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Making organizational learning work: Consent and double linking between circles
European Management Journal Vol. 14, No. 1, pp. 69--75, 1996
~
Pergamon 0263-23
73(95)00048-8
Copyright © 1996 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0263-2373/96 $15.00 + 0.00
Making Organizational Learning Work: Consent and Double Linking between Circles GEORGES ROMME, Associate Professor, University of Limburg, The Netherlands
What kind of organizational structure best supports organizational learning? Focusing on this question, experiments in The Netherlands have led to the circular organization, in which learning processes in teams (circles) are effectively combined with the administrative hierarchy. The circle structure is used for policy making, whereas policy implementation remains within the domain of supervisors and managers. The circular model appears to provide a learning structure in which feedback rather than power is the key organizing principle.
Endenburg found that the learning ability of organizations is severely hampered by their top down structure. He therefore developed an alternative model for structuring his company, the so-called circular organization, also known as the 'sociocratic organization'. A circular organization is created by superimposing a hierarchy of circles on the existing administrative hierarchy. These drcles operate on the basis of the consent principle, which guarantees the equivalence of all participants, and the principle of double linking between circles, which promotes both downward and upward communication between circles.
Introduction
In practical operation since the mid 1970s, the circular model has progressed beyond the experimental stage
The topic of organizational leaming has gained a lot of attention, although many business people and academics now take for granted the idea of organizational learning is difficult to realize in most organizations. In this respect, there is little agreement on how to create a learning organization. Most publications in this field focus on the development of individual and collective mental models, the thought constructs that affect how people act (e.g., Argyris, 1991; 1992; Garvin, 1993; Kim, 1993; Senge, 1990). Far less attention has been given to the kind of organizational structures that support organizational learning. Many companies have introduced delayering, empowerment or quality programs. Others have attempted to reengineer their business processes. All these vigorous attempts have been made with the implicit assumption in mind that the top down nature of organizational structures does not inhibit learning processes. In the early 1970s Gerard Endenburg, a Dutch entrepreneur and engineer, started experimenting with a new way of organizing his company. In these experiments EuropeanManagernentJournalVo114No 1 February 1996
69
MAKING ORGANIZATIONAL LEARNING WORK and is being used rather successfully in other Dutch organizations as diverse as a municipal police department, a large consultancy firm, a food catering company, and a chain of hairdressing shops. All these organizations have reported productivity increases of 30 to 40 percent, and both workers and managers seem to like working in them. In addition, the circular model has begun to fan out well beyond the Netherlands, and is currently being tried out in several large organizations in Brazil, Canada, Germany, and the USA. 1
Historical B a c k g r o u n d
In the circular model the consent principle only govems decision making on policy issues, such as the organization of work in a department or company-wide strategic issues. Dedsions about policy implementation are not made by consent, but remain within the domain of authority of line managers or supervisors. Organizing into Circles Every member of the organization belongs to at least one circle, a functional work unit. A circle is a group of people with a common work objective whose basic mode of decision making is by consent. Each circle includes its supervisor or manager. For a typical circle, consent decision making normally occurs in specially scheduled meetings, with a typical frequency of one meeting in every four or eight weeks. In these meetings decisions are taken about issues relevant to the work objectives of the circle, and within the limits of the circle's authority.
Endenburg Elektrotechniek is a successful electrical engineering company, currently employing 140 people, and was founded in Rotterdam in 1950 by Endenburg senior and his wife. After completing his studies in electrical engineering and radar technology, Gerard Endenburg joined his parents' company and was appointed General Manager in 1968. As a condition for accepting this position, Endenburg requested that he be allowed freedom to experiment, both technically and Quinn Mills (1991) in Rebirth of the Corporation also organizationally. Having grown to a company advocates empowered circles as the fundamental employing about 120 people in building stones of companies, Double linking is the single because they generate a lot of the early 1970s, Gerard Endenburg dedded to stop creative energy. Many people most important innovation feel further growth in order to give insecure with the idea of more attention to organizational working in a circle, which of the circular model renewal. He then started to according to Mills (1991) largely experiment with some of the ideas he had about results from a lack of knowledge about how circles decision making and organizational structure. These operate. He is wrong. The most important reason for experiments were espedally inspired by ideas taken from feeling insecure in circles involves the absence of a Quaker derision-making practice. The circular model threshold that safeguards the partidpation of each relies on four ground rules: decision making by consent, individual member. The consent prindple provides such organizing into drdes, double linking between circles, a threshold. Without this threshold, circles quickly and election of persons by consent (Endenburg, 1988; deteriorate into decision making units where power Romme, 1994; 1995; Van Vlissingen, 1991). games, feelings of mistrust, lack of commitment, and defensive manoeuvring prevail (cf. Argyris, 1992).
Decision Making By Consent The primary method of dedsion making is by consent, involving the absence of any 'argued objection'. The consent principle can be traced back to the Quaker tradition of dedsion making by consensus. The Quakers recognize that, while each individual has some ideas, it is likely that the best solution to important problems will come out of the collective wisdom of those closest to the problem, regardless of their formal position or group membership. Endenburg adapted the Quaker consensus principle of full agreement towards 'consent', defined as the absence of any argued objection. In other words, where a consensus decision is arrived at when all say yes, for a consent decision is it suffident that no one says no. The emphasis on argued objections is meant to stimulate creative solutions. Moreover, Endenburg found that decisions by consent are easier to implement than decisions taken on the basis of authority. In addition, power games could be largely avoided in this manner (Endenburg, 1988). 70
Double Linking Between Circles For practical reasons, most circles include not more than 20 to 25 members. A larger organization therefore has to subdivide into a hierarchy of circles. In this hierarchy each drde is represented in the next higher circle by its supervisor or manager, and one or more additional representatives chosen from the circle by consent. Double linking is perhaps the single most important innovation of the circular model. Its pivotal role is easily overlooked, because in most organizations the effectiveness of the single link between hierarchical levels is never questioned. Double linking requires a complete shift in thinking about management and leadership. Figure 1 provides a schematic overview of the kind of cydical process each circle is involved in: the leading, doing and measuring cyde.Zln the leading stage instructions are issued which are carried out in the doing stage. In the measuring stage, the results are observed and passed on to the leader, who subsequently European ManagementJournalVo114 No 1 February 1996
MAKING ORGANIZATIONAL LEARNING WORK
LEADING
LEADING
A
MEASURING
DOING
MEASURING \
Figura t 1"he C y c l i c a l Procass of k a a d i n g - l ) o i n g Measuring
The conventional idea of Likert's linking pin is implicitly based on the fundamental assumption that the doing/ leading and measuring/feedback link can be combined in one person. However, most managers trying to represent both links underestimate the fundamentally different requirements in terms of individual competences. Moreover, the traditional emphasis on downward information flows is to a large extent determined by a structure in which upper hierarchical levels appoint managers or supervisors at lower levels. If organizations really want to improve their learning ability, they should create channels for upward information flows that are governed by those closest to the information.
Electing Persons By Consent Each circle assigns its members to the positions or tasks via consent after open discussion. Important elections involve the circle's chair, representative(s) to the upper circle, supervisors of the lower drcles, general manager(s), and outside members of the top circle. Although election of persons by consent logically follows from the previous three rules, practical experience underscores the importance of adding this fourth rule. Our traditional behaviour programmes are such that we are very reluctant about discussing other persons in public, especially when they are present. EuropeanManagementJournalVol 14 No 1 February1996
,/
DOING
/
LEAD,N/I \
/ \\
compares the result with the norm and, depending on any difference, may issue a corrected instruction. This may be an overly simplistic view of the way circles operate, but it serves to point out the function of double linking in Figure 2. Assume circles A and B in Figure 2 have to work together, with drcle A being responsible for the operations of circle B. If circle A wants to be able to control the operations of circle B, the circular model suggests two connecting links should be developed and maintained. One link is the supervisor of circle B, appointed by consent in circle A, who transmits the information from the doing stage in circle A to the leading stage in circle B. The second link feeds back any relevant information from drcle B to the measuring stage in circle A. This link involves one or more representative(s) of circle B. Thus, the double link between circle A and B involves at least two persons.
/
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MEASURING Figure 2
DOING
I)oublc kinking Between Two Clrckts
Through our experiences in democratic systems we have been programmed with the message that secret voting is the best way to deal with elections. However, an election in a circle meeting places much weight on the arguments raised in favour of certain candidates. Speaking openly about the potential of circle members is an essential step in getting the fight person on the fight position. If after some time the drde finds that the 'wrong' member has been chosen, the procedure can be repeated. In order to prevent that, some individuals routinely hold on to their positions in Endenburg Elektrotechniek, each position in this company is re-elected at least once every two years. T h e Circular O r g a n i z a t i o n in Endenburg Elektrotechniek 3 The administrative organization of Endenburg Elektrotechniek, used for the day-to-day management and control of operations, is shown in Figure 3. Figure 4 shows the drcular structure that is superimposed over the administrative structure for dedsion making about policy issues. The staff of each department makes up the membership of the departmental circle. The general circle includes the general manager, all unit managers and department supervisors, and one or more representative(s) chosen from each departmental circle by consent. The top drde comprises the general manager, one or more chosen representative(s) from the general circle, and four outside directors. Circularity in Endenburg Electrotechniek can be illustrated by way of a critical incident that constitutes one of the most severe 'extemal' tests of the circular 7J.
MAKING ORGANIZATIONAL LEARNING WORK
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General Manager Assistant Manager ~
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Unit Managers Supervisors
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Figure ~1 The Administrative Struoture of Endenburg Elektroteohnlek in 1 9 9 4
model over a period of more than twenty years. In the late 1970s the company ran into a severe crisis situation when a large shipyard in Rotterdam, accounting for more than one-third of the business of Endenburg Elektrotechniek, suddenly shut down. After having studied the situation, the general circle decided by consent it was inevitable to layoff 60 workers. The day after the decision was announced, one of the fitters in the Manufacturing unit, Jan De Groot, asked the secretary of his circle to call a meeting as quickly as possible in order to discuss an idea he had for a better way to handle the sudden crisis. The circle secretary was able to arrange a meeting for the next day, and when everyone was gathered, De Groot explained his idea. 'It seems to me', he said, 'we'd do a lot better if we delayed
DepartmentalCircles Figure 4 TheCiroin$|rusture of IEndenburg Ilektrsteohnlek (used for Polioy Deolsione) in 1 9 9 4
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the layoff for a few weeks and shifted everyone who would be laid off into a concentrated marketing effort. The overall development in our kind of business is not as bad as it seems. There has just got to be more business out there! I would much rather spend my time wiring generators than knocking on doors with a suit and tie on, but I'll do it if it means keeping my job.' The circle members then discussed the proposal of De Groot, and after about half an hour the circle appeared to go along with this proposal. The circle's chair, who was in this case also the chosen representative to the general circle, summarized the picture that apparently had emerged. 'It sounds like this is what we want to do: we appoint Jan as a temporary second circle representative to the general circle. He will propose that we delay the layoff for one month while everyone in the company who can be spared concentrates on marketing. The marketers will have to give us a crash course and run the show.' 'OK', the chairman continued, 'let's go around the circle to see if anyone has objections.' No one did. The next day the general circle met and started to discuss the proposal of De Groot. After some initial reservations, all participants decided the proposal. Thus, in subsequent meetings the general circle developed a new layoff procedure implying that most layoffs were postponed, and all 'spare' workers would spend most of their time acquiring new projects. A final decision could not be made because of policy limitations on their authority to spend the company's reserve fund. This kind of decision could only be made by the top circle, and De Groot was designated as the temporary second representative to the top circle.
EuropeanManagementJournaIVo114No1February1996
MAKING ORGANIZATIONAL LEARNING WORK
In a special meeting of the top circle consent was given to spending part of the company's reserve fund, which allowed the general circle to launch the plan into action. Within several weeks, enough new projects were acquired to justify further postponement of the layoff. Only a few workers were actually laid off in this period. The unit that worked for shipyards was sized down, but several other business units started to grow and since then Endenburg Elektrotechniek developed a much more diversified customer base. This example illustrates how double linking between circles promotes both upward and downward communication. Decisions taken in higher circles are quickly disseminated to lower circles, whereas lower circles can easily influence decision making on higher levels. Thus, double linking facilitates the interaction between individual learning and organizational learning, which lies at the heart of the concept of the learning organization. De Groot's attempt to influence decision making at higher levels is quite exceptional, even within Endenburg Elektrotechniek. But, in the words of one employee: 'In my daily work the circular idea is not really visible, but it does become apparent in case of crisis situations or any other severe problem'.
New circle members who are unfamiliar with this procedure tend to be reluctant to talk about others during an election procedure, but their insecurity is often soon overcome. Through the process of argument and open discussion, circle members learn to use their collective wisdom in an effort to get the right person to the right place at the right time. Thus, at the end of an election feelings of victory or defeat tend to be absent, but instead a feeling of having done a good job together tends to prevail.
Electing A New General Manager One of the most important election procedures in the history of Endenburg Elektrotechniek started in 1993, when the general circle decided to elect a new general manager to take over from Gerard Endenburg who intended to retire within two years. The recruitment procedure was started by setting up a support circle of the general cirfle. This support circle first formulated a set of criteria (profile), and then developed a recruitment plan. The initial profile required the new manager, amongst others, to have a technical background and to be familiar with circular organizing. The general cirde gave its consent to this proposal and then delegated its execution to a special committee.
Elections in Practice The transition from traditional to circular procedures in empowered circles deeply affects each member of the circle. This transition becomes most evident in elections. What actually happens in an election procedure? Before the election meeting, the circle members are informed in writing about the election and during the meeting the election starts by asking each participant to write the name of anyone they wish to propose as a potential candidate on a special form. If several people are to be elected, several candidates are nominated. To each nomination the circle member adds his or her own name, so that it is clear who is proposing which candidate. The chair will then ask each member to state the arguments which prompted him to nominate this particular candidate. The chair makes sure there are no discussions during the presentation of arguments. Only after all members have made their arguments clear, an open discussion may develop. At some point, the circle's chair may go around with the question: do you want to change your candidate, in view of the arguments you have heard? If the chair feels that a certain candidate has been most emphatically nominated - which need not be the candidate with a majority support - he will ask if there is anyone who wishes to withhold his consent from this particular candidate. If there are no objections to this candidate, he is elected by consent. If anyone withholds his consent, he or she has to put forward any arguments for doing so. If after the discussion which follows, the objector still cannot give his consent, the chair will move to the next candidate. Note that the chair's role is crucial in this process. Most circles therefore give much attention to electing their chair. European ManagementJournalVo114 No I February 1996
The committee first tried to find an appropriate candidate within the company. Initially, these attempts failed and the support circle then tried to recruit an outside candidate. Several outside candidates were invited for a meeting with the committee, but no one was evaluated as good enough. External recruitment and selection agencies were also consulted, but again without success. These external agencies also had a hard time in defining and understanding the 'strange' nature of their client. With these experiences in mind the committee decided to look again for an internal candidate. The top and general circle organized an election in a joined meeting. After a short introduction by the chairman, each participant was asked to write a candidate on a ballot form. When the forms were handed over to the chairman, he started to ask each participant for the reasons behind his or her vote. Of a total of sixteen participants, seven did not come up with a candidate; five voted for Piet Slieker, a unit manager without a technical background, who seemed to meet all requirements except for his background in business administration; two participants voted for a general management team of two persons (including Slieker); and the two remaining votes were for other intemal candidates. In the subsequent discussion, it became dear that the position of general manager had to be redefined. At the end of the meeting, the chairman proposed Piet Slieker for the position of general manager. Two participants did not give their consent to this proposal because they wanted to wait for the results of a psychological assessment test. 73
MAKING ORGANIZATIONAL LEARNING WORK Two months later, during a second joined meeting of the top and general circle, the test results were discussed (after Piet Slieker had agreed to distribute the report). The candidate was again carefully evaluated in an open discussion, and subsequently, all partidpants gave their consent to the decision to appoint Piet Slieker as the new general manager. This implied Slieker would replace Endenburg after a transition period. All participants were quite positive about the election process. Pier Slieker felt his candidateship had been carefully evaluated, which gave him company-wide support in his new position. One of the consequences of the decision to elect Slieker is that the top structure now has to be redefined, especially in view of Piet Slieker's background in business administration rather than technical engineering. This process of finding and electing a new general manager illustrates the unconventional nature of the circular model, which has a negative and a positive side. From the outside, it may be hard to understand the unorthodox nature of decision making in a circular organization. But on the other hand, this approach to choosing a manager places the newly appointed manager in a position in which he has organizationwide support.
Education and Training The early development of the circular idea at Endenburg Elektrotechniek was largely inspired and driven by the genius of Gerard Endenburg. When Endenburg started to spend most of his time and energy outside the company in trying to get public recognition for his ideas, several units and departments appeared to lose interest in circle meetings, being hardly aware of the opportunities provided by the circular model. In addition, it quickly became clear that most people had been confronted too abruptly with the circular model, and needed a gradual re-introduction into its basic principles. Thus, the decision was made to implement the model anew, as if nothing was known about it. The implementation was no longer supervised by Endenburg, but by external consultants of a small support organization that had been established in the late 1970s to supervise the introduction of the circular model in (other) organizations. The re-implementation strategy emphasized the key role of education in skills and knowledge necessary for participating in circle meetings. Participating in educational programmes is therefore now considered as a normal part of a job in Endenburg Elektrotechniek. Workers are not given ,time off from work' to do a course, but training and education is viewed as an essential part of one's job.
The Top C i r c l e The role of the top circle of a circular company can be compared with the Board of Directors in European or North American companies. The top circle typically 74
includes the general manager(s), one or more representatives of the general circle, and several outside experts. The outside experts play a similar role as outside Board members in corporations. A striking difference with the traditional corporation is the absence of stockholders in the top circle. Endenburg's ideas about decision making on the basis of equivalence and consent imply the company should not be 'owned' in the traditional manner. Endenburg assumed most stockholders would not be interested in any other commitment to the organization than by their share in the company's equity: 'This kind of ownership constitutes a threat to the circular nature of Endenburg Elektrotechniek, because it allows outside meddling based on stock ownership. Consent decision making presupposes that the nature of one's function in the organization, and not the amount of stock held, determines what a person gets to consent to.' Initially, a solution to the ownership problem was found in separating purely financial interests from power in the company, by subjecting the financial stakeholders to decisions by consent by members of the company, including a representative of the stockholders at the top circle level. In addition, all employees were given opportunities for participation in the company's equity. Dutch corporate law, however, did not support these unconventional principles. A solution was developed by constructing a new legal structure on the basis of two conventional legal forms, the corporation and foundation. The foundation owns all stock in the corporation, and as such controls the corporation. The constitution of this foundation is based on the circular ground rules, and the members of the top circle of the corporation automatically also form the top circle of the foundation. In the Dutch situation, this construction has proved to be a highly effective protection against hostile takeovers, and similar constructions have recently been developed for corporations in the USA and the United Kingdom.
Feedback Rather Than Power Dutch sodety has a long history of organized consensus between employers, labour unions and governmental agencies. This tradition of consensus building may have created an extremely beneficial context for experiments in Endenburg Elektrotechniek and other Dutch organizations. In addition, these experiments may have profited from the small power distance between boss and subordinates in The Netherlands. Thus, subordinates will quite readily approach and contradict their bosses, that is, the emotional distance between subordinates and bosses is relatively small in the Netherlands (Hofstede, 1991). Similar cultural conditions exist in countries like the US, the UK, Canada, Germany and Sweden. But organizations in countries with a large power distance, such as France, India or Mexico (Hofstede, 1991), must deal with these cultural barriers before moving towards circular structures. EuropeanManagementJoumalVo114No 1 February 1996
MAKING ORGANIZATIONAL LEARNING WORK
Irrespective of our cultural background, most of us tend to view organizations with a top down image in mind. Thus, we automatically assume that power flows from top to bottom, instead of from bottom to top. From an engineering standpoint organizations are severely hampered by this top down structure, which leads to an increasing number of control activities, feelings of pressure, and lack of commitment. Many corporations have been trying to alleviate some of these problems by empowerment, delayering, or participative management programmes, but these solutions remain symptomatic as long as the organizing principles are based on power rather than feedback. In this respect, top down processes need to be counterbalanced by bottom up processes that are given an equal weight in the organizational structure, in order to create a cybemetically dynamic system in which feedback rather than power is the basic organizing principle. Note that there are some important differences with the role of quality circles in total quality management. Quality circles are teams of employees established for the purpose of learning about and improving quality in their work areas. As such, quality circles are typically not integrated in the core structure of the organization, and thus formal links with other circles or teams are absent. This also implies most quality circles cannot easily influence policy making at higher levels.
Notes 1.
2. 3.
Note that a similar model has been developed in the US by Russell Ackoff. Ackoff initially described his model as the 'circular organization' (Ackoff, 1981) but later started to refer to the 'democratic organization', because circularity appears to recognize the key idea of democracy in its original meaning. Figures 1 and 2 have been adapted from Endenburg (1988). The examples given in this article are described in more detail in Romme and Reijmer (1995), Sociocracyin Endenburg £1ektrotechniek, a case study for educational purposes which was a category prize winner in the 1995 EFMD European Case Writing Competition.
Ackoff, R.L. (1994). The Democratic Corporation. Oxford: Oxford University Press. Argyris, C. (1991). Teaching Smart People How to Leam. Harvard Business Review, May-June 1991, 99--109. Argyris, C. (1992). On Organizational Learning. Oxford: Blackwell. Endenbur8, G. (1988). Sociocracy: The Organization of DecisionMaking. Rotterdam: Sociocratic Center. Garvin, D~,. (1993). Building a Learning Organization. Harvard Business Review, July-August 1993, 78-91. Hofstede, G. (1991). Cultures and Organizations: Software of the Mind. London: McGraw-Hill. Kim, D.H. (1993). The Link between Individual and Organizational Learning. Sloan Management Review, Fall 1993, 37-50. Mills, D.Q. (1991).Rebirth of the Corporation. New Yorlc Wiley. Romme, A.G.L (1994). Circles, Hierarchy, Double Linking and Decision Makin8 by Consent. IODA Journal, 2, 7-12. Romme, A.G.L (1995). The Sodocratic Model of Organizing. Journal of Strategic Change, 4, 209--215. Romme, A.G.L and J.M. Reijmer (1995). Sociocracy in Endenburg Elektrotechniek (case study). Rotterdam: Sociocratic Center. Senge, P.M. (1990). The Fifth Discipline. London: Doubleday Currency. Van Vlissingen, R.F. (1991). A Management System Based on Consent. Human Systems Management, 10, 149--154.
GEORGES ROMME, Department of Management Sciences, Faculty of Economics and Business Administration, University of Limburg, P.O. Box 616, 6200 MD, Maastricht, The Netherlands.
George Romme is an Associate Professor at the University of Limburg. He holds a master's degree in Economics from the University of Brabant, and a doctoral degree in Business Administration from the University of Limburg. His research interests include the dilemma between hierarchical and self-organizing forms of management, and new organizational forms. This article, Making Organizational Learning Work, incorporates some data from the case study, Sociocracy in Endenburg Electrotechniek,
References Ackoff, R.L. (1981). Creating the Corporate Future. New York: Wiley.
European ManagementJournalVo114 No 1 February 1996
{authored by G. Romme and ].M. Reijmer) which was a category prizewinner in the 1995 EFMD European Case Writing Competition.
75
~
Pergamon 0263-23
73(95)00048-8
Copyright © 1996 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0263-2373/96 $15.00 + 0.00
Making Organizational Learning Work: Consent and Double Linking between Circles GEORGES ROMME, Associate Professor, University of Limburg, The Netherlands
What kind of organizational structure best supports organizational learning? Focusing on this question, experiments in The Netherlands have led to the circular organization, in which learning processes in teams (circles) are effectively combined with the administrative hierarchy. The circle structure is used for policy making, whereas policy implementation remains within the domain of supervisors and managers. The circular model appears to provide a learning structure in which feedback rather than power is the key organizing principle.
Endenburg found that the learning ability of organizations is severely hampered by their top down structure. He therefore developed an alternative model for structuring his company, the so-called circular organization, also known as the 'sociocratic organization'. A circular organization is created by superimposing a hierarchy of circles on the existing administrative hierarchy. These drcles operate on the basis of the consent principle, which guarantees the equivalence of all participants, and the principle of double linking between circles, which promotes both downward and upward communication between circles.
Introduction
In practical operation since the mid 1970s, the circular model has progressed beyond the experimental stage
The topic of organizational leaming has gained a lot of attention, although many business people and academics now take for granted the idea of organizational learning is difficult to realize in most organizations. In this respect, there is little agreement on how to create a learning organization. Most publications in this field focus on the development of individual and collective mental models, the thought constructs that affect how people act (e.g., Argyris, 1991; 1992; Garvin, 1993; Kim, 1993; Senge, 1990). Far less attention has been given to the kind of organizational structures that support organizational learning. Many companies have introduced delayering, empowerment or quality programs. Others have attempted to reengineer their business processes. All these vigorous attempts have been made with the implicit assumption in mind that the top down nature of organizational structures does not inhibit learning processes. In the early 1970s Gerard Endenburg, a Dutch entrepreneur and engineer, started experimenting with a new way of organizing his company. In these experiments EuropeanManagernentJournalVo114No 1 February 1996
69
MAKING ORGANIZATIONAL LEARNING WORK and is being used rather successfully in other Dutch organizations as diverse as a municipal police department, a large consultancy firm, a food catering company, and a chain of hairdressing shops. All these organizations have reported productivity increases of 30 to 40 percent, and both workers and managers seem to like working in them. In addition, the circular model has begun to fan out well beyond the Netherlands, and is currently being tried out in several large organizations in Brazil, Canada, Germany, and the USA. 1
Historical B a c k g r o u n d
In the circular model the consent principle only govems decision making on policy issues, such as the organization of work in a department or company-wide strategic issues. Dedsions about policy implementation are not made by consent, but remain within the domain of authority of line managers or supervisors. Organizing into Circles Every member of the organization belongs to at least one circle, a functional work unit. A circle is a group of people with a common work objective whose basic mode of decision making is by consent. Each circle includes its supervisor or manager. For a typical circle, consent decision making normally occurs in specially scheduled meetings, with a typical frequency of one meeting in every four or eight weeks. In these meetings decisions are taken about issues relevant to the work objectives of the circle, and within the limits of the circle's authority.
Endenburg Elektrotechniek is a successful electrical engineering company, currently employing 140 people, and was founded in Rotterdam in 1950 by Endenburg senior and his wife. After completing his studies in electrical engineering and radar technology, Gerard Endenburg joined his parents' company and was appointed General Manager in 1968. As a condition for accepting this position, Endenburg requested that he be allowed freedom to experiment, both technically and Quinn Mills (1991) in Rebirth of the Corporation also organizationally. Having grown to a company advocates empowered circles as the fundamental employing about 120 people in building stones of companies, Double linking is the single because they generate a lot of the early 1970s, Gerard Endenburg dedded to stop creative energy. Many people most important innovation feel further growth in order to give insecure with the idea of more attention to organizational working in a circle, which of the circular model renewal. He then started to according to Mills (1991) largely experiment with some of the ideas he had about results from a lack of knowledge about how circles decision making and organizational structure. These operate. He is wrong. The most important reason for experiments were espedally inspired by ideas taken from feeling insecure in circles involves the absence of a Quaker derision-making practice. The circular model threshold that safeguards the partidpation of each relies on four ground rules: decision making by consent, individual member. The consent prindple provides such organizing into drdes, double linking between circles, a threshold. Without this threshold, circles quickly and election of persons by consent (Endenburg, 1988; deteriorate into decision making units where power Romme, 1994; 1995; Van Vlissingen, 1991). games, feelings of mistrust, lack of commitment, and defensive manoeuvring prevail (cf. Argyris, 1992).
Decision Making By Consent The primary method of dedsion making is by consent, involving the absence of any 'argued objection'. The consent principle can be traced back to the Quaker tradition of dedsion making by consensus. The Quakers recognize that, while each individual has some ideas, it is likely that the best solution to important problems will come out of the collective wisdom of those closest to the problem, regardless of their formal position or group membership. Endenburg adapted the Quaker consensus principle of full agreement towards 'consent', defined as the absence of any argued objection. In other words, where a consensus decision is arrived at when all say yes, for a consent decision is it suffident that no one says no. The emphasis on argued objections is meant to stimulate creative solutions. Moreover, Endenburg found that decisions by consent are easier to implement than decisions taken on the basis of authority. In addition, power games could be largely avoided in this manner (Endenburg, 1988). 70
Double Linking Between Circles For practical reasons, most circles include not more than 20 to 25 members. A larger organization therefore has to subdivide into a hierarchy of circles. In this hierarchy each drde is represented in the next higher circle by its supervisor or manager, and one or more additional representatives chosen from the circle by consent. Double linking is perhaps the single most important innovation of the circular model. Its pivotal role is easily overlooked, because in most organizations the effectiveness of the single link between hierarchical levels is never questioned. Double linking requires a complete shift in thinking about management and leadership. Figure 1 provides a schematic overview of the kind of cydical process each circle is involved in: the leading, doing and measuring cyde.Zln the leading stage instructions are issued which are carried out in the doing stage. In the measuring stage, the results are observed and passed on to the leader, who subsequently European ManagementJournalVo114 No 1 February 1996
MAKING ORGANIZATIONAL LEARNING WORK
LEADING
LEADING
A
MEASURING
DOING
MEASURING \
Figura t 1"he C y c l i c a l Procass of k a a d i n g - l ) o i n g Measuring
The conventional idea of Likert's linking pin is implicitly based on the fundamental assumption that the doing/ leading and measuring/feedback link can be combined in one person. However, most managers trying to represent both links underestimate the fundamentally different requirements in terms of individual competences. Moreover, the traditional emphasis on downward information flows is to a large extent determined by a structure in which upper hierarchical levels appoint managers or supervisors at lower levels. If organizations really want to improve their learning ability, they should create channels for upward information flows that are governed by those closest to the information.
Electing Persons By Consent Each circle assigns its members to the positions or tasks via consent after open discussion. Important elections involve the circle's chair, representative(s) to the upper circle, supervisors of the lower drcles, general manager(s), and outside members of the top circle. Although election of persons by consent logically follows from the previous three rules, practical experience underscores the importance of adding this fourth rule. Our traditional behaviour programmes are such that we are very reluctant about discussing other persons in public, especially when they are present. EuropeanManagementJournalVol 14 No 1 February1996
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compares the result with the norm and, depending on any difference, may issue a corrected instruction. This may be an overly simplistic view of the way circles operate, but it serves to point out the function of double linking in Figure 2. Assume circles A and B in Figure 2 have to work together, with drcle A being responsible for the operations of circle B. If circle A wants to be able to control the operations of circle B, the circular model suggests two connecting links should be developed and maintained. One link is the supervisor of circle B, appointed by consent in circle A, who transmits the information from the doing stage in circle A to the leading stage in circle B. The second link feeds back any relevant information from drcle B to the measuring stage in circle A. This link involves one or more representative(s) of circle B. Thus, the double link between circle A and B involves at least two persons.
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Through our experiences in democratic systems we have been programmed with the message that secret voting is the best way to deal with elections. However, an election in a circle meeting places much weight on the arguments raised in favour of certain candidates. Speaking openly about the potential of circle members is an essential step in getting the fight person on the fight position. If after some time the drde finds that the 'wrong' member has been chosen, the procedure can be repeated. In order to prevent that, some individuals routinely hold on to their positions in Endenburg Elektrotechniek, each position in this company is re-elected at least once every two years. T h e Circular O r g a n i z a t i o n in Endenburg Elektrotechniek 3 The administrative organization of Endenburg Elektrotechniek, used for the day-to-day management and control of operations, is shown in Figure 3. Figure 4 shows the drcular structure that is superimposed over the administrative structure for dedsion making about policy issues. The staff of each department makes up the membership of the departmental circle. The general circle includes the general manager, all unit managers and department supervisors, and one or more representative(s) chosen from each departmental circle by consent. The top drde comprises the general manager, one or more chosen representative(s) from the general circle, and four outside directors. Circularity in Endenburg Electrotechniek can be illustrated by way of a critical incident that constitutes one of the most severe 'extemal' tests of the circular 7J.
MAKING ORGANIZATIONAL LEARNING WORK
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Figure ~1 The Administrative Struoture of Endenburg Elektroteohnlek in 1 9 9 4
model over a period of more than twenty years. In the late 1970s the company ran into a severe crisis situation when a large shipyard in Rotterdam, accounting for more than one-third of the business of Endenburg Elektrotechniek, suddenly shut down. After having studied the situation, the general circle decided by consent it was inevitable to layoff 60 workers. The day after the decision was announced, one of the fitters in the Manufacturing unit, Jan De Groot, asked the secretary of his circle to call a meeting as quickly as possible in order to discuss an idea he had for a better way to handle the sudden crisis. The circle secretary was able to arrange a meeting for the next day, and when everyone was gathered, De Groot explained his idea. 'It seems to me', he said, 'we'd do a lot better if we delayed
DepartmentalCircles Figure 4 TheCiroin$|rusture of IEndenburg Ilektrsteohnlek (used for Polioy Deolsione) in 1 9 9 4
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the layoff for a few weeks and shifted everyone who would be laid off into a concentrated marketing effort. The overall development in our kind of business is not as bad as it seems. There has just got to be more business out there! I would much rather spend my time wiring generators than knocking on doors with a suit and tie on, but I'll do it if it means keeping my job.' The circle members then discussed the proposal of De Groot, and after about half an hour the circle appeared to go along with this proposal. The circle's chair, who was in this case also the chosen representative to the general circle, summarized the picture that apparently had emerged. 'It sounds like this is what we want to do: we appoint Jan as a temporary second circle representative to the general circle. He will propose that we delay the layoff for one month while everyone in the company who can be spared concentrates on marketing. The marketers will have to give us a crash course and run the show.' 'OK', the chairman continued, 'let's go around the circle to see if anyone has objections.' No one did. The next day the general circle met and started to discuss the proposal of De Groot. After some initial reservations, all participants decided the proposal. Thus, in subsequent meetings the general circle developed a new layoff procedure implying that most layoffs were postponed, and all 'spare' workers would spend most of their time acquiring new projects. A final decision could not be made because of policy limitations on their authority to spend the company's reserve fund. This kind of decision could only be made by the top circle, and De Groot was designated as the temporary second representative to the top circle.
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MAKING ORGANIZATIONAL LEARNING WORK
In a special meeting of the top circle consent was given to spending part of the company's reserve fund, which allowed the general circle to launch the plan into action. Within several weeks, enough new projects were acquired to justify further postponement of the layoff. Only a few workers were actually laid off in this period. The unit that worked for shipyards was sized down, but several other business units started to grow and since then Endenburg Elektrotechniek developed a much more diversified customer base. This example illustrates how double linking between circles promotes both upward and downward communication. Decisions taken in higher circles are quickly disseminated to lower circles, whereas lower circles can easily influence decision making on higher levels. Thus, double linking facilitates the interaction between individual learning and organizational learning, which lies at the heart of the concept of the learning organization. De Groot's attempt to influence decision making at higher levels is quite exceptional, even within Endenburg Elektrotechniek. But, in the words of one employee: 'In my daily work the circular idea is not really visible, but it does become apparent in case of crisis situations or any other severe problem'.
New circle members who are unfamiliar with this procedure tend to be reluctant to talk about others during an election procedure, but their insecurity is often soon overcome. Through the process of argument and open discussion, circle members learn to use their collective wisdom in an effort to get the right person to the right place at the right time. Thus, at the end of an election feelings of victory or defeat tend to be absent, but instead a feeling of having done a good job together tends to prevail.
Electing A New General Manager One of the most important election procedures in the history of Endenburg Elektrotechniek started in 1993, when the general circle decided to elect a new general manager to take over from Gerard Endenburg who intended to retire within two years. The recruitment procedure was started by setting up a support circle of the general cirfle. This support circle first formulated a set of criteria (profile), and then developed a recruitment plan. The initial profile required the new manager, amongst others, to have a technical background and to be familiar with circular organizing. The general cirde gave its consent to this proposal and then delegated its execution to a special committee.
Elections in Practice The transition from traditional to circular procedures in empowered circles deeply affects each member of the circle. This transition becomes most evident in elections. What actually happens in an election procedure? Before the election meeting, the circle members are informed in writing about the election and during the meeting the election starts by asking each participant to write the name of anyone they wish to propose as a potential candidate on a special form. If several people are to be elected, several candidates are nominated. To each nomination the circle member adds his or her own name, so that it is clear who is proposing which candidate. The chair will then ask each member to state the arguments which prompted him to nominate this particular candidate. The chair makes sure there are no discussions during the presentation of arguments. Only after all members have made their arguments clear, an open discussion may develop. At some point, the circle's chair may go around with the question: do you want to change your candidate, in view of the arguments you have heard? If the chair feels that a certain candidate has been most emphatically nominated - which need not be the candidate with a majority support - he will ask if there is anyone who wishes to withhold his consent from this particular candidate. If there are no objections to this candidate, he is elected by consent. If anyone withholds his consent, he or she has to put forward any arguments for doing so. If after the discussion which follows, the objector still cannot give his consent, the chair will move to the next candidate. Note that the chair's role is crucial in this process. Most circles therefore give much attention to electing their chair. European ManagementJournalVo114 No I February 1996
The committee first tried to find an appropriate candidate within the company. Initially, these attempts failed and the support circle then tried to recruit an outside candidate. Several outside candidates were invited for a meeting with the committee, but no one was evaluated as good enough. External recruitment and selection agencies were also consulted, but again without success. These external agencies also had a hard time in defining and understanding the 'strange' nature of their client. With these experiences in mind the committee decided to look again for an internal candidate. The top and general circle organized an election in a joined meeting. After a short introduction by the chairman, each participant was asked to write a candidate on a ballot form. When the forms were handed over to the chairman, he started to ask each participant for the reasons behind his or her vote. Of a total of sixteen participants, seven did not come up with a candidate; five voted for Piet Slieker, a unit manager without a technical background, who seemed to meet all requirements except for his background in business administration; two participants voted for a general management team of two persons (including Slieker); and the two remaining votes were for other intemal candidates. In the subsequent discussion, it became dear that the position of general manager had to be redefined. At the end of the meeting, the chairman proposed Piet Slieker for the position of general manager. Two participants did not give their consent to this proposal because they wanted to wait for the results of a psychological assessment test. 73
MAKING ORGANIZATIONAL LEARNING WORK Two months later, during a second joined meeting of the top and general circle, the test results were discussed (after Piet Slieker had agreed to distribute the report). The candidate was again carefully evaluated in an open discussion, and subsequently, all partidpants gave their consent to the decision to appoint Piet Slieker as the new general manager. This implied Slieker would replace Endenburg after a transition period. All participants were quite positive about the election process. Pier Slieker felt his candidateship had been carefully evaluated, which gave him company-wide support in his new position. One of the consequences of the decision to elect Slieker is that the top structure now has to be redefined, especially in view of Piet Slieker's background in business administration rather than technical engineering. This process of finding and electing a new general manager illustrates the unconventional nature of the circular model, which has a negative and a positive side. From the outside, it may be hard to understand the unorthodox nature of decision making in a circular organization. But on the other hand, this approach to choosing a manager places the newly appointed manager in a position in which he has organizationwide support.
Education and Training The early development of the circular idea at Endenburg Elektrotechniek was largely inspired and driven by the genius of Gerard Endenburg. When Endenburg started to spend most of his time and energy outside the company in trying to get public recognition for his ideas, several units and departments appeared to lose interest in circle meetings, being hardly aware of the opportunities provided by the circular model. In addition, it quickly became clear that most people had been confronted too abruptly with the circular model, and needed a gradual re-introduction into its basic principles. Thus, the decision was made to implement the model anew, as if nothing was known about it. The implementation was no longer supervised by Endenburg, but by external consultants of a small support organization that had been established in the late 1970s to supervise the introduction of the circular model in (other) organizations. The re-implementation strategy emphasized the key role of education in skills and knowledge necessary for participating in circle meetings. Participating in educational programmes is therefore now considered as a normal part of a job in Endenburg Elektrotechniek. Workers are not given ,time off from work' to do a course, but training and education is viewed as an essential part of one's job.
The Top C i r c l e The role of the top circle of a circular company can be compared with the Board of Directors in European or North American companies. The top circle typically 74
includes the general manager(s), one or more representatives of the general circle, and several outside experts. The outside experts play a similar role as outside Board members in corporations. A striking difference with the traditional corporation is the absence of stockholders in the top circle. Endenburg's ideas about decision making on the basis of equivalence and consent imply the company should not be 'owned' in the traditional manner. Endenburg assumed most stockholders would not be interested in any other commitment to the organization than by their share in the company's equity: 'This kind of ownership constitutes a threat to the circular nature of Endenburg Elektrotechniek, because it allows outside meddling based on stock ownership. Consent decision making presupposes that the nature of one's function in the organization, and not the amount of stock held, determines what a person gets to consent to.' Initially, a solution to the ownership problem was found in separating purely financial interests from power in the company, by subjecting the financial stakeholders to decisions by consent by members of the company, including a representative of the stockholders at the top circle level. In addition, all employees were given opportunities for participation in the company's equity. Dutch corporate law, however, did not support these unconventional principles. A solution was developed by constructing a new legal structure on the basis of two conventional legal forms, the corporation and foundation. The foundation owns all stock in the corporation, and as such controls the corporation. The constitution of this foundation is based on the circular ground rules, and the members of the top circle of the corporation automatically also form the top circle of the foundation. In the Dutch situation, this construction has proved to be a highly effective protection against hostile takeovers, and similar constructions have recently been developed for corporations in the USA and the United Kingdom.
Feedback Rather Than Power Dutch sodety has a long history of organized consensus between employers, labour unions and governmental agencies. This tradition of consensus building may have created an extremely beneficial context for experiments in Endenburg Elektrotechniek and other Dutch organizations. In addition, these experiments may have profited from the small power distance between boss and subordinates in The Netherlands. Thus, subordinates will quite readily approach and contradict their bosses, that is, the emotional distance between subordinates and bosses is relatively small in the Netherlands (Hofstede, 1991). Similar cultural conditions exist in countries like the US, the UK, Canada, Germany and Sweden. But organizations in countries with a large power distance, such as France, India or Mexico (Hofstede, 1991), must deal with these cultural barriers before moving towards circular structures. EuropeanManagementJoumalVo114No 1 February 1996
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Irrespective of our cultural background, most of us tend to view organizations with a top down image in mind. Thus, we automatically assume that power flows from top to bottom, instead of from bottom to top. From an engineering standpoint organizations are severely hampered by this top down structure, which leads to an increasing number of control activities, feelings of pressure, and lack of commitment. Many corporations have been trying to alleviate some of these problems by empowerment, delayering, or participative management programmes, but these solutions remain symptomatic as long as the organizing principles are based on power rather than feedback. In this respect, top down processes need to be counterbalanced by bottom up processes that are given an equal weight in the organizational structure, in order to create a cybemetically dynamic system in which feedback rather than power is the basic organizing principle. Note that there are some important differences with the role of quality circles in total quality management. Quality circles are teams of employees established for the purpose of learning about and improving quality in their work areas. As such, quality circles are typically not integrated in the core structure of the organization, and thus formal links with other circles or teams are absent. This also implies most quality circles cannot easily influence policy making at higher levels.
Notes 1.
2. 3.
Note that a similar model has been developed in the US by Russell Ackoff. Ackoff initially described his model as the 'circular organization' (Ackoff, 1981) but later started to refer to the 'democratic organization', because circularity appears to recognize the key idea of democracy in its original meaning. Figures 1 and 2 have been adapted from Endenburg (1988). The examples given in this article are described in more detail in Romme and Reijmer (1995), Sociocracyin Endenburg £1ektrotechniek, a case study for educational purposes which was a category prize winner in the 1995 EFMD European Case Writing Competition.
Ackoff, R.L. (1994). The Democratic Corporation. Oxford: Oxford University Press. Argyris, C. (1991). Teaching Smart People How to Leam. Harvard Business Review, May-June 1991, 99--109. Argyris, C. (1992). On Organizational Learning. Oxford: Blackwell. Endenbur8, G. (1988). Sociocracy: The Organization of DecisionMaking. Rotterdam: Sociocratic Center. Garvin, D~,. (1993). Building a Learning Organization. Harvard Business Review, July-August 1993, 78-91. Hofstede, G. (1991). Cultures and Organizations: Software of the Mind. London: McGraw-Hill. Kim, D.H. (1993). The Link between Individual and Organizational Learning. Sloan Management Review, Fall 1993, 37-50. Mills, D.Q. (1991).Rebirth of the Corporation. New Yorlc Wiley. Romme, A.G.L (1994). Circles, Hierarchy, Double Linking and Decision Makin8 by Consent. IODA Journal, 2, 7-12. Romme, A.G.L (1995). The Sodocratic Model of Organizing. Journal of Strategic Change, 4, 209--215. Romme, A.G.L and J.M. Reijmer (1995). Sociocracy in Endenburg Elektrotechniek (case study). Rotterdam: Sociocratic Center. Senge, P.M. (1990). The Fifth Discipline. London: Doubleday Currency. Van Vlissingen, R.F. (1991). A Management System Based on Consent. Human Systems Management, 10, 149--154.
GEORGES ROMME, Department of Management Sciences, Faculty of Economics and Business Administration, University of Limburg, P.O. Box 616, 6200 MD, Maastricht, The Netherlands.
George Romme is an Associate Professor at the University of Limburg. He holds a master's degree in Economics from the University of Brabant, and a doctoral degree in Business Administration from the University of Limburg. His research interests include the dilemma between hierarchical and self-organizing forms of management, and new organizational forms. This article, Making Organizational Learning Work, incorporates some data from the case study, Sociocracy in Endenburg Electrotechniek,
References Ackoff, R.L. (1981). Creating the Corporate Future. New York: Wiley.
European ManagementJournalVo114 No 1 February 1996
{authored by G. Romme and ].M. Reijmer) which was a category prizewinner in the 1995 EFMD European Case Writing Competition.
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