Managerial Innovation

MANAGERIAL INNOVATIONS &
ENTREPRENEURIAL ORGANISATIONS
Claire CHAMPENOIS
Claire Champenois
• Professor in Entrepreneurship
• Research themes: sociological approaches to entrepreneurship, new work and
organizing forms, organizational creation and growth, entrepreneur-investor
relationships and conflicts
New York
Heidelberg
cchampenois@audencia.com
Learning Outcomes
At the end of this course, you will:
 be able to recognize, explain and apply key principles and

concepts of managerial innovations and entrepreneurial
organisations.
 be able to articulate the motivations behind the implementation
of these organisational forms, as well as their strengths and
drawbacks.
 have discovered whether you fit best with bureaucratic or
entrepreneurial organisations for your future work and why.
3
COURSE OVERVIEW
Session Topic
9 May Introduction to New organizational forms and Management Innovations

Case study : CIC Ouest
10 May The End of management?
Leading by values, commitment & management : High tech startup
growth
Case study: E-Solution & Testimony
11 May Contemporary Managerial Innovations: Self Managing Organizations
Entrepreneurial Management (Corporate Entrepreneurship)
Case Study: l’Oreal
12 May Network-organization 8
Case study: Nanospace

Planning
Session Topic & Assignment
9 May: 9.30-10.30 Introduction to New organizational forms and

VIRTUAL CLASSROOM –BlackBoard : Management Innovations
9 May: 10.30 – 15.25 Case study : CIC Ouest

Home work - Individual reading
- Individual work => preparation of a ppt or Word
presentation (answers to case questions) to
upload on BlackBoard before 15.25
(“CIC_StudentName_firstname.doc” or.ppt)
9 May: 15.30-16.30 Debriefing of Case Study & Conclusions
10
VIRTUAL CLASSROOM –BlackBoard
Evaluation
Homework on a case study 50%
(either CIC ouest or E-Solution)
Individual final exam: MCQ 50%

16 May, 13.30 -13.50 (on BBC)
11
MANAGERIAL INNOVATIONS
12
STARTING POINT
What do you know about
« managerial innovations » -
« entrepreneurial organisations?
(principles, purpose, example…)
When did you hear these words?
13
Managerial
« Innovation »? New management
practices
aimed at fostering the
firm’s flexibility, reactivity
and creativity
in order to be more agile
and competitive
14
Managerial
« Innovation »?
Post-bureaucratic
organisations
Entrepreneurial
Organisations
15
WHAT IS A BUREAUCRATIC ORGANIZATION?
MAIN PRINCIPLES ?
MAIN SHORTCOMINGS?
(based on your experience)
BUREAUCRACY: principles
Weber (1922):
 strict vertical hierarchy,

 specialized division of labor,
 formal written rules and guidelines,
 selection and promotion of the staff on the basis of their technical
competence
 separation of personal and corporate affairs.
17
BUREAUCRACY: + and -
Efficiency
Social / Business Norm
Goal displacement; Power

struggles;
Red tape Inefficiencies
Oppressive conformity;
Lack of personal;
expression & creativity
18
Managerial Innovations
1. Characteristics of MI
2. What results ?
Source: Audencia’s Chair For Managerial Innovation;

Bardon, T. and N. Arnaud, Cahiers de L’innovation Nr 1-4
19
Managerial Innovations
Characteristics
20
Post-bureaucratic organization forms:
Breaking up with traditional bureaucratic organization
modes
Characteristics of MI
Centralization Decentralisation
Verticality Transversality
Hierarchy Autonomy
Specialisation of tasks Enrichment of tasks
21
Breaking up with bureaucratic culture
22
Entrepreneurial organisation
 A Managerial Innovation :
 Creativity
 Agility : Opportunity seizing
 ‘Entrepreneurial management’ (Corporate Entrepreneurship)
 Established large firms & new ventures
23
Managerial Innovations: The End of
Management? Characteristics of MI
 To be more agile, more efficient, firms need to;

 Flatten hierarchical structures = have less managers
 or become self-managed organizations = have no managers
The End of Management

claim
Managerial Innovations: The End of
Management?
 Advantage to the end of management:

 Less HR costs
 Shorter decision chain
 Liberation of internal energies (empowerment)
 Managers:
 A source of cost
 Rule givers and controlers
 => A role to reinvent
A new social contract?
26
CIC OUEST
CASE STUDY
27
Questions
1. What were the motivations that pushed CIC Ouest to implement a business project (that
consisted in transforming its network and the functioning of its retail banking branches)?
2. What do you think of the implementation of this project? Identify strengths and
weaknesses of this implementation in the pilot phase.
3. What is the new organizational model for the retail banking branches? Present (i) the
initial model, (ii) how it changed after the implementation of the business project, and
(iii) the advantages of the new functioning compared to the previous one.
4. Based on an analysis of the difficulties that were encountered in the pilot phase, what
recommendations would you make (i) to the headquarter’s team to facilitate the
implementation of the business project at the network level and (ii) to the branch
management teams ?
28
Claire CHAMPENOIS
Course overview
Session Topic

10 May The End of management?
growth
11 May Contemporary Managerial Innovations: Self Managing Organizations

Entrepreneurial Management (Corporate Entrepreneurship)
12 May Network-organization 2
Case study: Nanospace

Planning, May 10th
9.30-10.30 Managerial Innovations :

VIRTUAL CLASSROOM - BB Results
Self managing Organizations
10.30 – 14.20 Case study : iAdvize (E-Solution)

Home work Group work => preparation of a ppt or Word presentation (answers to case
questions) to upload on BlackBoard before 14.20
(“Esolution_StudentName_firstname.doc” or.ppt)
7 April: 14.30-15.15 Debriefing of Case Study: Students’ presentation

VIRTUAL CLASSROOM – BB
7 April: 15.30-16.30 Testimony of Luc Davoust,

VIRTUAL CLASSROOM – BB Corporate Development Director @iAdvize / Q&As
3
WRAP UP
Key elements
& concepts
on
Managerial
Innovations?
Wrap up on Managerial Innovations:
Crossing Cases studied
Comp Firm’s Goal of MI MI implemented

any Characteristics (charachteristics)
CIC Large / Better address Enrichment of tasks ;
Ouest National clients’ needs, Autonomy; Transversality
Incumbent adapt to (knowledge sharing via
Traditional environment pairing )
sector changes, facilitate
coordination HQ-
branch 5
Breaking up with traditional bureaucratic organization
modes
Centralization Decentralisation
Verticality Transversality
Hierarchy Autonomy
Specialisation of tasks Enrichment of tasks
The End of Management?
6
Managerial Innovations: what results?
7
Managerial Innovations: what results?
 Social performance (Micro – Macro)
Do individuals feel better, more accomplished with MI ?
 Economic performance (collective level)
Mitigated results
8
How to make managerial innovation/ innovative
forms of organization performant ? (socially and
economically)
1. Do not consider them as one-fits-all solutions but customize the apporach
2. Take into account historical ways fo working /past decisions
3. Do not use them as communication tools mainly
4. Beware that not all individuals can act as entrepreneurs: identify those who do
5. Do not implement only technological tools
6. Have intermediary managers accompany MI implementation
Source: Audencia’s Chair For Managerial Innovation;

Bardon, T. and N. Arnaud, Cahiers de L’innovation Nr. 2
9
INTO THE « JUNGLE »
OF MANAGERIAL INNOVATIONS:
MAKING SENSE OF CONTEMPORARY CONCEPTS
10
Contemporary Managerial Innovations
 Various concepts
 Holacracy
 Teal organisation
 Liberated firm…
How to make sense of them?

Similarities? Differences?
What is really innovative?
Fashion or long-lasting trends?
11
COMMMON FEATURE:
SELF MANAGING ORGANIZATIONS
 SMOs Radical efforts to organize less hierarchically
 Organisations that radically decentralize authority in a formal

and systematic way throughout the organization.
« SMOs eliminate the hierarchical reporting relationship between manager and

subordinate that serves as the core building block of the managerial hierarchy and
constitutes its key mechanism of control. In self-managing organizations, all employees
hold well- defined decision rights that cannot be superseded by someone simply
because s/he is the “boss.” » (Lee, 2017)
12
SELF MANAGING ORGANIZATIONS: EXAMPLES
• Morning Star:
tomato processing company
bilateral contracts with other employees: ‘Colleague Letters of Understanding’ (CLOUs)
• Valve:
large and successful maker of computer games
radical decentralization of authority : employees have full flexibility and autonomy to choose the
games on which they would like to work. “Nobody ‘reports to’ anybody else’’.
• Older firms : Oticon, W.L. Gore, Semco, Johnsonville Sausage
13
HOLACRACY
WHAT IS HOLACRACY?
Power (kratos) to whole (holos)
« As an organising concept holocracy replaces

conventional hierarchy with a holarchy, which
is connection between holons»
Stefan Stern, Management Today, July-

Holacratie: vers une nouvelle structure
August2015 17
18
Holacracy: key principles
No intermediary management
Intrinsic personal motivation Leaders’ Interchangability
19
20
Holacracy: system of the future?
 Famous (and rare) Examples:

 Favi, Zappos, Biocoop ,..
 Entrepreneurial ventures: Le Phare (Nantes)
 Viability still to be proven

 can scare employees
 New name for old participative methods?
22
To go further
Holacratie (Holacracy®)
 Roger D. Hodge “First, Let’s Get Rid of All the Bosses” ,

New Republic, November 2015
 Stefan Stern, “Creating a World Without Managers”,

Management Today
 Consultants: IGI Partners : https://igipartners.com/en

23
LIBERATED FIRMS
(FRANCE)
EXAMPLE:
CHRONO FLEX
(CASE STUDY IN BLACKBOARD)

What is a liberated firm?
 Une entreprise libérée, c'est quoi ?
 https://youtu.be/ZrAFpPbz7O4
26
What is a liberated firm?
Characteristics of ‘liberated companies’
 Control replaced by trust

& limitation of the duality
conception/execution
 Reconfiguration of the organization around
operational jobs (vs. functional jobs)
 Organigramm centered on operational
positions and clients; fewer hierarchical
levels
 Changes in everybody’s role and mission
27
EXAMPLE - CHRONOFLEX
Why engage in a ‘liberation path’?
 To overcome an economic crisis and the resulting massive layoffs: to be more

profitable and to better adapt to a changing environment
 Personal conviction and values of the CEO (Alexandre Gérard)
(cf. testimony by A Gerard:
https://www.youtube.com/watch?v=VebUucpwAZc )
How?
 3 steps - a lengthy process:
 workshops about vision and values shared by employees => identification
of 4 shared values (p. 3)
 “Remove little stones”: addressing daily limitation to do their work
 Suppress power signs
 In parallel : CEO and top management coached on changing their
behaviors
28
The ‘liberation path’
 A tendency… along with controversies
 Examples:
 Michelin, FAVI (Jean-Francois Zobrist), IMA technologies (FR)
 Goretex, Zappos (USA)
 Ministry of Social Security (Belgium)
 Theoretical perspective:
 Tom Peters, « Liberation Management: Necessary Disorganization for the
Nanosecond Nineties »
 Isaac Getz, « Freedom, Inc. »
29
TEAL ORGANIZATION
Teal organization: the organizational model for
the future?
Laloux’s vision: an evolutionary perspective on organizations (and corresponding
management types)
Impulsive Traditional Success Pluralistic Evolutive
Innovation Autonomy Auto-

Reproductible
governance
Process
Key Work division
organizational Responsability Values Fullness
Stable
and managerial Hierarchy organizational
elements charts
Meritocracy Respect Purpose
+ Dependency
Hierarchy
Autonomy
Self-organisation +
YESTERDAY TODAY
(or tomorrow ?)
Source : Laloux F. (2014), Reinventing organizations, Ed. Nelson Parker; https://www.reinventingorganizations.com/
Claire CHAMPENOIS
Planning, May 11th
9.30-10.15 The End of Management: Debriefing on E-Solution Case Study

VIRTUAL CLASSROOM –BB Managerial Innovations: Self managing Organizations
10.15-12.30 Read Bernstein et al. (2016) ‘’Beyond the Holacracy Hype”

Home work Answer questions
12.30-13.30 Lunchbreak
13.30 – 14.30 Sharing of answers and discussion around ‘’Beyond the Holacracy Hype”
VIRTUAL CLASSROOM – BB
Entrepreneurial Management & Corporate Entrepreneurship
14.30 – 16.30 Case Study: L’Oreal
- Prepare answers to questions 1 to 5 (in case)
- Post on BB Forum ‘L’Oreal Case Study’ by 16.00 two answers to two questions
(indicated by professor), and by 16.30 a comment on one of your classmate’s
2
answers
E-Solution
Des pratiques de GRH et de management au
service d’une forte croissance dans une
start-up
© CCMP année 2017

Auteurs : Claire Champenois, Noémie Lagueste
Etablissement créateur : Audencia Business School
Case Study:
iAdvize
Visit:
https://www.iadvize.com/en/
Introduction
Context
Company
activity
- Founded in 2011
- High growth company: 100% / year
- Interest of the case: a start-up in which HRM was
pivotal to the firm’s growth & Innovative
management practices
5
E-Solution – values
Team Spirit Nine fundamental
values
Transparency Agility
People
Excellence
Commitment
Humility
Innovation Pleasure
6
E-Solution– values
Team spirit
Team spirit • A quality tested during

recruitment
People
Agility
• Numerous initiatives
• Writing of the Company
Transparency Commitment
Book
• …
Excellence Pleasure
Humility
Innovation
7
Agility
• Initiative left to employees
Agility • Culture of trial and error

• "Flat" hierarchy
People
Team spirit
• Organization in small teams
Transparency Commitment
Excellence Pleasure
Humility Innovation
8
People
• A long integration phase
• Social events and extra-work
People activities (to maintain the
Commitment
spirit of a business on a
Agility
human scale)
Pleasure
Team spirit • Availability of managers
Transparency Innovation
Humility
Excellence
9
Commitment
• Collaborative management
• The organization of work in
Commitment
project teams
People
Pleasure • Clear goals
• => employees understand
Agility Innovation the meaning of their work
and observe its impact
Team spirit Humility
Excellence
Transparency
10
Pleasure
• Aesthetics of the premises
• Importance of social
Pleasure
moments (Lucky Diners,
Commitment Innovation Wheel of Fortune, kitty)
People Humility
Agility
Excellence
Team spirit
Transparency
11
E-Solution– values
Innovation
• Central to employees’ activity:
Innovation inventing new services and new
Humility
uses
Pleasure
• E-Solution promotes innovation:
Excellence Hackatons, Kitty…
Commitment
People Transparency
Agility Team spirit
12
Humility
• A behavioural norm
Humility • often associated with team

spirit.
Excellence
Innovation
Transparency
Pleasure
Team Spirit
Commitment
People Agility
13
Excellence
• Omnipresence of objectives and
quantified indicators visible to
Excellence
all
Humility Transparency • Culture of figures (Company
Book)
Innovation Team spirit • Recognition and dramatisation
of successes (gong, sparkling
Agility chair)
Pleasure
Commitement People
14
E-Solution – Values
Transparency
• Communication to employees:
Transparency CEO 15 (which became the CEO
hour)
Excellence Team spirit
• High visibility of objectives
Humility Agility
Innovation People
Pleasure Commitment
15
Organisational culture
Cultural web model
Stories
Rituals and Symbols

routines
The Paradigm
Control system
Power structures
Organisational Structures
Johnson, G., Whittington, R. & Scholes (2011) 16

Organisational culture
 Values that are very intertwined and mutually reinforcing

 Relaxed atmosphere that drives excellence
Value-based  Employee autonomy

management  Decision-making speed
 Make it easier to
Agility /innovation manage growth
 Feeling of
Coherence of individual
belonging to a
actions
"professional
family"
Strong corporate
identity 17
HRM mechanisms
Recruitment
Integration
Training
Career Compensation
Management
18
HRM mechanisms
Focus on recruitement
 Collegial process / cooptation

 Fit with the company values
Recruitment
Typical challenges of a growth start-up :
 How can the company make itself more attractive to candidates?

 Building an employer brand
 Managing growth and the resulting large number of recruitments
 Avoiding recruitment errors
How can it avoid recruitment errors ?

Implement a formalised expert recruitment process
Make recruitment a priority
Sufficient time to recruit
Maximised trial and integration periods
19
HRM mechanisms
Focus on compensation
 A fixed salary at market minimum.

 A variable portion (linked to the employees’
Compensation
objectives )
 Significant non-financial compensation
Employees’ perception of pay :
 At the bottom of the pay scale

 Differences in wages sometimes perceived as unfair (commission-
based pay sometimes seems unfair)
 Salary is not the primary engine of employee commitment
The salary does not support the commitment, but it is

compensated by a framework, an atmosphere, a climate of good
living in the company
20
HRM mechanisms
A growth model that rests on HRM
A complete HRM Few errors and little Commitment of

system in a start-up turnover employees
Excellent cooperation Important bonds

Feeling of belonging to
and involvement in between employees /
the firm
work team spirit
Sales performance and

Competitiveness
quality of work.
21
HRM mechanisms
Commitment as a type of HR practice and as an
organisational model supporting growth
Commitment-based HR practices (« commitment

organizational model ») (Baron et al., 2001)
 Attachment based on relationships and company identification

 Selection based on values and cultural fit
 Coordination based on autonomy and informal control
22
Challenges and action plan for E-
Solution
Challenges
 Maintain commitment among the employees .
 Preserve a strong culture in a growth context.
 Increase diversity of employees.
 Integrate processes to manage activities and in the same
time preserve the specific features of the culture .
 Develop compensation system.
 Individual stress generated by the control exerted by
peers and high porosity between personal and work life.
23
Challenges and action plan for E-
Solution
Action plan
 Put in place career management path.

 Simplify company values.
 Redesign and systematise salary grids.
 Generalise and increase variable pay.
 Encourage employees to differentiate personal life and
work life.
24
Limits
 Uncertainty about assessment criteria

 Soft power: invisible, but social control omnipresent
 Strong culture that risks engendering sectarianism? Risk
of conformism?
 Adapted to a certain age (young); a very particular
individual profile?
 Expressing criticism is difficult
 Belief that accomplishment comes from work is imposed
 What skills are developed? How does this affect
employees’ employability?
25
« What did you retain
from Luc Davoust’s
testimony?
Key points?
Key ideas?
Main challenges?
2017-2022
26
WRAP UP
Key elements
& concepts
on
Managerial
Innovations?
Wrap up on Managerial Innovations:
Crossing Cases studied
Company Firm’s Characteristics Goal of MI MI implemented
(charachteristics)
iAdvize SME / International Sustaining strong growth Management by values + Management by objectives
New Entrant Innovating (in product and services) Transversal teams (swarms)
Innovative sector (Autonomy / decentralization/ transversality)
29
TAKING PERSPECTIVE ON
MI & SELF –MANAGING ORGANISATIONS
BERNSTEIN 2016
BEYOND THE HOLACRACY HYPE
31
« Beyond the Holacracy Hype », Bernstein et al.
(2016)
Read the text and answer the following question s ( with a
classmat e )
1. What are the key element of self-managed organisations?

2. What are the key claims made by the authors regarding self-
managed organisations?
3. What are the main advantages / strengths of this type of
organisations ?
4. What are the main drawbacks / weaknesses ?
Try to integrate your own experience in your answers
Prepare a ppt presentation (min. 1 slide / question)

32
(2016)
Q1: What are the key element of self -managed organisations?
 Principles of SM orgas :
Members share accountability for the work authority over how
goals are met, discretion over resource use, and ownership of
 information and knowledge related to the work.
 3 characteristics
1/ Teams are the structure
2/ Teams design and govern themselves.
3/Leadership is contextual (distributed among roles)
33
(2016)
Q2 : What are the key claims made by the authors regarding self -
managed organisations? (1/2)
- Latest efforts to combine what is most needed by leaders &
employees / orgas: reliability and adaptability.
- Self management : an old idea and practice (70 years old) :

 1950’s: in coal mines : self-managed teams s raised productivity
(miners in South Yorkshire, England, spontaneously
 organizing their work differently: Multiskilled autonomous groups,
interchanging roles and shifts)
 1970-80’s: participative management and
 industrial democracy. (Europe); into quality circles (Japan);
innovation task forces (US)
 1990’s : generalisation
34
(2016)
Q2 : What are the key claims made by the authors regarding self -
managed organisations? (2/2)
 Next step: Self-managed organisations: applying the principles of self-
management to entire institutions?
 Again, an old idea
 Most organizations, particularly large corporations, should adopt these

techniques in part, not in whole.
 New leadership needed :

the next generation of self-managing teams is demanding a new
generation of leaders—senior individuals with the vision to see where is
best to set aside hierarchy for another way of operating, but also with
the courage to defend hierarchy where it serves the institution’s
fundamental goals 35
(2016)
Q3 : What are the main advantages / strengths of this type of organisations ?
 Teams exist if and only as long as they are needed and relevant
 Multiple roles : roles that match individual capabilities with

organizational goals.
 Responding to emerging needs in the market (not top-down but

bottom-up)
 Ability to detect opportunity from the market/clients needs and adddres
them from the base (ex Valve : going to hardware)
36
(2016)
Q4 : What are the main drawbacks / weaknesses ?
 Multiple roles has costs :

 complicates actually doing the work
 complicates compensation.
 complicates hiring, both into the organization and into particular roles.
 Making decisions closer to the work but power and status differences still exist
; Time consuming
 Responding to emerging needs in the market. : risk to be too responsive to

your customers
 Need for leaders (who accept not to be leaders all the time)
37
ENTREPRENEURIAL MANAGEMENT &
CORPORATE ENTREPRENEURSHIP
39
Corporate Entrepreneurship…?
Corporate Entrepre ne ur s hi p
Various Definitions
 « Corporate Entrepreneurship is the process

whereby an individual or a group of individuals
in association with an existing organization,
create a new organization or instigate renewal
or innovation within the organization » (Sharma
and Chrisman, 1999)
 « Corporate Entrepreneurship refers to innovative,
risk-taking, proactive behaviors pursued at any level
and within any area of the firm » (Morris and
Kuratko, 2002)
 Spontaneous or Induced CE
Various Definitions
 « CE » often used interchangeably with « Intrapreneurship »,
« Internal Corporate Venturing »
Intrapreneurship
 « Employee initiative from below in the organization to undertake
something new; an innovation which is created by subordinates
without being asked, expected or perhaps even given permission
by higher management to do so » (Vesper, 1984)
 « Intrapreneurship refers to a process by which individuals… inside
organizations pursue opportunities independent of the resources
they currently control » (Stevenson and Jarillo, 1990)
Internal Corporate Venturing
 « an activity, which seeks to generate new businesses for the
corporation in which it resides through the establishment of
external or internal corporate ventures » (Von Hippel, 1977)
Why do companies decide to
foster Corporate
Entrepreneurship?
Why do companies decide to foster CE?
1. To revitalise the organization

2. To increase speed and responsiveness
3. To better capitalise on intangible assets
4. To grow abroad
CASE STUDY
45
L’Oréal CEOs
 Eugène Schueller : 1909 - 1957

 François Dalle : until 1984
 Charles Zviak : until 1988
 Lindsay Owen-Jones : until 2011
 Jean-Paul Agon : since 2011
Corporate Entrepreneurship
C A S E S TU D Y L ’ O R E A L - 5 Q u e s t i o n s
Questions 1 to 3:
Three tools to measure the
« entrepreneurial orientation » of an organization:
How « entrepreneurial » an organization behaves
enterprising/entrepreneurial
culture
1. Entrepreneurial Orientation: Covin and Slevin

Scale
2. Miller’s configurational model of the
entrepreneurial firm
3. Stevenson and Gumpert’s Entrepreneurial vs
Administrative management culture
C A S E S TU D Y L ’ O R E A L - Q u e s t i o n s
Scale
In general the top managers of my firm favour…
A strong emphasis on the marketing of tried-and-true products 1 to 7 A strong emphasis on R&D, technological leadership, and inovations
How many new lines of products or services has your firm marketed in the past 5 years (or since its establishment) ?
No new lines of products or services 1 to 7 Very many new lines of products or services
Changes in product or service lines have been mostly of a minor nature 1 to 7 Changes in product or service lines have usually been quite dramatic
In dealing with its competitors, my firm…

Typically responds to actions which competitors initiate 1 to 7 Typically initiates actions to which competitors respond
Is very seldom the first business to introduce new products/services, 1 to 7 Is very often the first business to introduce new products/services, administrative
administrative techniques, operating technologies, etc. techniques, operating technologies, etc.
Typically seeks to avoid competitive clashes, preferring a « live-and-let- 1 to 7 Typically adopts a very competitive « undo the competitors » posture
live » posture
In general, the top managers of my firm have…
A strong proclivity for low-risk projects (with normal and certain rates 1 to 7 A strong proclivity for high-risk projects (with chances of very high return)
of return)
In general, the top managers of my firm believe that…
Owing to the nature of the environment, it is best to explore it 1 to 7 Owing to the nature of the environment, bold, wide-ranging acts are necessary to
gradually via cautious, incremental behaviour achieve the firm’s objectives
When confronted with decision-making situations involving uncertainty, my firm…
Typically adopts a cautious, « wait-and-see » posture in order to 1 to 7 Typically adopts a bold, agressive posture in order to maximize the probablity of
minimize the probablity of making costly decisions exploiting potential opportunities
Adapted by Bouchard and Fayolle (2017)

CASE STUDY L ’ O REAL - Q u e s t i o n s

An entrepreneurial firm engages in (has three
characteristics):
 product market innovation (innovativeness)
 undertakes somewhat risky ventures (risk-taking)
 is first to come up with proactive innovations, beating
competitors to the punch (proactivity) Source: Miller
(1983)

Entrepreneurial Culture Administrative Culture
Strategic orientation Driven by perception of Driven by control of

opportunities resources
Commitment to seizing Revolutionary, with short Evolutionary, with long
opportunities duration duration
Commitment of Many stages, with minimal A single stage, with
resources exposure at each stage complete commitment of
decisions
Control of resources Episodic use or rent of required Ownership or employment
resources of required resources
Management Structure Flat with multiple informal Hierarchy

networks
(Stevenson and Gumpert, 1985)

Entrepreneurial management vs.
Administrative Management
 Entrepreneurial management : Entrepreneur or promoter strives

to seize and exploit opportunities, regardless of controled
resources
 Administrative Management: Administrator tries to realize the

most efficient allocation of possible resources
51
CASE STUDY L’OREAL - Questions
Assignment
 Individual reading of the case

 Prepare answers to questions 1 to 5 (in case)
 Post on BB Forum ‘L’Oreal Case Study’ by 16.00 two

answers to two questions
(indicated by professor), and by 16.30 a comment
on one of your classmate’s answers
Claire CHAMPENOIS
Planning, May 12th
9.30-10.30 Debriefing Case Study: L’Oreal

VIRTUAL CLASSROOM –BlackBoard Rational behind Managerial Innovations
Porous firm’s boundaries: Network-organization
10.30 – 14.5 Case Study: Nanospace

- Prepare answers to questions (individually or in group)
- preparation of a ppt or Word presentation (answers to case questions) to send by
email before 14.15 (“Nanospace_StudentName_firstname.pdf”) to
14.30 -15.45 Debriefing of the case study

VIRTUAL CLASSROOM – BB Conclusions
15.45-16.30 Revisions for the Exam (MCQ)

Questions to professors
2
CASE STUDY - DEBRIEFING
3
C A S E S TU D Y L ’ O R E A L - D E B R I E FI N G
Questions 1 to 3:
Three tools to measure the
« entrepreneurial orientation » of an organization:
How « entrepreneurial » an organization behaves
enterprising/entrepreneurial
culture

Scale
C A S E S TU D Y L ’ O R E A L - Q u e s t i o n s
Scale
In general the top managers of my firm favour…
A strong emphasis on the marketing of tried-and-true products 1 to 7 A strong emphasis on R&D, technological leadership, and inovations
How many new lines of products or services has your firm marketed in the past 5 years (or since its establishment) ?
No new lines of products or services 1 to 7 Very many new lines of products or services
Changes in product or service lines have been mostly of a minor nature 1 to 7 Changes in product or service lines have usually been quite dramatic
In dealing with its competitors, my firm…

Typically responds to actions which competitors initiate 1 to 7 Typically initiates actions to which competitors respond
Is very seldom the first business to introduce new products/services, 1 to 7 Is very often the first business to introduce new products/services, administrative
administrative techniques, operating technologies, etc. techniques, operating technologies, etc.
Typically seeks to avoid competitive clashes, preferring a « live-and-let- 1 to 7 Typically adopts a very competitive « undo the competitors » posture
live » posture
In general, the top managers of my firm have…
A strong proclivity for low-risk projects (with normal and certain rates 1 to 7 A strong proclivity for high-risk projects (with chances of very high return)
of return)
In general, the top managers of my firm believe that…
Owing to the nature of the environment, it is best to explore it 1 to 7 Owing to the nature of the environment, bold, wide-ranging acts are necessary to
gradually via cautious, incremental behaviour achieve the firm’s objectives
When confronted with decision-making situations involving uncertainty, my firm…
Typically adopts a cautious, « wait-and-see » posture in order to 1 to 7 Typically adopts a bold, agressive posture in order to maximize the probablity of
minimize the probablity of making costly decisions exploiting potential opportunities
Adapted by Bouchard and Fayolle (2017)


An entrepreneurial firm engages in (has three
characteristics):
 product market innovation (innovativeness)
 undertakes somewhat risky ventures (risk-taking)
 is first to come up with proactive innovations,
beating competitors to the punch (proactivity)
Source: Miller (1983)

Entrepreneurial Culture Administrative Culture
Strategic orientation Driven by perception of Driven by control of

opportunities resources
Commitment to seizing Revolutionary, with short Evolutionary, with long
opportunities duration duration
Commitment of Many stages, with minimal A single stage, with
resources exposure at each stage complete commitment of
decisions
Control of resources Episodic use or rent of required Ownership or employment
resources of required resources
Management Structure Flat with multiple informal Hierarchy

networks
(Stevenson and Gumpert, 1985)

WRAP UP
Key elements
& concepts
on
Managerial
Innovations?
Wrap up on Managerial Innovations
SMOs (holacracy, libetared firms, teal organisations)

Principles , + and -, how you fit in them
Company Firm’s Characteristics Goal of MI MI implemented

(charachteristics)
CIC Ouest Large / National Better address clients’ needs, Enrichment of tasks ; Autonomy;
Incumbent adapt to environment changes, Transversality (knowledge sharing via
Traditional sector facilitate coordination HQ- pairing )
branch
iAdvize SME / International Sustaining strong growth Management by values + Management by
New Entrant Innovating (in product and objectives
Innovative sector services) Transversal teams (swarms)
(Autonomy / decentralization/
transversality)
L’Oreal Large / National Seize opportunities (be the Decentralization of power; Autonomy
Incumbent main market player), innovate (individual initiatives); Agility (do/undo:do
Innovative sector better); Entrepreneurial Culture
9
WHY ?
RATIONALE BEHIND
MANAGERIAL INNOVATIONS
& ENTREPRENEURIAL ORGANIZATIONS
Reasons for implementing less-hierarchical
forms of organizing work
1. Faster information flows and sudden technological

developments = threats to rigid managerial hierarchy
2. Growth in knowledge-based work
3. Trend towards viewing work and organizations as places

for personal meaning
Source: Lee, 2017

11
New forms of work and innovative organizing
A new architecture of work
« the new economy » or decentralized
capitalism
A fundamental change in the way work is organized, structured

and governed is taking place
1. From jobs to projects : Jobs disappear and projects ascend

2. Design and production become simultaneous processes rather than orderly
sequential steps
3. Boundaries of firms have become extremely porous: rather a forest of inter-
organizational relationships
Source: Powell (2001) in: The 21st Century Firm (2001) Source : The capitalist firm in the 21st Century
Where does it come from?
The « old » system of organizing work (1950-1985)
 Sharp division in responsibilities and rewards between management

and labor
 Employment relationship guided by standard objective criteria
(seniority); merit/performance rarely measured
 Most employees did not face serious risks of layoffs
 Pay was secure
 Differentiated and explicit jobs; work organized into function-
departments (production, sales R&D, HR, etc)
 From 70’s onwards: growth and diversification but no fundamental
changes
Forces that fragilized the old system
Environment
• Uncertain
• Volatile
• Ambiguous
• Complex
 Globalization
To remain competitive:
 Technological change Flexibility /
Reactivity / Creativity
 Sociological changes
A new architecture of workWarning

this new logic is still nascent:
we see its fuller operation in emergent industries that were never wedded
to the older system
From Jobs to projects

 Jobs emerged in the late 19th and early 20th century as a way to package work in settings
where the same task was done repeatedly
 Conception of work has changed:

 from a focus on narrow and specific tasks carried out by individuals, constrained by rules
and prodedures…
 … to a collective effort conducted by teams with diverse skills, working with considerable
discrection, judged on results and outcomes.
Core features of new conception: interdependence and involvement
Porous Boundaries of firms : spread of network-

organizations
- Flattening of hierarchies, Spread of networks
- Boundaries of firms have become extremely porous: rather a forest of inter-
organizational relationships
- Mainly to access knowledge
Innovative forms of Organizing :
Multiple indicators
• 3 dimensions to map contemporary

organizational changes:
• Changing structures
• Changing processes
• Changing boundaries
Source: Pettigrew, Whittington et al. (2003), Innovative forms of Organizing

 Changing structures
 Heavy layers of middle managers too expensive + impeding information flows
and quickness of response => Delayering
 increased decentralization, both operational and strategic
 Projects become the vehicle for bridging traditionally separated ‘divisions’
 Changing processes
 Organizations enabling intensive interactions and flows of information, vertical
and horizontal, inwards and outwards
 Investments in HR; HRM supporting horizontal networking & maintaining
organizational integration
 Changing boundaries
 Increased competitive pressures => focus on ‘core competencies’, redrawing
boundaries around true competitive advantage
 Strategic downscoping and abandonment of conglomerate strategies
 Outsourcing of value-chain activities of low value or strategic significance
Course overview
Session Topic

10 May From jobs to projects : The End of management?
growth
11 May From jobs to projects : Entrepreneurial Management (Corporate
Entrepreneurship)
12 May Porous firm’s boundaries: Network-organization

Case study:
20 Nanospace
POROUS FIRM’S BOUNDARIES:
NETWORK ORGANISATIONS
SOUS-TITRE DE MA SOUS-SECTION SI BESOINS
never stop daring

WHY A NETWORK ORGANIZATION?
Inter-organizational Networks as the Locus of
Innovation rather than the individual firm (Powell
et al., 1996, 2005)
Example of the biotechnology industry:

Biotechnology: “the application of science and technology to living
organisms as well as parts, products and models thereof, to alter living
or non-living materials for the production of knowledge, goods and
services.” (OECD)
Applications: healthcare, agriculture, food, research processes and
materials
22
Example: Affilogic
– Nantes-based start-up
– Founder
– Technology
– Technology platform
– Therapeutic applications: detection of diseases, drug development
(oncology, inflammatory diseases)
Example: Affilogic
 - a mixed businesss model:

 Fee for…
 …Product development (oncology)
“generates and combine Nanofitins® for partners on a target by target

basis”
- Development without VCs: through alliances with Pharma industries

co-development fo active compounds/drug against a given disease
https://www.affilogic.com/partnering-strategy
Example: Graffinity Pharmaceutical
design / Santhera Pharmaceuticals
VC-based
Business and growth model
– 3 founders : an academic spin off
– Microarrays for compound screening (drug development)
– Business Model: dual BM:
• Techno platform (fee for services + alliances with Big Pharma for drug discovery
and selection)
• Drug development (rare diseases)
– Growth & Funding model:

• From 1 to 80 people in 3 years (1997- 2000)
• VC : Funding by VC (3 rounds of financing : seed/ series A and B public bank;
German VC; international anglosaxon VC: 3i, etc)
• Alliances : upfront fee/ miletsones fee / royalties). Goal: money and POC
• Fee for services (security) with Pharma partners
• Many R&D alliances with academic / biotech lab
• Merger (Buyout by) with Swiss drug development company Santhera
Pharmaceuticals
27
To go further
28
29
Largest Alliances (world level)
Best-selling biotechnology drugs in 2008

1. Enbrel (etanercept) rheumatoid arthritis (RA)(Amgen; other Developer: Immunex)
2. Rituxan (rituximab) several diseases (Genentech)
3. Humira (adalimumab) 5 indications (Abbott; techno developed by Cambridge
Antibody Technology Group )
4. Avastin (bevacizumab) cancer (Genentech)
5. Herceptin (trastuzumab) Breast cancer (Genentech)
6. Remicade (infliximab) (Johnson & Johnson)
7. Neulasta (pegfilgrastim) (Amgen)
8. Lantus (insulin glargine) (sanofi-aventis)
9. Aranesp (darbepoetin alfa) (Amgen)
10. Prevnar (diphtheria CRM197 protein) (Wyeth)
11. Procrit/Eprex (epoetin alfa) (Ortho Biotech)
12. Epogen (epoetin alfa) (Amgen)
13. Copaxone (glatiramer acetate) (Teva)

In which cases are Networks
the locus of Innovation? …
37
Porous Boundaries – Key points
In which cases are Networks
the locus of Innovation?
When knowledge is broad, rapidly changing and (geographically, institutionally)

dispersed => constant and rapid access to knowledge and information
When organizations are small, internally possess limited resources & lack legitimacy =>
access to lacking resources through networks & gain of legitimacy
• When market or user’s field is not stabilized => need for competitors and users to
cooperate to co-develop product (& impose a standard) and educate the market
38
Example of Biopharma industry:
Alliances provide to small biotech companies…
Significant capital to fund R&D
A means of sharing risk
Validation regarding the relevance of the company’s technology

in the eyes of investors
Access to capabilities not present in the biotech company or too

expensive to build (e.g. managing large scale clinical trials,
manufacturing, regulatory affairs, commercialization on a global
scale)
39
Source: Simon and Giovannetti (2017), Managing Biotechnology
Example of Biopharma industry:
Alliances provide to large pharma companies …
Access to innovative products (a significant portion of pharma

pipelines are represented by product candidates that we
discovered by alliance partners)
Access to cutting-edge technology that cannot be replicated in-
house either because of IP considerations or lack of expertise
Reduction of risk (acquiring ownership rights to a particular
product rather than acquiring the whole enterprise)
Source: Simon and Giovannetti (2017), Managing Biotechnology
40
CASE STUDY: NANOSPACE INC.
Question:
How and why do networks affect the recognition
and realization of innovative opportunities by
Nanospace?
that is: Identify key partnerships and their role
for Nanospace & Draw conclusions.
Knowledge intensive entrepreneurship (“KIE”) = start-up ventures relying on the intersection of

different types of knowledge: scientific/technological/ creative knowledge, market knowledge
(understanding of customers), business knowledge (running the company).
41
Name Group Nr.
NANOSPACE BOUERI
TRAN
Tarek
Chieu
1
1
GROUPS LO Yi-ting 1
CASTANO HENAO Ana maria 2
HONGNIAN Yang 2
VANCHA Alekya 2
before 14.15 : KHAWAND Sandra 3
REYMOND Adrien 3
NGUYEN Lan 3
SEND ppt or Word presentation INAFUKU Leonardo 4
(“Nanospace_StudentName_firs LE Binh 4
tname.pdf”) to
NAIR Abhishek 4
SALANDANAN Clarizze nicole 5
UMARETA Wahyu 5
COSTA SILVA INAFUKU Patricia Aline 6
LUO Jie 6
42
Claire CHAMPENOIS
CIC OUEST
CASE STUDY
2
Questions
1. What were the motivations that pushed CIC Ouest to implement a business project
(that consisted in transforming its network and the functioning of its retail banking
branches)?
2. What do you think of the implementation of this project? Identify strengths and
weaknesses of this implementation in the pilot phase.
3. What is the new organizational model for the retail banking branches? Present (i) the
initial model, (ii) how it changed after the implementation of the business project, and
(iii) the advantages of the new functioning compared to the previous one.
4. Based on an analysis of the difficulties that were encountered in the pilot phase, what
recommendations would you make (i) to the headquarter’s team to facilitate the
implementation of the business project at the network level and (ii) to the branch
management teams ?
3
1-Motivations behind CIC Ouest to business
project
Economical Decrease of retail banking margins due to low interest rates
Legal New European (Basel accords) and national regulation
Technological Digital revolution: new competition and change in customer

relationship
Sociological New customers’ behaviors towards banks

Mimetism with competition Reaction to the general movement of transformation in banks’
branch networks
Organizational Arrival of a new executive management team who launches
new dynamics
4
1-Motivations behind CIC Ouest to business
project
What is at stake:
1. Constantly adapting to evolving customers’ needs
2. Offer higher value services
3. While decreasing operational costs
5
1- Results’ generalization: Adoption logics of
managerial innovations
Rational approach: Transformation to address ‘objective’ challenges and requirements that the structure
‘rational’ factors faces.
Internal factors (organization-specific): deterioration of results; bad functioning modes

External factors (due to sector evolution): legal, technological, sociological factors
Neo- 3 ‘pressure’ types by internal and external stakeholders (DiMaggio and Powell, 1983)
institutionalist
approach Mimetic isomorphism: imitating other structures (competitors, model firms)
Coercive isomorphism: conforming to expectations of stakeholders
Normative isomorphism: standardization due to creation of common norms in sector
Political approach: Political, personal reasons: executive managers specific
Internal politics’
dynamics Need for recognition, Opportunity to boost one’s career, Wish to leave one’s mark on the
structure
6
2- Strenghths of the project
 Participation of various collaborators to the project:

 Steeering comittee
 Working groups
 Pilot phase allowing to ‘test’ (and correct) the new functioning mode
 Advantages
 An important system for accompanying and training (21) pilot teams :
secured the process
 Commitment of executive management members
 Participation of external stakeholders
7
2- Weaknesses of the project
 Early project announcement prior to implementation
 Launching right before summer season
 Lack of training for new positions (before taking on new role)
 Very tight implementation timetable: no right to error
8
3- Change in the organizational model
 At the level of branches’ NETWORK
 Grouping branches into larger entities that are managed as a single branch with several sites
 At the BRANCH level:

BEFORE:
 Simple hierarchical structure. A single Branch Manager (BM), centralizing decisions
 Several weaknesses
AFTER:
 Creation of a muti-headed Management team in each branch (new positions): BM, Assistant
Branch Manager (ABM), Operations Managers (OPM)=> Expertise, team animation by
occupation/market segment, Dedicated management
 More autonomy for employees
 Enrichment of tasks for receptionists
 ‘Pairing’ system and expertise centers => Knowledge sharing and flexibility
9
3- Change in the organizational model
Objectives pursued through the implementation of this enw organization:
Typical for MI
 Better address clients’needs

 Access to sharper competencies
 More available Customer Advisors
 Access to their privileged contact person on different sites (rather than one)
 Economic performance:
 Enhance commercial development
 Mutualize resources among different sites
 Increase agility:
 Reducing complexity of coordination between HQ and branches (now in smaller number)
10
4 - Recommendations
 To the headquarter:
 Training collaborators :
 Anticipate training for Operations Managers
 Anticipate training for Receptionists
 Train Branch Managers to become “managers of managers”
 Organizing of branches:
 definition of a maximal size
 Identify workforce needed
 Daily functioning of branches (enhance remote management tools,…)
 Human Resource Management
 Valorize new Assistant Branch Manager positions (to avoid feeling of status loss)
 Communicate on new career paths possibilities
 Create a strong incentive system for receptionists
11
4 - Recommendations
 To branches:
 Fostering cohesion among branches’ employees – to avoid silo effects
 Personalizing accompaniment of customer advisors (retail/corp)
 Communicating rapidly to customers on changes in organization
12
Beyond the Holacracy Hype 01-08-16 15:53
ORGANIZATIONAL STRUCTURE
Beyond the Holacracy Hype

by Ethan Bernstein, John Bunch, Niko Canner, and Michael Lee
FROM THE JULY–AUGUST 2016 ISSUE
I t was a Thursday afternoon in Las Vegas. Five employees were camped out in a team
room at Zappos, the largest company so far to implement holacracy—a form of self-
management that confers decision power on fluid teams, or “circles,” and roles
rather than individuals. On this particular day, in May 2015, the circle charged with
overseeing holacracy’s adoption was questioning the method’s effectiveness.
A couple of months earlier, Zappos CEO Tony Hsieh had offered severance packages to all
employees for whom self-management was not a good fit—or who wished to leave for any
other reason. Although most decided to stay, 18% took the package, with 6% citing
holacracy.
https://hbr.org/2016/07/beyond-the-holacracy-hype Pagina 1 van 26

In exit interviews and surveys, the 6% shared their concerns. They talked about
attending trainings to learn “shiny buzzwords” but seeing little difference in the way
work was done; facing “ambiguity and lack of clarity around progression, compensation,
and responsibilities”; getting “no definitive answers” to what they felt were basic
organizational questions; and concluding that holacracy was a “half-baked” idea.
Although many of their colleagues liked the system for a variety of reasons—they thought
it shaped roles to “make the most of my talents,” for instance, and allowed “each person
to influence the governance of the organization”—a number of those who left hadn’t
experienced it that way. For the sake of Zappos (and their careers), they had played along,
but they were unhappy. The offer of severance tipped them over the edge.
Most observers who have written about holacracy and other types of self-managed
organizations—the latest trend in self-managed teams—take an extreme position, either
celebrating these “bossless,” “flat” environments for fostering flexibility and engagement
or denouncing them as naive social experiments that ignore how things really get done.
To gain a more accurate, balanced perspective, it is important to look beyond the
buzzwords that describe these structures—“postbureaucratic,” “poststructuralist,”
“information-based,” “organic,” and so on—and examine why the forms have evolved
and how they operate, both in the trenches and at the level of enterprise strategy and
policy. That’s what we’ll do here.
Our research and experience tell us that elements of self-organization will become
valuable tools for companies of all kinds. Yet we see real challenges in embracing the
approach wholesale—Zappos is still grappling with them, even though its holacracy
adoption circle has regained its footing. Other organizations have decided it’s just too
consuming to go all in. Medium, a social media company that recently dropped
holacracy, found that “it was difficult to coordinate efforts at scale,” Andy Doyle, the
head of operations, explained in a blog post about the change. Using self-management
across an entire enterprise to determine what should be done, who should do it, and how

people will be rewarded is hard, uncertain work, and in many environments it won’t pay
off. So we’ll also look at circumstances in which it makes sense to blend the newer
approaches with traditional models.
What’s the Draw?

To better understand the impulse behind self-management models, consider what
leaders need most from their organizations: reliability and adaptability. Reliability means
many things, such as generating predictable returns for shareholders, adhering to
regulations, maintaining stable employment levels, and fulfilling customers’
expectations. So does adaptability: For example, some situations call for many small
adjustments in production or manufacturing to meet local needs, while others call for
fundamental shifts in strategy or capabilities.
All organizations must achieve both reliability and adaptability to some degree, but
usually one eclipses the other. Too much standardization for the sake of reliability can
make businesses insensitive to changing markets. Too much emphasis on adapting can
cause them to fragment and lose the leverage that comes with focus and scale (recall how
Apple cast about during Steve Jobs’s hiatus). Although managerial hierarchies can err in
either direction, they most often skew in favor of reliability—and create rigidity and red
tape.
Employees, too, need both reliability and

adaptability. To be effective on the job,
THREE MYTHS ABOUT SELF-MANAGING
ORGANIZATIONS people must have a stable working
#1. There’s No environment, access to critical resources,
Organizational Structure and clear goals and responsibilities. But
they must also have leeway to adapt to
changing conditions and make the right

decisions in the moment—and

managerial hierarchies often don’t
provide that flexibility and discretion.
When you’re an executive, it isn’t easy to

know the right balance of reliability and
adaptability—and even if you do, it’s
hard to get an organization to perform
accordingly. Hence the keen interest in
In fact self-management models are having organizations “feel their way”

intricately nested. A holacracy circle, toward the desired balance through self-
for example, may contain several management, which has actually been
subcircles, each with subcircles of its
own. At Zappos the General Company around for decades. You could say it
Circle—the only circle not nested began about 65 years ago, when Eric
within another—has 18 subcircles, Trist, an early member of the Tavistock
and the average number of subcircles
Institute (a British nonprofit that applies
is 1.8.
social science ideas to organizational life)
observed self-managed teams’ ability to
substantially raise productivity in coal
mines.
Back then, “longwall” mining was the unquestioned best practice. Each team performed
a single task, and tasks were done sequentially—a model that fused Frederick Taylor’s
scientific management and Henry Ford’s assembly lines. One team had to finish its shift
before the next could start. But miners in South Yorkshire, England, began spontaneously
organizing their work differently. Multiskilled autonomous groups, interchanging roles,
and shifts with minimal supervision allowed them to mine coal 24 hours a day, without
waiting for a previous shift to finish. In spite of that era’s prevailing belief that high
productivity came with doing the same task over and over, productivity soared.

Self-managed teams took different forms as they gained popularity in the 1970s and
1980s. In Europe they became synonymous with participative management and
industrial democracy. In Japan they morphed into quality circles and continuous
improvement efforts. In the United States they became the organizing framework for
innovation task forces. Moving to self-managed teams yielded breakthroughs in many
companies, mainly in manufacturing and service operation contexts. The Volvo plant in
Kalmar, Sweden, reduced defects by 90% in 1987. FedEx cut service errors by 13% in
1989. In the late 1980s and early 1990s C&S Wholesale Grocers created a warehouse of
self-managed teams, which enjoyed a 60% cost advantage over competitors, and General
Mills increased productivity by up to 40% in plants that adopted self-managed teams.
Such teams became more common throughout the 1990s, fueled by the promise of higher
productivity in work that was increasingly complex and dynamic. In most companies that
used them, just a fraction of employees were involved, generally in areas that demanded
more adaptability than reliability. In time they emerged in environments where
individuals could readily monitor their own performance and iteratively alter how they
worked.
FURTHER READING Eventually people wondered, Why stop at

self-managed teams? After all, the heavily
First, Let’s Fire All the Managers
CORPORATE GOVERNANCE MAGAZINE ARTICLE by
matrixed structures and complex reporting
Gary Hamel relationships surrounding those teams often
Morning Star, a leading food processor, hem them in and thwart their effectiveness.
demonstrates how to create an organization
For example, when C&S CEO Rick Cohen
that combines managerial discipline and
market-centric flexibility—without bosses, visited Harvard Business School, more than
titles, or promotions. a decade ago, to speak about his company’s
 SAVE  SHARE success with self-managed teams, he told
students that “the hardest thing is to keep

the managers out of the process and just let the teams do what they do.” Why not attack
the matrix head-on by applying the principles of self-management to entire institutions?
Indeed, organizations had begun to move in that direction. Management scholars Warren
Bennis and Henry Mintzberg each noted a shift toward adhocracy—flexible, informal
management structures—in the 1980s. A decade later the internet served as a model for
what some called “the networked firm.” More recently the open-source movement, agile
and scrum methodologies, and the sharing economy have inspired participative,
responsive structures—holacracy, podularity (a model with roots in agile software
development’s tendency to break tasks into small increments and to work with minimal
planning and fast iterations), and a range of company-specific variations on self-
organization. These are just the latest attempts to use self-management to reconcile
reliability and adaptability.
The new forms resist hierarchical constraints—but in some ways, contrary to popular
arguments, they resemble bureaucracy as sociologist Max Weber defined it in the early
1900s. Bureaucracy vested authority in depersonalized rules and roles rather than in
status, class, or wealth. The idea was to liberate individuals from the dictatorial rule of
whimsical bosses. Self-managing systems aim to accomplish the same thing, with less
rigidity. In that sense, you could think of them as Bureaucracy 2.0.
What’s fundamentally different here? It’s how the new forms go about balancing
reliability and adaptability, and the balance they seek to strike. If traditional
organizations strive to be machines governed by Newtonian physics, precisely predicting
and controlling the paths of individual particles, then self-managing structures are akin
to biological organisms, with their rapid proliferation and evolution.
What Self-Managed Organizations Look Like

Given their origins in self-managed teams, it’s not surprising that self-managed
organizations have similar codes of conduct: Members share accountability for the work,
authority over how goals are met, discretion over resource use, and ownership of
information and knowledge related to the work.
But what does it mean, in practice, to run

a whole enterprise this way? A range of
companies have made the leap, most
notably Morning Star, a maker of tomato
products; Valve, a developer of video
games and gaming platforms; W.L. Gore,
a highly diversified manufacturer; and, of
course, Zappos. (For more on Morning
Star, see “First, Let’s Fire All the
Managers,” by Gary Hamel, HBR,
December 2011.) As mentioned, we’ve
seen variations on the self-organization
theme, but the best-known and most
fully specified of these systems is
holacracy. Both because its formality
makes it somewhat easier to pin down
and examine and because it has been
implemented more often and at greater
scale than other designs, we focus
significantly on it in this article.
Self-organization models typically share

three characteristics:
Teams are the structure.

In holacracy, they’re “circles”; in

podularity, “pods”; at Valve, “cabals”;
and at many companies, simply “teams.”
Whatever they’re called, these basic
components—not individuals, and not
units, departments, or divisions—are the
essential building blocks of their
organizations. Within them, individual
roles are collectively defined and
assigned to accomplish the work. As in
traditional organizations, there may be
different teams for different projects,
functions (finance, tech, sales), or
segments (customer, product, service).
But self-managing enterprises have a lot
more of them—the overall organizational
structure is diced much more finely. After
Zappos implemented holacracy, 150
departmental units evolved into 500
circles.
The modularity allows for more plug-and-

play activity across the enterprise than in
a system where teams sit squarely in
particular units and departments. And the
teams come and go as employees
perceive changes in the organization’s
needs (just as task forces and project
teams in traditional organizations do, but
without the surrounding matrix

structure, which has a way of holding ad

hoc groups together even after they’re irrelevant). Some teams are more fleeting than
others. As new goals, tasks, and initiatives emerge, individuals create circles or pods or
cabals to tackle them. For example, St. Louis’s public television station, KETC, mobilizes
temporary teams to bring community voices and stories into programming in response to
major events, such as the financial crisis and recent events in Ferguson.
Teams design and govern themselves.

Although self-organization largely avoids traditional patterns of hierarchy, teams are
nested within a larger structure, which they have a hand in shaping and refining.
Holacratic organizations ratify a constitution—a living document outlining the rules by
which circles are created, changed, and removed. So the circles don’t just manage
themselves; within those guidelines, they also design and govern themselves. The
constitution doesn’t say how people should do their tasks. It explains in a broad-brush
way how circles should form and operate: how they should identify and assign roles,
what boundaries the roles should have, and how the circles should interact.
At Morning Star, which developed its own form of self-management, employees (in
consultation with relevant coworkers) write up formal agreements known internally as
“colleague letters of understanding” (CLOUs). These outline responsibilities, activities,
and overall goals and contain highly detailed metrics for evaluating performance. CLOUs
are essentially contracts that articulate employees’ work commitments to the
organization—like annual performance previews that let your colleagues know what they
can count on you to accomplish. The terms are renegotiated formally every year but can
be changed at any point to reflect new work requirements and individuals’ evolving skills
and interests.
Leadership is contextual.

In self-managed organizations, leadership is distributed among roles, not individuals

(people usually hold multiple roles, on various teams). Leadership responsibilities
continually shift as the work changes and as teams create and define new roles.
Technology is essential for keeping these changes straight. In a holacracy, for example,
enterprise software such as GlassFrog or holaSpirit is typically used to codify the purpose,
accountability, and decision rights of every circle and role, and the information is
accessible to anyone in the organization. At Morning Star, CLOUs are stored on an
internal server that makes each individual’s commitments visible to everybody at the
company. Transparency enables cross-team integration; all the thinly differentiated roles
are easier to find than they would be in a traditional organization.
When someone isn’t a good fit for a role,

it’s reassigned to someone else. Of
ORGANIZATIONS course, assigning roles is work in itself.
#2. Hierarchy No Longer In a holacracy, there’s a role for that, too
Exists —the “lead link,” which also assumes
responsibility for connecting a circle to
the larger circles that encompass it (for
instance, linking social media to
marketing and communications). In
more loosely defined forms of self-
management, such as podularity, roles
are flexibly reassigned, but it is left up to
the organization to figure out how.
These three characteristics add up to an

organization that is responsive to the
requirements of the work rather than to
the directives of any powerful
individual. Traditional management

Zappos has twice as many “lead link” goes wrong when the boss gets to
roles as it had managers pre-
prescribe what must be done—or how—
holacracy. What’s different, other
than the label? Leadership because of a job description, not because
responsibility belongs to the roles, he or she has particular insight into what
not to the individuals in them. will produce the desired outcome. Self-
Authority may be contextual, but it
does exist. managed organizations strip away much
of this ability to prescribe, using
structuring processes (rather than a fixed
structure) to maintain order and clarity.
What They Try to Accomplish on the Ground

Recent experiments with self-managed organizations have zeroed in on a few ways of
improving performance. In each area, they have seen success but also problems.
Designing roles that match individual capabilities with organizational goals.

In traditional organizations, each employee works within a single, broadly defined role,
and it’s often difficult for people to sculpt or switch jobs. In self-managing systems,
individuals have portfolios of several very specific roles (Zappos employees now have 7.4
roles, on average), which they craft and revise to address shifting organizational and
individual needs.
Negotiating with one another, employees allocate duties to those best suited to carrying
them out. The process lets individuals play to their strengths and interests and serves as a
safety check against roles that might be useful to one person but harmful to the team or
the organization. At Morning Star, people jointly draft and adjust their CLOUs to match
capabilities with work. Zappos has started a system of “badges” that let employees
convey at a glance the skills they have to offer. Badges are awarded to mentees by
employees already proficient as, say, a “rookie writer” (someone with limited
permissions who can respond to customer-facing e-mails in times of need) or a
“GlassFrog genius” (someone with a thorough understanding of the holacracy software).

In a holacracy, circle members can object to a suggested role change if it would “move the
circle backwards.” The person proposing the change must address the issue raised or, as a
last resort, drop the proposal.
FURTHER READING This approach to role design gives people

room to grow on the job. Consider Ryan, a
software developer at ARCA, a global
manufacturing and services company where
one of us spent more than a year observing
the implementation of holacracy. Early on,
Ryan—who was passionate about user
interface design—saw an unmet need to
The Transparency Trap ensure that ARCA’s software had a
TRANSPARENCY MAGAZINE ARTICLE by Ethan
Bernstein consistent look and feel. At one of his team’s
Too much openness can be counterproductive. structuring meetings, he pitched the idea of
Privacy is just as important to performance. creating a role for this work: UI liaison. No
 SAVE  SHARE one in the circle thought this would cause

any harm, so the role was created and the
lead link assigned it to Ryan, who also
continued to fill the software developer role. This allowed him to simultaneously
improve the group’s performance and pursue a professional growth opportunity.
Unlike fixed structures built around specialists who dedicate themselves to one function
full-time, these new organizational forms let employees become “utility players,” with
highly focused roles they can fill in multiple areas of the business. Take Karl, who came to
ARCA before it implemented holacracy. A recent law school graduate, he had little
business experience but showed great potential with his legal and analytical skills. His
versatility allowed him to take on multiple roles at the growing company, in sales, legal
services, and operations. However, as he worked across functional groups, he felt his
contributions were getting lost in the organizational structure. When the company

adopted holacracy, Karl’s many roles across multiple circles became explicit and visible.
He thought his value was more clearly recognized, which gave him even more confidence
to initiate changes and make decisions. Karl said, “Pre-holacracy, I felt pretty empowered
but always ran stuff by people. I think an org implementing holacracy is saying, ‘You
don’t have to run stuff by us anymore.’ I’ve taken the opportunity to exercise more
judgment and discretion.” As one of his peers noted a few months into the new system,
“Holacracy has really expanded his influence in the company.”
How did Karl fit all this work in? Holacracy let him jettison roles that weren’t a good use
of his time. For instance, he used the structuring process to carve out some
administrative responsibilities and pitch them as a separate role, which the lead link filled
with an enthusiastic new hire. Although this shift in responsibilities was initiated by an
individual contributor, not by a manager, it was highly formalized and official.
The upside of designing roles in this way is straightforward: Because employees are
driving the process, they have a greater sense of making real progress on meaningful
work. Teresa Amabile’s nearly 12,000 data points on the quality of “inner life at work”
show that having a daily sense of forward movement—even the smallest wins—along with
colleagues who provide resources, advice, and help are by far the two most significant
factors differentiating good days from bad. These factors are strongly associated with
creative problem solving, motivation, and engagement. Although studies of the effects of
self-managed teams on employee engagement have shown mixed results, self-managed
organizations are explicitly designed to remove impediments to day-to-day progress in
everyone’s work and to set colleagues up to be positive “catalysts” for one another.
Assuming that the connection is borne out, is the shift from traditional jobs to a larger
number of microroles a net benefit? Possibly—but role proliferation has costs, too. It
creates three kinds of complexity, all related to human capital:

First, it complicates actually doing the work, because employees struggle with
fragmentation. A significant body of literature on goal setting (aptly summarized by Marc
Effron and Miriam Ort in their book One Page Talent Management) finds that employees
perform less well on each goal as they take on more beyond just a handful. At Zappos,
each of the 7.4 roles an individual fills contains an average of 3.47 distinct
responsibilities, resulting in more than 25 responsibilities per employee. People grapple
with where to focus their attention and how to prioritize and coordinate across circles—
even with simple scheduling issues. To partially address these challenges, Zappos is
trying out a tool (modeled after ordinary budgeting systems but expanded beyond dollar
amounts or head-count limits) called People Points: Each circle gets a certain number of
points with which to recruit individuals into roles, with senior management determining
the points by assessing the business value of the circle’s work. (The company is exploring
crowdfunding models to replace this top-down budgeting.) And each Zapponian gets a
budget—100 points to allocate as he or she chooses. The system serves as a marketplace
for the work that needs to be done, allowing a person to work across multiple teams
without being told where to work. It also puts the onus on employees to fill their time
with valuable roles.
Second, having so many roles complicates compensation. As people assemble their

personal portfolios of roles, it becomes difficult to find clear benchmarks or market rates.
For instance, what would you pay someone who divides her time between developing
software, serving as the lead link for a software development team, working on
marketing strategy, creating internal leadership training, doing community outreach, and
planning events? Zappos is experimenting with basing compensation on the acquisition
or application of its skill badges. But the complexity is still daunting.
Third, role proliferation complicates hiring, both into the organization and into particular
roles. Although new employees are brought on to meet specific needs, they quickly start
adding other roles to their portfolios. In the last three months of 2015, Zappos’s roughly
1,500 employees made and received 17,624 role assignments (11.7 per employee), or

about 195 per day. Given that volume, the company developed Role Marketplace, a tool
to quickly post open roles and manage applications, with lead links ultimately deciding
who fills the roles. The tool handled almost a quarter of those 17,624 assignments. Using
both People Points and Role Marketplace, an employee could potentially find, apply for,
be assigned to, and start working in a role within a single day. That’s a lot of activity to
keep track of, even if you’ve got software to help.
Making decisions closer to the work.

Self-management aims to reduce the red tape and endless sign-offs usually needed to
make decisions in bureaucracies. In traditional organizations, intricate webs of titles, job
descriptions, and reporting relationships can make it difficult to figure out who decides
what. In some of the newer models, such as holacracies, everyone can see who holds each
role and what people are responsible for. The processes and norms for decision making
are streamlined too. Rather than run ideas up the flagpole and wait for answers to come
back down, individuals go directly to the people who will be affected. Within holacracies,
this is known as “going role to role.” It means that messages are less likely to get watered
down or misinterpreted through layers of management.
Communication is supposed to become more efficient and accurate as a result, which is

good for reliability. But to make smarter decisions in this sort of system, all members
must exercise their power and voices, which doesn’t always happen. One misconception
about self-managing organizations is that they eliminate differences in status. Although
those differences may be mitigated, they still exist and must be managed. Some people
have more power than others, and managers who used to supervise certain activities may
at times try to reassert control, making it hard for employees to know whether to follow
the new system or listen to their old boss.
It can also be tough for people to “step up” and claim their power. An employee at ARCA,
observing that members of her circle were not challenging a top-down order from a
former boss, said, “I feel that employees haven’t explored their agency within holacracy.”

For such agency to thrive, both managers and subordinates must unlearn old behaviors.
Another employee, who formerly had a managerial title, talked about how much time he
used to spend approving others’ decisions. Since the move to holacracy, he’s had to shift
to enabling mode, encouraging individuals to make decisions on their own.
Self-managing systems reinforce this unlearning to a point, through training on how to

“work in” and “work on” the structure and through processes and norms that make it
difficult for earlier forms of power to reemerge. For instance, 12 months into Zappos’s
implementation of holacracy (and just a couple of months before the severance-package
offer), 400 employees had completed the three-day holacracy training, and 90 had
become “certified facilitators” of governance and working meetings. But trainings don’t
in themselves eliminate problematic behavior, such as micromanaging others or
infringing on the autonomy of former subordinates. Old power rules can be deeply
embedded in culture and institutions and may require continual attention to unravel.
What They’re Talking About When They Say...

A glossary of self-management terms, starting at the organization level and moving to
the team and individual levels.
TEAL ORGANIZATION: A new kind of organization designed to enable “whole”
individuals (not narrow professional selves) to self-organize and self-manage to achieve
an organic organizational purpose (determined not through hierarchical planning but
incrementally, responsively, and from the bottom up).
HOLACRACY: The most widely adopted system of self-management, developed in 2007
by Brian Robertson. Authority and decision making are distributed among fluid “circles”
(defined below) throughout the organization, and governance is spelled out in a
complex constitution.
PODULARITY: A system of self-management in which each basic unit, or “pod,” is
treated as a microcosm of the whole business and acts on its behalf. Podularity has its
roots in agile (defined below).

AGILE: A theory of management originating in software development. In an agile system

of work, cross-functional, self-managed teams solve complex problems iteratively and
adaptively—when possible, face-to-face—with rapid and flexible responses to
changing customer needs.
CIRCLE: In a holacracy, a group of “roles”(defined below) working toward the same
purpose; in essence, a team that forms or disbands as the organization’s needs change.
CABAL: At the video game developer Valve, a multidisciplinary project team that forms
organically to work toward a major goal. “Voting with their feet,” employees create or
join a cabal because they feel the work is important.
ROLE: In a holacracy circle, a set of responsibilities for a certain outcome or process.
Roles can be created, revised, or destroyed; individuals usually have more than one, in
multiple circles.
LEAD LINK: In a holacracy circle, the role responsible for assigning other roles and
allocating resources. A lead link has some characteristics of a traditional manager but
is subject to the circle’s governance process.
CLOU: “Colleague letter of understanding”—at the tomato-processing company
Morning Star, an agreement crafted by each employee in consultation with relevant
colleagues, outlining the employee’s roles along with detailed performance metrics.
Even if employees want to speak up, it can be hard to absorb all the rules of engagement—
and once people start applying them, that “structuring” work can feel almost as onerous
as the Byzantine hierarchy it replaced. If every circle has a monthly governance meeting,
as is common in holacracies, and if employees are in 4.1 circles, on average, the meeting
time adds up. Zappos employees have so far dealt with the challenge by making their
meetings more efficient and using technology to reduce the need for direct interaction.
For example, the company developed a Slack bot to run governance meetings according
to holacratic rules. Although the automated facilitation and virtual discussions through
Slack reduce the time investment, the structuring work is still relentless, with each
person involved in roughly one governance conversation a week. At Medium, the social

media company that stopped using holacracy, that work proved too much to sustain.
Doyle said in his blog post, “The system had begun to exert a small but persistent tax on
both our effectiveness and our sense of connection to each other.”
Responding to emerging needs in the market.

We’ve traditionally romanticized our leaders as scouts with keen vision who monitor the
horizon for developments that deserve the attention of the organization and its people.
And thanks to increasingly advanced analytics, leaders’ observations have become far
more precise. Yet a great deal of evidence shows that efforts to drive change
programmatically from the top, solely in response to what senior leaders see, often fail.
Self-managing organizations take a different approach. Consider how Valve made the
decision to expand from PC games to hardware. The company’s 400-plus employees self-
allocate 100% of their time to projects they feel are valuable to customers. They
collaborate in cabals, which people form and re-form, project by project, by wheeling
their desks together, often several times a day. When a few employees got sufficiently
tired of repeated customer requests for hardware that would let people play games in the
living room, they formed a cabal to investigate the idea. When others recognized Valve’s
potential strategic vulnerability to a “closed” Windows store, they allocated some time to
that issue. In neither case did a siren sound from a lookout on high; the problems were
detected and addressed on the ground, through a steady accretion of talent. In November
2015 the cabals facilitated one of PC gaming’s largest hardware releases of the year, built
on an open platform that signals Valve’s willingness and ability to protect against the
threat of being closed out of customers’ PCs.
It’s possible, however, to be too responsive to your customers. Steve Jobs famously
pointed out that the market doesn’t always know what it wants. As Bain’s research on
growth through simplicity shows, adding SKUs in response to perceived customer needs
can mean less revenue. And Bob Moesta, whose Re-Wired Group advises organizations on
demand-side innovation, distinguishes between what customers explicitly ask

companies to supply and a more holistic view of demand. He says the latter is where real
value is created—but organizations need a level of reflection that goes beyond simple
responsiveness. Although it’s important to be close to your customers, it’s also critical to
maintain a broader perspective so that you don’t follow them off a cliff.
You might assume that the three goals of self-management structures—designing roles
that match individual capabilities with organizational goals, making decisions closer to
the work, and responding to emerging market needs—would make leaders less relevant.
Yet one of the greatest challenges of implementing the goals at scale is insufficient
leadership. When leadership is a shared responsibility, everyone must understand and
practice it. You end up with more formal team leaders as the number of modules
increases. Since adopting holacracy, Zappos has gone from 150 team leaders to 300 lead
links, who are responsible for its 500 circles.
Of course, managing looks different in these structures. It’s less about supervision and
direction and more about designing, facilitating, and coaching. One former manager at
ARCA said, “Leadership might be even more important in a holacracy than in a traditional
management structure. You have to lead by example and round up the troops rather than
rely on authority.” Members of self-managing teams have been saying similar things for
decades.
Costs and Benefits “Above the Trenches”

So far we’ve looked at self-management on the ground. But how does it work at a macro
level—where organizations set strategic direction, oversee global operations, and shape
their overall performance and trajectory?
Consider a large consumer packaged goods company like PepsiCo. Suppose it is deciding
whether to shift the ingredient mix of a product made for a certain market in response to
consumer demand for fewer artificial sweeteners. Self-management naturally facilitates

such changes. The people who touch the decision get together, evaluate the opportunity,
sort out the practical details (for example, discontinuing the use of certain suppliers), and
then make it happen, all without interference from above.
However, a company of PepsiCo’s scale has a multifaceted operational agenda, which

may include simplifying the global supply chain and freeing up capital for acquisitions.
To achieve such goals, you’ll need more than an array of small, local moves. In fact, you’ll
probably have to take actions that are suboptimal in a number of specific contexts. For
example, consolidating suppliers will cut complexity and costs overall, but you’ll miss
out on certain niche suppliers who could offer higher quality and lower prices in
emerging markets. Structures that transmit guidance from the top are better equipped
than self-managed organizations to make local trade-offs in service of scale—a critical
advantage for a global CPG company.
This is doubly true when it comes to corporate strategy. Most executives view strategy as
an essential feature, but proponents of self-managed organizations—like holacracy
cofounder (and coder) Brian Robertson—argue that it is actually a bug. Robertson writes
in his book about holacracy, “When you impose a ‘should’—as in ‘I should be X in five
years’ time’—you create an attachment to that outcome; the attachment limits your
ability to sense when reality is not going in that direction, or when other possible
opportunities arise that might conflict with what you first set out to achieve.” Because it’s
a ground rule of holacracy that you can revisit any decision whenever you want,
Robertson adds, “you will find it very difficult to drive others’ behaviors on the basis of
targets defined in advance.” Even though strategic planning isn’t explicitly prohibited,
such plans are often replaced by continually updated rules of thumb that take the form of
“emphasize X, even over Y.” At Zappos, providing the best customer service and
increasing short-term profits are both guiding principles—but if employees ever have to
choose between the two, they know to pick customer service.

In our view, this approach to establishing direction isn’t viable for certain kinds of
organizations. Take Sirius XM: It has invested billions of dollars to create a satellite radio
infrastructure that will generate returns for decades, so it needs a clear, stable, consistent
overarching strategy. W.L. Gore, with its portfolio of technology innovations that can be
brought to market in different ways, requires much less top-down strategic maneuvering.
Zappos is probably somewhere in between. Its strategic positioning has been clearly
differentiated for many years—and much of what has transpired since it adopted
holacracy represents an extension of that. However, Zappos has adapted to a shifting
market by making significant changes in product mix, customer targeting, and pricing.
Working within the framework of holacracy, the company achieved a 75% year-on-year
increase in operating profit in 2015 as a result of those strategic moves. So, although it’s
hard to say whether holacracy would enable the company to navigate major changes in
the competitive environment, early signs are promising.
Finding the Right Amount of Self-Management

As we’ve learned from self-managing teams, blanket arguments for or against broadly
applying the principles of self-management miss an important point: Most organizations,
particularly large corporations, should adopt these techniques in part, not in whole. We’d
be surprised if more than 20% of the Global 1000 looked “teal” in 2030, to use Frederic
Laloux’s term for “whole,” evolutionary, self-managing organizations. But we’d also be
surprised if more than 20% didn’t significantly draw on some of the techniques within
their corporate frameworks.
A great deal of piecemeal adoption is

already happening. Procter & Gamble,
ORGANIZATIONS for instance, operates a complex matrix
#3. Everything Is Decided organization in order to integrate its
by Consensus many brand categories, geographies, and
functions. But it also has a vast open-
innovation program, in which teams of

people outside P&G’s walls organize

themselves to solve problems for the
company. Google and 3M provide
familiar examples as well: For decades
employees have been encouraged to
devote a percentage of their time to self-
directed work—a volunteer economy
The majority doesn’t rule—and not that exists alongside the managerial
everyone has to agree with every idea hierarchy’s more directed economy.
that moves forward. In a holacracy,
for example, any circle member can
propose changes, and they are Deciding where to apply self-
adopted unless another member management in an organization hinges
objects on the grounds that they
on three questions: What needs to be
would harm the circle.
reliable? What kinds of adaptation are
important? And what organizational
forms will produce the right balance in
this case?
Using self-management principles to design an entire organization makes sense if the

optimal level of adaptability is high—that is, if the organization operates in a fast-
changing environment in which the benefits of making quick adjustments far outweigh
the costs, the wrong adjustments won’t be catastrophic, and the need for explicit controls
isn’t significant. That’s why many start-ups are early adopters. The business of designing
and developing games also fits these criteria well, as Valve discovered. But in reliability-
driven industries such as retail banking and defense contracting, hierarchical structures
prevail, even if there is room for niche competitors (in banking, think of Umpqua, famous
for having a phone in every branch that enables customers to ring the CEO’s office) or for
certain units within the organization (such as the original Skunk Works at Lockheed
Martin) to go against the traditional grain.

Companies must also work out how much hierarchy and process they need to ensure
coherence and what other kinds of “glue,” such as shared purpose and a common ethical
compass, they can use. Dov Seidman’s “The HOW Report” quantifies the degree to which
various companies rely on those other cohesive elements and links self-governance to a
range of performance outcomes. Seeing how others have fared can help organizations
sort out whether—and where—this particular glue makes sense for them.
Ultimately, and somewhat ironically, the next generation of self-managing teams is

demanding a new generation of leaders—senior individuals with the vision to see where it
is best to set aside hierarchy for another way of operating, but also with the courage to
defend hierarchy where it serves the institution’s fundamental goals.
A version of this article appeared in the July–August 2016 issue (pp.38–49) of Harvard Business Review.
Ethan Bernstein is an assistant professor of leadership and organizational

behavior at Harvard Business School. Follow him on Twitter: @ethanbernstein.
John Bunch is adviser to the CEO and holacracy implementation lead at Zappos.
Niko Canner is the founder of Incandescent. Follow him on Twitter: @nikocanner.

Michael Lee is a doctoral candidate at Harvard Business School. Follow him on

Twitter: @yanche.
This article is about ORGANIZATIONAL STRUCTURE

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20 COMMENTS
ROBINSON ROE 19 days ago

Thanks for the article, have been following Holacracy and Zappos from afar therefore great to gain this
perspective.
As per the comments, this is a journey of evolution which seems to be taking us back to a modernized
"cottage industry", (self managed/contained groups), approach after a detour down the Adam Smith's et
al Industrial Economy path. Our journey is being guided by the ideals we are chasing include; reliability,
adaptability, ownership, engagement, flexible, accountable, values...
However it seems that our current attempts at new approaches is treating and measuring the symptoms.
Many of the HOW Report metrics appear to be symptoms based.
This leads to the question, what is the cause?

Every organization needs to align its structure to either their outcomes/customers or to the functions
required to achieve the outcome. The majority of organizations align to functionality; sales, finance,
marketing, manufacturing, service, etc. Once this happens we are back to Adam Smith's Industrial pin
factory. Even within matrix structures there is still a dominant reporting line which is typically functional
based.
If we align to outcomes the people working there naturally become self managed/organized, have
ownership, are engaged. Decisions are now based on; how does this improve the outcome, not how does
this help me. There is much more thinking to explain here...
My guess is that holacracy doesn't do this and would be happy to have a discussion on this to learn
more.
SouthWest Airlines has an Airport Manager were everyone works together on delivery great service,
turning planes around quickly and at a low cost. Toyota aligns to value streams, outcomes. Semler had
teams of no more than 150 people focused on what they delivered with complete transparency.
The other missing point is that organizations need levels. The problem is that when we are organized by
functions the levels become the vertical silos with all the dysfunctional behaviour we know and dread.
When we are outcome aligned the levels perform two key tasks. 1/ Make the longer term decisions for
the company; are our outcomes the right ones and are we going about them the right way and 2/ Helping
the lower levels do their jobs, removing roadblocks, etc.
The reference to a Teal Organization and Orange thinking by Brooks in the comments, leverages Ken
Wilber's Integral Theory. Wilber wrote the forward for Feredrick Laloux's book. Integral is also referred
to as AQAL.
AQ is for All Quadrants - thinking, behaviour, culture, structures. All four quadrants operate together,
they are just different views of the same thing. Therefore if we don't have the structure quadrant aligned
to outcomes, this impacts the other quadrants, thinking, behaviour, culture. These are the symptoms we
observe.
AL is for All Levels, we all develop through levels of capabilities across multiple areas, cognitive, ethics,
moral, etc. An organization needs multiple levels as researched by Elliot Jaques and the world of
cybernetics with Stafford Beer's Viable System Model, which is based on Holarchy, not to be confused
with Holacarcy.
Beer worked with Salvador Allende's Chilean government in the early 70's to implement his holarchy
model. They ran the entire country this way.
I have tried to explain how this all comes together, leveraging Wilber's Integral Theory and other

academic work in a post at http://www.faqsfororgs.com/what-is-a-perfect-organization/
Hope these thoughts help the discussion.
Regards,
Rob
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"BEYOND THE
HOLACRACY HYPE"
Case study analysis
PRESENTED BY GROUP SIGMA

Ana Castaño
Clarizze Salandanan
Sandra Khawand
Binh Le
Tarek Boueiri
Abhishek Nair
QUESTION 1
What are the key elements of

self-managed organisations?
Self-managed organizations are perceived as “bossless,” “flat”
environments conducive to fostering flexibility and
engagement. They are characterized by 3 key characteristics:
Structure:
No more pyramid structures, here the teams are the structures and they
are represented by circles or pods. This allows for more "plug and play". For
example, As new goals, tasks, and initiatives emerge, individuals create
circles or pods to tackle them.
Key words:
Unique Governance: Transparency
Holocracy is a constitution so there are broad guidelines to designing
teams. Mainly, how they should identify and assign roles, Reliability and adaptability
what boundaries the roles should have, and how the circles should interact. Balance between standardization and
Within those guidelines, teams design and manage themselves flexibility
Shared accountability, ownership, and
Contextual leadership: authority over work and how goals are
leadership is distributed among roles, not individuals (people usually hold met
multiple roles, on various teams). So as the project advances and the roles Sensitivity and reactivity to changing
are defined, leadership switches amongst members of the team. Roles can markets
be reassigned based on performance
QUESTION 2
What are the key claims made by the authors

regarding self-managed organisations?
1. Elements of self-organization will become valuable tools for companies of all kinds
2. Too consuming to go all in.
3. Medium, a social media company that recently dropped holacracy, found that “it
was difficult to coordinate efforts at scale.
4. Rewards for people is Hard
5. Too much standardization for the sake of reliability can make businesses
insensitive to changing markets.
6. Too much emphasis on adapting can cause them to fragment and lose the
leverage that comes with focus and scale.
QUESTION 3
What are the main 1.

High flexibility which means high
4.
Flat structure allows for direct
advantages / strengths capability for change where needed,
and faster work
communication between individuals so
messages are less likely to get watered
down or misinterpreted through layers
of this type of of management.
organisation? 2. 5.
Roles and leadership are constantly Recruitment process more open to
moving, giving employees a sense of diverse candidates - due to the
purpose and meaningful work company structure, a candidate with a
strong resume can be looked into.
3. 6.
Shared ownership, accountability, and Independence, reliability, and
authority on how the work is done and adaptability - employees can use their
how objectives are achieved: this own discretion over how to use
increases knowledge sharing and drives resources. Employees’ value is also
the process forward equally more clearly recognized.
QUESTION 3
Example:
Less restrictions, less bureaucracy (or micro
management), and less hierarchy or constrictions
usually leads to more creativity.
As a team lead in a digital marketing agency

(liberated firm), I had the freedom to implement
the processes that I thought worked best for my
team, and alter them based on the clients'
requirements.
This flexibility (within a standardized environment)

created more room for customization and
creativity.
We had top-line guidelines on how to interact with

clients but were able to implement our own style
to each account.
This came with some drawbacks of course

(depending on people and their proactivity levels)
especially in terms of quality of service.
QUESTION 4
What are the main

drawbacks /
weaknesses? Employees become “utility players”.
A study shows that employees perform less well on
each goal as they take on more beyond just a handful.
Reliability can be a problem since everything can
constantly change.
Can be difficult for employees because their roles
can be changed at any time.
Hiring becomes complicated as well due to the role
proliferation. It also becomes hard to find suitable
candidates
Compensation becomes complicated.
QUESTION 4 - CLARIZZE
Example:
Having worked for start-ups, we were given Having autonomy and flexibility made us gain
independence and freedom to solve problems more areas of expertise and get to know
by ourselves without first consulting our everyone in the company better since we can
manager and going straight to the department work and interact with all the departments
needed. This can be good because it can solve without having to go through hierarchical
the problem much faster, leading to higher positions first.
productivity but at the same time, it can be
risky because it can cause an even greater Decision time was much faster because we
problem. didn’t have to wait for the manager to ask his
manager to ask his manager and instead we
I was also assigned different projects all the can go directly to the CEO.
time which made it hard for me to focus on
my day-to-day tasks and reach our teams’ I think that startup cultures are very fun and
goals/quotas and leading to overworking and everyone is passionate about what they’re
overtime. But this is also a good thing because doing so it’s like working and playing hard at
we get to realize our skills and what we’re the same time where the company is like a
actually interested to do in the company and family. Unfortunately, I wasn’t able to
for our job positions. During this time, I was in experience this much in the company since it
sales but with my boss giving me new tasks, I was during the pandemic but they would often
realized I was more into data analysis and stay late in the office and just have dinner
strategy formulation. together and drink beer and talk.
Being in a tech startup, multiple platforms are We sometimes have so many meetings a week
constantly being created and launched and that extends even after office hours.
being assigned to those platforms but then
ending up being shut down can bring down I also worked for a very traditional company
the teams’ mood and morale. and we had to plan a company wide event in a
span of 2 months but various approvals could
take very long (could take months) so we had
to spend lots of time on planning to come up
with multiple backup plans.
QUESTION 4 - ANA QUESTION 4 - BINH
Example: Example:
It will depend on the culture of the country. I Having worked for a decentralized MNC, there
think Colombia is a country where you have to are several procedures that employees are
tell people what to do. In old, traditional and expected to follow. However, we also have a
complex companies I think it would be very high autonomy in our daily work and
difficult. Also because of Colombian culture, responsibility. As for the characteristics of a
you can not expect someone to do things on decentralized company, there are endless
their own (unless self-managing changes the discussions for several key topics among
culture 180 degrees), but in my position, I departments such as support for debt
wouldn’t trust a lot of people Ive worked with collection, production arrangement, Debt
to self-manage themselves, even more if the limits which are time consuming and back and
results would go on me. forth email and communication.
When you have so many positions that are The good part of autonomy is that it helps to
labor-handed, how can you let them self- motivate the employee in their work and have
manage? if it's something that needs to a belonging feeling in the company when they
comply with schedules, volume, direct take full responsibility for their work and are
functions, etc. related to many activities in the company.
QUESTION 4 - ABHI QUESTION 4 - SANDRA
Example Example:
The work environment in a mature MNC is When such flexibility is integrated without the
always different to that in a startup company appropriate HRM and recruitment processes
and so are the processes that are predefined (to ensure everyone shares the same view -
and always expected to be followed. or, in the case of Zappos, to eliminate the ones
that don’t work well in such an entrepreneurial
Having worked in both scenarios, what I environment), there will always be a certain
personally understand about the big corporate unfairness in the way the work is split. Some
companies are they prefer going by a certain employees (on the high achievement /
predefined process because they believe its a proactiveness side) will take ownership of
controlled and efficient approach as they can tasks that aren’t being done with the purpose
foresee and tackle any risks of achieving OKRs set for them and the team.
This creates a lot of stress and leads to
However in the case of startups, due to this burnout
lack of predefined processes and the
advantage of being a new generation In short, companies must make sure all
company, they understand the innovation employees have the right mindset and similar
team members at the lowest level can bring standards of work to avoid such situations
inn to improve productivity is much higher and
therefore give an opportunity for employees
to be more innovative and experiment with
ideas and approaches without having to worry
about consequences or results.
This said, however depends also on the

management of the startup, and their work
style because while some startup would prefer
to let employees at all levels explore their
ideas, some prefer to designate teams to
Managers and they be the one’s who can
make the decision about whether the power or
freedom should be given to junior employees
to explore new innovative methods.
Thank You!

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MANAGERIAL INNOVATIONS &

At the end of this course, you will:

 be able to recognize, explain and apply key principles and

9 May Introduction to New organizational forms and Management Innovations

Case study: Nanospace

9 May: 9.30-10.30 Introduction to New organizational forms and

9 May: 10.30 – 15.25 Case study : CIC Ouest

Individual final exam: MCQ 50%

 strict vertical hierarchy,

Goal displacement; Power

Source: Audencia’s Chair For Managerial Innovation;

 ‘Entrepreneurial management’ (Corporate Entrepreneurship)

 Established large firms & new ventures

 To be more agile, more efficient, firms need to;

The End of Management

 Advantage to the end of management:

9 May Introduction to New organizational forms and Management Innovations

11 May Contemporary Managerial Innovations: Self Managing Organizations

Case study: Nanospace

9.30-10.30 Managerial Innovations :

10.30 – 14.20 Case study : iAdvize (E-Solution)

7 April: 14.30-15.15 Debriefing of Case Study: Students’ presentation

7 April: 15.30-16.30 Testimony of Luc Davoust,

Comp Firm’s Goal of MI MI implemented

 Social performance (Micro – Macro)

Do individuals feel better, more accomplished with MI ?

 Economic performance (collective level)

Source: Audencia’s Chair For Managerial Innovation;

How to make sense of them?

 SMOs Radical efforts to organize less hierarchically

 Organisations that radically decentralize authority in a formal

« SMOs eliminate the hierarchical reporting relationship between manager and

• Older firms : Oticon, W.L. Gore, Semco, Johnsonville Sausage

Power (kratos) to whole (holos)

« As an organising concept holocracy replaces

Stefan Stern, Management Today, July-

Intrinsic personal motivation Leaders’ Interchangability

 Famous (and rare) Examples:

 Viability still to be proven

 Roger D. Hodge “First, Let’s Get Rid of All the Bosses” ,

 Stefan Stern, “Creating a World Without Managers”,

 Consultants: IGI Partners : https://igipartners.com/en

(CASE STUDY IN BLACKBOARD)

 Une entreprise libérée, c'est quoi ?

Characteristics of ‘liberated companies’

 Control replaced by trust

Why engage in a ‘liberation path’?

 To overcome an economic crisis and the resulting massive layoffs: to be more

 A tendency… along with controversies

Impulsive Traditional Success Pluralistic Evolutive

Innovation Autonomy Auto-

9.30-10.15 The End of Management: Debriefing on E-Solution Case Study

10.15-12.30 Read Bernstein et al. (2016) ‘’Beyond the Holacracy Hype”

© CCMP année 2017

Team spirit • A quality tested during

Agility • Culture of trial and error

Agility Team spirit

Humility • often associated with team

Rituals and Symbols

Johnson, G., Whittington, R. & Scholes (2011) 16

 Values that are very intertwined and mutually reinforcing

Value-based  Employee autonomy

 Collegial process / cooptation

Typical challenges of a growth start-up :