Closing The Gap Towards Evolutionary Teal Organizations

In his book Reinventing Organizations Frederic Laloux outlines the stages of organizational development.  He touches on all the aspects that categorize organizations to fall mainly into one or another stage of development.  He also goes into extensive detail comparing the most common stages of organizational development today. This is namely orange – and the most evolved stage of organizational development – namely teal.  This post focuses on the Human Resources staff function. It discusses how teal organizations operating primarily from a teal paradigm grow their people to close the gap towards evolutionary teal.

If you’re not familiar with this groundbreaking work, read the review of the book here, a teal manifesto and finally a more in-depth analysis of how this concept of teal organizations looks like in software development companies here.

A brief history

Compared to childhood development, Frederic Laloux analyzed organizations and categorized them into one of a handful of main development stages, each compared to the colour of the rainbow.  At the bottom of the spectrum is magenta, then red, followed by amber, orange, green and finally teal as the most evolved state available to us today.

The book describes each organizational development paradigm by using a describing term, and a metaphor, and outlining the main improvements or breakthroughs each stage of development brought to society as a whole.

He emphasizes the importance of each stage and how the earlier stage organizations are not worse than the more mature organizations, just like a toddler is not better than a teenager or an adult.  It is merely an objective analysis of the described behaviours and traits at each stage of the development process to help you know where you are and help you get where you want to be.  One stage is not more important than any other stage, just as a child can not fully develop if they don’t go through all the different stages of development.

Orange – Achievement

Inherited from the scientific thinking that revolutionized industry at the turn of the previous century, the keyword associated with organizations mainly operating from an orange paradigm (or orange organization for short) is an achievement.

Breakthroughs and Guiding Metaphors

Compared to the earlier stages of organizational development, orange organizations introduced innovation, meritocracy and accountability.

The guiding metaphor that best describes this development stage is the machine. In earlier development stages only those born into leadership or positions of power were allowed to lead, in orange organizations meritocracy was introduced.  Suddenly everyone had an equal opportunity to rise to leadership based on their achievements.  This was a huge improvement for the general population and drastically improved society.

The orange organization, roughly born during the industrial age more than 100 years ago sees business as a big, complex and intricate machine.  It’s all about efficiency and the ability to outdo competition with its primary goal of growth.

The terminology used that shows exactly how deeply this machine metaphor is embedded in organizations today includes terms like “…units and layers, inputs and outputs, efficiency and effectiveness, pulling the lever and moving the needle, accelerating and hitting the brakes, scoping problems and scaling solutions, information flows and bottlenecks, reengineering and downsizing. Leaders and consultants design organizations. Humans are resources that must be carefully aligned on the chart, rather like cogs in a machine.”

Any defining brand of our time, for example, Nike, Coca-Cola, Microsoft, Facebook, and Google are all examples of orange organizations.  They focus on growth and gaining market share, or winning the competition of global market share.  Although size is not the deciding factor for categorizing an organization, most large organizations can be classified as operating from an orange paradigm.

Staff functions

1. Structure

In terms of staff functions, orange organizations have centralized staff functions for HR, IT, finance and others.  The central hub, or head office, makes the decisions while the branches and departments merely follow suit with little bargaining power.  They are handed a budget, staff allocation and resources decided by the centralized hub.

2. Recruitment

A descriptive job description is a basis for recruitment.  The rather specific role is then filled by a sometimes long and heavy interview process by trained HR personnel and managers. The focus is on whether the person will fit the job description outlined.

It’s rather like looking for a very exact piece of clothing when you go out shopping with a predetermined list of requirements.  You specify the colour, style, fabric and price and only buy a piece that fits all your requirements.  Similarly, you’ll only appoint people who match the majority of your checklist.

3. Performance management

Performance management is usually based on individual performance. An individual is measured based on KPIs established by the hierarchical superior.  The appraisal reviews the past year’s performance against these objectively set targets. The emphasis is on organizational goals and how the employee contributed to the organization’s success.

Teal – Evolutionary

The keywords associated with organizations mainly operating from a teal paradigm (or teal organization for short) are wholeness and evolution.  The guiding metaphor that best describes this development stage is the living organism.

A teal organization is rather like the human body where there are different organs and systems, like the respiratory – or the cardiovascular system, each with a unique and special function. It cannot, however, be separated from the whole as in the case of a machine where a part can easily be replaced if not functioning well.

A living organism is more complex and intertwined than a machine and requires equilibrium to remain in an optimal state of health.  When one part grows too much it becomes cancer.  When another part does not function optimally it harms the entire organism, gradually decreasing its ability to function too.  Organizational health requires the well-being of all these parts and the interaction of these parts with each other.

Purpose and wholeness

In a teal organization, everything happens organically driven by a desire to remain in balance with the changing environment around it.  There is a level of integration that is new compared to all the previous stages. Roles, functions and even personalities are blended and unique rather than clearly defined and similar. There are no dress codes or formal rules, these ‘policies’ are rather driven by mutual respect and shared goals. Teal companies have distinct personalities whereas their orange predecessors aimed to be anonymous.

In teal organizations, the health of the organization is the critical currency of success.  They prioritize long-term growth over immediate returns.  This means that growth is slower than that possible in an orange organization but it is much more long-lasting and sustainable.  The teal organization doesn’t compete to win, it uniquely co-creates, understanding that no two organizations need to solve the same problem in the same way.  When there’s no competition the available resources can be used much more productively.  There are no losers when there’s no competition.  Everybody wins.

Creating communities

Purpose, rather than growth, defines the primary goal of teal organizations.  It is a deep-seated passion of the people who choose their community based on what they believe.  Teal organizations employ or partner with people who want to contribute to a cause.  It’s not just a job.  It’s a calling.

People are motivated by their ability to solve the problems they feel strongly about.  It is the Ethereum developers who are building an entire financial ecosystem in their free time because they truly believe and want to see decentralized finance.  It is the Blizzard game developers who want to work at Blizzard because they want to build the games they enjoy playing themselves.

Where the typical orange organization’s employee works to satisfy their basic material needs and care more about the reliable pay-cheque than the products they’re building, in teal organizations the need to have a positive impact on the world is met by the ability to contribute to something they use and believe in.

Small is beautiful

Although most teal organizations are on the smaller side, there are larger organizations that operate from a teal paradigm. Toyota in its earlier days was probably one of the first organizations moving towards a teal paradigm. The popular Spotify too, during its initial years of operation, is moving towards a teal paradigm.

The majority of brands included in the book as representative case studies are, however, not well-known to most, clearly showing the difference in primary goal.  Where orange organizations’ vision mostly includes “global”, or being the most used brand, a teal organization aims to solve problems people care about with a smaller, but niche, market.

Staff functions

1. Structure

In terms of staff functions, teal organizations decentralize staff functions for HR, IT, finance, and project management to be included in self-managing or autonomous teams.  Any centralized functions merely serve as a vision or guide to coordinate different parts within the whole to maintain equilibrium and harmony.

The Ethereum Foundation is a good example of this where Vitalik Buterin shares his vision for the foundation while simply providing an infrastructure where self-organizing teams can then build their version of how they see the solutions.  Each month there is a themed hackathon where hundreds of developers build solutions.  Each solution is presented and judged and some win a cash prize while others continue to build their products based on the feedback they gained during the hackathon.  The culture is one of helping each other with open-source code and tools.

The foundation doesn’t own any of the products that make up the foundation.  They merely provide the environment for people to create a world they envision without any say as to what or how people build it.  This makes it easier to manage, and much easier to scale.

2. Recruitment

The team, rather than HR or management, drives recruitment in teal organizations.  The team decides when they need someone. They then interview candidates collectively, understanding that it is ultimately the team who knows their problems and culture best and thus best equipped to find a good fit.

Continuing with the fashion shopping metaphor used earlier, the purpose of shopping is to find something comfortable to wear at work.  It can be any colour, style, fabric or price, but it needs to fit well, be comfortable and easy to maintain.  Finding a suitable match is much easier with these more loosely defined goals than in the very specific shopping list in the orange example.

3. Performance management

Performance management in teal organizations moves from KPIs and performance appraisals to peer-based discussions and coaching.  Appraisals are seen as personal inquiries to discover an individual personal learning journey with a focus on personal development.  It’s about making the people great so that they will build great solutions.

Crucial tools for performance management are making use of appreciative inquiry and individual- and team coaching.  Performance management takes place in conversations, not spreadsheets.

Growing People

Growing an organization requires growing the people within the organization.  When you develop your people and help them succeed, they, in turn, will help you succeed. Win-win.

Growing towards an evolutionary teal organization means developing the people, not the system.  Growth becomes infinite when you’re no longer restricted by a single leader or manager.  When you tap into the collective intelligence of the group and allow them the freedom to create, the impossible suddenly becomes possible.

Do you have the courage to trust your people?  Are you ready to let go and cross the gap between where you are and where you want to be?

If you’re ready to take your organization to the next level, ask yourself this one question:

How can you make your people awesome?