The Leaderless Organization

Abraham Lincoln.  Winston Churchill.  Nelson Mandela. We honor our leaders and always have.  In both public and business life they are treated with almost godlike reverence.

I guess that’s why we compensate our corporate chiefs hundreds of times more than we do the average worker and then give them tens of millions more in bonuses, even when they are fired for cause.  Mediocrity in leadership seems to pay as well as excellence.

All of this begs the question:  Do we really need leaders?  Is the small chance of getting an excellent one worth the high cost of the mediocre breed?  Top management thinkers have begun to ask that question and, surprisingly, there are some prime examples of high performing organizations who are able to succeed without any leaders at all.

What Happens Without Managers?

In the field of management, there’s no one more prominent than Gary Hamel, who The Wall Street Journal named “the world’s most influential business thinker” and who is the most reprinted author in the history of the Harvard Business Review.  He’s pioneered popular concepts such as core competency, strategic intent and reinvention.

So it rose eyebrows when he recently published an article entitled First, Let’s Fire All the Managers and declared that, “Management is the least efficient activity in your organization.”  He then went on to suggest that it gets even worse as organizations get larger, that there are actually diseconomies to scale when it comes to management.

As a counter example, he examines the company Morning Star, which is a $700 million enterprise that is in the capital intensive business of processing tomato products.  Nobody has a boss, anybody can spend company money and employees negotiate salaries and responsibilities with each other.

Perhaps most importantly, Morning Star isn’t a collective, but a privately owned, rapidly growing, highly profitable business.  Hamel says it succeeds because the “mission is the boss.”

The Conductorless Orchestra

Okay, so it’s possible to run a business without managers, but what about an orchestra, where you need not only tightly coordinated teamwork, but a clear artistic direction? Surely, that’s a different matter altogether.

Not so fast.  It just so happens that one of the world’s most successful orchestras, the Orpheus in New York City, has been operating without a conductor since 1972.  They not only regularly play at top venues like Carnegie Hall and Lincoln Center, but have won multiple Grammy awards.  Much like at Morning Star, the lunatics truly run the asylum.

Everything, from the individual pieces played to the way they are interpreted, is decided through building consensus.  First, among a core group that leads a particular ensemble, then among the full orchestra.  For the next performance, a new core group emerges while the previous one fades into the background.

Not surprisingly, the Orpheus has become a highly studied model, most notably by Harvey Seifter in this highly cited article.

The Ad Hoc Organization

Possibly the most interesting case of a leaderless organization is Anonymous, which isn’t really an organization at all, but a mish mash of online chat rooms, forums and software protocols.

As Forbes’ london bureau chief Parmy Olson explains in her book, We Are Anonymous, the hacktivist group grew out of the imageboard 4chan and other online subculture sites. The online chatter turned to pranks, mostly consisting of uncovering the identity of online rivals and ordering pizzas and the like to their homes.

The pranks turned to more purpose driven acts, such as uncovering pedophiles and eventually online activism.  The group has successfully targeted the Church of Scientology, Sarah Palin, the governments of Tunisia and Egypt as well as major corporations like Paypal, Mastercard and Visa, among others.

Anonymous doesn’t have a leadership structure or even a real membership.  Someone gets an idea for an “Op” and recruits through chat rooms.  Planning is done by ad hoc groups in special private chats that are invite only.  Despite being loosely knit and geographically diverse, they have successfully attacked organizations with sophisticated infrastructures.

The Nature of the Organization

The emergence of leaderless organizations creates important questions not just about leaders, but organizations and particularly corporations.

The question of why firms exist was first taken on by Ronald Coase in his landmark 1937 paper The Nature of the Firm, in which he argued that their main function was to minimize transaction costs, specifically search and informational costs.

That’s been the prevailing view for nearly a century, but in the new semantic economy, those costs have much less relevance.  I think it’s clear that merely optimizing costs is no longer enough for an organization to survive, much less thrive.

While returns to scale diminish along with transactional frictions, organizational costs do not keep pace.  Sluggish organizations, no matter how efficient, can fall fast while small upstarts can go global overnight.  Hierarchies, in many if not most cases, fail to keep up with peer networks.

In the old Coasean organization, leaders mainly functioned as gatekeepers.  They kept employees in line, organized work, watched costs and kept things moving smoothly.  Now that it’s become clear that leaderless organizations can do that just as well, what is the function of a leader?

What Do Leaders Really Do?

By now I think it’s clear that organizations no longer serve to direct work, but to direct passion.  Good leaders therefore, direct passion effectively, bad leaders do not.

Of course, that’s easier said than done, but as I described in an earlier post, Daniel Pinkoffers a very useful framework of autonomy, mastery and purpose.  Organizations in the digital age that provide those three things, no matter what their size, history or technology, can succeed.  Ones that do not will fail.

And that’s what leaderless organizations teach us about how to manage more conventional enterprises.  While the examples above show that organizations can be self organizing, leaders with industrial age tendencies often obstruct progress.  They pursue efficiency to the exclusion of passion, become overbearing and diminish performance.

Those who devote their efforts to the success of organizations like Morning Star, the Orpheus Orchestra and Anonymous are committed to a purpose, much like those at Apple, Facebook Google and other successful enterprises   In the end, a leader’s primary function is to imbue work with meaning.

Good leadership, after all, is defined by its absence.

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Greg Satell is a consultant who concentrates on media, marketing and innovation. Check out at his site, Digital Tonto and follow him on twitter @digitaltonto