Frederic Laloux Reinventing Organizations

© Frederic Laloux (content based on his book „Reinventing organizations“ (2014) 2
Frederic Laloux
Reinventing organizations

Background
 Modern organizations have brought about sensational progress for humanity in less
than two centuries―the blink of an eye in the overall timeline of our species. None of
the recent advances in human history would have been possible without organizations
as vehicles for human collaboration.
 And yet, many people sense that the current way we run organizations has been
stretched to its limits. We are increasingly disillusioned by organizational life. For people
who toil away at the bottom of the pyramids, surveys consistently report that work is
more often than not dread and drudgery, not passion or purpose. That the Dilbert
cartoons could become cultural icons says much about the extent to which
organizations can make work miserable and pointless.
 Life at the top of the pyramids isn’t much more fulfilling. Behind the façade and the
bravado, the lives of powerful corporate leaders are ones of quiet suffering too. Their
frantic activity is often a poor cover up for a deep inner sense of emptiness. The power
games, the politics, and the infighting end up taking their toll on everybody. At both the
top and bottom, organizations are more often than not playfields for unfulfilling pursuits
of our egos, inhospitable to the deeper yearnings of our souls
 Could it be that our current worldview limits the way we think about organizations?
 Could we invent a more powerful, more soulful, more meaningful way to work together,
if only we change our belief system?

The basic question
 What do organizations molded around the next stage of consciousness look and feel
like?
 Is it already possible to describe their structures, practices, processes, and cultures (in
other words, to conceptualize the organizational model) in useful detail, to help other
people set up similar organizations?
 Can we create organizations free of the pathologies that show up all too often in the
workplace? Free of politics, bureaucracy, and infighting; free of stress and burnout; free
of resignation, resentment, and apathy; free of the posturing at the top and the drudgery
at the bottom?
 Is it possible to reinvent organizations, to devise a new model that makes work
productive, fulfilling, and meaningful?
 Can we create soulful workplaces―schools, hospitals, businesses, and
nonprofits―where our talents can blossom and our callings can be honored?
??

The greatest danger in times of
turbulence is not the turbulence―
It is to act with yesterday’s logic.
Peter Drucker

Human development happens in stages, along various lines
How has humanity evolved from the earliest forms of human consciousness to the complex
consciousness of modern times?
How do we human beings evolve today from the comparatively simple form of consciousness we
have at birth to the full extent of adult maturity?
Example dimensions:
 needs (Maslow)
 worldviews (Gebser)
 cognitive capacities (Piaget),
 values (Graves),
Humanity evolves in stages. We are not like trees that grow continuously.
We evolve by sudden transformations, like a caterpillar that becomes a butterfly, or a tadpole a frog.
 moral development (Kohlberg, Gilligan),
 self-identity (Loevinger),
 spirituality (Fowler),
 leadership (Cook-Greuter, Kegan, Torbert),

The evolution of consciousness is accelerating ever faster
When we plot the successive stages of human and organizational consciousness on a timeline, the
result is striking. Evolution seems to be accelerating, and accelerating ever faster.
Never before in human history have we had people operating from so many different paradigms all
living alongside each other.
The same is true for organizations: in the same city, if we care to look, we can find Red,
Amber, Orange, and Green Organizations working side by side.

With each level of development, everything changes, including
organizational models
 Every transition to a new stage of consciousness has ushered in a whole new era
in human history.
 At every juncture, everything changed:
 society (going from family bands to tribes to
 empires to nation states);
 the economy (from foraging to horticulture, agriculture, and industrialization);
 the power structures;
 the role of religion.
 One aspect hasn’t yet received much attention: with every new stage in human
consciousness also came a break-through in our ability to collaborate, bringing about a
new organizational model.
 Organizations as we know them today are simply the expression of our current world-
view, our current stage of development.

Human development
Overview of the main (organizational) paradigms
Levels of Consciousness
TURQUOISE
TEAL
GREEN
ORANGE
AMBER
RED
MAGENTA
INFRARED
foraging
bands
authority by
the Elders
powerful
chiefdoms
formal
hierarchies
command
& control
“the stick”
effective
matrix,
predict &
control,
“the carrot”,
shareholder
perspective
relationships
above
outcomes,
stakeholder
perspective
self manage-
ment for
evolutionary
purpose
100 000
yrs ago
100 00
yrs ago
1000
yrs ago
100
yrs ago
10
yrs ago
1
yr ago

There is nothing inherently “better” about
being at a higher level of development, just as
an adolescent is not “better” than a toddler.
However, the fact remains that an adolescent
is able to do more, because he or she can
think in more sophisticated ways than a
toddler.
Any level of development is okay; the question
is whether that level of development is a good
fit for the task at hand.”
Nick Petrie (Center for Creative Leadership)
On human development

(Impulsive) RED organizations
Metaphor: WOLFPACK
CHARACTERISTICS
 Constant exercise of power by chief to keep
troops in line.
 Fear is the glue of the organization.
 Highly reactive, short term focus.
 Thrives in chaotic environments.
EXAMPLES
 Mafia
 Streetgangs
 Tribal militias
LEADERSHIP STYLE
 predatory
KEY BREAKTROUGHS
 Division of labor
 Command authority

(Conformist) AMBER organizations
Metaphor: ARMY
CHARACTERISTICS
 Highly formal roles within a hierarchical pyramid.
 Top down command and control (what and how).
 Stability valued above all through rigorous processes.
 Future is repetition of the past.
EXAMPLES
 Catholic church
 Military
 Most government agencies
 Public school systems
LEADERSHIP STYLE
 paternalistic-authoritative
KEY BREAKTROUGHS
 Formal roles
(stable and scalable hierarchies)
 Processes
(long term perspectives)

(Achiever) ORANGE organizations
Metaphor: MACHINE
CHARACTERISTICS
 Goal is to beat competition; achieve profit and growth.
 Innovation is the key to staying ahead.
 Management by objectives (command and control
on what; freedom on the how).
EXAMPLES
 Multinational companies
 Charter schools
LEADERSHIP STYLE
 goal- and task-oriented, decisive
KEY BREAKTROUGHS
 Innovation
 Accountability
 Meritocracy

(Pluralistic) GREEN organizations
Metaphor: FAMILY
CHARACTERISTICS
 Within the classic pyramid structure, focus on
culture and empowerment to achieve extraordinary
employee motivation.
EXAMPLES
 Culture driven organizations
(e.g. Southwest Airlines; Ben&Jerry‘s …)
LEADERSHIP STYLE
 consensus oriented, participative, service
KEY BREAKTROUGHS
 Empowerment
 Values-driven culture
 Stakeholder model

(Evolutionary) TEAL organizations
Metaphor: LIVING ORGANISM
CHARACTERISTICS
 Self-management replaces hierarchical pyramid.
 Organization is seen as a living entity, with its own
creative potential and evolutionary purpose.
EXAMPLES
 Patagonia
 FAVI
 Buurtzorg
LEADERSHIP STYLE
 distributed leadership, with inner rightness and
purpose as primary motivator and yardstick
KEY BREAKTROUGHS
 Self management
 Wholeness
 Evolutionary purpose

Every challenge you encounter in life
is a fork in the road.
You have the choice to choose which
way to go― backward, forward,
breakdown or breakthrough.
Ifeanyi Enoch Onuoha (Author and life coach)
What triggers a person to open up to a later, more complex stage
of consciousness?

What determines which stage an organization operates from?
It is the stage through which its leadership tends to look at the world.
Consciously or unconsciously, leaders put in place organizational
structures, practices, and cultures that make sense to them,
that correspond to their way of dealing with the world.
Example: Values vs “the bottom line”
The general rule seems to be that the
level of consciousness of an
organization cannot exceed the level
of consciousness of its leader.

Development as a series of disidentifications and
changing „yardsticks“.
RED „immediately satisfy my needs“
AMBER „rules and group norms“
ORANGE „egoistic ambitions“
TEAL
The „yardsticks“ change from external to internal:
RED „get me what I want“
AMBER „conforming to social norms“
ORANGE „effectiveness & success“
GREEN „belonging & harmony“
TEAL
„inner rightness, service to the
world, calling/purpose“
EXTERNAL INTERNAL

„Going TEAL“
 Life as a journey of unfolding instead of pre-planned goals and routes
 Internal yardsticks to grow into true nature and work toward your calling
 A life well-lived breeds success, profit etc., not vice versa
 Focus on strengths, not on failures and what‘s wrong
 No mistakes, only opportunities to learn
 Wisdom beyond rationality
 „Both-and“ thinking instead of „either-or“
 Integrating mind-body-soul
 Be true to yourself
 Striving for wholeness with Self, others, life, nature
Now I become myself.
It’s taken time, many years and places;
I have been dissolved and shaken, worn other people’s faces …“
May Sarton

Example organisations
AES Energy sector―Global―40,000 employees―For profit
BSO/Origin IT consulting―Global―10,000 employees (1996)―For profit
Buurtzorg Health care―Netherlands―7,000 employees―Nonprofit
ESBZ School (Grades 7-12)―Germany―1,500 students, staff, and parents―Nonprofit
FAVI Metal manufacturing―France―500 employees―For profit
Heiligenfeld Mental health hospitals―Germany―600 employees―For profit
Holacracy Organizational operating model
Morning Star Food processing―United States―400-2,400 employees―For profit
Patagonia Apparel―United States―1,350 employees―For profit
RHD Human Services―United States―4,000 employees―Nonprofit
Sounds True Media―United States―90 employees and 20 dogs―For profit
Sun Hydraulics Hydraulics components―Global―900 employees―For profit

3 TEAL breakthroughs
operate effectively, even at a large scale, with a system based on peer
relationships, without the need for either hierarchy or consensus.
Self-management
practices that invite us to reclaim our inner wholeness and bring all of who we
are to work, instead of with a narrow “professional” self / “masculine resolve” etc.
Wholeness
organizations seen as having a life and a sense of direction of their own. Instead
of trying to predict and control the future, members of the organization are
invited to listen in and understand what the organization wants to become, what
purpose it wants to serve.
Evolutionary purpose

self organizing teams
coaches w/o P&L responsibility when needed
almost no staff functions
coordination and meetings ad hoc when needs arise
radically simplified project management,
minimum plans & budgets
fluid and granular roles
decision making fully decentralized (advice process)
transparent real time information sharing incl,. financials
anybody can spend any amount of money provided advice process is respected
formal multi-step conflict resolution process
focus on Team performance, peer-based process for individual appraisals
self-set salaries with peer calibration, no bonus, profit sharing
Teal SELF MANAGEMENT practices

self-decorated warm spaces without status markers
clear values translated into explicit ground rules,
ongoing values discussion
quiet room, meditation practices, team supervision, peer coaching
storytelling practices to support self-disclosure and
community building
absence of job titles and descriptions to allow selfhood
to shape roles
honest discussion about individual time commitments
regular time devoted to address conflicts
specific meeting practices keep ego at check
distributed initiatives taking
recruitment interviews by future colleagues, focus on fit with organization
personal freedom for training, focus on culture-building
personal inquiry into one‘s learning journey and calling
caring support to turn dismissal into a learning opportunity
Teal WHOLENESS practices

organization seen as a living entity with its own
evolutionary purpose
strategy emerges organically from collective intelligence
of self-managing employees
decision making by listening to organization‘s purpose
(everyone, large group, meditations…)
concept of competition irrelevant (embraced to pursue purpose)
growth and market share only important in as much they
help achieve purpose
profit as lagging indicator: will come naturally when doing
the right thing
inside out marketing: offer is defined by purpose
„sense and respond“ planning/budgeting/controlling
no or radically simplified budgets, no tracking of variance; no targets
„change management“ no longer relevant as organization constantly adapts from within
suppliers chosen by fit with purpose
total transparency invites outsiders to make suggestions to better bring about purpose
conscious sensing of what mood would serve best
Teal EVOLUTIONARY PURPOSE practices

BASIC ASSUMPTIONS/NORMS
of teal organizations self management
Trust
Information and
decision-making
Responsibility and
accountability
 We relate to one another
with an assumption of
positive intent.
 Until we are proven wrong,
trusting co-workers is our
default means of
engagement.
 Freedom and accountability
are two sides of the same
coin.
 All business information is
open to all.
 Every one of us is able
to handle difficult and
sensitive news.
 We believe in the power of
collective intelligence.
Nobody is as smart as
everybody. Therefore all
decisions will be made with
the advice process.
 We each have full
responsibility for the
organization. If we sense that
something needs to happen,
we have a duty to address it.
It’s not acceptable to limit
our concern to the remit of
our roles.
 Everyone must be
comfortable with holding
others accountable to their
commitments through
feedback and respectful
confrontation.

of teal organizations wholeness (part 1)
Equal worth Safe and caring workplace
 We are all of fundamental equal worth.
 At the same time, our community will be
richest if we let all members contribute in
their distinctive way, appreciating the
differences in roles, education, backgrounds,
interests, skills, characters, points of view,
and so on.
 Any situation can be approached from fear
and separation, or from love and connection.
We choose love and connection.
 We strive to create emotionally and spiritually
safe environments, where each of us can
behave authentically.
 We honor the moods of … [love, care,
recognition, gratitude, curiosity, fun,
playfulness …].
 We are comfortable with vocabulary like care,
love, service, purpose, soul … in the
workplace.

Overcoming separation Learning
 We aim to have a workplace where we can
honor all parts of us: the cognitive, physical,
emotional, and spiritual; the rational and the
intuitive; the feminine and the masculine.
 We recognize that we are all deeply
interconnected, part of a bigger whole that
includes nature and all forms of life.
 Every problem is an invitation to learn and
grow. We will always be learners. We have
never arrived.
 Failure is always a possibility if we strive
boldly for our purpose. We discuss our
failures openly and learn from them. Hiding
or neglecting to learn from failure is
unacceptable.
 Feedback and respectful confrontation are
gifts we share to help one another grow.
 We focus on strengths more than
weaknesses, on opportunities more than
problems.

Relationships and conflict
 It’s impossible to change other people.
We can only change ourselves.
 We take ownership for our thoughts, beliefs, words, and actions.
 We don’t spread rumors.
We don’t talk behind someone’s back.
 We resolve disagreements one-on-one and don’t drag other
people into the problem.
 We don’t blame problems on others.
When we feel like blaming, we take it as an invitation to reflect
on how we might be part of the problem (and the solution).

of teal organizations evolutionary purpose
Collective purpose Individual purpose Planning the future
 We view the
organization as
having a soul and
purpose of its own.
 We try to listen in to
where the
organization wants to
go and beware of
forcing a direction
onto it.
 We have a duty to
ourselves and to the
organization to
inquire into our
personal sense of
calling to see if and
how it resonates with
the organization’s
purpose.
 We try to imbue our
roles with our souls,
not our egos.
 Trying to predict and
control the future is
futile. We make
forecasts only when
a specific decision
requires us to do so.
 Everything will unfold
with more grace if we
stop trying to control
and instead choose
to simply sense and
respond.
Profit
 In the long run, there
are no trade-offs
between purpose
and profits. If we
focus on purpose,
profits will follow.

Why teal organizations are so successful (1)
Liberating previously unavailable energies
Through
purpose
Individual energies are boosted when people identify with a purpose greater
than themselves.
Through
distribution of power
Self-management creates enormous motivation and energy. We stop working for a
boss and start working to meet our inner standards, which tend to be much higher and
more demanding.
Through
learning
Self-management provides a strong incentive for continuous learning. And the definition
of learning is broadened to include not only skills but the whole realm of inner
development and personal growth.
Through better
use of talent
People are no longer forced to take management roles that might not fit their talents in
order to make progress in their careers. The fluid arrangement of roles (instead of
predefined job descriptions) also allows for a better matching of talent with roles.
Less energy wasted
in propping up the ego
Less time and energy goes into trying to please a boss, elbowing rivals for a promotion,
defending silos, fighting turf battles, trying to be right and look good, blaming problems
on others, and so on.
Less energy wasted in
compliance
Bosses’ and staff’s uncanny ability to create policies generates wasteful control
mechanisms and reporting requirements that disappear almost completely with the
self-management.
Less energy wasted in
meetings
In a pyramid structure, meetings are needed at every level to gather, package, filter,
and transmit information as it flows up and down the chain of command. In self-
managing structures, the need for these meetings falls away almost entirely.

Why teal organizations are so successful (2)
Harnessing and directing energy with more clarity and wisdom
Through
better sensing
With self-management, every colleague can sense the surrounding reality and act upon
that knowledge. Information doesn’t get lost or filtered on its way up the hierarchy
before it reaches a decision maker.
Through
better decision-making
With the advice process, the right people make decisions at the right level with the input
from relevant and knowledgeable colleagues. Decisions are informed not only by the
rational mind, but also by the wisdom of emotions, intuition, and aesthetics.
Through
more decision-making
In traditional organizations, there is a bottleneck at the top to make decisions.
In self-managing structures, thousands of decisions are made everywhere, all the time.
Through
timely decision-making
As the saying goes, when a fisherman senses a fish in a particular spot, by the time his
boss gives his approval to cast the fly, the fish has long moved on.
Through alignment with
evolutionary purpose
If we believe that an organization has its own sense of direction, its own evolutionary
purpose, then people who align their decisions with that purpose will sail with the wind
of evolution at their back

Contact
Ulrich Gerndt
managing partner
Tel +49 (0)89 / 76 73 66 0
Fax +49 (0)89 / 76 73 66 100
ulrich.gerndt@change-factory.de
Looking forward to meeting you.
change factory GmbH
Im Alten Fruchthof
Gotzinger Straße 52 b
D-81371 München
www.change-factory.de

Frederic Laloux Reinventing Organizations

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