Target Teal’s Associative and Operational Structure
When we started Target Teal, we had many doubts regarding how we could organize ourselves in legal and associative terms. We were sure we would be a self-managed organization in its essence, but we’d also wanted to go beyond, distributing the property of the business and also avoiding the employee-employer relationship. Without finding many legal precedences for what we were aiming to build, we happened to design our own model that mixes characteristics of both organizations and networks.
Each partner at Target Teal delivers value directly to clients by signing contracts with them. Although we are separate companies, we present ourselves as a single organization under the same brand.
Looking back, I realize that some principles guided the design of what we today call org-net:
- Autonomy: Partners at Target Teal have the autonomy to choose which roles they fill and which projects they are involved in. Obviously, those choices have a direct impact on the agent’s income, as we’ll see below.
- Scalability: In theory, Target Teal’s model is completely scalable, since we use the “nested team structure” found in approaches like Holacracy, Sociocracy, and Organic Organization. But that remains to be proved since at the moment of this writing we only have 7 partners.
- Boundaries: As opposed to a pure network where there is not clarity between who is part of it and who is not, we preserve at Target Teal the boundaries of an organization, which also includes a minimum expected dedication from its partners.
- Zero-staff: The non-incorporation of Target Teal allows us to operate without any staff functions. Each agent takes care of one’s own legal bureaucracy. Generally speaking, accountants, lawyers, and financial/administrative departments are not needed. Since we also have a distributed and remote team, we don’t need to worry about facilities.
- Community: Mutual support and a space for vulnerability allow Target Teal’s partners to ask for help when they need it. Although individual projects are possible, we seek to sign contracts in pairs or even larger teams to increase interactions and learning.
Distributed Fund
One key aspect of the org-net is the Distributed Fund, a mutual-credit system that allows us to remain unincorporated and to transfer resources between agents without double taxation. The DF works this way:
When a partner receives any income from clients using the brand, this information is entered in a ledger (spreadsheet). Currently, the DF’s contribution is 5%, so if I sign a contract of $50.000, I will be owing Target Teal $2.5k. No money is transferred between accounts at this point. The ledger simply accumulates the amount each partner is owing to Target Teal. The total amount represents the balance of this virtual account.
When a partner needs to invest an amount using the fund, he or she follows the process in our structure (currently anyone can spend up to 40% of the fund, as long as they give it transparency). In order to pay for the investment, the partner can either pay him/herself and deduct from his/her own debt, OR he or she can ask the partner with the highest debt to do so.
The Distributed Funds is mainly used to pay for our website hosting, marketing tools, some advertisements and events we promote. We also have used the DF to invest in the translation crowdfunding of Reinventing Organizations to Portuguese. Actually we have an issue right now: we are not spending enough and the balance keeps increasing! I have never seen an organization with such a problem.
Credit Pile
Some people ask about the contributions of each partner in the side/support roles. Are they equal? Or do some partners contribute more than others?
No, the contributions are not equal. Some partners focus more on delivering services to clients. Others invest more time doing other things that do not generate revenue directly. The reasons for doing so are highly personal. I, for example, enjoy designing games for helping our clients better understand self-management. I do it simply because I find it useful and I like it. Others do more client work because that increases their revenue.
In order to balance things out, we have created a way to redistribute resources through the Distributed Fund. We call it Credit Pile. In our circle meetings, usually once per month, we pick an amount from the Distributed Fund and give it back to partners. Usually, each participant chooses how much he or she wants to give, to whom and for what reason. It is working fantastically well because besides creating a sense of justice, this became a very interesting moment for appreciation and feedback.
Assumptions of the Org-Net
You might think that we are geniuses that pioneered a new organizational model that will suit every company. But we are not. The org-net model has some specific assumptions that make its application very narrow and specific. Those include:
- Few or no physical assets: When your company needs to acquire assets or make big investments in order to deliver value, like buying expensive machinery or advertising on TV, that increases risk. Our current model requires agents to take risk personally. But since what we buy is at most some books we need to print or a venue we need to book, that is acceptable. So we can’t buy many things, and our business even doesn’t require us to do so.
- Short and simple value-chain: The org-net assumes that its partners will be able to deliver value to clients almost individually. If one specific project required the coordination of dozens of people, that would increase risk also, making it less likely that the owner would be willing to take that risk personally. We work with small contracts for the same reason.
- No support functions: Since the Tealer’s income comes directly from serving the clients, we cannot have partners that do only a support function, like marketing for example. Actually it is possible to pay support functions with the Distributed Fund, but that would make it too uncertain for the partner, and we have never made this experiment.
Advantages
Comparing our approach to other consulting companies we know, we have observed some advantages so far:
Side-role development: This one is very important to me. I don’t enjoy becoming to narrow-focused or specialized in doing just one thing. Because of our structure, all things that are not outsourced must be accomplished by the partners themselves. That can give me an opportunity to learn more about inbound marketing, for example. If that becomes an issue — as we won’t be so good doing such side roles as an outside specialist — we might consider outsourcing it. At Target Teal, besides doing client work, I can do some programming, design website pages, create games and write ebooks, and that is fantastic.
High return for the partner: Due to our low operational costs, 95% of the returns minus taxes go back to the consultant or people directly involved in the project. That makes Target Teal very attractive for highly experienced consultants that do not want to work on their own. An agent can earn more than R$ 30.000 if he or she puts enough effort and has a good reputation. That is the monthly salary of an executive in Brazil.
Mutual support: Our culture of vulnerability supported by practices like the Care Mode in Organic Organization creates a space where consultants can share their most difficult dilemmas and be heard. Working with organizational change is hard work and emotionally challenging. We often confront our own shadows during the interventions we do and it becomes very important to have a safe space to ask for help.
Limitations
We are very aware of the limitations of the org-net model, and we recognize them as tensions we’ve chosen to live with. The first one is that Target Teal may not be so attractive to people that are not financially secure. At the beginning at least, agents may have a hard time finding clients and building their own clientele. They may partner with other more senior consultants, but that is not usually enough to create a steady income. For that reason, the org-net requires consultants to develop their own network of contacts and becoming relevant in the market. Consultancy work is highly personal and sometimes clients ask for a specific person, due to his or her personal reputation. Learning to sell one’s service is also crucial, as sometimes we have to do some active prospecting rather than just navigating the opportunities that come directly to us.
How we get clients and projects
Fortunately, most of our clients come from our own networks of contacts. Some are referred by past clients, others from previous places we worked. Sometimes contacts come from our website contact page. Other times they’ve heard about us in open workshops and events that we promoted. Very little times we do active prospecting for consulting services. Target Teal’s reputation is growing, so companies that search for our name as a brand rather than a specific consultant are becoming more and more common.
Collaboration between partners
Some ask whether this model would lead us to a highly individualistic culture, given that our incomes come directly from the clients we serve. But that couldn’t be further from the truth.
At Target Teal we witness collaboration on different domains. First, in the client work, we say that a partner can deliver value by him/herself, but that is not totally true. As the job is highly demanding, we inevitably ask each other for help. For example, even though at the beginning I was highly worried about income (as sharing a project inevitably leads to splitting the revenue), I quickly learned that actually sharing a project gives me more energy and also makes the work more effective. So, no individual projects anymore for me. That doesn’t pay out.
We also collaborate on projects in internal roles, like writing ebooks, launching a new campaign or developing our methods/approaches. That is also very exciting because we have a lot of freedom to choose where we put our energy.
Things yet to be improved
The org-net model is suiting us very well. We constantly add some practices and improve the existing ones. Also, there are a couple of things that are not so clear or we don’t have a definitive answer. Those include:
Partner Exit: Any partner may leave the partnership, provided that he or she pays his debt to the organization and also fulfills other contractual duties, like transferring property to the remaining agents. But we do not have any explicit agreement about how to remove a partner from partnership against his/her will. That is hard since litigation is not an option because we are not incorporated. A possible solution is creating a buyout clause so that leaving might become financially incentivized. We are considering this possibility.
Changes to the Contract: Although changing the agreement is not so common, when we do so we require the consensus of all partners. In the future, we might create an elected committee in order to make it scalable.
Hope you readers like this detailed description about how we work. Please comment below if you have further questions and let us know if you do some experiments in that direction.
