Reinventing Organizations – Review

What is a “Teal Organization”? Frédéric Laloux, in Reinventing Organizations, uses a colour scheme, based on Integral Theory, to describe the historical development of human organizations: Red > Orange > Green > Teal. Laloux lists three breakthroughs of Teal organizations:

1. Self-management: driven by peer relationships
2. Wholeness: involving the whole person at work
3. Evolutionary purpose: let the organization adapt and grow, not be driven

The book describes in detail how Teal organizations work and how they can be initiated. Laloux studied many organizations and through observation and engagement deduced what makes them work. While his deductions are a bit questionable, they include organizations of all types, such as AES, Buurtzorg, FAVI, Morning Star, RHD, Sun Hydraulics, and Patagonia.

It is possible that the world needs more Teal organizations so we can evolve as a society and a civilization. First we shape our structures, and then our structures shape us, Winston Churchill said (attributed). Geary Rummler stated that if you put a good person in a bad system, the system wins every time. Our organizations influence our behaviours, as they compose a significant part of our social networks. Creating better organizations will give us the necessary  ‘technology’ to further develop.

This book is an important management book to read this decade. It articulates a possible framework needed for better organizations that can grow and adapt to work in complex environments. This is not as difficult a read as The Wealth of Networks (still worth reading) but it is rich with anecdotes and descriptions which is its real value.

Here are some examples of self-management:

Job Title: No job titles

Crisis Management: Transparent information sharing. Everyone involved to let best response emerge from collective intelligence.

Role Allocation: No promotions, but fluid rearrangement of roles based on peer agreement. responsibility to speak up about issues outside of one’s scope of authority.

Performance Management: Focus on team performance. Peer-based processes for individual appraisals.

This book opened my eyes to how well self-managing organizations can function. The examples in this book should help to change anyone’s mind about the need for command and control, or a focus on the bottom line. These are not necessary to be successful. The examples come from several sectors and various sizes of organizations.

One of Laloux’s conclusions is on the necessary conditions for success with the Teal model. It comes down to only two factors:

• The CEO must drive the change
• The Board must believe in the change and support the CEO

That’s it.

Organizations can adopt Teal practices, but they will never become whole, self-managing & evolutionary organizations unless they meet these two conditions. I think this is important.

Laloux describes what happens when the Board is not aligned with an evolutionary CEO. It means going back to Orange. So the key role of a CEO is in holding the space so that teams can self-manage. It means keeping others, like investors, from screwing things up. From the stories in this book, it’s clear this is a difficult task in our short-term, market-driven economy. But we are entering the network era which will call for new organizational models.

I recommend Reinventing Organizations. Read it, talk about it, re-read it. It is an excellent background resource to Organize for Complexity, explaining 21st century organizational transformation in much greater detail. But a much better and more informed read is Freedom Inc.

Caveat: The stories & examples are worth much more than the overall thesis.

Criticism of Reinventing Organizations: Teal is the New Black