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Anatomy of Agile Enterprise

Janne J. Korhonen

The Future of Governance is Circular

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Traditional governance and steering, based on the top-down predict-and-control paradigm, is inert in the face of today's complex and dynamic environments. Autocratic control based on a single perspective runs the risk of missing other important perspectives and information relevant to decision-making. Democracy is equally inflexible and comes with a higher time-cost -- the majority has control and overshadows oppositional perspectives. Consensus decision-making takes into account all perspectives in an egalitarian manner but is impracticably time- and energy-consuming. It also tends to preserve the status quo, engender groupthink and reward those who are least accommodating.

As an alternative approach to governance, the Dutch entrepreneur Gerard Endenburg developed sociocracy, an all-encompassing approach to governance that extends all levels of the organization and includes all its members. Endenburg adapted the consensus principle of full agreement towards consent: the absence of any argued objection. Whereas consensus is arrived at when all say yes, consent is when no one says no. Such decision-making focuses effectively on what is best for the whole, rather than contributing to a tug-of-war between individuals and their personal wants. It aims at unity rather than unanimity. Decisions emerge rather than are being made. Sociocracy is compared vis-à-vis other governance approaches in Figure 1.

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Figure 1. Increasing complexity calls for more participative approaches to governance.

The sociocratic governance structure is based on a circle organization, created by superimposing a hierarchy of circles on the existing administrative hierarchy. Optimally, this hierarchy reflects Requisite Organization, where each organizational stratum has its distinct type of decision-making. A circle is a unit of people with a common work objective and authority over its policy domain. Whereas policy decisions are made by consent, other decision methods can be applied in the implementation of the policies within the circles, as long as this is agreed upon by consent. In circle meetings, the circle formulates and updates its objectives; performs the three functions of operating, measuring, and directing; and maintains the quality of its resources. This circularity synthesizes participative and authoritarian work relations that are generally seen as incompatible. It facilitates self-organized agile responses while keeping requisite reins on the participative system in the form of vertical authority and accountability.

To take into account the perspectives of the higher-level circle and lower-level circles, each circle is always double-linked to the overlapping circle via at least two people who belong to and take part in the decision-making of both circles. As shown in Figure 2, one of these links is appointed from the higher-level circle and is the person with overall accountability for the lower-level circle's results, and the other is a representative elected from within the lower-level circle. The double-linking mechanism promotes both downward and upward communication and ensures upward representation without eroding the authority and accountability of the leader.

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Figure 2. Circle organization and double-linking.

The consent principle is also employed in sociocratic elections, in which people are chosen for functions and responsibilities. Instead of a simple democratic majority vote, the ballots are discussed in public (who voted whom and why), people may change their votes, and the facilitator proposes a nominee who undergoes a consent round. The election is complete, when no objections surface. In an election by consent, the arguments raised in favor of the candidates are likely to be pertinent to the work context and people's capabilities rather than be grounded in political considerations or favoritism as in traditional nominations.

Sociocratic governance principles are of particular relevance in implementing Agile Governance that enables continuous reformation of business models, capabilities and processes. As the decision-making rights are distributed to the self-organizing circles with just-enough coordination through consent-based negotiation of roles and accountabilities, the people closest to any given problem use requisite discretion within their authority to respond thereto. Enabling independent yet interconnected decision-making at all levels, such governance enables agile responses to whatever extent is required on an ongoing basis.

Circular organizing represents the future of work organization that brings together the best of authoritarian and participative systems. The circular model brings about more agility and an increased ability to capitalize on ideas and changing market conditions. Organizations that have applied the sociocratic model have reported productivity increases of 30 to 40 percent and have attained job satisfaction among both workers and managers.

Further Reading

Endenburg, G. (1998). Sociocracy: The Organization of Decision-Making. Eburon.
Endenburg, G. (1998). Sociocracy As Social Design. Eburon.
http://www.socionet.us/
http://www.sociocratie.nl/
http://www.holacracy.org/

Janne J. Korhonen provides insights into how information technology can be applied strategically to catalyze organizational change and responsiveness. Drawing from both theory and practice, he discusses agile enterprise and its governance.

Janne J. Korhonen

Janne J. Korhonen is an independent business and IT consultant,specializing in enterprise architecture, business process management,service-oriented architecture and pertinent governance models. He has over ten years of experience as an architect and consultant in a variety of extensive and mission-critical IT projects. With strong theoretical underpinnings, his consulting encompasses systemic co-development of business, organization and information technology.

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