Democratic Management: An Analysis of the Trends in Co-operatives and “Teal” Organizations

Democratic Management: An Analysis of the Trends in Co-operatives and “Teal” Organizations

By: Rebecca Fisher-McGinty, Round Sky Solutions (co-operator & trainer) & Saint Mary’s University (MMCCU Student).

Abstract: This paper explored, drew connections, and pieced out differences between two (Teal and Co-operative) of the many collaborative management and non-hierarchical movements and trends across the globe that Round Sky Solutions Cooperative has targeted, served, and stumbled upon. Though these two movements are siloed, I found many connections between the Teal movement and Co-operative movement. After conceptual research on the two movements, I found they have a lot of shared common issues, but generally seem to approach the world in different ways in which they could learn from each other. I concluded that worker co-operatives can be Teal organizations, but Teal organizations are not necessarily able to be classified as co-operatives. Teal organizations, inspired by Fredrick LaLoux’s book “Reinventing Organizations” are mainly driven by democratic management under three “breakthroughs” whereas co-operatives are driven by the co-operative principles and values to serve its members.  

Keywords: co-operative management, co-operative movement, democratic management, teal organizations

Introduction:

Round Sky Solutions (Round Sky) is a small distributed worker-owned co-operative with workers across the United States offering an online collaborative management and leadership training to individuals around the world. Round Sky stretches the co-operative nature of locality bringing leaders in cooperative-minded movements together through the training. The online Collaborative Leadership Certification Program (CLCP) is offered to leaders seeking democratic management tools and skills to integrate into their teams and their leadership. In this work, people from across the world have been interested in this program revealing the relevance of collaboration and the co-operative value of democracy across cultures and movements. This relevance of collaborative and democratic management spreads across movements beyond the co-operative movement. As a part of the co-operative movement, I was curious how the co-operative movement compares and intersects with other movements. This paper seeks to explore, to draw connections, and to piece out differences between two (Teal and Co-operative) of the many collaborative management and non-hierarchical movements and trends across the globe that Round Sky Solutions has targeted, served, and stumbled upon.

Round Sky’s online training offers a solution to the common issues in democratic management. This includes issues with accountability, such as who works on which project and what their role entails. Further, it answers the questions about how to approach workers not meeting expectations, such as not following through on their projects. The training also offers a “Standard Meeting Practice” to give leaders a tool to effectively include everyone’s voice and needs for their work to be addressed. A universal need for democratic tools to support the values of democracy and inclusion has been revealed as Round Sky has served students from Spain, Ghana, France, Russia, Canada, New Zealand, and the United States in 2018 alone. Further, those students have come from a variety of organizations and perspectives including worker co-operatives, food and consumer co-operatives, organizational coaches and consultants, non-profit directors, co-operative developers, small business owners, and even, corporate executives. Thus, leaders in many walks of life believe in the idea of shared or participatory leadership and management.

Co-operatives and Co-operative Principles

This paper refers back to the international co-operative identity, principles, and values as a framework (see Appendix A). Thus, I will be using the identity of a co-operative as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise” (ICA, 2017, p. ii). The identity and the seven internationally recognized co-operative principles guide all co-operatives. For this paper and Round Sky’s CLCP training, the second Co-operative Principle, Democratic Member Control, provides particular relevance stating that “cooperatives are democratic organisations controlled by their members, who all actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organised in a democratic manner” (ICA, 2017, p. ii). Although co-operatives are organized in a democratic manner, not all are self-organized by the workers and thus not equally democratically managed, which I will explore further. This principle places the power democratically on the members of the co-operative. Further relevance to the trend of collaborative management, “co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity” (ICA, 2017, p.ii). These internationally recognized values help to guide the co-operative movement and co-operatives.

Much of this paper will not focus on the management of Consumer Co-operatives. Warbasse defines a consumer co-operative as a “voluntary association in which the people organize democratically to supply their needs through mutual action, and in which the motive of production and distribution is service not profit” (Warbasse, 1942, p. 7). Consumer co-operatives are democratically managed by their members, which are the consumers. This means that the workers in the workplace do not necessarily have a vote in the business unless they are also members. Thus, consumer co-operatives tend to be democratic in their membership structure, not their workplace structure. There is a significant difference between the workplaces of consumer co-operatives and worker co-operatives.

Worker-owned co-operatives are also guided under the internationally recognized co-operative principles and values. In this case, the workers are the members of the co-operative, so the business is democratically managed and owned by the workers. Worker co-operatives’ democratic management structures vary among co-operatives. As reported in the USFWC report, “there is no standard form for governance structure, or the relationship between governing rights and ownership rights” (Palmer, 2017, p. 12). Some co-operatives use free flow dialogue to run their business, some vote on decisions for the co-operative, and some use structures like Sociocracy, Holacracy, or Collab. However, the interlinking factor is that each member (worker-owner) gets equal power with their vote. Worker co-operatives also make up a significant portion of known co-operatives worldwide. The Global Census on Co-operatives reported 2,514,598 total co-operatives globally with 84,799 worker co-operatives (Coop Census, 2014, p. 5). Further, the USFWC reports a steady increase of worker co-operatives with 323 reported in 2015 (Palmer, 2017, p. 5) and 450 reported in 2017 (State of The Sector Report, 2018, p. 3). Thus, there is an increase in the desire for co-operatives and perhaps for democratic management and ownership. As I explore the similarities between the co-operative movement and other trends in organizational management, I am referring to the democratic practices of worker-owned co-operatives.

Trendiness of Collaborative Management

This paper focuses the Co-operative movement and Teal movement. However, there are other notable movements and trends that could be explored. According to Rajan et al, the popularity of “flat” organizational structures have increased in corporate environments (Rajan, R & Wulf, J., 2006, pp. 759-760). Companies becoming more flat often looks like a reduced hierarchy usually by eliminating middle managers (Rajan, R & Wulf, J., 2006, pp. 759-760). However, flat structures are not necessarily democratic, nor are they guided by principles or values. Other movements include the regenerative organizations movement, employee owned businesses or ESOPs, socially responsible and conscious businesses, servant leadership, and more. Collaborative, more worker-friendly environments are trending and likely contributing to the awareness and particular relevance of both the Co-operative and Teal movements.

Teal Movement

There are several movements and trends encouraging democratic member control and engagement. A notable one is the “Teal” movement described by Frederic Laloux in  Reinventing Organizations (2014) encouraging and framing a new type of self-management in organizations: “Teal” Management. The concept of reinventing organizations has a large, active, and international following. In the Reinventing Organizations Discourse forums, there are 4231 users across the globe (Reinventing Organizations Discourse, 2018, n.p.). Teal practitioners and followers have introduced themselves in these forums from the Netherlands, South Africa, the United States, Canada, Colombia, Germany, Mexico, Brazil, France, United Kingdom, Russia, and Switzerland to name a few (Reinventing Organizations Discourse, 2018, n.p.). There are no consolidated statistics around Teal management organizations, but this forum certainly reveals Laloux’s vast following.

Teal Breakthroughs

Laloux’s framework illustrates a trend that paves the way of self-managing organizations deviating from the mainstream hierarchical organizational model. Laloux posits that “we are about to make a new leap… A leap to a stage that Wilber gives the color ‘Teal’ and that I sometimes call ‘Evolutionary.’ If there is much pain in the world today, it’s in part because our current ways of being in the world feel increasingly outdated and incapable of dealing with the challenges we are facing” (Laloux, 2016, p. 18). This “new” way of being in the world, described as Teal, refers to teams that employ “self-management [to] replace[s the] hierarchical pyramid. Organizations are seen as living entities, oriented toward realizing their potential” (Laloux Chart in Appendix B). The metaphor of a “living organism” guides Teal managed organizations with three “key breakthroughs:” “self-management, wholeness, and evolutionary purpose” (Laloux Chart in Appendix B).  

In the first guiding key breakthrough of Teal management, Laloux states:

Self-management. Teal organizations operate effectively, even at a large scale, with a system based on peer relationships. They set up structures and practices in which people have high autonomy in their domain, and are accountable for coordinating with others. Power and control are deeply embedded throughout the organizations, no longer tied to the specific positions of a few top leaders (Laloux, 2015, n.p.).

This breakthrough resembles the second co-operative principle of democratic member control within worker-owned co-operatives (Appendix A). This principle ensures that the members (workers) are self-managed and accountable to the coordination and direction of the work.

The second guiding key breakthrough is:

Wholeness. Whereas Orange and Green organizations encourage people to show only their narrow “professional” selves, Teal organizations invite people to reclaim their inner wholeness. They create an environment wherein people feel free to fully express themselves, bringing unprecedented levels of energy, passion, and creativity to work  (Laloux, 2015, n.p.).

This breakthrough does not directly connect to any of the co-operative principles. However, it indirectly connects to the first co-operative principle of voluntary and open membership and the fifth principle of education in addition to the co-operative ethical values of honesty, self-help, solidarity, equity, and openness (see Appendix A). A historic figure in Spain’s co-operative movement, Arizmendi speaks to the potential that work can have on a person: “work is a path towards personal and communal self-realization, individual perfecting and collective betterment; it is the exponent of a more unquestionable social and humanistic consciousness” (Arizmendiarrietta, n.d., para. 277). Thus, part of co-operatives is creating a space for that wholeness breakthrough to exist.  

Lastly, the third guiding key breakthrough is:

Evolutionary purpose. Teal organizations base their strategies on what they sense the world is asking from them. Agile practices that sense and respond replace the machinery of plans, budgets, targets, and incentives. Paradoxically, by focusing less on the bottom line and shareholder value, they generate financial results that outpace those of competitors (Laloux, 2015, n.p.).

Evolutionary purpose indirectly connects to the fourth principle of autonomy and independence and the seventh principle of concern for community (see Appendix A). It connects to the principle of concern for community specifically because co-operatives exists for more than profit. Instead, co-operatives operate to support member and community needs, which requires a co-operative to evolve with time. Co-operatives, being “close to the needs of their members and community”, position themselves to better understand where innovation should and need to happen (Brat, 2013, p. 26). Due to the structure of worker cooperatives, members simply know what they need to better shift, evolve, and innovate the work for the better.  

Teal Movement and Co-operative Principles

Despite these resemblances and connections, the key breakthroughs do not include anything around ownership of the company as the co-operative principles suggest. Thus, Teal organizations could still be investor-owned firms, which would be a significant difference from co-operatives. The Wikipedia page states that “in Teal, while fulfilling the organization’s purpose might require financial investment, which in turn might give investors a legitimate voice in the organization and the right to a fair return on their investment, the organization does not exist solely to serve its owners” (Wiki, n.d., n.p.). There is not a universal structure that Teal organizations can grow into, which might become a problem in the future for them. Further, Teal organizations do not necessarily encourage continuous education and training, cooperation amongst Teal organizations, or concern for community. These are key parts of the Co-operative movement that differ from the Teal movement. However, some of these things are happening in the Teal movement.

Interestingly, Laloux states that “the three breakthroughs reinforce each other but companies don’t necessarily have to embrace all three” (Laloux, 2016, p. 55). This contrasts with the approach to the co-operative principles and values. It leaves room for a blurred interpretation about becoming a Teal organization. In general, co-operatives are expected to follow the principles as they identify with the co-operative identity. However, following the co-operative principles is a dynamic process and not necessarily a destination. Laloux explains that companies do not have to embrace all three breakthrough so “the task [is] less daunting for leaders inspired to transform their organizations… they generally focus, at least at first, on the breakthrough that to colleagues feels the most important”  (Laloux, 2016, p. 55). Laloux’s approach is quite patient. On the other hand, co-operatives must be verified to use the .coop website address brand. To verify a co-operative, must submit “a copy of the organization’s bylaws, a copy of the organization’s most recent annual report or the most recent past two years of audited financials or financial statements provided to members over the past 3 years, and a sample of the organization’s membership application forms and/or membership materials, promotional, sales or informational material that reference the organizations status as a cooperative” (Verification Page, 2018, n.p.). There is not a similar demarcation or identity of Teal organizations, which may be a barrier to ensuring a strong and legitimate Teal presence. This also makes it a challenge to track and understand the reach and impact of the Teal trend.

Are Co-operatives Teal? Is Teal Co-operative?

There is not much written analysis around co-operatives and teal companies. However, a blogger on Medium explores the connections between co-operatives and teal organizations. He illustrates some of the differences and similarities: “One [cooperatives] having to do with ownership, the other with governance [Teal]. Both are worker- and client- centric, and both claim to have a clear purpose built on strong mutual values. Most coops I have come across have a rigid, formal structure with a clear hierarchy” (Bergh, 2018, n.p.). Bergh suggests that there is a lot of overlap, but that a co-operative’s hierarchy is what sets it apart. Bergh fails to differentiate between consumer co-operatives and worker co-operatives. Further, a formal structure is not in contradiction with Teal or democratic management. Instead, it can help to facilitate self-organization without a hierarchical approach.

Worker-owned co-operatives can be Teal, but a Teal organization cannot be a co-operative just by being Teal. As mentioned above, a co-operative could be Teal if it strives toward the three breakthroughs of self-management, wholeness, and evolutionary purpose. Many worker-owned co-operatives are inherently and effectively striving for that. However, a Teal organization could not be classified as a co-operative unless it commits to the seven internationally recognized principles (see Appendix A), which stray from the three breakthroughs (see Appendix B). The co-operative principles also may require significant change within the company’s relationship with financial investment from the workers, investors, and profit-sharing or patronage. Thus, a co-operative could be Teal, but a Teal organization is not necessarily a co-operative.

History Before Teal

Further, the narrative of the Teal movement might even threaten the longstanding history before Reinventing Organizations. At first glance, Laloux’s Reinventing Organizations seems to be offering something completely new to the world. However, in reality, Teal environments have existed since before the start of the first formalized co-operatives in Rochdale in the 1800s (Fairbarn, 1994, p. 2). Further, Medium blogger, Prentice reflected on the similarities between indigenous cultures in pre-colonization California with Teal management:

Teal management approaches may be new to us, with our legacy of kingdoms instead of kindoms, of feudal ideas of private property ownership, our left-brain ways of interpreting reality, our chronic wealth disparity, and our generally exploitative approach to other humans and the rest of the natural world. But the assertion (as written on the back of my Reinventing Organizations hardcopy) that Laloux is documenting the “few pioneers [who] have…‘cracked the code,’” makes it sound as if a handful of modern European and American male executives have “discovered” something brand new, which sounds a bit like the modern equivalent of the conceit that Columbus “discovered” America in 1492 (Prentice, 2016, n.p.).

Similar to Prentice’s connection to the history of Teal management far before the Reinventing Organizations book and current movement, this book offers a historic view that invisibilizes the history of and extent of co-operatives in our current economy. Although there is no current evidence, this overlook could be harmful and undermine the co-operative movement.

Arguably, one of the main goals of both the Teal and Co-operative movements is a better, more humanizing, workplace for its workers. So, are Teal organizations supporting, acting in neutrality, or threatening the co-operative movement? I do not have an answer for you, but my sense is that on one hand, Reinventing Organizations is a great step towards getting another audience to understand and believe in democratic management. Further, the Teal movement may provide language and energy for more purposeful organizations that will evolve to share profits (an important leap to democratic workplaces) rather than to produce profits for investors. However, I speculate that it may turn out to placate people to not grow into full co-operatives or democratically owned entities while leaving room for a mere interpretation of Teal management alone. Before we can know, there needs to be more evidence about the commitment to truly Teal practices throughout an organization and how to guide companies to remain committed to Teal. So far, there seems to be little overlap or knowledge sharing between the two movements. Thus, the Teal movement might be acting in neutrality to the co-operative movement.

Connecting Along Common Issues

This is where Round Sky Solutions’ work comes in. The two movements often use different words to describe the self-managed or democratic structure. And, they each have seemingly different foci: one being focused on ownership by members and one being focused on management structure. However, those in each movement intersect in their search for tools to handle the complexity of democratic management effectively. For many democratically managed teams they need tactics for decision-making, facilitating meetings, managing conflict, producing strategy, managing projects, and tending to personal development. Round Sky offers tools and tactics rooted in the power of collaboration that can be applied to all sorts of contexts and realities. Round Sky has marketed and connected to both communities. Thus, their cohorts often include coaches of Teal organizations and co-operative owners or leaders. The mixture of the two movements and realities creates a rich conversation and learning environment for both sides. Thus, the training helps to solve the common struggles in democratic management for both the Co-operative movement and the Teal movement.

Conclusion:

In conclusion, the Co-operative movement and the Teal movement have a lot of similarities and they can learn a lot from each other. Co-operatives can learn from the Teal focus on improving their management style. The Teal movement can learn from the co-operative difference, which is maintaining its purpose; the fact that capital is a tool rather than the goal as well as in worker co-operatives are about human dignity and labour dominating capital. The Teal movement can learn from the legal ownership structure of co-operatives to strengthen their connection to their three breakthroughs.

Further, the historic difference with co-operatives being quite an old concept and the Teal movement being quite new can contribute to the lack of interaction between the two. The co-operative principles and the Teal breakthroughs have some overlap, but the differences around ownership and the language used in each movement likely contribute to siloed movements. The Co-operative movement and Teal movement have a lot of shared common issues and generally seem to approach the world in different ways in which they could learn from each other. They could stand for some co-operation amongst co-operatives and Teal organizations.  

References

Arizmendiarrieta, D. (undated). Reflections (Pensamientos), Otalora (Azatza): Mondragon Corporation Cooperativa. 13-116. Retrieved from http://www.arizmendiarrieta100.com/wp-­‐content/uploads/2015/02/Reflections.pdf.

Bergh, M. 2018. The color of coops ain’t teal. Medium. Retrieved from https://medium.com/weelaborate/the-color-of-coops-is-not-teal-2cb83e201c33.

Brat, E. & Buendia Martinez, I. & Ouchene, N. (2016). Innovation Priorities and Practices in Cooperatives. International Institute for Cooperatives. Retrieved from Saint Mary’s Course Platform. 

Fairbairn, B. (1994). The Meaning of Rochdale: The Rochdale Pioneers and the Co‐operative Principles, University of Saskatchewan Printing Services. 1-11. Retrieved from Saint Mary’s Course Platform. 

ICA. (2017). Guidance Notes to the Co-operative Principles. Retrieved from International Co-operative: https://www.ica.coop/sites/default/files/publication-files/ica-guidance-notes-en-310629900.pdf

Laloux, F. (2015). The Future of Management Is Teal. Strategy and Business. Retrieved from: https://www.strategy-business.com/article/00344?gko=10921.

Laloux. F. (2016). Reinventing Organizations: An illustrated invitation. Pub by Nelson Parker. Retrieved from https://www.dropbox.com/s/6z752v84em7g5rn/Reinventing%20Organizations%20Illustrated%20(161028).pdf?dl=0.

No author. (2014). Measuring the Size and Scope of the Cooperative Economy: Results of the 2014 Global Census on Co-operatives. DaveGraceAssociates. Retrieved from https://www.un.org/esa/socdev/documents/2014/coopsegm/grace.pdf .

No author. (2018). State of Worker Cooperative in the United States 2017. Democracy at Work Institute and the U.S. Federation of Worker Cooperatives. Retrieved from https://institute.app.box.com/s/dkgolqlb4puqvy6av87csbc8iyojqc4o

No author. (2018). Verification Page. .coop. Retrieved from https://www.coop/faq/verification/.

No author. (2018). Reinventing Organizations Discourse. Online Forums. Retrieved from http://discourse.reinventingorganizations.com/.

No author. (no date). Ownership. A wiki to inspire next-generation organizations. Retrieved from www.reinventingorganizationswiki.com/Ownership.

Palmer, T. (2017). WORKER COOPERATIVES IN THE U.S.2015 State of the Sector. Democracy at Work Institute. Retrieved from https://institute.app.box.com/v/wc2015stateofthesector.

Prentice, J. (2016). The Most Dangerous Notion in “Reinventing Organizations”. Medium. Retrieved from https://medium.com/@jessicajprentice/the-most-dangerous-notion-in-reinventing-organizations-9032930295e2.

Rajan, R., & Wulf, J. (2006). The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies. The Review of Economics and Statistics, 88(4), 759-773. Retrieved from http://www.jstor.org.library.smu.ca:2048/stable/40043033

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Appendix A: Co-operative identity, values & principles

Definition of a Cooperative

A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

Cooperative values

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Cooperative Principles

The cooperative principles are guidelines by which cooperatives put their values into practice.

1. Voluntary and Open Membership

Cooperatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2. Democratic Member Control

Cooperatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organised in a democratic manner.

3. Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4. Autonomy and Independence

Cooperatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.

5. Education, Training, and Information

Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.

6. Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

7. Concern for Community

Cooperatives work for the sustainable development of their communities through policies approved by their members. (ICA, 2017, p. ii)

Appendix B: Breakthroughs in Collaboration

(Laloux, 2015, n.p.)