Can B Corps Operate Like Living Organisms?

Published on the Stanford Social Innovation Review:

The B Corp movement is one of the most effective frameworks for using the power of business to solve social and environmental problems. The success of many B Corps (including Etsy’s recent IPO and multi-billion-dollar valuation) has shown that its management philosophy—considering the interests of all stakeholders when making decisions, cultivating a values-driven culture, and empowering employees—can create highly effective and highly profitable business models.

After reading the book Reinventing Organizations by Frederic Laloux, however, it occurred to me that B Corporations now have an opportunity to upgrade their internal management practices to create an even greater, longer-term positive impact on people and planet.

For those unfamiliar, Laloux argues that every major shift in human history (the industrial revolution, for example) has produced a distinct management philosophy and organizational model. He examines past and current models with the goal of describing what businesses that are designed around the next shift in human consciousness will look and feel like. He uses a color system (originally created by philosopher Ken Wilber) to explain the management philosophies and organizational types that arose during each major stage in human development. A quick overview:

Red (Impulsive)

  • First appeared between 100,000 and 10,000 years ago
  • Leaders use fear, threats, and/or violence to keep the organization together
  • Examples: mafia, street gangs, wolf packs

Amber (Conformist)

  • First appeared 1,000 years ago
  • Strict top-down command and control; narrowly defined, formal roles within a hierarchical pyramid
  • Examples: military, most government agencies

Orange (Achiever)

  • First appeared 200 years ago
  • Goal is to beat the competition, maximize profits, and achieve growth
  • Examples: multinational companies

Green (Pluralistic)

  • First appeared 50 years ago
  • Strong focus on culture, employee empowerment, and stakeholders (within the classic pyramid structure)
  • Examples: B Corps, Conscious Capitalism, other social enterprises

Teal (Evolutionary)

  • First appeared 25 years ago
  • Self-management replaces hierarchical pyramid
  • Organization is seen as a living entity, with its own creative potential and evolutionary purpose

What makes Reinventing Organizations appealing and relevant to me is that Laloux is not describing a theoretical, utopian future. He spent several years researching the structures, practices, processes, and cultures of 12 companies (including Patagonia, Morning Star, Sounds True, Buurtzorg, and Sun Hydraulics) that he identified as operating as “Teal” organizations. Each has made three major breakthroughs:

  • Self Management: These companies are like living organizations that operate effectively, even at a large scale, with a system based on peer relationships, without the need for either hierarchy or consensus. For example, Morning Star—a 2,400-person company that produces more than 40 percent of the tomato paste and diced tomatoes consumed in the United States—operates entirely on self-management principles.
  • Wholeness: These organizations invite their employees to bring their whole selves to work every day (instead of a narrow “professional” self). Many Teal organizations, for example, devote regular time to addressing conflicts; avoid the use of job titles and descriptions (to allow the individual to shape their own role); and enumerate core values with explicit behaviors, habits, and norms.
  • Evolutionary Purpose: Teal organizations have their own life and sense of direction. Instead of trying to predict and control the future, they invite members to sense and respond to the shape and larger purpose of the organization. A New Year’s ritual for the company Sounds True includes employees sitting in silence and opening their mind to what the organization wants from them for the coming year. Anyone can share with the group what they have heard.

These interlocking sets of practices, Laloux suggests, constitute an emerging, coherent organizational model—the blueprint of the future of organizations.

High-impact, “Teal” B Corps?

The organizations Laloux chose to research had the most advanced practices from a management point of view—not necessarily from an external social and environmental point of view. It left me wondering: Aren't the two meant to go together? Laloux told me in an interview that he agrees they are. The 12 organizations he researched had advanced internal management practices, but some of them were no more advanced from a social or environmental perspective than your average company.

Without adopting Teal practices, I believe the B Corp movement will eventually reach a ceiling in the amount of positive impact it can create (regardless of a strong focus on culture and values). I believe B Corps have an opportunity create unprecedented impact if they let go of their hierarchical pyramid structure in favor of self-management, and learn to view themselves as a living entity, with their own creative potential and evolutionary purpose.

This is already starting to happen. Several B Corps—such as Mightybytes, CauseLabs, WorldCentric, LIFT Economy, and the Ian Martin Group—have been inspired by Reinventing Organizations to make the leap to Teal. Fitzii, a line of business within the Ian Martin Group, for instance, has made some major changes in the last six months: sharing compensation structures in full transparency, instituting a number of practices supporting “wholeness,” and making plans for instituting peer-based performance evaluations.

These are early days for this new management paradigm. But one thing seems clear: High-impact, Teal B Corps could be an incredible force for good. It’s time to open a conversation within the B Corp community, and within the circles of social entrepreneurship more broadly, about next-stage management practices as a way to accelerate the positive impact we can create in the world.