Even in Teal organizations, people do not always fit in or perform adequately. But when this occurs, the responses in Teal are different from earlier stage organizations.
A New Perspective
In Teal organizations, dismissals are rare. Roles tend to evolve to fit an individual’s strengths, and people are generally highly motivated by both a sense of autonomy and a desire not to let their colleagues down. Layoffs are infrequent since Teal organizations tend to adjust more flexibly and rapidly to downturns. More likely, departures are voluntary. Some people are not comfortable with this new approach to worklife and they overwhelmingly return to other environments of their own volition.
But, as a last resort (and only if a mediated conflict resolution process is unsuccessful), dismissal can occur. When it does, the associated emotions are embraced. People and choices are respected. Support is provided. And departure is treated as a learning opportunity, for both parties.
In contrast, dismissal in earlier stage organizations can be summarized as follows:
In the Red paradigm, it’s up to the boss/leader to decide who to fire or keep. Formal processes are not necessary. Voluntary departures may be seen as betrayal.
In Amber organizations, dismissals often follow a lapse of discipline, or a violation of the rules. The consequences may be well defined. For example, a first offense (perhaps arriving late) might mean suspension for a day. Repeated offense might result in dismissal.
In today’s versions of Amber — some government agencies, religious organizations, public schools, the military, etc. — extended (even lifetime) employment is the norm. These long relationships may extend to social circles. The possibility of dismissal carries the threat, not only of the loss of a job, but also of the associated social fabric. Those feeling unfulfilled in an Amber organizations face a painful choice.
Orange organizations have a wide range of practices for dismissals. Authority commonly lies with the boss (maybe after HR approval or counseling).
The causes are typically either performance or organizational cost-cutting/strategic redirection. Rarely is there implicit or contractual understanding that employment is guaranteed.
It is common to have elaborate systems of performance management. Then, dismissal can follow when attempts to lift below-par performance have failed.
On the other hand, the need for a dismissal may also be seen as a flaw in the hiring process. In part, this is because the cost of hiring someone who later proves to be unsatisfactory is high. . Severance packages are not uncommon. Sometimes, assistance in finding a new job is offered. Orange organizations may have quite progressive dismissal practices.
Green organizations have a high tolerance for individual differences and are likelier to look for an alternative to letting people go. People who do not conform to the community rules and values may feel marginalized, and leave as a result. Otherwise, dismissal practices are similar to the Orange paradigm.
People choose to leave before dismissal
In Teal organizations, dismissals prove to be surprisingly rare—because of the in-built flexibility. Self-management means people can customize a job at which they excel. A person with “performance issues” might shed one or more roles in which she is not strong and take up others that better match her skills, interests, and talents. In traditional workplaces, where a job is well defined, there is usually less flexibility.
Moreover, feedback on performance in Teal does not come from another, remote level (like a boss or HR). It comes from colleagues. There is much less reason to find fault with their feelings about your performance. These are the people you need to work with everyday. If this feels awkward, you can take an adult decision to move on.
For example, at Sun Hydraulics, an engineer might notice that somehow little work comes his way — few colleagues invite him to join their projects, or solicit his advice. At Buurtzorg, a nurse will feel in her interactions with colleagues that she doesn’t fit the team, or that self-management doesn’t suit her after all. About 25 nurses elect to leave each month for that reason (while 250 nurses join every month).
Almost universally, people choose to leave before they are dismissed. And almost always the departure happens by mutual consent, and on a friendly basis. This does not change the fact that on a personal level the process can be painful. The self-managing context helps people realize that no one is to blame; that they are perhaps not meant for this kind of work.
Dismissal still happens occasionally
But occasionally, self-managing organizations do face situations where they need to part ways with people who don’t fit. Perhaps someone breaches company values, or systematically fails to follow the advice process (in many Teal organizations, failing to follow the advice process is the only “fireable” offense). In both of these cases, the fundamental fabric of self-management may be threatened. These situations don’t rely on a hierarchy for action, but on peer-based mechanisms.
It usually starts with a conflict resolution effort, initiated by a team or an individual. They talk with the person in question and try to find a mutually agreeable solution. If this fails, they can call a mediator, or a panel, to facilitate resolution. In most cases, this brings resolution. In some cases, the person and the team decide on some mutual commitments and give it another go. In others, the person comes to see that trust is irrevocably broken and understands it is time to leave.
If no agreement can be found, and as a last chance to settle the matter, the team may ask an owner/founder to mediate. In the rare cases where even that fails, the team can ask the founder to put an end to the person’s employment. This process, with some variations, is followed at Buurtzorg and Morning Star.
Economic troughs are handled differently
Few Teal organizations have laid people off during downturns. Self-managing organizations are exceedingly flexible and accumulate little overhead. They weather downturns better than traditional organizations. FAVI and Sun Hydraulics, for example, have both withstood severe recessions (with revenue decreases of 30 to 50 percent) without layoffs.
In some cases, colleagues agree to share the pain and opt for temporary pay reductions. From a Teal perspective, it would be improper to lay off colleagues just to boost profits for a few months if the overstaffing is deemed to be only temporary.
When an organization moves to self-management, people in management roles are no longer needed. Zappos faced that situation and offered former managers substantial time and assistance to find new roles where they could add value. They also offered all employees a generous severance payment if they did not feel fully committed to the new organization. .
This is different to structural overstaffing. AES faced this many times with power plants it bought in Eastern Europe, Asia, Latin America, and Africa. In some cases, the previous government owners had used the plants to create artificial jobs. After acquisition, AES swiftly reduced the number of employees, mainly via a generous voluntary severance program. Only rarely were people asked to leave. In Panama, AES created a loan fund for employees who took the package. This helped many to start new businesses.
Maintaining jobs artificially makes no sense from a Teal perspective. A concern about job security is partly inspired by fear. It neglects the truth that everything changes. It dismisses the possibility that a person whose talents are wasted in an overstaffed organization might find a better way to express his gifts where they are needed. Life is continuously unfolding; dismissals and even layoffs can be part of that unfolding, although they are rare in self-managed structures.
Frequently Asked Questions
In Teal organizations the decision about whether a person will stay with the organization belongs with that individual and/or their team. Forced dismissals are infrequent because people are given clear indications if they are not a fit so that they can choose to leave voluntarily. In many cases a parting of the ways happens by mutual consent in the process of self-managed conflict resolution. Only when everything else fails do organization founders fire people, but this is also initiated by the team or a conflict mediation panel.
When you don’t have a fear that your boss may fire you at will, it’s easier to show up fully at work. If you’re not being judged and do not depend on adhering to a set of rules to stay in the job, you tend to bring your whole self to the workplace.
Teal organizations don’t reduce dismissals to cold, contractual transactions that avoid dealing with the emotions and pain. Instead, they accept and work with those human issues to turn departures into a learning experiences that can meaningfully enhance the person’s and the organization’s future path.
Giving people the opportunity and encouraging them to actively find a new role in the company when they are not performing well or when their current role is no longer needed contributes to the organization’s ability to listen and understand what it is trying to become, to fulfill its evolutionary purpose.
Concrete cases for inspiration
AES introduced a generous severance program and a loan fund to make post-acquisition layoffs mostly voluntary and less traumatic.
AES has demonstrated a distinctively Teal approach to layoffs due to structural overstaffing after buying power plants previously owned by governments. After the acquisition, AES had to lay off hundreds of people and managed to do that relatively painlessly through a special voluntary severance program. Here is Dennis Bakke‘s, CEO, perspective on the matter:
"The right size of a workforce is equal to the number of people needed to make the workplace fun. Having too many employees demoralizes colleagues and causes turf battles. A very astute AES plant manager in Northern Ireland told me that arguments over turf are good indicators that the facility has too many people. No one worries about who does what when there is enough work to go around. My belief that business should not carry unneeded employees does not mean that they should be given pink slips and hustled out the door. Departing employees need time to make the transitions to new work. Organizations should be generous with severance arrangements. We encountered overstaffing almost every time we made an acquisition. One of the first things we did after acquiring a business was to set up a generous and voluntary severance program. Only rarely were individuals asked to leave. In Panama, AES created a loan fund for employees who took the severance package. A year later, I traveled to a celebration lunch with former employees who had left the company. Seventy-one new businesses had been started by these former employees, most of whom tapped the AES loan fund. Even with generous voluntary severance arrangements, the changeover from a company you know to one you don’t can be traumatic. I strongly believe that these difficult transitions are a necessary evil that forces employees and organizations to adjust to a dynamic world. Part of the joy of work is learning new roles and taking on new responsibilities. Job security is attractive gift wrapping, but seldom is there anything of lasting value inside."
In the Holacracy model, a person can be removed from their roles but still stay in the member pool and take time to hunt for new roles. If this fails, a custom dismissal process, such as a peer removal, can be initiated.
Holacracy does not prescribe a specific process for dismissals. Starting and terminating people’s contracts originally lands in the scope of the top circle, who can then assign that authority as they see fit. For example, there can be an HR role that has authority to hire and fire. Or in the partnership model (as in HolacracyOne) there is a partnership removal process with partner peer review (similar to Morning Star).
Because there is no fusion of person and title, the lead link in any circle is free to make a decision and remove somebody from a specific role. The person is not fired in this case, but remains in a member pool and must pitch for other roles. If no new role can be found, the person either leaves voluntarily, or a custom dismissal process is triggered.
Dismissals can be initiated by any individual, using the conflict resolution process if needed.
At Morning Star, the process is almost identical to the one used at Buurtzorg, except that it is initiated by an individual rather than a team. Morning Star views a dismissal as the final step in a conflict and therefore uses its conflict resolution mechanism to deal with the situation. The process starts when one person asks another to leave the organization. Suppose that someone finds that a colleague has fundamentally breached a company value (perhaps the person made an important decision without requesting advice from colleagues) or that a colleague is failing time after time to live up to his commitments, despite a number of previous attempts to improve the situation. She can initiate a conflict resolution process, asking her colleague to resign. If the person asked to leave does not agree, a four-stage conflict resolution process begins:
In a first phase, they sit together and try to sort it out. In the discussion, the person asked to leave can suggest ways to restore trust. Or perhaps he will come to see that he has irrevocably lost the trust of his colleagues and that he is better off looking for work elsewhere. If they can’t agree on an outcome, another colleague is called in as a mediator. If necessary, in a third step, a panel of colleagues is asked to mediate. As a last resort, Chris Rufer, the founder and president, is asked to join the panel. People asked to mediate or sit on a panel take their role very seriously. Morning Star’s principle of not using force against anyone is at stake. They are not a jury, passing a verdict on a colleague. Their role is to explore every possible way to restore trust in the relationship. The process can take a long time if needed. Only when the person who has been asked to leave sees that colleagues genuinely tried to find a solution and that none could be found, will he come to accept that resignation is the reasonable outcome. Therein lies the power and legitimacy of the process.
Because Morning Star views a dismissal as a private conflict between two persons, everyone is under the understanding of full confidentiality (as is always the case with the conflict resolution mechanism). As a result, no data exist of how often this happens. . Some more senior employees report that they have been part of a handful of panels over the years. They are advocates for the method. The panel discussions are never easy they report, but they do help people reach fair and reasonable outcomes.
Dismissals are self-managed, using a mediated conflict resolution process.
Dismissals are self-managed, using a mediated conflict resolution process.
At Buurtzorg, if someone has lost the trust of the team, they try to find a mutually agreeable solution. If that doesn’t work out, the group calls in the regional coach or external facilitator to mediate. In almost all cases, the presence of a mediator brings resolution. In some cases, the person and the team decide on some mutual commitments and give it another go.
In others, after some deliberation, the person comes to see that trust is irrevocably broken and understands it is time to leave. If no agreement can be found, and as a last attempt to settle the matter, team members can ask Jos de Blok, the founder, to mediate. In the rare case where even that fails, they can ask him to put an end to the person’s contract (legally, he is the only one who can do so).
A novel alternative to dismissal in a time of crisis
When CEO Jean-François Zobrist was faced with critical decisions, he readily looked to the workforce for help. More than once, on impulse, he went around the shop floor, asked everybody to stop the machines, climbed on a soapbox and shared his problem.
His first major crisis happened in 1990 when orders plummeted in the wake of the First Gulf War. there simply wasn’t enough work to keep workers busy. Capacity and costs needed to be reduced. There was one obvious solution: fire the temp workers.
But at FAVI, no one was really considered a temp worker. For reasons related to labor laws in France, new recruits were hired as temp workers for 18 months before being offered a full contract. Most were already considered full members of their teams. By firing them, FAVI would rescind its moral commitment to them, and it would lose talent it had invested in, with a recovery perhaps only a few months away.
With no clear answers, Zobrist found himself on the soapbox and shared his dilemma with all employees (including the temp workers whose fate was being discussed). People shouted questions and proposals. One said, “This month, why don’t we all work only three weeks and get three weeks’ pay, and we keep the temp workers? If we need to, we will do the same thing next month as well.”
Heads nodded, the proposal was put to a vote, and unanimously agreed. Workers just agreed to a temporary 25 percent salary cut. In less than an hour, the problem was solved and machine noise reverberated around the factory again.
- Feedback and Performance Management
- Compensation and incentives
- Commitment, Working Hours and Flexibility
Notes and references
Quartz's article "Internal Memo: Zappos is offering severance to employees who aren’t all in with Holacracy" ↩︎
Source: Laloux, Frederic. Reinventing Organizations. Nelson Parker (2014), pages 187-188 ↩︎
Interview Frederic Laloux with Brian J. Robertson, 2013 ↩︎
Source: Laloux, Frederic. Reinventing Organizations. Nelson Parker (2014), pages 128-129 ↩︎
Source: Laloux, Frederic. Reinventing Organizations. Nelson Parker (2014), page 128 ↩︎