Stewardship: Remaking Traditional Companies into Natural Enterprises

Traditional Corporation
Natural Enterprise
Normal formation mechanism
Incorporation then eventually public offering
Self-organization as partnership
Source of initial capital
Large capital infusion from established corporations, capitalists and lenders, in return for substantial control of the business
Organic, from customers
Organizational structure
Hierarchical, centralized, top-down managed
Flat, networked, self-managed
Decision-making process
Executive decree
Unanimous consensus of members
Importance of innovation
Moderate; it is often easier to buy out, or buy off innovative competitors
Key strengths
Political and economic power; brand presence
Agility; customer proximity
Sales process
Develop product in lab, mass produce, advertise
Identify unmet customer need, develop customized solution, deliver to pre-qualified customers, market virally
Stakeholder priority
(1) Absentee shareholder-investors; (2) executives; (3) creditors
(1) Members; (2) customers; (3) community
Social & environmental responsibility
Subordinate to shareholder profit
Paramount; implicit and explicit
Optimal size
The bigger the better
Small: 30-150 members each with unique skills or knowledge
Primary objective
Profitable growth
Members’ well-being

Peter Block wouldn’t like the title of this blog. In his newest book The Answer to How is Yes, he asserts that how is the wrong question, one that keeps us back from doing what we really want to do, what we were meant to do, waiting for someone to show us how. “The boss doesn’t have what you want”, he tells us.

The new book is based on one chapter of a classic 1993 Peter Block book Stewardship, which I’ve just finished reading. Way back then, Block had already learned what I was a decade from realizing, that entrepreneurship is natural to all of us, and that hierarchy, money, growth and self-interest are not necessary ingredients of true entrepreneurship but rather obstacles to its effectiveness.

Stewardship attempts what might just be an impossible task: The converting of large, established companies into what I call Natural Enterprises. Chapter by chapter explains how to dismantle the obstacles to true entrepreneurship, slowly convincing the people in the enterprise that you are absolutely committed to radical change, that you mean it (lots of big companies talk a good empowerment story, but have absolutely no intention of acting on it). One of the hardest parts, he says, is convincing managers to give up managing (in favour of stewardship) and at the same time, ironically, convincing line employees to give up comfortable dependency, where they’re not really responsible for anything. It’s a difficult trade-off, and I am sure it would take enormous patience to pull this off, but Block is the master, and he’s covered all the angles.

The question of course is why bother to convert established totalitarian enterprises to democratic Natural Enterprises — why not just start fresh and build a new Natural Enterprise from scratch? Then you don’t have to undo all the things that are wrong with the old model, and you can start with the people you want to make a living with, instead of trying to remake a pool of employees into what they are not (and can’t be too unhappy not being, since they’ve stuck around in the old enterprise).

Even if I were the owner of a very successful traditional enterprise, I’d be more inclined to quietly start up a completely separate ‘side business’ using the Natural Enterprise model, cherry-picking the people who I think would be most inclined to accept the responsibility and egalitarian principles of such an enterprise, instead of trying to convert everyone. Block devotes much of Stewardship to methods of dealing with, and turning around, “cynics, victims and bystanders” — people who don’t believe Natural Enterprise can work and poison it with their negativity, people who say they can’t do anything or won’t take responsibility unless they’re given more power, and people who withhold commitment until the Natural Enterprise concept has been proven to work by others. These people will kill you. Better, I think, to start fresh and not let these people into your organization in the first place.

Block puts a wonderful perspective on all this. The traditional corporate governance system is fundamentally wrong for us, and for our society, he says, for three reasons:

  • “If day in and day out we go to a workplace that breeds helplessness and compliance, this becomes our generalized pattern of response to the larger questions of our society and our lives”, and democracy will flounder.
  • “Autocratic governance withers the spirit”. It disengages us and makes us less effective.
  • Centralized control interferes with and precludes innovation, quality, and deep understanding of and response to what customers really need and want.

The cult of leadership drives us to think that hierarchy works, that those at the top of the hierarchy can really wield substantive change, and that the organization is best served when the rest of us just do what we’re told. These are all untrue, of course. Instead, Block points out:

  • Our ‘leaders’ have more impact in the news than in their organizations. They are symbolic, but deluded to believe they are much more.
  • They reinforce the idea that most accomplishment comes from extraordinary personal action, when most accomplishment actually comes from team and community collaboration.
  • They convince us that until/unless we climb to the top of the organization, our impact on the organization can only be marginal.
  • They begin to believe their own press, take undue credit for successes (and get unfairly fired when the organization fails), take home a wildly disproportionate share of the organization’s profits, and take unilateral and ill-considered actions that hurt the organization, in the belief they can do no wrong.

Even well-intentioned leaders quickly get sucked into the mythologies of the old model: They start telling subordinates how to behave, view management as essential to all organizational change, use education as indoctrination, and use performance appraisals to ensure compliance.

Block’s stewardship model, like my Natural Enterprise one, is one of equal partnership of all co-workers. Block outlines five principles for such partnership:

  • The need for agreement on shared purpose among all partners. The organization reflects everyone’s vision, not just “management’s”.
  • The need for unanimity in major decisions. “Every partner has the right to say no”.
  • The acceptance of joint accountability and responsibility. No blame games.
  • The need for absolute honesty. “Not telling the truth to each other is an act of betrayal”.
  • The prohibition of abdication. No sitting on the sidelines. Full engagement.

He then moves on to operating principles for organizations that are governed by such partnerships. I’ve ‘radicalized’ these principles a bit, because I think Block tends to get a bit mired in traditional operating methods, and compromises the statement of these principles to the point they lose some of their power:

  • Empower everyone: Day-to-day decision-making is entrusted to those closest to the customer, those on the front line. Learning from experimentation means learning by making mistakes.
  • No managers, no hierarchy, no titles: Everyone manages themselves, and collectively manages the organization.
  • Only long-term, qualitative measures: Collective, meaningful results, not behaviours and actions to get there.
  • Local solutions, not standard solutions: Except where health and safety is at stake, standard answers are suboptimal. Diversity and innovation need to be encouraged, not crushed.
  • Promise of commitment to service: Partners are in the business to serve others, not to maximize their self-interest. The freedom of equal partnership bring with it responsibility for service and full engagement.
  • No secrecy: Complete information and the complete truth, all the time. That includes training everyone to understand the whole business (“business literacy”) so they can make meaning of this information.
  • Equal compensation: No individual ratings or rankings means that everyone shares equally in the success of the organization. Block is a bit equivocal about this, for good reason — it’s the hardest tenet of traditional hierarchical enterprise to give up, especially when competitors still operating under the traditional pay-for-rank model may seduce some people to bolt. I say let ’em go. I go even further, and say compensation should be based on what the partners need, not on their impossible-to-determine ‘individual’ performance. That needs to be spelled out in the partnership agreement. You have kids and a mortgage, you need more compensation than the 60-year-old with no debts; the traditional compensation model gets it exactly backwards.

It’s great to read this kind of principled idealism from someone who has worked with real organizations for decades. He is at once pragmatic anduncompromising. No wonder Dave Smith is such a fan of his.

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4 Responses to Stewardship: Remaking Traditional Companies into Natural Enterprises

  1. This is all great stuff, and a useful checklist to see how the organisation that I work for is going.However, I’d like to criticize your idea of needs-based compensation. Why should somebody with kids and a mortgage get more? They chose to have children, and to buy a house. Perhaps the 60-year-old with no debts would like to donate to a charity, or fund a new natural enterprise his friend is starting. Or any number of other good things.

  2. Paul Hunt says:

    I grew an enterprise with all these ideals at the start. The enterprise was very successful, but many of the details you advocate got lost in the process. It is very hard to compensate everyone the same when some are working 70 hour weeks, studying and inovating brilliantly, while others barely put in their time and don’t have any interest in learning more.Total openness worked until the group got larger than 25. At that point too many people were business illiterate to understand the context of decisions. There were too many contexts for everyone to understand everything. We were still open when anyone asked, but we stopped volunteering all info to everyone.

  3. Peter says:

    For anyone interested in a real life example of a highly successful corporation built on similar principles, check out Yvon Chouinard’s “Let My People Go Surfing”. It came out last year and tell how was built. Yvon and Paul Hawkins are two of my favorite role models for entrepreneurship.

  4. In my experience, the “followers” resist these ideas as much as the “leaders.” I have one coworker who uses papal and divine metaphors when referring to senior managers of the company. This person will not make decisions, even when asked to do so!

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