Three KSFs of Decentralized Autonomous Organization
This article was originally written in Japanese by our CEO, Yoshihide Arai.
Recently, many executives and interviewers asked me about the decentralized autonomous organization, holacracy, and teal. That’s why I decided to take a pen in hand.
As a background of the frequent questions for me, centralized organization systems do not match the modern environment in the aspects of rationality, productivity, and work engagement.
There are many reasons; however, I’ll focus on the three KSFs of the decentralized autonomous organizations.
The concept of a centralized organization is the opposite of that of the decentralized autonomous organization. In a centralized organization, the government body has the power to command, make a decision, and control its organization. On the other hand, in a decentralized autonomous organization, all the individuals and teams work and collaborate proactively and autonomously.
For our company, Atrae, we are sharply attentive to the concept of the decentralized autonomous organization. We’ve made a try-and-error to create a company achieving the following two: all employees have strong ownership; the company and the employees are connected not by labor-management relations but bonded by the same vision.
In the above process, I’ve found the most important three things: Information Sharing, Decision Making, and Evaluation.
Information Sharing
Recently, the evolution of technology enables us to share information without any costs, and it is getting more and more accessible at a rapid pace. However, there are hurdles against doing that, for example, culture, individual mentality, etc. Sometimes, it is difficult for some employees to share information because they don’t want to share information, and there are some disincentives. It is essential to incubate culture that enables employees to share information with psychological safety.
Decision Making
To create the best decision-making system is almost impossible. We neither adopt the centralization or hierarchical decision-making process, nor the majority decision that has many serious bugs.
In Atrae, every project unit manages its business autonomously. Each project has its project leader who manages its budget and has approving authority. We think they are not essential: the concept of promotion, manager, and the title. The project leader should be just a role. This is important.
The concept of this system is as follows: every member asks each decision making to people who are good at that field. It is a matter of course that each member can contradict and offer a counterargument to the decision. (More precisely, everyone must object if one has a different opinion.) It is not rare to invite a member out of the board member to make a decision.
Sometimes, some troubles come from a wrong decision by younger members lol. However, such events are precious experiences for them. In the first place, such mistakes are so rare since somebody around makes advice to ask board members.
Evaluation
The flat, decentralized autonomous organization doesn’t have to lead to the conclusion of an equal salary. I think the amount of contribution should drastically change the salary. Some members make great value through extraordinary efforts, while some contribute with their great loyalty within their limited resources. I think the evaluation is critical. However, the “correct” evaluation does not exist, and humans can’t evaluate other members correctly.
So, we’ve struggled to compose the evaluation system with marketability principles like in the stock market. I omit the detail here, but we build an automated system that estimates the contribution of members by the data of 360-degree evaluation. The system determines the distribution of salary source.
The board member decides salary source; however, the distribution is determined by our members via the 360-degree rating. Actually, for now, our evaluation team members are modifying the algorithm, we board members make a minor adjustment to the estimation. We plan to create an automated evaluation system.
By the way, for the feedback for personal growth, I think every member should get it from other members whom he/she wants to hear the feedback — the advice from a person who the one respects strengthens one’s energy to grow.
At the end of this note
I neither think the decentralized autonomous organizations is the silver bullet, nor all company has to change into such organizations. I don’t stick with flatness. What we focus on is to give birth to teams that members of the team can be enthusiastic about their work without any hindering things.
I also asked about the teal organization. But, I didn’t read the book, since it’s too thick lol. So, I can’t talk about teal. However, I’ve struggled to manage the decentralized autonomous organization. In the process, I found the above three KSFs.
I feel we need to keep changing the form of organization to fit our VUCA world, including the evolution of technology (zero cost for communication) and change of competitive superiority (from operational excellence to creativity).
