Peter Drucker (1988) has said that in today's business environment you cannot manage people in the traditional way. Knowledge workers are different and demand work that is more meaningful. In the future, we can expect even greater changes that will characterize the leaderless organization. Three essential differences distinguish the leaderless from the open organization.
Absence of professional managers and supervisors. In the leaderless organization, managing is not a career, but rather a competency that everyone in the organization will be able to develop.
Task forces and peer councils extending across company boundaries. In the leaderless organization, task forces and peer councils may not even be actual employees of the company. Given the needs of the market and demands of the business, the organization will determine the best way to meet customer needs. This will not require control, but influence on the various stages of the value creation chain. Thus, much work might be contracted or outsourced to organizations that have formed alliances with the leaderless organization.
Ability to stretch and fold in response to market conditions. This ability makes the leaderless organization incredibly resilient. In today's turbulent business environment, with its high rate of energy circulation, companies must be able to deal with both tension-expanding (stretch) and tension-compressing (fold) forces. Leaderless organizations will be able to stretch to accommodate special needs and then return to shape or fold back. They will be able to deal with uncertainty by flexibly changing structure when necessary and then reconfiguring without breaking apart.
Let's look at each of these three characteristics of the leaderless organization in more detail.
With his usual prescient insight, Drucker (1988) has seen the future of strange attractor organizations and the strange attractor economy. The whole meaning of organizations, Drucker argues, must change in consequence. He talks about the age-old search for the one right organization, and that there can no longer be any such thing as the one right organization. As we know, the "right" type of organization will depend on the business conditions, the level of energy and complexity in the business environment, and the wisdom and creativity of the individual peer-based organization.
In the strange attractor world of organizations in which leaderless companies will emerge, fierce competition between companies will coexist with a lot of collaboration. Despite the competition, there will be a free flow of ideas and people between companies. Employees will be counted as assets, and " leaders " will be counted as costs. In a leaderless organization, workers count, supervisors are obsolete. This does require a new gestalt for organizational thinking.
A leaderless organization will be characterized by an unequivocal and explicit rejection of the myth of leadership. It will operate with the assumption that employees are naturally motivated and interested in creating and distributing value to everyone who has a stake in the organization. Further, it will assume that everyone is capable of participating in decision making, and the arena of action will be networks of people learning and deciding together what to do next . Peer management wisdom will replace classical leadership as the norm that guides behavior. Councils and the cross-functional teams chartered by the councils will be the flexible centers of decision making in the leaderless organization.
The full implementation of peer management wisdom will see the demise of the concept of the executive as we have known it; organizations will not have room for the baggage of professional executives. It will include equalizing salaries and increasing monetary rewards for innovators within the company; increasing the flow of information through methods such as open book management; and increasing the sharing of knowledge between people in the organization. Designated executive "leaders" will be redundant, as power and decision-making responsibilities will have been spread throughout the company. Council membership will include employees of the organization, key customers, important vendors and suppliers, and perhaps even competitors . The task forces they charter to do the actual work may, or may not, be employees of the company.
While organizations will be of various types and in different stages of development or decline, the evolution of the global marketplace itself is bringing us to the strange attractor of leaderless organizations. As boundaries dissolve and energy flows, artificial walls will fall ”and any wall will be seen as artificial. Contemporary evolution theory teaches us that new species evolve away from the center, on the fringes. On the fringes of work and organizational life today, we are already beginning to see borderless organizations and workers.
Imagine: Employee A works for company B while simultaneously working on projects for companies C and D. As former and current rivals, companies B and D together redesign a key industry process to benefit all consumers. Company C brings employees and customers together on a team to work on a particular project, but when the project is completed, the team is disbanded and the team members go off to work on another team or even for a different company. Competing companies B, C, and D along with others in the industry meet together on a regular basis, not to collude and jack up prices, but to cooperate over shared resources, including workers, thereby lowering prices.
Further, as Art Kleiner suggests in The Age of Heretics (1996), "We can imagine a time when factories that make Fords on Monday make Chevrolets on Tuesday and refrigerators on Wednesday. If such a time ever came to pass, economies of scale would be meaningless" (340). This is the strange business world of the strange attractor organization. In this world it will be difficult to distinguish companies as boundaries continually dissolve and the lines separating companies become blurred. Workers will move from project to project, from assignment to assignment, from organization to organization. Careers will be defined not by the company you work for, but by the work in which you specialize or generalize, given your unique combination of talents, strengths, and interests, or in other words, your own unique blend of intellectual capital.
In many cases, knowledge workers will not even be employees of the organization for which they work. Instead they will be contractors, experts, consultants , part-timers, joint venture partners , and so on who will identify themselves by their own knowledge rather than by the organizations that pay them. Boundaries between people and organizations will be seen to be illusionary and harmful as energy flow, degrees of freedom, and relationships become increasingly chaotic . Many, if not most, workers will essentially become independent contract workers.
Kleiner makes the following suggestions:
Some companies become more like banks, providing money to fund projects. Others evolve into contracting agencies, assembling teams of people to meet a particular need at will. Others find their real power comes from being distribution and-trading systems. Still others survive as purveyors, primarily, of a brand name . Everything else might be contracted out. (341)
This is what I believe could happen. When peer-based thinking becomes more common and as networks begin to dominate the corporate landscape, cross-functional councils and task forces will spin off from companies and become quasi-autonomous groups of skilled people who contract their services to different organizations or to different sources of financial capital. In spin-offs, the spun-off firm might still be owned by the original proprietors or just have key players from the original firm who brought along key intellectual capital or an important customer base. The original firm will maintain its mission and core competencies managed by the councils and the task forces they charter.
With the leaderless organization, we're also entering what Lester Thurow (1999) has called the free agency era of employment. This view of the future of employment is consistent with what many career specialists are predicting today. Individuals will begin to see themselves as independent contractors who will team with others and market themselves to businesses needing their services. Corporate cradle-to-grave job security is already a thing of the past. Now corporations are about to learn that just as business conditions no longer make long-term commitments to employees feasible , their employees will no longer be interested in a long- term relation with them. Instead, skilled workers are being attracted to a dynamic state of sequential contract work on different project teams for different companies.
High-tech entrepreneurs are already behaving this way. Several highly skilled individuals come together to create a product or service with the goal not of building a long-term business, but of becoming successful enough to attract attention and be bought out by a large company. The entrepreneurs then take their money, go their separate ways, and find their next project, thus creating ad hoc networks of relationships and complementary skills that can be reassembled in the future.
Some might be frightened by this picture of the near future, yet I see great freedom and opportunity. With this accelerated rate of energy flow comes almost limitless freedom, as boundaries evaporate and people regardless of income level, social status, race, or gender discover their options are only limited by their imagination . There will also be greater freedom and opportunities for organizations. Recall the "stretch" and "fold" properties of the strange attractor. At any one moment in the history of the dynamical system, two events or states are folded into close proximity, while in the very next moment they are stretched unpredictably far apart. This is due to the nearly infinite degrees of freedom possessed by the strange attractor system.
In strange attractors the stretch and fold properties create universal and wonderful shapes that result from two antagonistic tendencies: to converge and to diverge. In strange attractor organizations this is accomplished through diversity. When diverse individuals are organized into networks, they are able to create highly adaptable and resilient forms. From moment to moment choices are made by the system that cannot be predicted , so paths are followed that cannot be foreseen. Yet, even if the moment-to-moment evolution cannot be known, nor the behavior of the parts be anticipated, the system as a whole is fully knowable and predictable.
Hierarchy is inadequate in this strange world; it will break apart under the stresses of uncertainty and turbulence. Companies need to develop the elasticity and the plasticity that is characteristic of the stretching and folding of the strange attractor! The leaderless organization is one that can thrive in a world of nomadic teams and redefine its identity to participate meaningfully and profitably in this new world without boundaries. This will be a world of less certainty but greater possibilities. The leaderless organization is perfect for this type of business environment.
By providing the central core of capital and other resources, yet contracting out the work flows to "nomadic" project teams, the leaderless organization is aptly suited to instantaneously respond to customer needs and stretch quickly in any direction the market moves while being able as well to fold back when business conditions require it. Surprisingly, the organizations who make this transition will find that order is for free, and increasing returns are the norm. It is a world, the strange attractor organization, where there are no losers, except those who refuse to participate. Everyone can win and no one need lose with the possibility of increasing returns.
One strategy touted today is to own as much of the value chain as you can. Why? To control it. But this is bad strategy and bad philosophy. You can't control it, but you will increase your costs and invite the demons of diminishing returns to torpedo your company. You don't need to own assets and infrastructure to generate revenue and profit streams. In the strange attractor world, power is understood to mean influence, not control. Spin-offs and alliances will be central in the shift from open to leaderless organizations.
A PriceWaterhouseCoopers study released in November 2000 showed that companies that made alliances experienced 20 percent more growth than those that did not. Strange attractor organizations will own less of the value chain, but influence more. Through alliances, outsourcing, independent contractors, and other means, leadership organizations will distribute the various aspects of the value chain around and sometimes own nothing more than the brand. This will open them up to increasing returns by requiring less cash, giving them greater flexibility and speed, and granting them access to the best minds in the industry. It will also spread out overhead costs in such a way that costs stay down so prices can stay down and salaries can go up.
Many Internet-based start-ups are already acting like the semiautonomous teams of the strange attractor, or leaderless, organization. I know of several young entrepreneurs who have founded dot-com companies with a five-year plan in mind. They have no intention of building a long-term business, but only of putting together a team to do something phenomenal, attract the attention of an already established business, and within five years get bought out. They are behaving very much like the individuals who see themselves as independent contractors and team with others on a project-to-project basis. In many ways they are creating the pattern that most workers of the future will follow.
Of course the majority of dot-coms following this strategy have failed. Their downfall can be traced to the failure of dot-com leaders to manage the increased energy flow and implement appropriate managerial systems and processes ”and the fact that the marketplace hasn't yet developed the infrastructure to handle this new type of company. While they were already acting like strange attractor teams, there were no strange attractor organizations to support them. In the future, when long-term businesses themselves have jumped into the strange attractor world, the infrastructure will be in place to support this new wave of project-based careers, and there will be very little risk in this type of employment. In fact, I believe it will be more secure than what many experience today.
Consider the following: Currently, if you want to overnight a forty-page document from one coast to the other, with Federal Express it costs $16; with the U.S. Postal Service it costs $3. If you decide to fax the document, the cost is $9. However, if you decide to e-mail it, the cost is only 9 cents . Not only is e-mail the fastest way, it is also the cheapest. This development of progressively lower costs and higher benefits will be characteristic of leaderless organizations as less and less structure comes between the sender and the receiver of information.
As costs continue to decrease, the barriers for anyone entering the market go down as well, which lowers the cost even more.
Positive feedback produces increasing returns, whereas negative feedback produces diminishing returns. Where structure is minimum and energy flow is maximum, positive returns dominate and prediction and control are impossible . In the stability of the hierarchy, prediction, control, and command seem possible and desirable; but in the chaos of the strange attractor, unpredictability , cooperation, and communication are required. These are nonlinear traits and call for peer-based management techniques.
The attainment of the three essential characteristics of a leaderless organization ”the absence of professional managers and supervisors, task forces and peer councils extending across company boundaries, and the ability to stretch and fold in response to market conditions ”is hard to imagine for today's organizations. It will require the rejection of the myth of leadership and the practice of distributed decision making with peer-based thinking. In a leaderless organization, each person has his or her value and dignity honored, has a sense of responsibility for the common good, and has an equal opportunity to participate in decision making as well as equal access to information. Individuals make choices with open access to relevant information that will allow everyone an equal opportunity and the chance to become the architect of his or her own career.
Just like the strange attractor, the leaderless organization will be able to shape itself to whatever reality presents itself given the stretch and fold properties of the external networks it creates. In this phase of organizational life, it is not of decisive importance that any particular organization survive. It is the continuity of business and social processes, such as the production and distribution of goods and services, that must be maintained no matter which particular company does it.
This is a very hopeful view. As Philip Slater argues in his book A Dream Deferred (1992), democracy is inevitable, for it is the only social system capable of handling successfully the constantly accelerating rate of energy flow and complexity of our near future. In peer-based capitalism the arena of action will be networks of individuals leading and deciding together what to do next, where decisions are based on open systems and freely available information. Individuals will make choices that allow everybody equal opportunity and greater equality in distribution of the world's goods and services.