Chaordic Leadership

Chaord is a concept I came across by Dee Hock, the founder of VISA, perhaps one of the most impactful companies of the 20th century and with a current market cap of $413bn.

But before talking about chaord, we need to understand something about startups.

The systems, processes, and leadership skills required to make startups successful are entirely different from those which make traditional companies successful.

Simply put, company building under highly volatile and uncertain circumstances requires a special type of company culture. Startups arise and thrive on the edge of chaos, but need just enough order to give them pattern.(p.2)

Chaos + Order = Chaord

Traditional vs Startup

When Dr Dre wanted to create his new headphones he already knew a bunch of variables which reduced chaos.

People already bought headphones. He knew what makes a good quality headphone. He knew validated price points. He knew the competitive landscape etc.

There wasn't a laundry list of hypotheses that he had to validate before having a strong level of certainty.

All that was required was good execution.

Compare this to a startup where there is no precedent for your idea.

You have no idea if the market needs your product, and you have no idea if your product solves the problem well enough.

There is no precedent to base your pricing off of, and no proven channels for go-to-market.

Everything is unknown.

You have to validate your hypotheses and have flawless execution.

Operating under such high levels of uncertainty means problem solving becomes an extremely creative endeavor.

These dynamics require a very special type of organizational structure and leadership style.

This is what I explore today.

⚔️ Command & Control

Command and control is a highly popular way to run a traditional business. Decisions are made at the top and orders funnel down to employees for execution.

Highly defined processes are often set up as a way to mitigate risk. Companies that value process over people see people as the problem.

Command & Control is a tactic to avoid bad outcomes, and less about creating good ones.

"Our finance person, Sheila, had a black poodle that she sometimes brought to the office. One day, I arrived at work to find the dog had chewed a big hole in the conference room rug. Replacing that rug cost a fortune. I created a new policy: no dogs at work without special permission from Human Resources". Reed Hastings & Erin Meyer: Netflix: No Rules Rules (p. xix).

Prior to building Netflix with a forward thinking culture, Reed built a company obsessed with process to prevent bad outcomes. He reflects:

"Policies and control processes became so foundational to our work that those who were great at coloring within the lines were promoted, while many creative mavericks felt stifled and went to work elsewhere....Then two things occurred. The first is that we failed to innovate quickly. We had become increasingly efficient and decreasingly creative."

To keep growing through their stifled innovation they had to acquire new business units because innovation wasn't coming from within. The complexity of integrating these new acquisitions created many problems.

In addition, reliance on management defined processes meant employees weren't able to think for themselves. They weren't able to adapt to new situations.

So it seems too much process sucks. But if you take away the process and control, will the organization descend into chaos?

Perhaps.

But that's not necessarily a bad thing.

🌪 Chaordic Leadership

Hock describes a chaordic system as:

"any self-organizing, self governing, adaptive, nonlinear, complex organism, organization, community or system, whether physical, biological or social, the behavior of which harmoniously blends characteristics of both chaos and order. Loosely translated to business, it can be thought of as an organization that harmoniously blends characteristics of competition and cooperation... As I learned from the formation and operation of Visa, an early archetype of such organizations, they require a much different consciousness about the leader/follower dichotomy"

Chaordic organizations need more chaos than order, otherwise the order will stifle innovation. As we saw with Reed, process is where creativity goes to die.

In a process driven organization leadership will attempt to compel certain behaviors through order and structure. In a chaordic organization, such as a startup, leadership will induce behavior through a certain type of leadership.

👀 Don't look down

In traditional companies management looks downwards. Management is often hierarchical, where people impact change through authority not influence.

These organizations tend to treat people as resources to exploit.

In a chaordic organization Hock recommends a great manager should:

• first manage himself (internal)

• second manage his superiors (upward)

• third manage his peers (around)

Note, he never says manage his subordinates (downwards).

"The common response is that all one's time will be consumed managing self, superiors and peers. There will be no time to manage subordinates Exactly! One need only select decent people, introduce them to the concept, induce them to practice it, and enjoy the process. If those over whom we have authority properly manage themselves, manage us, manage their peers, and replicate the process with those they employ, what is there to do but see they are properly recognized, rewarded -- and stay out of their way?" (p.4)

I wish I had this mindset when I was first promoted from individual contributor to manager for the first time. I used to get too involved in the day-to-day and wanted to do the work myself every time my team struggled to produce results.

This was clearly not effective.

Great managers, on the other hand, turn talent into performance. They act as a catalyst towards results. Great managers don't get things done by doing it themselves, they get things done by enabling other people to do it.

Great managers realize that their biggest asset is their ability to effect change in others. You must know your team. What makes them tick. What saps their energy. What their unique skillsets are. You must master the art of bringing out the best in other people.

This is very different from setting guide rails and ensuring people stay within them. You must provide air for the fire, not starve it of oxygen.

You can't dominate your team with knowledge, authority, or rules. You cannot compel performance. You must empower your team to perform independently of you.

Performance in chaordic organizations comes through influence not authority.

Employees should be able to solve problems autonomously, from a first principles perspective on their own. They should not rely on process to guide them.

Processes are built in the absence of nuance. The real world is not.

Chaordic Frameworks

As much as chaordic organizations embrace chaos, they don't forgo structure altogether.

Here are some frameworks that high performing teams embrace.

♻️High velocity feedback loops

Most of the startup world is well acquainted with the theory of agile development laid out in The Lean Startup, but the concept of high velocity feedback loops doesn't just apply to product development.

Feedback loops, and more specifically the velocity of feedback loops, is important in every aspect of your company.

When I say velocity I mean both the speed and quality in which feedback is processed.

Quick feedback loops with crappy inputs help no one. Slow feedback loops with high quality feedback is better, but your competition will quickly outcompete you.

As a leader you must be looking to shorten the time it takes to receive feedback, and increase the quality of each cycle.

To increase the quality of feedback in your organization, I highly recommend reading Radical Candor. For increasing speed, it's really a case of building feedback loops into your processes.

Lose a deal? Write a post-mortem.

Receive some great customer love? Share it in a public slack channel.

Do everything in your power to get high quality feedback all the way to the top. Don't underestimate how hard this becomes as you grow. Leadership can become quickly detached from crucial information in the trenches, particularly as you pass the Dunbar number of 150 employees.

📍Give context not control

Your organization should provide employees with enough context about a problem, and then let them run wild.

Avoid dictating how problems should be solved. Remember, controlling the process stifles creativity which is essential to solving new, hard problems.

Providing context also means setting expectations. Many employees fail not because they can't do something, but because they don't know what's expected of them. How can you perform well when you don't know what good looks like?

👨‍✈️Centralize decisions, while collectively sourcing inputs

Unpopular opinion: dictatorships are effective organizations.

Decisions are made quickly.

Dictatorships fail however when the person in charge becomes corrupt or is incapable of doing the job. You want to guard the effectiveness of a dictatorship while leveraging the knowledge shared within a democracy.

You want to crowdsource your inputs, but centralize the decisions.

Communicate to your employees that their contributions will influence outcomes, but they won't determine them. Leadership dictate decisions which are influenced by employees.

It's your job as a leader to make decisions, but it's equally your job to know that your employees are the domain experts. Their input is often more valuable than your own in isolation.

In a chaordic organization truth is more important than consensus.

📉 Embracing failure

Our goal is obviously not to fail. Our goal is to succeed.

Having said that we should not be afraid to fail.

We must accept that failure is the path to success, not the opposite of it. Don't proactively seek out failure.. avoid the "failure porn" culture that's become popular in the valley. But equally don't avoid failure either.

When failure comes knocking, embrace it and ensure those high velocity feedback loops are running on full blast to get you to success quickly.

📈Growth mindset, not fixed

You don't need to have everything figured out. But you do need to be able to figure it out. Growth mindset is all about learning. Fixed mindset is about proving what you already know. Scrap that mindset.

Know that you should always be improving. It's not your Y-intercept that matters (where you start), it's the speed of your growth curve that determines where you end up.

Wrapping it up 🌯

Startups operate in a world where the only constant is change, and those who are unable to innovate will die.

Innovation means solving complex problems creatively, venturing where no man has gone before.

Too much process or control and you'll stifle creativity altogether.

Care less about avoiding bad behavior, and care more on encouraging good behavior.

The antidote is Chaordic Leadership.

A set of principles and frameworks that enable you to embrace the crazy and thrive on the edge of chaos and order.

Remember...

Order comes through empowerment, not authority.

Order comes through setting expectations, not restrictions.

Order comes through figuring it out, not having it figured out.

Order comes through learning from failure, not avoiding failure.

Order comes from people exploiting resources, not people being exploited as resources.

Order comes from decisions that are made centrally, based on information that is sourced collectively.

So now that you've been introduce to Chaordic Organizations, where does your company sit... command and control or chaos and order?