These are not static categories; they represent a theory of organizational evolution. The prevailing form of management in the industrial era has gradually matured over the past 150 years. It’s moved from blind obedience to informed acquiescence, and it’s just now moving to self-governance, but it still has a long way to go.
The Self-Governance Premium
S+B: What surprised you most about the results?
SEIDMAN: We didn’t realize how much blind obedience still exists: About 43 percent of the companies we surveyed fit into that category. Informed acquiescence came in at 54 percent. Only 3 percent of the responders worked for self-governance-style companies.
But those 3 percent have a definite premium. Ninety-two percent of those in self-governance systems viewed their financial performance to be above average — compared with 77 percent of those in informed acquiescence organizations, and 52 percent of those in blind obedience.
Self-governance companies also scored well on ethics — 94 percent said their companies had above-average reporting of misconduct (people report unethical behavior when they see it), compared to 62 percent for acquiescence and 26 percent for blind obedience. Among those self-governance company respondents, 94 percent also agreed their company was superior in terms of the rapid adoption of new ideas, compared with 67 percent for informed acquiescence and 18 percent for blind obedience.
The study also found that companies with consistent behavior reflecting trust and a sense of higher purpose — key indicators of self-governance — scored 87 percent on employee loyalty. These were the people who said, “I will still be working for this company 12 months from now.” Self-governance company respondents were also much more likely to score high on customer satisfaction (“My company has very satisfied customers”).
S+B: Some might criticize you for relying on people’s own assessments of company performance rather than tracking the financial data.
SEIDMAN: Yes, but the pattern was consistent enough — and what we know about respondents’ biases congruent enough — to suggest that it was a reasonably good proxy for actual performance, at least for comparing our three categories. You could also criticize us for talking only to U.S. employees, but since then we’ve found the same basic correlation in 17 other countries, including most members of the G8.
We also use the same diagnostic survey in our work with individual companies. We survey everyone in an executive team, a division, or a whole company, to measure the “how”: the habitual thinking and actions. We even include suppliers: “What’s it like to negotiate with this company?” We’ve found the same correlations everywhere.
S+B: Did you test your own company with the same instrument?
SEIDMAN: Yes. It’s critical for us, because we’re promoting the benefits of this philosophy to our client partners. In some areas LRN scored well, in others not as well. We are still on a journey of our own.
When we got the results, we decided we were going to move up the curve. So we ripped up LRN’s org chart and put in new practices. For instance, we changed our performance evaluations; employees now seek the feedback they feel is important from a self-selected “network” of colleagues, who provide it based on our own standards of principled performance and behavior. Individuals give the final score for themselves; the company lives with that self-rating. We have nominations and elections in the company for some of the councils that govern the company. This is in a 300-person global company, one that employs people with diverse skills and cultural backgrounds.
LRN scores very high on people having a deep sense of purpose and mission, but we still have work to do on clarifying decision making in our flat structure. We have to be especially mindful because some people carry baggage from previous employment: “My last four bosses did not respect my views or trust me to make decisions. You say you’re an ethical company, but how do I know you won’t do the same?”