RenDanHeYi Lessons from Latin America
Based on a conversation with more than 10 firms from Latin America, this post explores distinctive traits of Haier’s experience in comparison with self-management practices from the Holacracy, Sociocracy, Teal, and Agile movements.
On the 29th of March, we had the rare pleasure to join a group of experienced, mature, and curious organizations in a common, ongoing exploration of self-management, self-governance, and self-realization in Latin America. The event represented a unique opportunity to talk about the RenDanHeYi and compare it with other well-known models such as Agile, Teal, Sociocracy, Holacracy, or specific implementations pioneered by progressive firms such as Semco, Buurtzorg, Valve, or Morningstar.
Together with more than 10 average-sized (up to 500 employees) firms, we explored salient and distinctive traits of Haier’s experience, together with the journey to adopt them, from the lenses of different cultures, geographical regions, industry sectors, and practices, with takeaways interesting for all companies desiring to go deeper into this peculiar management approach that is attracting so much attention around the globe.
To know more about the RenDanHeYi, consider joining the upcoming free webinar, The RenDanHeYi in practice. Voices from the world, for the first major release of our 3EO Toolkit and hands-on experiences from companies spanning 3 continents on June 21st at 2 PM CEST and booking your seat for the 3EO / RenDanHeYi Masterclass.
How does the RenDanHeYi stand among self-management practices?
When analyzing RenDanHeYi’s central concepts and solutions within the much broader space of flatter, more fluid, manager-less organizations, several aspects stood out. Here are the aspects that sounded more insightful.
Re-bundling beyond the team
Most successful experiences empower groups of employees at motivating, coordinating, and measuring themselves purely at the team level. Due to the nature of their business characterized by simple, linear, or shallow value chains, re-structuring work into independent pieces and associating them with small, autonomous teams is usually enough (see Buurtzorg). Culture, internal communication, and technology act as the glue connecting otherwise fully separate components.
Still, the complexity of platform and ecosystemic strategies Haier taps into, with thousands of internal and external actors creating value together, demands much more interlocked, interdependent, and synchronized actors communicating, collaborating, and reciprocally providing feedback.
This is the first dimension that distinguishes the RenDanHeYi from other methods: more than Micro-Enterprises alone, it is thanks to Ecosystem Micro-Communities, and their dynamic agreements that tens of nodes can rapidly coalesce, self-orchestrate, and share value around rich customer scenarios without any hierarchy, managerial control, or overhead. Such agile, lean, timely ability to seek and integrate services coming from the edges dramatically redefines each firm’s core mission: effective motivation, coordination, and monitoring of agents. This brings self-organization from a team to an enterprise-wide level.
For more than a century, the hierarchy has been the social process of choice for internal alignment, integration, and activation. This happened because the hierarchy’s ability to divide and conquer scales dramatically well. With a span of control of 10 reports, 10.000 colleagues and the information to be exchanged among them could be easily managed through only 4 layers. Unfortunately, centralizing power at the top often means squeezing energy, engagement, and creativity out from all other organizational levels. With it, also business agility, innovation, and survival may be gone forever.
While most modern self-management attempts are indeed better equipped than traditional management at guaranteeing inclusion and participation of members through consensual, or consent-based decision making, in order for them to operate efficiently, a limit must be imposed on the number of colleagues in each node, and the number of sub-nodes in each team.
Haier is instead able to solve this conundrum, once and for all, by preserving both participation and scale. The resulting human system is much leaner and infinitely more scalable than any other available approach by giving up any reporting line or form of middle management through Industry Platforms, Ecosystem Micro-Communities, and blockchain-based technology.
Full decentralization is not necessarily the future
The desire to bust bureaucracy so diffused in self-management experiments is often associated with the removal of any middle management and with the systemic distribution of power and responsibilities to the edges of the organization. As a result, every team is demanded to take over all the basic services (e.g., recruiting, sales, technology, financial controls, etc.) it may need. For how philosophically exciting this may sound, totally decentralizing enabling services is far from optimal.
Here again, the RenDanHeYi structurally extends current basic self-management designs by acknowledging the crucial tension between core and periphery, centralization and decentralization, offering Shared Services Platforms (SSPs) as an answer. SSPs recognize how to support capabilities must indeed be reimagined entrepreneurially by minimizing delays, overheads, and any unnecessary middleman but without throwing the baby out with the bathwater. Their very existence brings the coherence, standardization, sustainability, and, why not, the optimization of internal services large companies usually aspire to and can hardly find in other self-managed operating models.
Open allocation is the door to self-organization
While we may not be aware of that, agile practices fit very well into complex matrixed organizations, especially because most of the freedom they bring is limited to squads (see Spotify) or teams.
Still, the association of individuals to teams usually remains a prerogative of the manager or of an Organization function within HR. Valve (through desks with wheels) but also sociocratic / holocratic traditions (through selections) broaden the room for choice by letting individuals pick their own responsibilities and projects.
Once more, though, Haier exceeds even the most advanced self-management models by proposing universal, totally transparent, technology-enabled mechanisms for matching the supply and demand of labor. Through public orders (of skills and time in Micro-Enterprises or of services in Ecosystem Micro-Communities) and bidding (by employees or Micro-enterprises owners), thousands of people can effortlessly and in a near real-time spot the competencies and opportunities they want to have access to, facilitating organizational learning, fostering self-realization and better achieving business results. All of this without any managerial role.
Finally getting rid of budgeting
Forecasting, planning, budget allocation, and cascading down, periodic reviews are an expensive, time-consuming, and frustrating game most corporate employees know even too well how to play. More than getting numbers right (i.e., fortune telling), the goal is to spend all the allocated funds by the end of the fiscal year to secure them again for the future. A big waste of time and money that severs the firm’s ability to efficiently allocate resources and focus on the most promising opportunities.
Industry Platforms and VAMs (Valuation Adjustment Mechanisms) erase such annoying, unrealistic, and suboptimal processes by setting just a few strategic directions from the top (Fields and Sub-fields) to then leaving Micro-Enterprises free to decide their own direction and strategy. VAMs are investment contracts through which Industry Platforms fund Micro-Enterprises for them to achieve self-set targets that significantly beat average market performance. Such a combination of top-down direction and bottom-up initiatives works marvelously at amplifying a multitude of ambitious ventures with minimal to no supervision.
Reaping the benefits through profit and ownership sharing
How should the entrepreneurial initiative be compensated? What’s the value of taking on risks, putting yourself on the line, and acting as an owner?
As an answer to participants’ curiosity, Haier’s horizontal and vertical targets, together with value sharing, have been presented to explain how both employees bidding for orders and nodes joining Ecosystem Micro-Communities indeed directly benefit from the results they contributed to achieve, by receiving a slice of them. Together with profit sharing, at the conclusion of a multi-step incubation process, Micro-Enterprises may also be incorporated, with owners formally becoming investors and equity partners in the new company.
All the forms of value circulation imagined by Haier nudge employees and teams to collaborate as peers, helping and being responsible for each other toward a common ecosystemic goal and sophisticated user experiences.
The points above are just some of the divergences and upgrades the RenDanHeYi adds on top of self-management that emerged during the event. Even only through this non-comprehensive list, it is easy to see how disruptive, deep, and advanced the solutions pioneered by Haier are, if compared with the most progressive organization designs currently available.
What can be learned from current RenDanHeYi experimentations?
Transformation and experimentation are the second main area extensively explored at the event. Ignition, transition, and adoption strategies to take inspiration from the RenDanHeYi have been the subject of many questions from attending enterprises. The following are some of my takeaways.
Use skin in the game to bridge sponsorship and execution
Differently from top-down management schemes, each individual in Haier is expected to behave as his or her own CEO. That includes putting their face and sometimes money on the business ideas they propose.
This simple concept breaks the usual sponsor-management-collaborator role distribution of traditional hierarchies, thus making it hard for executives to come up with ideas for new Micro-Enterprises that will then “be assigned” to somebody else in the organization. Since no authorization or sponsorship is any longer needed (only a VAM contract driving expectations and investment), Micro-Enterprise owners should be considered ideators, entrepreneurs, and workers (with their team) all at the same time. Paving new ground and getting rid of both organizational and technological debt demand a visible, strong, and convincing personal commitment.
How to minimize the risk of failure?
Expensive, years-long, wall-to-wall projects seem quite anachronistic in an era of unpredictability and global turmoil. It may be wiser to find areas and groups within the organization with the right level of interest, need, and maturity for acting as pilots and learning grounds. At the same time, the senior leadership should be onboarded, convinced, and ideally available to sponsor the initiative. Both pilot participants and executives should appreciate the experimental and nonlinear nature of the journey ahead.
With thousands of Micro-enterprises as concurrent bets, the RenDanHeYi intentionally considers failure as the mechanism to parallelize experiments, filter successful ones, and accelerate corporate differentiation and learning. Balancing the pressure on results with psychological safety (for example, by anticipating a certain rate of Micro-Enterprises that won’t achieve their targets and through a Talent Pool with the possibility for members to be re-allocated to other Micro-Enterprises) makes personal initiative much easier to achieve.
How to pick the initial set of Micro-Enterprises?
Shark tanks, hackathons, and idea management are all viable approaches to engage a meaningful part of the enterprise population in applying the RenDanHeYi to business challenges relevant to them.
MAQE demonstrated how incremental idea validation (going from idea definition to first customers, to revenues, etc.) may serve as a guideline for increasing the amount of time and investment the firm will offer to the wanna-be entrepreneur.
Besides, opening up the brainstorming to the entire employee base helps at shifting company culture toward transparency, inclusion, and equivalence while reducing the chances to waste energy due to the lack of visibility about real customer issues among the top management.
Who should design organizational architecture?
For how extreme Haier it may sound, even the RenDanHeYi keeps some responsibilities in the hands of the board and the CEO. Among them, certainly, the final word about organizational mechanisms themselves or what, in Boundaryless, we call the architectural leadership of the firm.
Other examples, famously Sociocracy and Holacracy, attribute also this right to the organization itself, with an explicit mandate for each and every employee to sense tensions (gaps between the current reality and expected outcomes) and act upon them, even when it entails changing roles, structures, and responsibilities.
Boundaryless leverages Sociocracy together with the RenDanHeYi exactly with the aim to make organization design adaptive and participative.
What does success look like?
How should we define success when there is no point A or B, the path is uncertain, every decision seems fluid, and action is distributed among thousands of fairly autonomous teams?
We believe that more than the introduction of any specific organizational pattern (MEs, EMCs, VAMs, etc.), the most desirable outcome firms at the moment should look after is a persistent and pervasive ability to keep evolving. Internalizing the responsibility to keep moving ahead, involving customer-facing colleagues in design decisions, and targeting a balance between market ambition and internal structures produce an adaptive advantage that is quite impossible to match.
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