesired or expected.The best defense
against major unexpectedfailuresis to failoften. Periodic anddeliberate stress testing will not
only getcompanies more resilient against unanticipatedfailure,but willactuallymake
companies thrive in sucha situation.
How might you defend yourself againstunexpected failure,and learntothrive insuchsituations?
Netflixtakesit one stepfurther: the company
developed “Chaos Monkey”, a tool that
randomly disablesproduction instancesto
makesure they cansurvive this common type
of failure without any customerimpact.
Google andAmazon host GameDays, where
failure is manuallyintroduced or simulatedto
mirror real-worldfailure, withthe goal of both
identifying the resultsand practicingthe
response.
CONTINUOUS STRESS TESTING
THROUGH “INDUCED GENTLE ABUSE”

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1. Intrinsic motivation
2. Decentralizeddecision-
making or self-management
3. Discretionary resources
4. Beliefin capabilities
5. Continuous learning for
mastery andconfidence
6. Stress testing through
induced failures
What drives us
outwards?
What binds us
together?
1. Shared vision and purpose
2. Shared values
3. Information transparency
4. Talent hiring, grooming,
evaluating and rewarding
5. Structure (teams; contracts;
circles)
6. Mutual trust and co-dependence
7. Rulesof engagement (templates,
brand books, formats)

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CONTINUOUS STRESS TESTINGSHARED VISION, COMMON PURPOSE

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SHARED VISION, COMMON PURPOSE
When the common purpose is createdwithinput fromallof the employees, the organization
stays onboard aligned,andfocusedon the right outcome.Itprovides a moralcompass, and
givesguidance in situations in whichthe right course of actionis not immediately clear,butin
whichthere is no doubt aboutthe desired outcome.
Canyou/everyone inyou organization clearly articulatethe keycomponents of the company visionand
purpose? How doyou makesure your visionstays“alive”throughout the organization?
“Webelieve our first responsibility is to the doctors, nurses
and patients, to mothers and fathers and all others who use
our products and services. In meeting their needs, everything
we do must be ofhigh quality. We must constantly strive to
reduce our costs in order to maintain reasonable prices.
Customers' orders must be serviced promptly and
accurately. Oursuppliers and distributors must have an
opportunity to make afairprofit.” Thecompany’s famous
credo provides a “north star” forall employees, and
corresponding strategy, direction, values, and behavior.
The purpose of supporting the great
outdoors drives allbusiness activities,
beyond the products that itmakes.
Patagonia gives profit-shares to
environmental NGOs, andoffers paid
employee sabbaticalstodrive positive
environmental change, engaging everyone
toshare inits purpose andvision.

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SHARED CULTURE, COMMON VALUES

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SHARED CULTURE, COMMON VALUES
Empowered organizations have aclearset of valuesand corebeliefsgoverning behavior and
performance.Enacting these valuesstarts atthe leadership level.Decentralizationmakesa
strong culture allthe more important tocorrectfor the loss of corporate control in decision-
making. A culture isfeltandunderstood through experiencesandstories. Stories andmyths
area greatwayof ensuring common valuesstay “alive”in the organization.
What are the core values andbeliefs thatgovern how people behave withintheir role? Are your core values
andpurpose kept"alive"inthe organization? How do you exemplifythese valuesas aleader?
Eachandevery employee atZynga (developer
of Farmvilleand Words WithFriends) is
expectedtofollow the samesimplecore valuein
every endeavor: “Beyour own CEO:Own
outcomes.”
The cornerstone of Nordstrom’s culture is its
storytellingculture, whichresolve around “service
stories”. Employees are taught that every customer
interactionis astory opportunity. These stories,
repeatedover andover, eventuallybecoming legends
that serve tocreatecohesion, createjoint experiences,
andkeepvalues alive.

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INFORMATION TRANSPARENCY

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INFORMATION TRANSPARENCY
“Tomove faster,pulse faster tomore people”.Ensure information transparency through
open communication aboutactivities, progress, successandfailure,andlearnings. This is a
sharpdeparture from the long valued“information sharing on aneed-to-know basis”. It
makessure the people atthe edge of the organization are fedin realtime with allrelevant
information they needto make the best decisions. Transparency breedstrust and
accountability –the foundations of greatteamwork.
How might you ensure information transparency, building trust andaccountability
toyour customers andwithinyour team?
Inthe mid-2000s, McCrystaldrasticallytransformed
his teamcoordination. Insteadof havingcallswith
his topcommanders, that wouldthenshare
information “down the line”, he organized callswith
7000 people toshare information, allowingpeople
toprovide updates and intelin3-minute chunks.
Socialmedia marketingcompany Buffer puts
radical transparency atthe heart of the
organization. They are open about revenues,
pricing decisions,user numbers, progress
reports oncustomersupport and performance
tothe outside world. Internally, they share salary
information, createcc-liststoensure open
internal communicationvia e-mail,anduse
IDoneThis toshare daily improvements.

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INFORMATION TRANSPARENCYTALENT HIRING, GROOMING,
EVALUATING AND REWARDING

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TALENT HIRING, GROOMING,
EVALUATING AND REWARDING
Hire people whose personal goalsare alignedwith organization goals andmission. To ensure
synergy, youshould not only hire basedon personalalignment with company purpose, but
alsoon culturalfit–without losing out on diversity. Value-basedgrooming evaluatesand
rewardspeople on common values,andculturalfit.
How might you hire, groom, evaluate,and rewardemployees toenhance cohesion?
Whole Foods offers the right tovote tolocal
teams.New hires serve for aperiod of one to
three months ona team,afterwhichthe team
approves (orrejects)the candidate asa
permanent teammemberby two-thirds vote.
At Morning Star,employees are part of asocial
network that includes areal-timefeedof
performance data,colleague activities(andhow it
relatestothe organization’s mission),andpeer
feedback. People don’t move “up” at Morning Star,
they grow inrespect andresponsibility (and
compensation) basedon theircontribution.

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STRUCTURE

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People need some form of structure to worktogether, yet(permanent) structures often leadto
silo-ed behavior.Co-dependent teams,or “small fighting units”, allow for product, marketand
customer focus.Bytranscending functionalunits, these teams operatewith clearbut fluid
structures thatadaptandmorph basedon the needsof the organization andchangesin the
environment.
Nestedcircles. TernarySoftware uses
(nested) circles,with representatives
forminglinkagesbetweenthem.
Thereisahierarchyofpurpose,
complexity,andscope, butnotof
peopleorpower.Eachcirclehasfull
authority to make decisionswithin
the scopeof itsspecificpurpose.
Decisionsare notsentupwards, and
cannot beoverturnedbymembersof
overarchingcircles.
Parallelteams.AtZara, creative
teams work inparalleltoeach other.
Each team isgivenfullresponsibility
and autonomy overcertain items–
from beginningtoend.Thisallows
for incrediblespeedofproduction
(from ideationto sales), and market
responsiveness.Italso allowsthe
company to locallymanufacture its
clothesinSpain.
What alternativeteam structurescanyou put inplacethat fostercohesion?
Rotating cross-disciplinary
teams. Vox letstech developers,
editorialteams, marketers,
publishersandphoto/video
departmentsorganicallyform
around newopportunitiesinto
rotating, cross-disciplinary
teams, speedingup,andopting
innovative news formats over
administrative efficiency and
“pipe-line” structures.
STRUCTURE

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MUTUAL TRUST AND CO-DEPENDENCE

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MUTUAL TRUST AND CO-DEPENDENCE
Any person canmake any decision afterseeking advicefrom(1) everyonewho willbe
meaningfully affected,and(2) people withexpertise in the matter.Advice receivedmust be
takeninto consideration. The point is not tocreatea watered-downcompromise that
accommodateseverybody’swishes. Itisabout accessingcollectivewisdom in pursuit of a
sound decision: with allthe adviceand perspectivesthe decision maker has received.
How might you design your team/organizationsothat mutualtrust andco-dependence are fostered and
“silos”are avoided? Howcanyou imbedadvice processesin your team/organization?
AEScombineshierarchywith advice
processes. Employeesconsultthose
impacted byadecisionand those
consideredexperts.Decisionsare
made withthe personwho notices
the issue,theperson mostaffected by
it,or otherwisesomeonethat the
managers believeisthebestperson to
make thedecision.
W.L.Goreuses circlesmade of
representativecolleagueswhogo
through theadviceprocesson
behalfofthewholeorganization.
Team leadersare voted
democratically andrepresentthe
team inother decision-making
circles.
Buurtzorg usessocialmediato
supportand speeduptheadvice
process. Within 24hoursof apost,
amajority ofnurseswillhavereadit.
Theseposts evokedozens,
sometimeshundreds,of
comments.

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RULES OF ENGAGEMENT

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RULES OF ENGAGEMENT
Culture and valuescome alive through behavior.Rules of engagement referto “the wayyou
feeland act”in any givencircumstance,providing authorization and/or limits, among other
things. Itoftenalso defineswhatthe public sees. Apartfroma setof “ground rules”, rules of
engagementmay include abrand books, working formatsandtemplates.
Canyou formulate a setof guiding principles thatdictate behaviorand actionandkeep your teamunited?
How doyou exemplifythese valuesas aleader?
Leaders during the Americancivilrights era
reliedon a number of techniques tohelp
encourage people tojointhe movement and
remainunited asone. It took extensivetrainings
toprepare civilrights workers for the violence
they wouldencounter inthe South.
Training includedrole playsand signinga
pledge toremainnonviolent.
Peace Corps offers a unique experience toits
trainees andvolunteers. While the intrinsicrewards
of joining are great, the challenges anddemands are
many. Tomaintaincohesion and reputation, the
organization has a sharedset of togovern behavior,
while respectinglocaltraditions and regulations.