Social Enterprise Start-ups – 5 reasons to implement sociocracy early

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sociocracy: effective governance

At the beginning of every enterprise, there are thousands of decisions to make. Some decisions feel temporary, but some set the path you will be traveling on for years. If you are a social enterpreneur, integrity in your decision-making will be important to you, and you’re not willing to compromise just because you’re just starting out.

We work with organizations of all kinds but what they all have in common is that they care about social change. What we have to offer them is a way of running their own organization so that they can get done what they want to get done but never have to give up on their values and their ideal of “we’re in this together”. We teach them a way of decision-making that connects them, instead of dividing them. That moves them forward, as a team, both in process and in content. A way of decision-making that allows them to hear everyone without slowing you down.

Many start-ups begin their journey with a lot enthusiasm. Any process that regulates how decisions are made within the team seems unnecessary. After all, you all want the same, right? And if you don’t agree, then you… work it out…? Your values are strong, your team spirit is strong, nothing can go wrong. So, what’s the problem? There isn’t really any problem – yet. Your issues will comes down the line. You’re not preparing for growth, and down the line, you will either have to compromise on your integrity, your growth or your effectiveness. Imagine you start a new business and you use a computer with a old processor. Yes, that works. Yes, people did business in the olden days – so sure, you can do that. But just like outgrowing your computer system is a pain, so is outgrowing your governance system. It is actually a real pain. Typical symptoms: There are issues you don’t even bring up anymore because reaching agreement seems impossible. Things call through the cracks, or people step on each other’s toes. Worst case: valuable people leave in frustration or anger. All of those can have governance issues as their root issue. Which means you need (a) a good and clear governance system and (b) a plan for growth. The plan to “just work it out” will not carry you through bigger disagreements. A good process will help you smoothen out the path, which can make the difference between a growing business and failure.

What’s different about the governance system – sociocracy – we are talking about? The three main elements are:

  • Decisions by consent. Consent decision-making method is highly inclusive. A decision is made when no one has an objection. It is a very clear and also very natural decision-making method. Imagine you want to eat out with a friend. You want chinese, he wants pizza. You object to pizza, but he is ok with chinese. How will you decide? Chinese it is. A decision is made and no one is bent out of shape. There is a lot more to say but you get the idea.
  • Nested circles. The organizational structure follows patterns of recursion. Semi-autonomous committees (we call them circles) are making decisions about their area of expertise and authority, and those committees are interlinked so everything is taken care of. Nobody has to be good at everything and you can bud out into additional circles without changing your structure. Growth works well in sociocoracy. And adaptability is baked into sociocracy.
  • Paying attention to feedback. Feedback comes in many different shapes: sales, clicks, emails. But also: how content are your employees? How are meetings working for everyone? Is your meeting time used efficiently? How did it land on you when I said this? Does my leadership style encourage people to speak up if they disagree? How to I react if they do? Feedback is everwhere, and it is always valuable. In order to make the most of feedback and measureables, you have to build them into your processes. Before you make a decision, think about how you will measure its impact. Trial and error is only useful if you notice when you were off base. Many small decisions with quick and effective adjustment will boost your success significantly. Giving all employees the feeling that they are being heard is sweet – but actually hearing them is different.

You might notice: these principles are very simple but deep. But it gets even better. The beauty of this governance system shows in how the pieces interlock and reinforce each other. Taking feedback seriously leads to more effectiveness: when you take in feedback with an open heart and mind, people will be more encouraged to speak up, which will give you better information which will make your work fit better, which will make you more effective. Transparency and clarity in decision-making reinforces effectiveness: When you are transparent about your criteria and decisions, people will know how to plug in well, they will appreciate each other more, listen better, trust each other more, invite each others input more often, work together more efficiently, and so on. Equivalence leads to transparency: when everyone can be heard without being silenced, they can bring their whole self to work, which will lead to more sharing, more buy-in, which will make you more effective. The three ingredients together make a magic sauce, creating an upward spiral of effectiveness, shared and transparent power, and real connection between human beings.
It is not uncommon that integrity is sacrificed to save time. Yes, we’d really like to hear everyone but sometimes making an autocratic decision is good? Yes – but . What makes all the difference is having clarity about what is a decision you can make alone and what is a decision your team makes. In sociocracy, we set policy in the teams (circles), and within that frame, everyone is welcome to make decisions. You can have both the equality and the freedom to act IF you have clarity and transparency in place.

The situation of a start-up is special, and even more so for a social enterprise. Integrity is key. But we also want to grow. Here are the five reasons why starting out with a smart, sociocratic governance system is a good idea:

  1. Collaboration on eye-level in the DNA of you business. If you build an organizational culture early that fosters inclusion, welcomes dissent and adapts due to feedback, you will carry those values from the first moment on and will keep them in your DNA. Retro-fitting organizational culture is painstakingly hard. Therefore, start with equivalence and clarity from first moment on.
  2. Seemless growth. The organizational structure in sociocracy works like fractals. Every circle has the same make-up. We can scale indefinitely without having to change the patterns. Like in nature, a few simple rules can form the most complex system. The patterns stay the same, no matter what scale. Grow as big as you want, you cannot outgrow sociocracy.
  3. No burn out, no power struggles. In the beginning, you might agree a lot with your co-founders. If you make your decisions only when everyone agrees, you’re using consensus decision-making. Consensus works well in small, very aligned, homogenous groups. We understand that that is enjoyable – but the more diverse your organization is, the more you will run into issues with consensus. What do you do when a decision is blocked? What if you can’t move forward and get stuck because someone always says no and cannot be moved to even try it? Sociocracy uses consent decision-making, meaning that a decision is made when no one objects. If our threshold is not to make everyone happy but to find a solution that does not slow anyone down, we’re in a better position to make decisions faster without ignoring people and without burn-out. Consent balances out group needs and individual needs like no other decision-making method. It is safe, inclusive and fast at the same timem and it offers you an array of options of how to move forward if there are objections or concerns.
  4. Speed through autonomy. With an inspired team, the last thing you want to do it slow people down. In this situation, clarity is your best friend: if it is clear who has what authority, you give people the opportunity to run with their ideas. But you want to make sure you’re still a team. In sociocracy, policy decisions are made by consent by the team itself. That way, you can be sure to move as a team and stay on the same page. With so much to do, you can stay sane by delegating tasks into roles filled by team members. Ever heard of the too-many-cooks syndrome? We don’t all have to do everything, and we don’t all have to decide everything. The good thing is that you can have both: the safety of knowing you’re on the same page, and the freedom to act freely within those limits.
  5. Easy to share responsibility. Working for a start-up can comsume all your time and energy. It is very easy to burn out. You need to distribute power. In an organizational structure with nested circles and roles, we will be able to give people an area of responsibility that is clearly defined. Domains and tasks are fine-grained and go together in a transparent way. That way, everyone knows their own piece, and everyone knows how it all goes together to create the whole. An organizational structure with nested circles also has another advantage: teams are small and nimble, and we keep all meetings relevant by putting only those people into a team who actually work together. Don’t sit through meetings that do not require your presence. Don’t you have other things to do?

The earlier you start, the earlier you can harvest all the benefits of a sociocratic organization. That way, you do not need to make a big transition later. Sociocracy and social enterprises are a natural fit. Sociocracy translates to “governance by the people who associate together”. You cannot teach positive change if your own business is chaos and power games. Lead by example and start out smart.

Jennifer Rau, for SoFA

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