United States of Inc.: Corporations As Nation-States in Silicon Valley’s Latest Utopian Management Scheme

During my desultory post-graduation years in San Francisco, I lived in a big duplex with three roommates. We had bands, fledging writing gigs and other financially unpromising passions, until one of us threw over la vie bohème to work at a consulting firm. We teased him mercilessly for using nonsensical catchphrases like “think outside the box” and for getting a job telling other people how better to run their companies when he’d never actually run a company himself. In the years since, he started an airline in a foreign country, and everyone else began talking about thinking outside the box, too.

Management theory is the philosophy of the corporate class, who are more or less the ruling class in contemporary America. It’s surprising, then, how little attention the rest of us pay to what corporate leaders say to each other about what they do. True, a lack of interest in managementese is understandable, because who even knows what these people are talking about as they spill vast cloud banks of vaporous words across the landscape? To read Brian J. Robertson’s “Holacracy: The New Management System for a Rapidly Changing World” is to sled through abstractions, euphemisms and neologisms (“energizing roles,” “processing tensions” and so on), wondering what any of it has to do with making a living by providing goods and services to a market.

“Holacracy” is particularly noteworthy, though, because it does offer a substantively new way to run a corporate enterprise, one that is already famous for requiring difficult readjustments in the handful of companies that have tried it. Zappos, the online shoe retailer, and Medium, a blend of publisher and social blogging platform, are two of the most prominent organizations to use holacracy, and the bumpiness of Zappos’ conversion has received a good amount of press. Reporters have described the new system as “no job titles, no managers, no hierarchy,” and a whopping 14 percent of Zappos’ workforce took a buyout rather than adapt to holacracy’s arcane system of circles within self-organizing circles and multiple, shifting “roles” assigned to each employee.

It helps to understand holacracy as a structure designed by a one-time software engineer — in other words, by the sort of skilled worker who is typically managed by people who don’t really understand what he does and who consequently gets a lot of stupid, unreasonable and even impossible orders. Although Robertson doesn’t emphasize this in “Holacracy,” his system owes much to the Agile software development method, formulated in 2001 by a group of software developers who produced a “manifesto” of 12 principles intended to free them from managerial meddling and unrealistic, inflexible advanced planning — all features of the power structures this group associated with outdated industrial economies. Under an Agile system, a work team’s methods might change to adapt to new information or unforeseen problems and needs, issues often raised by the people actually writing the code or using the software.

Holacracy, which applies this approach to the structure of all sorts of companies, is meant to allow whoever uses it to “dynamically update workflows, expectations and even the very structure of the organization” by “unleashing the power of evolutionary design on the organization itself.” Evolution is a metaphor used approvingly by both Agile development and holacracy, although both seem to have an imperfect sense of how biological evolution actually works. What they mean, put simply, is an organic process in which whatever the members of the group decide to do is continuously shaped by and adapted to the changing conditions they encounter (such as feedback from the customer) rather than by a master plan established at the beginning of a project.

With holacracy, this process applies to the entire company, making it, Robertson argues, better suited to survive and thrive in a world far from the “simple and static” environment of the Industrial Age (a characterization that would have amazed those who lived during that period of historic upheaval). The technology industry is fond of portraying everything it does and every condition it faces as utterly unprecedented; no one lives more fully inside the Trotskyite concept of perpetual revolution than a Silicon Valley entrepreneur. Robertson describes our new “postindustrial world” as consisting of “increasing complexity, enhanced transparency, greater interconnection, shorter time horizons, economic and environmental instability and demands to have a more positive impact on the world.”

I won’t try to describe exactly how holocracy works, although you might want to watch this video produced by Robertson’s consulting company, HolacracyOne, or read an “in plain English” version of its constitution if you’re curious about the nitty gritty (or as nitty as this particular gritty gets — which isn’t very). The word “constitution” is significant, because for all Robertson’s talk of evolution — which he insists is “the most intelligent designer around” — the concepts at work in holacracy have deeper roots in the political sciences than in the life sciences. Evolution does not “design” anything; it’s a process that occurs as a result of the entirely random phenomenon of genetic mutation. Evolution has no intentions, but human institutions certainly do, and the way Robertson describes holacracy offers a fascinating window into what corporate leaders imagine the future results of those intentions will be.

Today’s management literature portrays a social economy in crisis. (Although, to be sure, the people who write such books have a vested interest in making their audience believe that it faces unparalleled challenges.) Big institutions, these experts proclaim, gravitate toward rigid procedures and structures that make them ill-suited to the incessantly changing world we now inhabit. As Robertson puts it, the old-fashioned Industrial Age corporation is a top-down, authoritarian beast in which near-absolute power is concentrated at the top. “The formal power structure in most modern corporations is that of a dictatorship,” he writes. The dictator might be a corrupt plutocrat like Ken Lay, the CEO of Enron, or a brilliant, demanding and inspirational figure like Steve Jobs, but the tenor of the enterprise is set by this leader and most decisions get funneled downward from above, leading to bottlenecks and conservatism. Front-line workers with practical experience and good ideas have to get approval from supervisors who are too often preoccupied with protecting their own turf. (This was Robertson’s own experience as a programmer.)

In a holacratic corporation, ultimate authority is invested in a company constitution that describes how things operate. “The very first step,” Robertson writes, “is for the CEO to formally adopt the Holacracy constitution and cede his or her power into its rule system.” Like Western civilization’s gradual conversion from absolute monarchy to various forms of representative government, this is a “shift from personal leadership to constitutionally derived power.” Decisions are made and work gets done by semi-autonomous, self-organizing “circles” or teams, many of which contain smaller circles who are responsible for and given authority over specific areas. Sub-circles choose and send representatives to the larger circles that contain them to make sure their problems and interests are addressed.

What this resembles is not the intentionless operation of evolution, but a democratic republic. Given the dire view most Americans have of our own national government, you can see why Robertson doesn’t lean on this analogy, but he does compare a holacratic corporation to a city. Tony Hsieh, the founder of Zappos and the figure responsible for the e-retailer’s adoption of holacracy, told Robertson that this is how he wants his company to operate: like a city. Instead of thinking of themselves as employees, the staff would consider themselves citizens.

And this, while Robertson hardly seems to realize it, represents a big change in how most of us think of corporations and the people who work in them. There’s a long, rich cultural record of Americans’ feelings about the big capitalist entities where many of us earn our bread, from the musical “How to Succeed in Business Without Really Trying” to “Mad Men” and novels like Joshua Ferris’ “Then We Came to the End.” Clearly, they offer some of us more than just a job; corporations have cultures, loyalists, dissidents and even outside evangelists, like the many consumer devotees of Apple.

But as much as we may identify with the corporations we work for, it’s another thing entirely to think of ourselves as their citizens. To someone unlikely to ever be called upon to deploy the techniques and philosophy laid out in “Holacracy,” what’s most unsettling about Robertson’s book is this creep from employee to “team member” to citizenship. Along with it comes Robertson’s notion that every corporation has its own “purpose,” one that is, significantly, independent of the people it comprises and their hopes or desires for it. This, also, bleeds into beliefs like romantic nationalism and the idea that nation has a destiny over and above the desires of its people.

Of course, many social and political institutions work this way, including very small ones. A functional marriage, for example, is often said to include three parties: each spouse and the marriage itself. A partner might decide to do or not do something for the sake of the marriage and its health, not merely to please the other partner. A citizen might volunteer to go to war or to work at a low-paid job because he or she wants to serve his or her country or community. Human beings are social animals and most of us believe that societies are something more than just the sum of their individual members, that cities and ethnic groups and nations have identities all their own.

Corporations have identies, too, even if we usually call these brands. Still most of us would probably say there’s a fundamental difference between, say, General Electric and Chicago or France. A city or a nation is a fundamentally human institution, while a corporation is a creature of the marketplace. Whatever lofty rhetoric a corporation might advance regarding its “mission,” we still see it as a money-making enterprise with a responsibility to enrich its shareholders and provide a decent living to its staff. France, on the other hand, could hardly be said to have a mission. It simply is, existing for its own sake like a person. Its citizens pay taxes to their state, receive services and vote in elections, but that’s not the extent of their relationship to their nation. It belongs to them and they belong to it, and apart from the material benefits they get from the relationship, there’s tremendous amount of intangible meaning they derive from it, too.

If holacracy can be made to work (and there’s some debate about that), it seems churlish to denounce it. As described by Robertson, it gives workers more control over what they do and how they do it, control subtracted from the autocratic power of managers. But the world described in “Holacracy” is a weirdly hermetic one. (Business writer Steve Denning has pointed out that Robertson offers a vision of the corporation in which actual customers seem something of an afterthought.) It’s a world where the interests of the company and its employees magically coincide, where the staff necessarily derive their identity from their membership in the corporation and where fulfilling the corporation’s destiny is everyone’s fondest dream. Captured within this vision is a glimpse of a future in which states and governments wither away and are replaced by corporations as the institutions that envelope us and tell us who we are.

The prospect is scary. Holacracy’s constitution does guarantee some few rights to the employee, such as determining how you accomplish what you’ve been given to do. But citizens have fought long and hard for the rights that come with membership in a state, and many are of course still fighting for them. What rights we have within or against corporations are usually enforced by the governments those corporations dismiss as regulatory meddlers. And while most corporations employ us at will and can fire us whenever they please, citizenship can’t be so easily taken away. It belongs to us — morally — as a job never can. People who grouse that government ought to be run more like a business forget that a nation or a city is no such thing. It has myriad meanings and duties. A corporation, no matter how much the management class babbles on about mission and purpose and identity, really only ever has just one.

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