The (In)Human Side of Exponential Organizations
"Exponential organizations" has been a buzzword since the book with the similar title appeared in 2014. Authors Salim Ismail, Michael Malone, and Yuri van Geest coined the term in their bestseller and describe the various characteristics that define so-called Exponential Organizations. The examples of such companies (i.e. Airbnb and Uber) are known to many, but the characteristics of such organizations are not.
And while Exponential Organizations are a hot topic and most of the described companies in the book are growing rapidly, we're questioning the human side of such enterprises. How do these organizations engage their employees? How do they create an environment in which people can thrive? And what are the dangers of their exponential growth? We sat down with Bucket List hero and co-author Yuri van Geest and discussed various topics in his home town, Rotterdam.
The authors describe the characteristics of Exponential Organizations (ExOs) in detail and managed to mould them into a comprehensive model. The model consists of 11 main aspects in which the authors think ExOs differ from more "traditional" organizations. Here's a short 60 second video to get you quickly up to speed. Besides watching this video, we highly recommend you to read the book. It's packed with great case studies and a lot of food for thought on the future of work.
The authors believe the brain is a good metaphor for their acronyms (IDEAS SCALE). "The right brain manages growth, creativity and uncertainty, while the left brain focuses on order, control and stability".
We think both the acronyms (of which Yuri admitted that it took some creative efforts to turn them into "IDEAS SCALE") and the metaphor of the brain are quite far-fetched. Still, the content of the book is inspirational and very useful for both startups and larger organizations in order to get familiar with a fast changing business world.
But what about the human side of such enterprises? How do ExOs engage and motivate their employees? And how do the findings of our own research relate to the research done by Van Geest and his co-authors?
Massive transformative purpose
A clear overlap between what we've seen in the companies we've visited and the ExO model is the strong focus on purpose. The fact that organizations are trying to make a positive dent in the universe is an important way to increase employee engagement and motivation. The positive effects of being connected to a clear purpose have been confirmed by various Patagonia, where they use their business as a force for good. A clear and inspirational purpose binds people together and creates alignment within the entire organization.
A potential pitfall for ExOs (in fact for any type of organization) is that, when success comes, there's a danger that the initial purpose becomes less important than financial gains. ExOs like Airbnb, Uber, and Google all started out with a strong focus on their purpose but along the way started to lose sight of it. As we've personally witnessed at Google, the purpose "to organize the world’s information and make it universally accessible and useful’ is just a tiny portion of what the employees at Google are currently working on.
During our visit to the Googleplex one of the employees even told us: “A part of the company is working on amazing things that are literally changing the world. But there’s a very large portion that is just here to make money; not that inspiring as you can imagine.” And this makes perfect sense when you know that Google's main source of income (90%) is the advertising business. For many ExOs purpose has been their entire raison d'etre, but when large sums of money (and investors) come into play it's apparently hard to stay true to the purpose.
In ExOs, autonomy is described as "self-organizing, multi-disciplinary teams operating with decentralized authority". We agree on the fact that autonomy can be a powerful motivator as we witnessed great examples all around the world. civil servants at Brussels' Social Security Department can work whenever, wherever, and however they want.
Even though the results are astonishing, when companies grow (and especially when they grow rapidly) they tend to constrain exactly that particular freedom and autonomy. Often more and more command-and-control structures are introduced which start to limit employees to thrive. Over time bureaucracy, conformity and compliance become more important than autonomy and freedom.
The dark side of success
ExOs are inspirational case-studies of how organizations can thrive in today's rapidly moving business environment. However, they should not be viewed solely as rigid blueprints for change. When organizations experience exponential growth they tend to lose sight of what made them successful in the first place. Organizations that forget to put their purpose first are at risk of losing it all. Not just financial success, but moreover employee engagement (and retention) and goodwill of their customers.
The same counts for autonomy. Once companies grow and start implementing structures that promote bureaucracy, they will simultaneously experience the drawbacks of reduced autonomy. The example of FAVI should teach all of us a powerful lesson. Once they started introducing more command-and-control, conformity and compliance structures, profits started to drop rapidly and eventually vanished entirely. ExOs are highly inspirational case studies, but be careful, the inhuman side is lurking.
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Another point of view of the inhumanity of exponential organizations - from the employees perspective:
I have not personally fact checked this story to verify that it is true, but I've heard and witnessed and experienced similar situations in my working career so that I have little reason to doubt the story.
Most of us know monopolies are bad. “They have no incentive to deliver better products or to get more efficient.” And if a monopoly can do whatever it likes, the victim is likely to be the customer. If it exists outside an organization, measures can be taken to end that. Within organizations, creating monopolies seems standard practice, but why!?
“It was like being with a parent that didn’t really want us”, says CEO of GE Appliances, Kevin Nolan. He explained: “The one hope everyone had was that Haier bought us because they wanted us, and we were curious to find out what that would mean”. 4 years later, we visited to find out how GEA was doing. Getting to talk to them was harder than we thought: “Our managers and executives are currently working on the assembly lines.” They are doing what!?