Principles of self-management in organizations and applications for DAOs

In Frederic Laloux’s book Reinventing Organizations, he talks about the evolution of organizations over the history of humanity. He explains that all organizations operate on a spectrum that spans the following five organizational philosophies:

Red-Fear “wolf-pack”

• Authority is top down but must always fight to retain its power
• Watch your back at all times
• Highly reactive, short-term focus
• Examples include tribal militia, street gangs, wolf-packs

Amber-Process “army”

• Formal roles and processes shape everything people do
• Stay in line and you’ll get by
• Highly formal roles with hierarchical pyramid
• Examples include military, government,

Orange-Achievement “perform”

• Innovation, profits, growth, and achievement are the highest values
• Roles are assigned based on merit
• Individual personality is often ignored over “professional culture” with masculine traits such as “drive, confidence, non-emotionality” being valued
• Most multinational companies follow this role

Green-Pluralistic “family”

• All perspectives are considered and valued equally, leadership structures and hierarchies still exist, but leaders have to constantly give up their power while still trying to guide the direction of the organization — strong shared culture
• Bottom-up processes and power structures
• Empathy to others, emphasizes fairness, equality, harmony, community
• Tries to userp power inequality by gaining consensus among all — this is monolithic thinking, creates stalemate and secret power games emerge and it’s not always practical to listen to everyone and can be too tolerant by operating this way
• Ultimately these are values-driven organizations, socially responsible at the core of their mission

Teal-Evolutionary “living organism”

• Self management — peer relationships dictate everything, with virtually no hierarchies or consensus
• Wholeness — Emphasis on bringing whole self to work and being vulnerable with others
• Evolutionary purpose — the organization’s direction is shaped by its members based on ongoing emergent needs of the org and its purpose

Laloux spends most of the book explaining how this final form — Teal-Evolutionary — works and why they are the highest and generally most desirable form of organization.

While Teal organizations are certainly impressive, it’s hard to suggest that the world will adopt them en-masse any time soon – they require a hefty amount of work to implement and are pretty complex (as you’ll see). However, as the popularity of decentralized autonomous organizations (DAOs) continue to increase due to their emphasis on community governance and ownership, it seems like the Teal model could be a great fit for new DAOs to explore.

In the rest of this article, I’m going to walk through some of the key structures and processes used in self-management as a key component of Teal-evolutionary organizations, as these seem like the most applicable to how a DAO is designed and run.

Structures

Self-managing teams

• Teams are based on projects, functions, or a mix of both
• No rules or procedures other than what teams decide on for themselves
• Teams have short, infrequent meetings, and only as often as needed
• When opportunities or issues arise that span across multiple teams, teams can each elect individual(s) to represent their interests
• This is a structure that inherently empowers all individuals and creates a strong sense of trust between people and their organization

No boss, no middle management

• Rather than having meetings at every level and continuing to pass information up and decisions down the hierarchy, teams are empowered to make all their own decisions
• Some organizations will opt to have support roles that offer the resources of experts, external consultants, or coaches, who do not make decisions, only offer information or recommendations to the teams, who then decide what to do with that
• Ultimately this creates reverse delegation — frontline teams do everything unless they want to push them upward or laterally when they need support

Bare minimum staff functions

• HR, planning, purchasing, engineering, etc. all get shut down and put within teams who do their own hiring, planning, purchasing, etc.
• People work together to give one another feedback, and collaboratively work to set one another’s salaries based on what they all think is fair — collecting data from a variety of people about their peer’s performance helps to keep assessments objective
• Occasionally, experts may be brought in to help train people on a specific function or serve as temporary consultants if nobody else can serve that function

These structures might seem like they give a lot of responsibility to teams and individuals — and they do. But it seems that this type of total responsibility is what gives people a sense of belonging and meaning in what they do.

Processes

Decision-making

• In principle, anyone can make a decision to resolve an issue
• Usually, the decision-maker is the person who noticed the issue or the person most affected by it
• They must collect advice from those affected and who have expertise in the area (though they don’t have to use any of it) — in some orgs, they do this via online forums — this is well-suited for most decisions being made within DAOs, unless a decision really doesn’t affect others
• The more serious the decision, the wider the net of advice the person must seek
• Any principled objection can prevent a decision from going through, and those involved work to devise solutions that resolve principled objections
• Ultimately this transcends the idea that decisions must be made top-down, or by consensus; instead, they are informed and made by those who are affected by the issue
• The decision-maker has to live with the consequences of their choice, and since they are usually the most affected by it, this process ultimately helps to keep the decision-maker accountable
• When things need to get done, someone shares publicly that it is a task, and others step up and take them on

This is one of the most interesting processes to me — it means that not everything must be put to an on-chain proposal, and that generally, not everyone votes on every proposal. It abandons the monolithic, exhausting principle that everyone has to agree on everything, and instead empowers the right person to make their own decision, and to live with the consequences.

I could also see a version of this where certain types of decisions can only be made by people who have been chosen (via on-chain vote or delegation) to resolve those types of issues. For example, decisions about investing can only be made by elected members of the treasury. This would prevent people from making decisions that don’t affect them, especially if the process were to be codified into a smart contract.

Meetings

• Meetings are called as needed, with some types of meetings being scheduled regularly
• Generally, no agenda created until the meeting
• At the start of the meeting, people bring forward topics
• A facilitator helps run the meeting and keep everyone on track for time

Purchasing and investments

• These are decided upon by people who are affected by them
• Must seek advice from appropriate people who are affected
• Standards are sometimes defined or groups formed in cases where purchases or investments are based on sophisticated knowledge — ie. treasury management

In the case of DAOs, finances can be limited or have unique dynamics such as treasuries being subject to fluctuations in crypto prices. It could be practical to have an approval layer required for any decision to be made, where decisions about certain topics can be made by anyone, but then must be approved first by elected gatekeeper(s) before they can be implemented.

Information / internal communications

• There are no closed doors, everyone has access to all data and information
• This empowers teams and individuals to make decisions by giving them access to any relevant information they may need at any time without friction
• All-hands meetings are held on occasion (ie. quarterly) to share, discuss, and debate info across the org

Changing roles

• When someone wants to change their role, they bring it to those who would be affected by the new role, and discuss it with them following this process
• In larger orgs, a role marketplace is created where people can share what they are interested in doing, and others can give and take tasks from one another

In DAOs, roles can be incredibly fluid. The idea of a “role marketplace” could be a feature some DAOs choose to add to a bounty board (ie. functions to pass off existing work or components of longer-term roles at a set rate alongside other bounties for new work)

Total responsibility

• If someone is aware of an issue, they must do something about it, it’s not enough just to share that it’s a problem
• Usually you go and have a conversation with the person(s) who are most affected or knowledgable about the topic

Performance management

• Team performance is generally valued over individual performance
• Each year or quarter teams self-evaluate and develop plans to improve
• They present these plans to management or to a voluntary team who give feedback
• Peer-set salaries — everyone helps to set one another’s payments based on what they contribute

Dispute management

This entails sequential layers of support for resolving conflict, reflecting principles of restorative justice:

• Sit together and attempt to resolve it privately (every new recruit is trained in conflict resolution principles including non-violent communication)
• Find a colleague they both trust to act as a mediator if they can’t resolve it on their own — mediator cannot force a decision, only guide
• If mediation fails, a panel of topic-educated experts is convened — panel cannot force a decision, only guide
• Ultimately someone may eventually be elected by the org to make a decision if the previous steps do not result in resolution

In times of crisis

• The org may elect to have a way that some people or teams are given central authority to make certain decisions in times of extreme crisis
• In these scenarios they must communicate effectively about where they are withdrawing power, why and for how long
• The org can elect to dismiss them if they feel this has been abused

In the case of DAOs, certain wallet(s) could be given this type of override ability based on a delegation power by members of the community, or based on a vote.

Role of senior management

• Very few if any senior management roles
• Their job is to help this system work and run smoothly — basically to create structures that empower people to own and run the org

This feels really fitting. Especially for DAOs that are driven by an ethos of community-governance, management’s role should generally be to create conditions for the community to build and thrive together, and to get out of the way as much as possible outside of that.

Dismissals

• Anyone can be dismissed, including senior roles
• If a person feels another person should be removed, they can raise it to the entire community, or to those people most affected by the offending person’s role to get their feedback before bringing it to the broader community
• People often realize when they aren’t a good fit for this style of org — colleagues will engage with them less often, they’ll get bad feedback, and ultimately will either work to improve or leave

This one isn’t perfectly clear — within a DAO, it might make sense that if someone feels a person should be removed, a committee is elected to help review the evidence and make a decision as to why, with opportunities for the person to be put on probation as an intermediary phase before potentially being removed from the organization.

A few reflections

• There are definitely going to be gaps in terms of how all this gets applied and any specifics that haven’t been listed. It’s not intended to be an all-encompassing, rather, it’s more of a “scaffolding” that DAOs may consider as a starting point to build upon.
• The fact that the Teal model of the “living organism” has been scaled to work with tens of thousands of people (as described in the book) is pretty incredible. Of course, it would likely not be easy to adopt the Teal model within an established or large organization, but if these principles are embedded from the beginning along with proper onboarding of team members, one could envision the model being successful for DAOs of all sizes.
• Finances and payments — DAO finances can be quite complex — so this could be fleshed out much more deeply and in so many permuations — perhaps I will write a future article about this
• Ultimately this is about answering “how can everyone be powerful” without necessarily being equal
• What I’m describing here is “social-ware”. In the future, it’s likely that most of these processes and structures will eventually become codifiable via smart contracts, which any DAO or organization could elect to adopt. Based on your wallet being connected to the system, you would be given permissions that allow you to follow the structures and processes your organization has set out. (Orca protocol seems to be working on this type of thing already)
• I’m excited to see how this plays out as the early DAO landscape continues to evolve. Would love to hear any feedback anyone has.