The Emergence of the Teal Organization

According to Frederic Laloux, the author of Reinventing Organizations: A Guide for Creating Organizations Inspired by the Next Stage of Human Consciousness, the days of the top-down hierarchy as the dominant organizational framework may be numbered. Despite its continued preference by the current power elite, the bureaucratic management model is rapidly becoming limited and obsolete now that the technology revolution has unleashed the extraordinary and unstoppable phenomenon of distributed intelligence.

Laloux points out that organizations are expressions of the dominant worldviews of their times. His extensive research traces the evolution of organizations over the past 10,000 years. Over that period, Laloux noticed whenever we change the fundamental way we think about the world, we come up with new and more powerful types of organizations, and while prior forms of organizations don’t completely disappear, the higher-order organizational frameworks that evolve from new ways of thinking tend to become the dominant practice of the new age. Laloux also noticed that these passages from one age to another are not continuous, gradual transitions but sudden transformations, and most importantly, he suggests that we are in the midst of one of these transformations right now.

Using a color-coded typology inspired by the work of Clare Graves and made popular by Don Beck and Christopher Cowan in their book Spiral Dynamics, Laloux outlines the evolution of four types of organizations over the last ten millennia and describes in detail the attributes and characteristics of a fifth and radically different emerging organizational form.

The first of the four historical types is the Red organization, which appeared about 10,000 years ago when people were organized into chiefdoms. The fundamental rubric in these small groups is the exercise of overwhelming personal power through fear or submission to keep organizations intact. This type of organization is highly reactive and focused on the short term. Current examples of Red organizations include the Mafia, street gangs, and tribal militias.

The second type is the Amber organization. Organizational life dramatically shifted when the agricultural revolution transformed nomadic hunter-gatherers into settled farmers and gave rise to the first bureaucracies with the emergence of political states, social institutions, and organized religions. In Amber organizations, authority is linked to formal roles rather than to powerful personalities. These roles are arrayed in strict chains of command to direct all aspects of social activity. One of the great breakthroughs of bureaucracy is its capacity for long-term planning and scalability, which enables the accomplishment of complicated endeavors. Current examples, according to Laloux, include the Catholic Church, the military, and most government agencies.

The Industrial Revolution generated the next type, the Orange organization. While Orange organizations retain the hierarchical pyramid as their basic structure, followers are given more autonomy in how to accomplish management directives. Nevertheless, consistent with the industrial worldview, organizations are viewed as machines that need to be manipulated and controlled by their leaders. Thus, these organizations can feel lifeless and soulless despite the small freedom workers have in performing their tasks. The multinational company is a current example of an Orange organization.

The fourth historical type is the Green organization. With the increased educational level of workers, especially in the second half of the twentieth century, organizational leaders became uneasy with the exercise of hierarchical power. Thus, Green organizations emphasize the importance of empowerment, striving for bottom-up processes, gathering input from all, and building consensus. However, despite their focus on creating strong human cultures, Green organizations are still hierarchies because the notion of empowerment is predicated on the premise that the leaders have the authority to choose whether to delegate their power.

The one common feature of the four historical models is bosses. From the first chiefs to present-day CEOs, the exercise of power has been about “being in charge.” Even in the empowerment structures of Green organizations, the people in charge have to delegate their power for empowerment to take hold. But Laloux asks, “What if we could create organizational structures that didn’t need empowerment because, by design, everybody was powerful, and no one was powerless?” In other words, what if we could create organizations where power wasn’t a function of being in charge, and thus, there were no bosses? The answer, according to Laloux, is the Teal organization.

The Teal organization is a revolutionary new management model that operates from the premise that organizations should be viewed as living organisms and, therefore, function more like complex adaptive systems than machines. Accordingly, this organizational form is a flexible and fluid peer relationship structure where work is accomplished through self-managed teams.

Teal organizations have no layers of middle management, very few staff, and very few rules or control mechanisms. Instead of reporting to single supervisors, people are accountable to the members of their teams for accomplishing self-organized, collective goals. As counterintuitive as it may seem, eliminating controlling bosses typically enables a better-controlled organization because peer pressure is a more effective performance motivator than compliance. In describing the dynamics of Teal organizations, Laloux points out, “The heart of the matter is that workers and employees are seen as reasonable people who can be trusted to do the right thing.” In other words, a distinguishing characteristic separating self-managed, peer-to-peer networks from centralized, top-down hierarchies is that the facilitators of networks trust people a lot more than the take-charge bosses in hierarchies.

While there are no bosses in Teal organizations, these are not leaderless enterprises. In fact, Teal organizations have more leaders than their hierarchical counterparts because they can tap into the leadership capabilities of everyone within the organization. In Teal organizations, all voices count because anyone can sense a problem or opportunity. Additionally, since anyone can be a leader, everyone has the wherewithal to recruit followers to determine whether they need to do something. If enough people join, action is taken; nothing is done if recruits can’t be found. What makes these peer-to-peer networks so efficient, in comparison to top-down hierarchies, is their inherent ability to leverage their collective intelligence as a powerful resource for responding to fast-changing circumstances.

In a relatively stable world where all social institutions share the same hierarchical paradigm, leveraging the individual intelligence of the few is a workable premise for designing organizations. For over 10,000 years, there was no practical competition for the top-down hierarchical paradigm and no incentive to change for those who enjoyed the lucrative benefits of being on the top of these pyramids. However, this is changing because, as advances in digital technology continue to pressure organizations to be faster and more adaptable, business leaders will eventually—and perhaps suddenly—discover that the only way they can respond to this pressure is to transform themselves into Teal organizations.

To learn more about the peer-to-peer management system, see my new book Nobody Is Smarter Than Everybody: Why Self-Managed Teams Make Better Decisions and Deliver Extraordinary Results.